The Run for the Roses helped Churchill Downs run up Wall Street-forecast-topping third-quarter results. But investors sold off the stock anyway.
Fans were barred from the Kentucky Derby when Churchill Downs pushed the race to Labor Day weekend from its traditional April slot amid the coronavirus pandemic and its accompanying state mandates against large crowds. It was the first time the Derby hadn’t run on May’s first Saturday since 1945, when, amid World War II, it ran June 9.
Churchill Downs officials lamented the moved race’s fallout — lower ticket revenue, fewer sponsorships, lower wagering — but said the decision to keep reserved seats and grandstands empty made sense.
The earnings didn’t suffer. Churchill Downs said in a Thursday statement that its net income was $43.2 million, or $1.08 per share, for the three months ended Sept. 30, up from net income of $14.8 million, or 36 cents per share, a year earlier. Analysts polled by Seeking Alpha had, on average, forecast 75 cents in earnings per share.
Churchill Downs said a $27.6 million after-tax increase, driven by operations and equity income from unconsolidated affiliates, boosted the quarterly results.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 38.5% to $121.9 million from $88 million.
Quarterly revenue rose 10.3% to $337.8 million from $306.3 million and topped the $293.5 million forecast of Seeking Alpha-polled analysts.
Churchill Downs shares fell $4.22, or 2.75%, Friday to close at $149.15 on the Nasdaq.
In a Thursday conference call with analysts, Churchill Downs highlighted a huge bright spot — record revenue of $116 million at its TwinSpires online betting platform. The company said that excluding Derby Week, the platform drew 40% more players and 10% more in handle wager per active player in the third quarter compared with a year earlier.
Overall, the platform’s revenue rose 77% increase from a year earlier as handle rose 69% to more than $730 million.
The company touted the openings of two new Kentucky properties — the Oak Grove hotel-racino in Oak Grove and the Newport racino in Newport, calling them potential future revenue boosters. The company also said it was glad to have all of its gaming properties open again after coronavirus infection curve-flattening shutdowns.
“Our third-quarter results were strong, not just because the Kentucky Derby was in it, but because of the strength of all of our businesses,” Churchill Downs CEO William Carstanjen said. “Our focus in the quarter was on operating all of our properties under our strict safety and social distancing protocols against the continued backdrop of the COVID-19 pandemic.”
Thanking NBC television, Carstenjen said horse racing fans tuned in to watch the Derby even its new spot, drawing 20% more viewers than the most-watched sporting event on 2019’s Labor Day weekend.
“In many ways,” he said, “the Kentucky Derby showed its strength as a unique and special asset. … It’s a great economic engine.”
Churchill Downs said it hopes the 2021 Kentucky Derby will have some fans.
Carstanjen said during the conference call that his company is planning to run the next Kentucky Derby in its traditional first Saturday in May spot assuming that reserved seating will be at 40% to 50% of capacity. The Churchill Downs racetrack holds 165,000 spectators.
Carstanjen added that his company will delay selling any general admission tickets until closer to the race.
Follow Matthew Crowley @copyjockey
