As it poised itself to capitalize on new sports betting opportunities and proceeded with expansion plans, Churchill Downs posted increases in second-quarter net income and revenue from a year earlier.
In a statement Thursday, the Louisville, Kentucky-based company, which includes five racetracks, six casinos and the twinspires.com online betting platform in its business portfolio, said net income was $103.1 million, or $7.55 per share, for the three months ended June 30, up from net income of $78.3 million, or $4.81 per share, a year earlier.
Revenue rose 11.8 percent to $379.4 million from $339.3 million.
The latest results exclude the sale of Big Fish Games, which the company sold for $990 million to Aristocrat Technologies on Jan. 9.
Net revenue at the company’s casinos rose 11 percent to $98 million.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that filters out one-time items, rose 13.5 percent to $174.5 million from $154 million.
Louisville had more than 2½ inches of rain the week of the Kentucky Derby in April. But during a Thursday conference call accompanying the results, Churchill Downs CEO Bill Carstanjen said the namesake track prospered, setting records for net revenue, adjusted cash flow, and wagering for the race – both Derby day and for the full week.
Derby day attendance was 158,000, the eighth highest on record, he said.
Betting handle on the company’s twinspires.com betting platform rose 12 percent in the quarter from a year earlier, he said.
Churchill Downs lost some expansion momentum in July when it canceled a $51 million deal to buy the Lady Luck casino in Vicksburg, Miss., from Reno-based Eldorado Resorts because of antitrust concerns.
Also in July, Churchill Downs agreed to exchange its quarter stake in Saratoga Casino Holdings LLC for the remaining piece of the Ocean Downs harness track and casino in Maryland it didn’t already own.
Nevertheless, the company said it will continue with its $179 million deal to buy Presque Isle Downs & Casino in Erie, Penn., and will take over the Lady Luck Casino Nemacolin in Pennsylvania, for $100,000.
Churchill will pay Eldorado a $5 million termination fee for the scrapped deal.
Beyond mergers and acquisitions, the expansion of sports betting opened new opportunities for Churchill Downs.
Carstanjen said his company will open sports books this month in its two Mississippi casinos. State regulators approved sports betting in casinos in June. The state joins Delaware and New Jersey in having legalized the practice.
Churchill Downs prepared to enter sports betting in New Jersey by agreeing to enable sports gambling at the Golden Nugget Atlantic City. Under the deal, outlined by Louisville Business First, Churchill Downs’ technology partner SBTech, will, pending necessary licenses, develop the consumer website, mobile apps and back-office systems. Churchill Downs’ Twin Spires team will manage the platform.
“I think the unique capability we have in the online space is we already have a team of sophisticated people that know how to acquire customers, that know how to manage those customers with good (customer relationship management capabilities, to bonus them, to take good care of the VIPs, to market and grow our brand,” said Chief Operating Officer William Mudd. “We do this right now in Twin Spires.”
Carstanjen added, “What’s important is to build a capability and an infrastructure that hopefully over time will allow you to participate in a number of states. And as you participate in more and more states, that’s where you can leverage your cost structure and your personnel to really drive increases in your profitability.”
In Kentucky, Churchill Downs said this week it will hire up to 200 new employees to help staff its new 85,000-square-foot, $65 million Derby City Gaming casino, opening in September. The casino will feature slot machine-style electronic historical racing machines, which allow betting on races that have already taken place.
Churchill Downs opened a $37 million improvement project at its flagship namesake racetrack — the Sterling Gate Suites and the Paddock Gate entrance and pedestrian plaza — ahead of the Kentucky Derby. The improvements included seating for about 1,800 higher-end customers, all of which sold out for this year’s race, Carstanjen said.
The company finished the first phase of its $32 million project to improve transportation infrastructure to and from the track, he said; the second phase will debut before the Breeder’s Cup Championship at the track Nov. 2 and 3.
The projects followed the completion of a $15 million, 35,000-square-foot expansion at Ocean Downs that debuted in December.
Churchill Downs shares closed at $279.10 Thursday on the Nasdaq. The share price has risen 17 percent since 2018 started Jan. 2.
Follow Matthew Crowley on Twitter @copyjockey
