Churchill Downs beats Wall Street forecast on revenue, misses on earnings per share for third quarter

October 26, 2023 9:31 PM
Photo: Shutterstock
  • Matthew Crowley, CDC Gaming Reports
October 26, 2023 9:31 PM
  • Matthew Crowley, CDC Gaming Reports

Churchill Downs has its eye on a big opening, next year’s 150th running of the Kentucky Derby. It’s also preapring for a big event, December’s planned opening of the company’s second Derby City betting hub, which follows the June opening of a similar spot.

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In the meantime, the Louisville, Kentucky-based thoroughbred racing and casino operator posted third-quarter revenue that topped Wall Street forecasts, although earnings per share missed.

In a statement Thursday, Churchill Downs said its net income was $61 million, or 79 cents per diluted share, for the three months ended Sept. 30, up from $57 million, or 74 cents per share, a year earlier. The latest result missed the consensus 83-cent-per-share forecast of analysts surveyed by Seeking Alpha.

Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that excludes one-time costs, rose 33.7% to $218.2 million from $163.2 million.

Revenue rose 49.4% to $572.5 million from $383.1 million and topped the $568.5 million consensus forecast by Seeking Alpha-polled analysts.

For the second consecutive quarter, Churchill Downs said Virginia properties acquired in 2022’s $2.49 billion deal for Peninsula Pacific Entertainment boosted overall revenue.

The company said the properties, the Colonial Downs Racetrack in New Kent, Virginia, and six Rosie’s Gaming Emporium locations in six Virginia cities — Collinsville, Hampton, New Kent, Dumfries, Richmond, and Vinton — added $89 million to revenue and $38.3 million to adjusted EBITDA.

In a conference call with analysts and journalists, Chief Executive Officer Bill Carstanjen said his company continues work on its paddock makeover, part of a $185 million to $200 million project, and its $14 million Jockey Club renovation. Both projects are on budget and on schedule, he said, and will be finished by April 30, in time for the May Derby. Sales for the race are ahead of schedule compared with other years and premium seating is already sold out.

“Our focus right now is delivering these two major projects and a unique and spectacular Kentucky Derby 150, which, when done as we anticipate, will then lead to the projects of the future,” he said.

Carstanjen said Kentucky’s ban of gray games, unregulated slot machinelike games in bars, restaurants, taverns, or truck stops, will boost Churchill Downs historical racing machine parlors in the state. Carstenjen said the American Gaming Association estimated that more than 12,000 illegal games were operating in the state.

Kentucky’s Republican-controlled legislature passed the ban, House Bill 594, and Gov. Andy Beshear signed it into law in March. That month, American Gaming Association CEO Bill Miller said in a note that Americans bet $511 billion on unregulated machines and with illegal sportsbooks and online casinos in 2022, which cost communities more than $13 billion in tax revenue.

Carstanjen said his company is completing design and construction plans for a new $100 million to $110 million historical racing machine hub on a 20-acre site in near Owensboro, Kentucky; the target opening date is first quarter 2025.

He added that Churchill Downs opened six race and sportsbooks at its Kentucky properties on Sept. 7 and that its RVA Entertainment Holdings LLC joint venture will start a referendum campaign in November to develop a casino in Richmond, Virginia. Churchill Downs the same month will mount a referendum campaign to build a historical racing machine site in Manassas Park, Virginia.

Churchill Downs shares fell 37 cents, or 0.34%, Thursday to close at $108.06 on the Nasdaq Stock Market.