Churchill Downs updates on deals, posts forecast-topping 3Q revenue

October 28, 2022 10:57 AM
Photo: Shutterstock
  • Matthew Crowley, CDC Gaming Reports
October 28, 2022 10:57 AM

Churchill Downs rode the momentum of a new partnership with FanDuel and closed acquisitions into its earnings call Thursday. The racetrack and casino operator’s third-quarter results, however, were mixed.

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Earnings per share and revenue dropped from a year earlier, though the latter topped forecasts. A key cash flow measure rose from a year ago to a record and adjusted earnings topped forecasts.

In a statement, the Louisville, Kentucky-based company said its net income was $57 million, or $1.49 per share, for the three months ended Sept. 30, down from net income of $61.4 million, or $1.57 per share, a year earlier. Churchill Downs said a $2.4 million after-tax increase in transaction and preopening expenses dampened its latest results.

Adjusted earnings per share, which exclude one-time costs, were $1.62, which topped the $1.58-per-share forecast by Seeking Alpha.

Churchill Downs shares sold off on the news, dropping $10.56, or 5.06%, Thursday to close at $197.94 on the Nasdaq Stock Market.

Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that also excludes one-time costs, rose 4.5% to a record $163.2 million from $156.1 million.

Revenue fell 2.5% to $383.1 million from $393 million and missed the $397.9 million forecast of Seeking Alpha-polled analysts.

Churchill Downs reached a multiyear deal to supply television rights and some wagering rights on some of the company’s races to FanDuel. The deal, which will start once Churchill Downs’ existing non-Kentucky Derby media-rights contract expires in 2023, covers several years, Churchill Downs said, without saying how many. Nor did Churchill Downs disclose financial terms.

Churchill Downs also closed on the purchase of Ellis Park in Henderson, Kentucky, for $79 million in cash and Chasers Poker Room in Salem, New Hampshire.

Ellis Park already features a thoroughbred racetrack with 300 historical racing machines. During a conference call with analysts and journalists, Churchill Downs Chief Executive Office Bill Carstanjen said his company will invest $75 million to upgrade racing infrastructure and customer amenities at Ellis Park and build a historical racing machine casino in Owensboro, Kentucky. Carstenjen said he would have budgeting and timing estimates for these projects during the fourth-quarter conference call.

Churchill Downs will also upgrade Chasers, investing about $150 million to add up to 800 historical racing machines and make other improvements.

Carstenjen said Churchill Downs remains on track to sell the 326-acre Arlington Park to the National Football League’s Chicago Bears for $197 million in 2023’s first quarter.

He added that the company has begun building the foundation and walls for its hotel-casino project in Terre Haute, Indiana. The project, which will include a casino with 1,000 slot machines, 34 table games, and a sportsbook alongside a 122-room hotel, will be completed in the first quarter of 2024 and will cost up to $290 million, Carstenjen said. The company had said the project would open in late 2023 and cost $260 million.

Earlier this month, Jefferies reiterated a “buy” rating on Churchill Downs, foreseeing incremental cash-flow boosts from the Ellis Park and the FanDuel deals.