A 56% jump in cash flow from its TwinSpires gaming platform helped drive a third-quarter income rise for horse-racetrack operator Churchill Downs, topping Wall Street forecasts. But revenue missed forecasts and investors may focus more on land sales and the company’s development plans.
In a statement Wednesday, Louisville, Kentucky-based Churchill Downs said its net income was $61.4 million, or $1.57 per share, for the three months ended Sept. 30, up from net income of $43.2 million, or $1.08 per share, a year earlier. The latest per-share result topped the $1.45-per-share average forecast of analysts surveyed by Seeking Alpha.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that excludes one-time costs, rose 28.1% to $156.1 million from $121.9 million.
Revenue rose 16.3% to $393 million from $337.8 million, but missed the $406.8 million forecast of Seeking Alpha-polled analysts. A $24.7 million revenue increase from Oak Grove Racing, a historical racing machine parlor that opened in fall 2020, helped boost Churchill Downs’ third-quarter revenue.
As mentioned, TwinSpires’ performance was strong; its adjusted EBITDA rose 56% from a year earlier to $31.2 million and its horseracing handle rose 31%.
One Churchill Downs quarterly highlight jumped from the financial pages to the sports pages: the $197.2 million sale of the company’s 26-acre racetrack property in Arlington Heights, Illinois, to the National Football League’s Chicago Bears. Churchill Downs said the deal isn’t expected to close until late 2022 or early 2023.
On June 17, Bears CEO Ted Phillips tweeted that the team had bid on the parcel, which is about 30 miles north of the Bears’ current home, Soldier Field. Many news outlets have speculated that the team might use the parcel to build a mixed-use complex, including a new stadium. However, the Bears’ Soldier Field lease runs through 2033.
Roy Arnold, CEO and president of Endeavor Properties, a finalist bidder for Arlington Heights, told the Chicago Tribune that he’d like to work with the Bears to offer both racing and football on the site. But Bears’ spokesman Scott Hagel told the newspaper the team isn’t interested in offering racing.
Meanwhile, Churchill Downs said it plans to open a new $80 million, 43,000-square-foot, historical-racing-machine entertainment venue, Derby City Gaming Downtown, in Louisville, Kentucky. The complex will have 500 historical racing machines and a fresh-air gaming area. Construction will start later this year; opening is expected in mid-2023.
On Sept. 29, Churchill Downs’ board approved a $500 million share-buyback program to replace a $300 million buyback program authorized in October 2018. The company said the new repurchase program has no time limit and may be suspended or dropped anytime.
Jefferies & Co. rates Churchill Downs “buy” and on Sept. 29 raised its price target for the stock to $283 from $245. After Jefferies analyst David Katz toured Churchill Downs’ properties, he told Seeking Alpha that the company has a unique and expanding growth pipeline and estimated that the company’s shares could rise.
Churchill Downs shares fell $2.34, or 0.93%, Wednesday to close at $250.41 on the Nasdaq. The stock’s price has risen 32.9% in 2021.
Follow Matthew Crowley on Twitter @copyjockey.
