The coronavirus shutdown aftermath has been convulsive for Churchill Downs. An Illinois horseracing track had barely opened this month when one in Florida was forced to close.
As the racetrack and casino operator managed the Polaroid-picture shakes and announced a market-broadening Internet betting deal, its second-quarter results were mixed.
Lexington, Kentucky-based Churchill Downs, which operates the Kentucky Derby, said revenue topped Wall Street forecasts, but earnings per share, which were negative and part of a loss, missed. Shares rose during regular trading.
In a statement, Churchill Downs said its net loss was $118.8 million, or $3 per diluted share, for the three months ended June 30, reversing year-earlier net income of $107.1 million, or $2.63 per share. Analysts polled by Seeking Alpha had expected, on average, a 79-cents-per share loss.
A $95.2 million net loss from discontinued operations factored in the overall results.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, was $30.1 million down from $215 million a year earlier.
Revenue fell 61.2% to $185.1 million from $477.4 million. Seeking Alpha-polled analysts had expected $120 million in revenue.
Churchill Downs shares rose in both regular trading (up $3.67, or 2.92% to $129.47 and after-hours (up $3.53, or 2.73%, to $133 at 5 p.m. PDT) on the Nasdaq.
“The upside in the quarter demonstrates the breadth of the growth avenues for Churchill Downs,” said Jefferies gaming analyst David Katz. “It reflects the relevant potential of the digital offerings, which should continue to accelerate. Regional gaming also indicated strong margins, consistent with those of other operators.”
Churchill Downs injected a business-as-almost-normal element into the announcement, saying it will launch its BetAmerica sports betting and online gambling platform in Michigan in partnership with the Hannahville Indian Community. Financial terms weren’t disclosed for the deal, which will hinge on licensing and regulatory approvals.
Under the deal, the partners will open a physical BetAmerica sportsbook at Island Resort & Casino in Harris, Michigan, and launch the BetAmerica online sportsbook platform statewide. BetAmerica sportsbooks are already available in Indiana, Mississippi, New Jersey, and Pennsylvania.
Staying with the online betting theme, Churchill Downs reported $18.3 million in adjusted EBITDA growth and $100.7 million in increased handle (a 21.6% year-to-year increase) for its TwinSpires betting platform. The growth came even after Churchill Downs shifted the Kentucky Derby from May to September.
Kentucky Gov. Andrew Beshear and state public health officials have OK’d limited spectator attendance at Derby week events Sept. 1 to Sept. 5. Beshear on July 9 signed an executive order requiring Kentucky residents to wear cloth face masks in public but it’s unclear whether that directive will last into September.
Churchill Downs, like many other gambling companies, shut down casinos and tracks in March, heeding governors’ and health officials’ fiat, and prepared for May openings by increasing cleaning, temperature-checking staff, and mandating customer physical distancing. Also, joining many other companies, the company suspended food buffets and valet services.
During the mandated infection curve-flattening shutdown Churchill Downs temporarily furloughed employees at its gaming properties and some tracks while continuing their health insurance coverage.
The company also temporarily cut salaries for all remaining non-furloughed salaried employees by a percentage of their total pay. Senior-most executive managers took the largest salary decreases, based on both percentage and dollar amount the company said. Salaries for non-furloughed employees will resume their annual base salary after Friday.
Churchill Downs said all of its gambling properties have reopened, except for Calder Casino in Miami, which closed July 6, five days after the company’s Casino Des Plaines in Des Plaines, Illinois, reopened. The company said money is already flowing; net revenue jumped 9% and adjusted EBITDA rose 38% for the May-June period the properties were open compared with a year earlier, the company said.
Some furloughed workers have returned to work as properties reopened, the company said; others remain temporarily furloughed because of mandates to reduce the number of people in indoor spaces.
Follow Matthew Crowley on Twitter @copyjockey
