Good day, ladies and gentlemen. And welcome to Churchill Downs Incorporated Fourth Quarter and Full Year Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. And I would now like to introduce your host of today’s conference, Ms. Courtney Norris, Director of Corporate Communications. Please go ahead.

Thank you, Sam. Good morning. And welcome to this Churchill Downs Incorporated conference call to review the company’s business results for the fourth quarter and year ended December 31, 2014. The company’s fourth quarter business results were released yesterday afternoon in a news release that has been covered by the financial media. A copy of this release announcing results and any other financial and statistical information about the period to be presented in this conference call, including any information required by Regulation G, is available at the section of the company’s website titled News located at churchilldownsincorporated.com, as well as in the website’s Investors section. Let me also note that a news release was issued advising of the accessibility of this conference call on a listen-only basis via phone and over the Internet. As we begin, let me express that some statements made during this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, expectations or beliefs about future events or results or otherwise are not statements of historical facts. The actual performance of the company may differ materially from what is projected in such forward-looking statements. Investors should refer to statements included in reports filed by the company with the Securities and Exchange Commission for discussion of additional information concerning factors that could cause our actual results of operations to differ materially from the forward-looking statements made in this call. The information being provided today is of this date only and Churchill Downs Incorporated expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations. I will now turn the call over to our CEO, Mr. Bill Carstanjen.

Thanks Courtney. Good morning, everyone. With me today are several members of our team including Bill Mudd, our President and Chief Financial Officer; Alan Tse, our General Counsel; Mike Anderson, our Vice President of Corporate Finance, Treasury and Investor Relations; and Bob Evans, Chairman of our Board of Directors. I will make a few general comments and then turn this over to Bill Mudd. After he has finished his comments we will be happy to take your questions. First, the few comments on our fourth quarter, the company produced record net revenues and adjusted EBITDA for the quarter. While there is quite a bit of other noise in our financials as a result of closing the Big Fish Games acquisition and the accounting adjustments required as a result of it, here are a few summary observations about our core businesses. Our regional game casino segment experienced improving trends later in the fourth quarter and those trends have continued so far this year. This was a nice ending for year where the general trends in the economy and in our specific markets have improved soft in the most of the year. We spent 2014 focus pretty carefully on costs and operating as efficiently as we sensibly could. That is a part of our DNA and we will continue in 2015. But we are now seeing some encouraging topline indicators that we hope continue. With respect to our TwinSpires.com segment, we had real headwinds in 2014 because of the loss in late 2013 of the Texas online wagering market and because of new taxes imposed by New York and Pennsylvania on accounts deposit wagering activity. Those are important states for us. We held up better than we thought in 2014 on both the top and bottomline, and the comps get easier in…

Thank you, Bill. Good morning, everyone. I'll keep my comments brief and focused on important drivers of operations and items affecting our income statement and balance sheet, as a result of the Big Fish acquisition. After I make a few comments, we will be happy to address any questions. Please note that we have renamed our segments. Gaming is now called Casinos and Online is now called TwinSpires. This was done to avoid any confusion with Big Fish Games, which are games conducted through online and mobile devices. Overall, it was another good year and an excellent fourth quarter with record net revenues and record adjusted EBITDA in both periods. The net income line, however, was pressured in the fourth quarter by items below adjusted EBITDA, which we will describe in great detail later. For the year, our Casino revenues increased to $31.5 million or 11%, as revenues from Oxford acquisition were offset by slight declines in our other Casino properties on industry weakness during the majority of year and the closure of poker operations on July 1, 2014 at Calder Casino. For the fourth quarter, our Casino business revenues remained flat to prior year as at growth Oxford Casino, driven by the gaming floor expansion we completed last December was coupled with better weather and offset softness at our other properties. On a comparable year-over-year basis, our fourth quarter was the strongest to the year. Part of this was driven by easier comps, as we enter the second half of the year but we are seeing more trips and higher win per trip, particularly in the middle and top tiers of the database which is encouraging. The lower end of the database has stabilized, when considering some of the promotional changes we made to our direct mail marketing programs.…

Thanks, Bill. At this point, I think we’re ready to take any questions if there any that are out there.

Thank you. [Operator Instructions] Our first question comes from Cameron McKnight with Wells Fargo. Your line is open.

Thanks very much. Good morning.

Good morning.

Bill, with respect to the casino segment, you mentioned in your prepared remarks, you’re seeing encouraging topline indicators? I’m wondering if you could elaborate a little bit there given most of the regional gaming peers of reported results given commentary just that things at the low-end are starting to get better and getting better over and above the effect of easy comparisons from weather?

Yeah. I think, as I mentioned in my comment, Cameron, as we look at each of the quarters over the last year, I think the first quarter was our softest, second quarters were better, third quarter were better and the fourth quarter was the best, at least on a year-over-year perspective. And I think part of that was driven by the fact that the comparables in the prior year were a little bit easier. But we’re certainly seeing more life in basically all tiers of our business and actually we’re seeing a little bit more life in the top and middle tiers than we are in the bottom tier. The bottom tier is stabilized, but it’s not really the predominant driver of our growth. And if you look across the regions of the U.S., we’re seeing a lot of strength right now in Louisiana. Mississippi has improved dramatically from where we were. We’re not seeing the reductions that we had seen earlier last year. And in the North East, particularly in our main facility, we had a terrific January but that was unfortunately -- last year was a terrible winter weather period for us but this year, I think, we’ve got four times more snow as people know that live in that area. So, unfortunately, it was offset by a very brutal few weeks here in the last few weeks of weather, so all signs are pretty encouraging. We believe that’s really directly related to the fact that fuel prices have dropped and consumer discretionary income has improved.

