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Oct. 28, 2020, 4:05 p.m. EDT

Churchill Downs Incorporated Reports 2020 Third Quarter Results

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LOUISVILLE, Ky., Oct 28, 2020 (GLOBE NEWSWIRE via COMTEX) -- Churchill Downs Incorporated /zigman2/quotes/205054336/composite CHDN +1.20% ("CDI" or the "Company") today reported business results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights/Update on Operations

-- Net revenue of $337.8 million, up 10% over the prior year quarter

-- Net income of $43.2 million compared to $14.8 million in the prior year quarter

    -- Adjusted net income of $47.8 million, compared to $22.3 million in the prior year quarter

    -- Adjusted net income of $47.8 million, compared to $22.3 million in the prior year quarter

    -- Adjusted EBITDA of $121.9 million, up 39% compared to $88.0 million in the prior year quarter

    -- Ran the 146th Kentucky Oaks and Derby on September 4th and 5th

    -- TwinSpires delivered record revenue of $116.0 million, up 77% over the prior year quarter

    -- Maintained strong margins in our wholly-owned casinos

    -- Opened Oak Grove Racing, Gaming & Hotel in Oak Grove, Kentucky

    -- Opened Newport Racing & Gaming in Newport, Kentucky

    (a) Reflects amounts attributable to CDI.

    
    
    
    
    
    
            CONSOLIDATED RESULTS                 Third Quarter
            (in millions, except per share data) 2020                  2019
            Net revenue                          $         337.8       $         306.3
            Net income                           $         43.2        $         14.8
            Diluted EPS                          $         1.08        $         0.36
            Adjusted net income                  $         47.8        $         22.3
            Adjusted diluted EPS                 $         1.19        $         0.55
            Adjusted EBITDA                      $         121.9       $         88.0
            (a) Reflects amounts attributable to CDI.
            (b) These are non-GAAP measures. See explanation of non-GAAP measures below.
            
    
    
    

    "Our properties' extensive operating protocols have been extremely effective and have allowed us to operate safely during the pandemic," said Bill Carstanjen, Chief Executive Officer of the Company. "We have continued to refine and improve our efficiencies and safety protocols in the fourth quarter."

    Third Quarter 2020 Net Income Attributable to CDI

    The Company's third quarter of 2020 net income attributable to CDI was $43.2 million compared to $14.8 million in the prior year quarter. The Company's third quarter of 2020 net income from continuing operations was $43.1 million compared to $15.2 million in the prior year quarter.

    The following items impacted the comparability of the Company's third quarter net income from continuing operations:

    -- $3.3 million after-tax expense decrease related to our equity portion of the non-cash change in fair value of Midwest Gaming's (the parent company of Rivers Des Plaines) interest rate swaps;

    -- $3.0 million after-tax decrease in expenses due to legal reserves in the prior year quarter that did not recur in the current year quarter; and

    -- $0.5 million non-cash tax impact related to the re-measurement of our net deferred tax liabilities in the third quarter of 2019 that did not recur in the current year quarter based on an increase in revenue related to states with higher tax rates.

    -- Partially offset by a $4.3 million after-tax increase in higher transaction, pre-opening and other expenses.

    Excluding these items, net income from continuing operations increased $25.4 million primarily due to the following:

    -- $27.6 million after-tax increase driven by the results of our operations and equity income from our unconsolidated affiliates.

    -- Partially offset by $2.2 million after-tax increase in interest expense associated with higher outstanding debt balances.

    COVID-19 Update

    The supplemental information in this release provides additional detail on the temporary closures and the respective reopening dates by segment and property for our Company as a result of the COVID-19 pandemic. As of September 30, 2020, all of our properties have reopened with patron restrictions and gaming capacity limitations. We also implemented other initiatives to facilitate social distancing and enhanced cleaning, such as increased frequency of cleaning and sanitizing of all high-touch surfaces, mandatory temperature checks of all guests and team members upon entry and required training for all team members on safety protocols. Certain amenities at our properties have continued to be suspended, including all of our food buffets and valet services, and certain restaurants and food outlets. As the Company has reopened these properties, certain employees have returned to work while others remain on temporary furlough due to the capacity restrictions at these properties.

