Late Wednesday, after releasing yearly and quarterly numbers, Churchill Downs Inc. announced a series of renovations to its iconic track. The multi-year series of capital projects are expected to enhance and expand the Kentucky Derby experience across three key areas of Churchill Downs Racetrack: between the finish line and the First Turn Club, temporary suites in the infield that line the homestretch and the addition of three permanent buildings in the infield.
The net results of the improvement will yield about 20,300 seats that are premium or have access to premium amenities. Churchill Downs CEO Bill Carstanjen, during Thursday’s investors call, said he was confident there will be demand for the improvements.
“More holistically, there is a clearly recognized and understood shift in consumer behavior where they, in general, particularly in the United States, but even to a large extent internationally, want to attend experiential events,” Carstanjen said. “They want to have big-experience bucket-list experiences, and that’s helpful to events like ours (the Kentucky Derby) because we are a unique American traditional special happening. So, we can take advantage of, we’re a beneficiary of, this larger trend toward special concerts and special big events and travel. That’s a growing healthy space, globally.”
Churchill Downs reported record fourth-quarter revenue of $624.2 million in 2024, an increase of $63 million, or 11 percent year-over-year. Revenue for 2024 reached $2.7 billion, up 11 percent, or $272.6 million compared to 2023.
The capital projects are to be finished in stages, with a target date for completion expected to be the 2028 Kentucky Derby.
“One of our core principles is to accomplish our major construction projects year-to-year with respect to the Derby without disrupting the bucket-list experience that everybody comes to the Derby expects to get every year,” Carstanjen said. “So, I think we can manage very effectively to limit or eliminate any material disruption to folks. We’re very confident about doing that, and that goes into how we plan these projects and sequence the different pieces of the construction.”
Churchill Downs recently opened historical racing machine facilities in Dumfries, Virgina, in November and this month in Owensboro, Kentucky. Generally, Carstanjen said, there is a five-year payback period for such facilities, but with HRMs “we’ve generally beaten that.”
“The HRMs in the markets we’re in now, they’ve been competitive and in strong ecosystems where we thought we could go really hard and get a return even quicker than five years,” Carstanjen said. “Generally, when we look at managing our own, comparing our different opportunities to place capital across our different assets when it comes to HRMs and gaming in general, we’ve been successful doing that.”
After the release of quarterly and year-end figures Wednesday, analysts were generally upbeat about Churchill Down’s outlook.
“Churchill Downs Q4 beat Street estimates by 2% though in-line to our Q4E EBITDA, with Gaming and Twin Spires driving the beat and Live & Historical better than feared,” wrote Truist Securities analyst Barry Jonas. “Investors have been focused on the Rose (in Dumfries, Virginia) performance to date, which faced tough weather through January, though we still see the property as well positioned to hit or exceed initial underwriting.
“Impressively, management unveiled several multi-year Derby projects which we believe could add significant long-term value based off historical ROI. We continue to view the Derby as a unique trophy asset with sizable scope and scale for additional growth.”
Analyst David Katz of Jeffries wrote that “results demonstrated another solid quarter driven by better-than-expected performance in both the Gaming and live & horse racing segments. It is important to note that EBITDA generation from The Rose Gaming Resort was below our estimates, which could offset an otherwise positive quarter for the shares.”
