Churchill Downs on Wednesday posted record financials for the second quarter, with $980 million in revenue and EBIDTA of $477 million.
“This marks the sixth consecutive record second quarter for both metrics,” Churchill Down CEO Bill Carstanjen said during Thursday’s results conference call.
To continue that momentum, Churchill Downs recently completed a strategic review of its wholly owned properties. Nine Churchill Downs gaming properties are up for sale: Calder Casino in Florida, Terre Haute Casino in Indiana, Hard Rock Casino in Iowa, Oxford Casino in Maine, Ocean Downs in Maryland, Harlow’s and Riverwalk Casinos in Mississippi, Del Lago in New York, and Presque Isle in Pennsylvania.
“First and foremost, these are assets with long histories of good cash-flow generation, capital, and performance,” Carstanjen said. “Starting with that premise of we have good assets, certainly it’s the case that there’s activity in the market in this space in general. We can all see that, and people can take from that with what they wish. But we think this is an excellent time for us to go to market.
“In our case, I think we’ll be looking at more individual or small bundles of transactions based on different buyers’ interests and needs. But first and foremost, the most important thing to highlight is we’re selling proven strong assets that ought to fit in other people’s portfolios and other people’s plans, and from our perspective, we’re pleased with the environment and pleased with our plan to take these properties to market.”
Carstanjen noted there are no intentions to sell Churchill Downs’ historical racing machine properties in Kentucky, Virginia, or New Hampshire.
“Our intention is to use any asset sale proceeds to significantly reduce our leverage, reinvest selectively in Churchill Downs Racetrack and in other high-return projects, and fund the repurchase of shares of our stock,” he said. “Going forward, we will concentrate on assets with strong cash flow and durable competitive advantages.”
Churchill Downs will focus on three assets going forward: the Kentucky Derby, its historical racing machine businesses, and its Twin Spires business.
“Together, these cornerstones support the horse racing ecosystem and provide multiple avenues for profitable growth and long-term shareholder value,” Carstanjen said.
Churchill Downs has the right to 10 HRM licenses and 5,000 machines in Virginia. Carstanjen said its portfolio in Virginia generates strong margins and free cash flow, while supporting racing purses, tax revenues, and jobs across the state.
“We are exploring options to run referendums in the town of Pulaski and in Amherst County, both in the western part of Virginia, that would allow us to further expand our HRM footprint,” Carstanjen said. “We believe both jurisdictions are underserved markets with attractive growth potentials.”
In Kentucky, Churchill Downs operates eight HRM venues with about 5,300 machines that “continue to generate strong growth and significant purse funding,” Carstanjen stated. Since Derby City Gaming in Louisville opened in 2008, purses at Churchill Downs Racetrack have increased from less than $40 million to more than $100 million.
“We see further long-term growth through leading gaming content, enhanced entertainment, new products, including electronic table games, and selective expansion,” Carstanjen said.
In June, the Pennsylvania Supreme Court ruled that skill games that are deployed in Pennsylvania are illegal gaming devices.
“As a legal gaming operator in jurisdictions like Kentucky and Pennsylvania and Virginia, that’s good for our business,” Carstanjen said. “We play by the rules. We’re licensed. We pay taxes. We contribute to other avenues as the government requires us, whether it be horse racing or otherwise. And it’s not fair. It’s not regulated, and it’s not right when folks just come in and open up illegal gaming operations. So, this is going to be good for Presque Isle (in Erie).”
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