Churchill Downs sets records for Kentucky Derby revenue and quarterly metrics, but misses Wall Street forecasts

Churchill Downs sets records for Kentucky Derby revenue and quarterly metrics, but misses Wall Street forecasts

  • Matthew Crowley, CDC Gaming Reports
July 29, 2022 2:19 AM
  • Matthew Crowley, CDC Gaming Reports
  • United States
  • Commercial Casinos
  • Other

An after-tax gain from the sale of land near Florida’s Calder Casino and record Kentucky Derby wagering fueled record second-quarter net income for Churchill Downs. The racetrack and casino operator also posted record higher revenue for the quarter, but both it and per-share adjusted earnings missed Wall Street forecasts.

In a statement, the Louisville, Kentucky, company said net income was $339.3 million, or $8.79 per diluted share, for the quarter ended June 30, up from net income of $108.3 million, or $2.76 per share, in the second quarter 2021.

Adjusted earnings per share, which exclude one-time costs, were $3.90, short of the $3.99-per-share average forecast of analysts surveyed by Seeking Alpha.

The $193.6 million after-tax gain came from the Calder land, 115.7 acres that Churchill Downs sold in June for $291 million, or approximately $2.5 million per acre, to New York-based Link Logistics.

Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that also excludes one-time costs, rose 24.8% to $291.2 million from $233.3 million.

Second-quarter revenue rose 13.1% to $582.5 million from $515.1 million, but fell short of the $592.1 million forecast by Seeking Alpha-polled analysts.

In a conference call with analysts and journalists, Churchill Downs Chief Executive Officer Bill Carstanjen said the Kentucky Derby was a bonanza. The company set records for wagering on the race, program, and week, and the company’s TwinSpires betting platform generated record handle on the Derby Day program and race.

NBC’s national television audience for the famous 1.25-mile Triple Crown race was 16 million on average and 19 million at peak, the largest since 2017, Carstanjen said.

Second-quarter adjusted EBITDA for Churchill Downs Racetrack was up nearly $59 million from a year earlier, Carstanjen said.

“The Derby truly was back in full force,” he said.

The Churchill Downs racetrack’s new Home Stretch Club opened in time for Derby Week and Carstanjen said his company expects its final investment in the project will be $38 million, about $7 million under original projections. The club added 3,250 premium seats and provided new high-end experiences for Derby patrons.

Carstanjen said his company plans to integrate pari-mutuel wagering into existing third-party online sports-wagering platforms and perhaps generate “content fees” for its racetracks. Covers.com, a sports-wagering news site, suggested DraftKings may be one such third-party betting platform.

In April, Churchill Downs said it would would improve its namesake track further, upgrading its paddock as part of a $185 million to $200 million project. The Paddock Project will debut in May 2024 for the Kentucky Derby’s 150th running and will increase guest spaces from 5,000 to 12,000, add club spaces, and add premium seating to create 3,612 new reserved seats and room for 3,250 standing-room-only tickets.

Churchill Downs is also widening its overall portfolio. The company in February said it would acquire Pacific Peninsula Gaming Entertainment for $2.49 billion, thereby gaining assets in Virginia and New York, along with the operations of the Hard Rock Hotel-Casino in Sioux City, Iowa.

The deal’s New York assets include the del Lago hotel-casino in Waterloo, which includes 1,700 slot machines, 80 table games, a sportsbook, and a 205-room hotel. The Virginia assets include the Colonial Downs Racetrack in New Kent and six historical racing centers. Carstanjen said New Kent will host 27 races this year.

Carstanjen said Churchill Downs has the Virginia Racing Commission’s okay to acquire the Virginia properties. He added that the company expects to be on the Iowa Racing and Gaming Commission’s agenda for approval Aug. 25 and has applied for licensing with the New York State Gaming Commission.

Churchill Downs shares fell $3.08, or 1.4%, Thursday to close at $216.92 on the Nasdaq Stock Market. The share price has fallen 9% in 2022.

Follow Matthew Crowley on Twitter @copyjockey.

Follow Matthew Crowley on Twitter @copyjockey.