    Our third quarter of 2020 financial results were materially impacted by the rescheduling of the 146th Kentucky Oaks and Derby from the second quarter of 2020 to the third quarter of 2020 without spectators, by the temporary suspended operations at certain properties, and continued restrictions at the properties that have reopened.

    Oak Grove Racing, Gaming & Hotel

    On September 18, 2020, the Company opened simulcast and historical racing machine ("HRM") operations at Oak Grove Racing, Gaming & Hotel ("Oak Grove") in Oak Grove, Kentucky with 1,325 HRMs. The 128-room hotel at Oak Grove opened October 15, 2020.

    Effective September 11, 2020, the Company purchased the remaining equity interests of WKY Development, LLC, a joint venture that owns Oak Grove, from Keeneland Association, Inc. for $3.0 million. As of September 30, 2020, the Company no longer reports a noncontrolling interest associated with Oak Grove in the accompanying consolidated financial statements.

    Newport Racing & Gaming

    The Company also invested $38.4 million to build-out Newport Racing & Gaming ("Newport"), located in Newport, Kentucky, to create a premier entertainment experience as an extension of Turfway Park. Newport opened on October 2, 2020 and has a pari-mutuel simulcast area, a 17,000 square foot gaming floor with 500 HRMs, and a feature bar.

    BetAmerica Update

    On September 24, 2020, the Company opened a retail BetAmerica sportsbook at Bronco Billy's Casino in Cripple Creek, Colorado, and on September 25, 2020, the Company opened a retail BetAmerica sportsbook at Island Resort & Casino in Harris, Michigan. BetAmerica plans to launch its mobile sportsbook and iGaming application in each of Pennsylvania, Colorado and Michigan, and its mobile sportsbook application in Indiana, subject to regulatory approvals.

    In August 2020, the Company announced the entry into multi-year agreements with GAN Limited and Kambi Group PLC to provide player account management, casino platform, sports trading and risk management services to BetAmerica.

    Segment Results

    The summaries below present net revenue from external customers and intercompany revenue from each of our reportable segments:

    
    
    
    
    
    
            Churchill Downs Third Quarter
            (in millions)   2020      2019
            Net revenue     $  68.0   $ 32.7
            Adjusted EBITDA 23.9      5.2
            
    
    
    

    For the third quarter of 2020, net revenue increased $35.3 million from the prior year quarter due to a $31.9 million increase from Churchill Downs Racetrack primarily due to the rescheduling of the 146th Kentucky Oaks and Derby without spectators, and a $3.4 million increase from Derby City Gaming.

    Adjusted EBITDA increased $18.7 million in the third quarter of 2020 from the prior year quarter due to a $14.9 million increase from Churchill Downs Racetrack due to the rescheduling of the 146th Kentucky Oaks and Derby without spectators, and a $3.8 million increase at Derby City Gaming due to the increase in revenue and favorable cost structure subsequent to the temporary closure of the property.

    
    
    
    
    
    
            Online Wagering Third Quarter
            (in millions)   2020       2019
            Net revenue     $  126.4   $  70.4
            Adjusted EBITDA 31.9       15.0
            
    
    
    

    For the third quarter of 2020, net revenue increased $56.0 million from the prior year quarter primarily due to a $54.1 million increase from TwinSpires. TwinSpires handle grew $253.7 million, or 68.8%, compared to the prior year quarter.

    Our online sports betting and iGaming net revenues increased $1.9 million compared to the prior year quarter primarily due to a full quarter of iGaming results in Pennsylvania for the third quarter of 2020 compared to the prior year quarter.

    Adjusted EBITDA increased $16.9 million in the third quarter of 2020 from the prior year quarter primarily due to a $16.4 million increase from TwinSpires due to an increase in handle and a $0.5 million decrease in the loss from our online sports betting and iGaming operations.

