A different-season, fan-free Kentucky Derby meant for a slimmer annual bottom line for horse racing track and gambling operator Churchill Downs. 2020 revenue dropped by 21% from a year earlier, but fourth-quarter revenue and earnings per share topped Wall Street forecasts.
The COVID-19 pandemic forced the Run for the Roses to move from May to September and keep grandstands empty.
“The most important aspect of the quarter for Churchill Downs is that its growth projects and channels are becoming more active with the conclusion of COVID,” Jefferies gaming analyst David Katz told investors. “We believe the growth in Illinois, Kentucky and digital gaming should drive value.”
In a statement Thursday, Louisville, Kentucky-based Churchill Downs said net income was $17.1 million, or 43 cents per share, for the three months ended Dec. 31, up from net income of $4 million, or 10 cents per share, a year earlier. Analysts polled by Seeking Alpha had, on average, forecast earnings of 27 cents per share.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes one-time costs, rose 7.3% to $79.2 million from $73.8 million.
Fourth-quarter revenue fell 0.8% to $278.2 million from $280.6 million. Seeking Alpha-polled analysts expected $274.12 in revenue.
The company said a $14.2 million revenue increase at Oak Grove Racing in Oak Grove, Kentucky, boosted overall revenue. Simulcast and historical racing machine play opened at Oak Grove started in September 2020; hotel operations there started in October 2020.
“Against the backdrop of the COVID-19 global pandemic, we managed our business efficiently and responsibly, and with that discipline, we have maintained a strong company,” Churchill Downs CEO Bill Carstanjen said in a statement. “We are moving forward in 2021 with a relentless focus on strategic and organic growth opportunities that will enable us to continue to deliver a strong return on investment to our investors.”
Full-year results put the coronavirus’s damage in sharp relief. The company had a 12-month loss of $81.9 million, or $2.08 per diluted share, compared with a net loss of $137.3, or $3.38 per diluted share, a year earlier.
Full-year EBITDA fell 36.5% to $286.5 million from $451.4 million and full-year revenue fell to $1.01 billion from $1.33 billion.
The Kentucky Derby was moved from May 2 to Sept. 5 and run without fans. These moves prompted lost ticket revenue, a sponsorships dip, and less wagering, amounting to a $121.8 million drop in Derby Week revenue.
Churchill Downs was busy heading into the results report. This week, Churchill Downs said it would sell its 326-acre Arlington International Racecourse for redevelopment. Races at the track will run as scheduled from April 30 to Sept. 25. The sales price wasn’t disclosed.
Churchill Downs also said it would buy back 1 million common stock shares from a Duchossois Group affiliate for $193.9 million.
Last month, Churchill Downs said it would launch its TwinSpires platform in Michigan. Online wagering revenue was a 2020 bright spot for Churchill Downs, growing $118.3 million year-to-year, boosted by the TwinSpires platform.
Looking forward, Churchill Downs said it plans to return the Kentucky Derby to its May time slot and may revise the $300 million hotel and historical racing machine complex it had planned at its flagship Louisville racetrack.
The original $300 million plan had called for a 156-room, seven-story hotel, a 900-machine historical racing machine center; hospitality and meeting spaces; and a 27,000-square-foot ballroom. Carstanjen said on a conference call with analysts that plans may change.
“We believe we can and should do the project more cost-effectively,” he said.
Churchill Downs shares closed Friday at $230.63 on the Nasdaq, up $1.13 or 0.49%.
Follow Matthew Crowley on Twitter @copyjockey