Okay. Great. Thanks for your answers. That’s very helpful. And then moving on to Big Fish, you closed a deal about 10 weeks ago. Can you comment on whether anything has surprised you either to the upside or to the downside, since you guys took over there?

Sure. I would say that we’ve been very, very pleased. And it’s largely been in line with what we expected and I think that’s a good thing. Big Fish was a very large transaction for us. We did a tremendous amount of work before we did it. So, I’m happy to say that we haven't really been surprised. We knew the team very well. We knew the business very well when we decided to do the deal, so largely everything has been performing as we hope that it would. I guess if I -- on a more qualitative side as opposed to a quantitative side, continue to just be incredibly impressed by the dedication of this team, the commitment of this team through the business and the focus around business intelligence and analytics. The strength of that work within the company is something that continues to really impress us. Cameron, I hope I answered that question, but just let me know if there is any other specifics you wanted.

Sure. Thanks. Thanks, Bill. And then just moving on, I mean, the earn-out to Big Fish is premised on a pretty significant amount of growth over the course of this year. Can you give us a bit of commentary on the product pipeline and the profile of marketing spend this year, given that we expect this paramount that’s coming down the pipe?

Sure. I would say in general, the approach of this business, one of the things we like about this business that it’s a portfolio approach. So it doesn’t make giant bets on individual games. Instead it uses a low-cost development network, consisting of not only U.S. resources but development shops that they have partnership arrangements with, from around the world to put out a portfolio of content and then content soft launched, marching began slowly and is carefully measured to track which new games are likely to have some upside. So, I don’t think -- this is not a business that ever gets in too deep or bets too much on any individual gamer or any individual content. And I would say because of that fact, we always want to be careful about the forward-looking statements we make about the content that will come out during the course of the year. We are going to put out a lot of content, up to a 20 plus games, which some of them are very big bets in and of themselves and we prefer not to get into any kind of real details on them until we actually soft launch them and can measure some of the initial returns and some of the initial evaluations of the marketing spend before we go into too much detail publicly on our true expectations for any piece of content. So that’s probably not the answer you’d like to hear, but that’s how we are going to talk about this going forward. We are going to be -- we are going to prove it before we get into too much expectations setting with the public.

And, Cameron, just to kind of reiterate what Bill said without providing forward-looking guidance, I think to the extent that you see bookings continue to grow and you can expect that our user acquisition cost, all our marketing costs as you said is also growing. So, we are expecting to spend considerably more marketing cost this year than we did last year. I think you are going to see the EBITDA growth was driven by cost and marketing and it is absolutely, is not.

Got it. That’s great. And then just one final question, this is a little more general. I mean. when we speak to investors, we sense that -- we sense the social gaming is still a category, that’s not terribly well understood. Could you give us some commentary on just the size and the growth in social gaming, I mean the industrial overall as a new category of entertainment, just to frame the market size and opportunity for investors?

Yes. I think there’s a few analysts out there that cover only social gaming. Eilers is probably one of the bigger ones. And correct me, Bill and team here, if I say anything it’s kind of -- look I am talking of the memory, so I’d encourage anyone listening to actually go look at the research they have. The global market right now is expected to be about $3 billion market, about $1.5 million of that is in the U.S. Is that fair, Bill?

That’s fair, right. Correct.

And they have it growing at 20% roughly clip a year as an industry. So it’s a very strong industry, but it has a lot of growth potential. So -- and if you look at where revenues are produced on the Big Fish, considerable amount of that is outside of the U.S. I don’t have the exact numbers, pardon me, but it is a global business.

Yes. I’d add a couple remarks to that. The social casino space, relatively new space it’s growing pretty rapidly a $2.7 billion business growing at a 20% clip or thereabout is a pretty impressive standing start. And some of the trends we see for our business, we don’t want to speak to other people’s social casino business, but we a see a fairly sticky customer base, a fairly consisting customer base. So the lifetime value of these customers within the space so far is very, very appealing to us, and perhaps different than trends you might see on other forms of social games. So that’s one element of the social casino space, that for us remains very attractive, characteristics of the customers that are already customers in the space, or generally the mobile game market, which is a big focus of Big Fish beyond just the social casino piece. That’s the space that’s been growing very rapidly and we don’t keep our own numbers for how big that industry is expected to grow, but you can look at Eilers and other publications out there that provide estimates. But I've seen estimates in Eilers saying that space -- the mobile game space not gaming, not gambling but mobile game space will be a $30 billion space over calendar year '15 growing to $40 billion by '17. So the gaming space -- mobile game space just in and of itself is considered by many to be a large rapidly growing space, of which the social casino piece is just one part.

And just to add on to that, Cameron, about a quarter of our casino revenues are outside the U.S. And to Bill’s point on the casual free-to-play space, that $30 billion market, about 40% of that business is outside the U.S. So, it’s truly a global platform.

Got it. Thanks. Those are some big numbers. Thanks a lot, guys.

Thank you. [Operator Instructions]

Well, I guess we don’t have any other questions, so thanks everybody for joining us today and we look forward to talking to you next time.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may all disconnect.