    
    
    
    
    
    
            Gaming          Third Quarter
            (in millions)   2020       2019
            Net revenue     $  134.9   $  178.6
            Adjusted EBITDA 75.4       71.7
            
    
    
    

    For the third quarter of 2020, net revenue decreased $43.7 million from the prior year quarter primarily due to an $18.0 million decrease due to the temporary suspension of operations at Calder from July 2, 2020 to August 31, 2020; and a $15.0 million decrease at Oxford, a $10.5 million decrease at Presque Isle, a $2.8 million decrease at Lady Luck Nemacolin, a $2.4 million decrease at Ocean Downs, and a $0.3 million decrease at Harlow's, all of which were due to the patron restrictions and gaming capacity limitations at each property. Partially offsetting these decreases were a $2.9 million increase at Fair Grounds and VSI and a $2.4 million increase at Riverwalk, driven by targeted promotional offers and higher unrated play.

    Adjusted EBITDA increased $3.7 million for the third quarter of 2020 from the prior year quarter driven by an $8.8 million increase due to strong performances from our Rivers Des Plaines and Miami Valley Gaming equity investments. These increases were partially offset by a $5.1 million decrease at our wholly-owned Gaming properties as increased Adjusted EBITDA for our Mississippi and Louisiana properties was more than offset by a decrease in Adjusted EBITDA for our other wholly owned Gaming properties compared to the prior year quarter due to patron restrictions and gaming capacity limitations.

    All Other

    For the third quarter of 2020, All Other Adjusted EBITDA decreased $5.4 million primarily due to a $3.0 million decrease from Arlington due to the temporary suspension of operations and patron restrictions during our live meet in the third quarter of 2020 compared to the prior year quarter, and a $2.4 million decrease at Corporate primarily due to an adjustment to our estimated annual payout related to accrued bonuses.

    Annual Dividend

    In October 2020, the Company's Board of Directors approved an annual cash dividend on CDI's common stock of $0.622 per outstanding share, a 7 percent increase over the prior year. The dividend is payable on January 6, 2021, to shareholders of record as of the close of business on December 4, 2020, with the aggregate cash dividend paid to each stockholder rounded to the nearest whole cent. This marks the tenth consecutive year that the Company has increased the dividend.

    Conference Call

    A conference call regarding this news release is scheduled for Thursday, October 29, 2020, at 8 a.m. ET. Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast and broadcast of the call at http://ir.churchilldownsincorporated.com/events.cfm , or by dialing (877) 372-0878 and entering the pass code 5858624 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. An online replay will be available at approximately noon ET on Thursday, October 29, 2020, and will continue to be available for two weeks. A copy of the Company's news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at www.churchilldownsincorporated.com .

    Use of Non-GAAP Measures

    In addition to the results provided in accordance with GAAP, the Company also uses non-GAAP measures, including adjusted net income, adjusted diluted EPS, EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA.

    The Company uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company's operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP, and should not be considered as an alternative to, or more meaningful than, net income or diluted EPS (as determined in accordance with GAAP) as a measure of our operating results.

    We use Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

    Adjusted net income and adjusted diluted EPS exclude discontinued operations net income or loss; net income or loss attributable to noncontrolling interest; changes in fair value for interest rate swaps related to Midwest Gaming; recapitalization costs related to the Midwest Gaming transaction; transaction expense, which includes acquisition and disposition related charges, Calder racing exit costs, as well as legal, accounting, and other deal-related expense; pre-opening expense; and certain other gains, charges, recoveries, and expenses.

    Adjusted EBITDA includes the Company's portion of EBITDA from our equity investments.

    Adjusted EBITDA excludes:

    -- Transaction expense, net which includes:

      -- Acquisition and disposition related charges;

      -- Acquisition and disposition related charges;

      -- Calder racing exit costs; and

      -- Other transaction expense, including legal, accounting, and other deal-related expense;

      -- Stock-based compensation expense;

      -- Midwest Gaming's impact on our investments in unconsolidated affiliates from:

        -- The impact of changes in fair value of interest rate swaps; and

        -- The impact of changes in fair value of interest rate swaps; and

        -- Recapitalization and transaction costs;

        -- Asset impairments;

        -- Gain on Ocean Downs/Saratoga Transaction;

        -- Legal reserves;

        -- Pre-opening expense; and

        -- Other charges, recoveries and expenses

        For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the condensed consolidated statements of comprehensive (loss) income. Refer to the reconciliation of comprehensive income to Adjusted EBITDA included herewith for additional information.

