Churchill Downs Posts Record Revenue Despite Net Income Drop

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Churchill Downs Inc. (CDI) has unveiled impressive second-quarter (Q2) revenue for 2023, hitting an all-time high while at the same time revealing a considerable decrease in net income year-over-year.

The company reported that the Live and Historical Racing and Gaming sectors had a significant role in setting new records for adjusted EBITDA. CDI reported Q2 net revenue of $768.5 million, which shows a 32% growth in comparison to Q2 2022’s $582.5 million. This substantial increase can be attributed to the strong performance of both the Live and Historical Racing and Gaming divisions.

A Closer Look at Financial Performance

Adjusted EBITDA also reached a high of $363.7 million, a 25% rise compared to $291.2 million in the same quarter of the previous year. Nevertheless, net income saw a sharp decrease of 58% to $143 million, down from $339.3 million in Q2 2022, due to increased costs following after-tax gains.

CDI attributed the decline in net income to several factors including a $193.6 million after-tax gain from the sale of Calder property in 2022, a $18.5 million after-tax rise in costs due to Presque Isle impairment in 2023, and a $6 million after-tax net increase in all other nonrecurring expenses.

Removing the effects of the aforementioned after-tax gains and increases, CDI states that its Q2 net income actually increased by $21.8 million year-over-year due to a $43.9 million after-tax rise primarily led by operational results, despite a partial offset by a $22.1 million after-tax rise in interest expense linked with larger outstanding debt balances.

Segment-Wise Performance and Future Plans

Examining CDI’s segment-wise Q2 results, revenue from Live and Historical Racing saw a massive jump of 48% to $408 million compared to $275.9 million in 2022. Meanwhile, the adjusted EBITDA for this segment rose by 36% to $223.5 million, up from $163.9 million in 2022.

CDI drew attention to the all-sources handle record set during Derby Week when the Churchill Downs Racetrack hosted the 149th Kentucky Derby as a key contributor to the adjusted EBITDA and the launch of the new First Turn Experience.

The company also revealed the recent opening of a new 123-room hotel with dining facilities at Derby City Gaming and Hotel in Louisville, Kentucky, which is expected to further boost the performance of the Live and Historical Racing segment.

A $14 million renovation of the Jockey Club Suites at Churchill Downs Racetrack, set to be completed in time for the 150th Kentucky Derby in May next year, has also been announced by CDI.

Gaming Revenue and Direct Online Wagering Exit

Revenue from the gaming segment increased by 34% to $247.9 million from $184.5 million in 2022, while its adjusted EBITDA saw a 16% improvement to $123.4 million from $106.8 million in 2022. The increases were credited to properties acquired in New York and Iowa through the P2E Transaction, despite a decrease in revenue from other gaming properties.

For TwinSpires operations, the revenue rose slightly to $139.1 million from $138.5 million in 2022, while the adjusted EBITDA remained flat at $33.9 million, influenced by the B2B Horse Racing expansion strategy and the decision to exit the direct online Sports and Casino business in Q1 2022.

Finally, CDI stated it finalized a $600 million offering of 6.75% senior notes due 2031 on April 25, 2023. Effective May 22, 2023, the company’s common stock was split two-for-one, with a corresponding increase in the number of its authorized common stock shares.

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