Recent deals fueled a second-quarter revenue jump for Churchill Downs and the racetrack operator eyed more. The company said it will add a hotel, historical race wagering center at its namesake Louisville racetrack and will expand one Illinois casino and seek a license for another.
During a conference call with analysts accompanying the results, Churchill Downs CEO Bill Carstanjen disclosed the hotel plans for the Louisville racetrack and historical betting hub but gave no cost details. He said he hoped to have the new features, which will be by the track’s first turn, operational by the 2021 Kentucky Derby.
Carstanjen added that his company chose an architect for the project and he will disclose specifics during the third-quarter earnings call this fall.
“We obviously have a tremendous opportunity to utilize a hotel and that infrastructure around the Derby, but really, our meet as a whole,” Carstanjen said. “Anytime the Churchill Downs Racetrack is running is an opportunity to help fill the hotel. A big driver of the hotel will also be the attached historical racing machine facility. As you’re familiar, when you have an amenity like a hotel, you can keep guests longer and you can attract additional guests to the facility.”
Turning to Illinois, Carstanjen said his company plans to expand Rivers Casino Des Plaines near Chicago, a property in which it bought a 61 percent stake in for $407 million in March. The expansion will include adding 800 games to the casino, which will raise the total to about 2,000. Churchill Downs will pay a $24 licensing fee for the project, which needs regulators’ OK.
Carstanjen also said his company will pursue of one of six new casino licenses Illinois’ new gambling expansion bill will make available and may add slots or table games at its Arlington Park Racecourse in Arlington Heights.
Although Churchill Downs revenue beat Wall Street forecasts, net income fell short.
In a statement Thursday, the company said its net income was $107.1 million, or $2.63 per diluted share, for the three months ended June 30, up from net income of $103.1 million, or $2.52 per diluted share, a year earlier.
The latest result fell short of the $2.73 per share forecast of analysts surveyed by Zacks Investment Research.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that filters out nonrecurring costs, rose 23.2 percent to $215 million from $174.5 million
Revenue rose 29.9 percent to $477.4 million from $379.4 million. Zacks polled analysts had expected $469.9 million in revenue.
A 64 percent surge in gaming segment revenue, which rose to $177.8 million from $108.2 million a year earlier, bolstered Churchill Downs’ overall revenue in the quarter. A $37.3 million increase from the Presque Isle Downs in Erie, Pennsylvania, and a $21.9 million increase from the consolidation of Ocean Downs Casino in Berlin, Maryland, boosted the segment. Churchill Downs bought Presque Isle downs for $178.9 million on Jan. 11.
Analysts had looked kindly at Churchill Downs before the earnings call. Susquehanna Financial Group issued a “positive” rating last week. But the earnings news didn’t help the stock price, which fell $5.88, or 4.66 percent, Friday to close at $120.35 on the Nasdaq.
Churchill Downs shares are up 48.9 percent in 2019.
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