        About Churchill Downs Incorporated

        Churchill Downs Incorporated (the "Company", "we", "us", "our") is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event, the Kentucky Derby. We also own and operate three pari-mutual gaming entertainment venues in Kentucky: Derby City Gaming; Oak Grove Racing, Gaming, and Hotel; and Newport Racing and Gaming. Our online wagering business owns and operates TwinSpires.com, the largest and most profitable online horse racing wagering platform in the U.S., and BetAmerica, an online sports betting and iGaming platform in the U.S. We are also a leader in brick-and-mortar casino gaming with approximately 11,000 slot machines and video lottery terminals ("VLTs") and 200 table games in eight states. Additional information about CDI can be found online at www.churchilldownsincorporated.com .

        Certain statements made in this news release contain various "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "seek," "should," "will," and similar words or similar expressions (or negative versions of such words or expressions).

        Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors, among others, that may materially affect actual results or outcomes include the following: the impact of the novel coronavirus (COVID-19) pandemic and related economic matters on our results of operations, financial conditions and prospects; the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit; additional or increased taxes and fees; public perceptions or lack of confidence in the integrity of our business or any deterioration in our reputation; loss of key or highly skilled personnel; restrictions in our debt facilities limiting our flexibility to operate our business; general risks related to real estate ownership, including fluctuations in market values and environmental regulations; catastrophic events and system failures disrupting our operations; online security risk, including cyber-security breaches; inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events; increases in insurance costs and inability to obtain similar insurance coverage in the future; inability to identify and complete acquisition, expansion or divestiture projects, on time, on budget or as planned; difficulty in integrating recent or future acquisitions into our operations; costs and uncertainties relating to the development of new venues and expansion of existing facilities; risks associated with equity investments, strategic alliances and other third-party agreements; inability to respond to rapid technological changes in a timely manner; inadvertent infringement of the intellectual property of others; inability to protect our own intellectual property rights; payment-related risks, such as risk associated with fraudulent credit card and debit card use; compliance with the Foreign Corrupt Practices Act or applicable money-laundering regulations; risks related to pending or future legal proceedings and other actions; inability to negotiate agreements with industry constituents, including horsemen and other racetracks; work stoppages and labor issues; changes in consumer preferences, attendance, wagering and sponsorship with respect to Churchill Downs Racetrack and the Kentucky Derby; personal injury litigation related to injuries occurring at our racetracks; weather and other conditions affecting our ability to conduct live racing; the occurrence of extraordinary events, such as terrorist attacks, public health threats and civil unrest; changes in the regulatory environment of our racing operations; increased competition in the horse racing business; difficulty in attracting a sufficient number of horses and trainers for full field horse races; our inability to utilize and provide totalizator services; changes in regulatory environment of our online horse wagering business; a reduction in the number of people wagering on live horse races; increase in competition in our online horse racing wagering business; uncertainty and changes in the legal landscape relating to our online horse racing wagering business; continued legalization of online sports betting and iGaming in the United States and our ability to predict and capitalize on any such legalization; inability to expand our sports betting operations and effectively compete; failure to manage risks associated with sports betting; failure to comply with laws requiring us to block access to certain individuals could result in penalties or impairment with respect to our mobile and online wagering products; increased competition in our casino business; changes in regulatory environment of our casino business; concentration and evolution of slot machine manufacturing and other technology conditions that could impose additional costs; and inability to collect gaming receivables from the customers to whom we extend credit.

        We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

        /zigman2/quotes/205054336/composite
        US : U.S.: Nasdaq
        $ 229.56
        +2.72 +1.20%
        Volume: 238,518
        March 5, 2021 4:00p
        P/E Ratio
        N/A
        Dividend Yield
        0.27%
        Market Cap
        $8.73 billion
        Rev. per Employee
        $150,571
        loading...
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