While revenues climbed, predominantly driven by growth in its gaming and historical racing machine (HRM) venues, net income fell 5% to $76.7 million. This was attributed to multi-venue operators’ higher expenses and lower insurance recoveries, which impacted the company’s bottom line.

Gaming and HRM Segments Drive Churchill Downs Q1 Growth

In contrast to the operator’s overall net decline, CDI’s gaming revenues rose by over 9.9% to $267.2 million. Analysts say this was fueled by the company’s opening of the Terre Haute Casino Resort in Indiana in April last year and its ongoing expansion of its Virginia HRM properties.

Nevertheless, the organizations’ Live and Historical Racing segment attributed stronger growth results, increasing revenues to $276.4 million, equating to a rise of 11%,

Churchill Downs’ adjusted EBITDA subsequently edged up 1% to $245.1 million, which accounted for the modest operational gains witnessed across its operational portfolio. Its Gaming segment EBITDA rose slightly to $123.5 million, while Live and Historical Racing and Wagering Services delivered $102 million and $41.3 million, respectively.

TwinSpires – CDI’s sportsbook platform – held firm after posting $115.8 million despite declaring a $2.2 million decline in sports betting revenues. As a result, Churchill Downs formally exited Kentucky’s competitive sportsbook market earlier this year, citing its continued underperformance in its on-site operations.

However, the firm’s newest properties helped offset the regional problems faced, with its Terre Haute Casino Resort in Indiana alone injecting $31.6 million in revenue following its first full year of operations. Similarly, the Rose Gaming Resort in Virginia added a further $18.2 million, having launched in November 2024.

Yet, despite the additional revenue from these successful expansion venues, Churchill Downs ultimately missed Wall Street analysts’ expectations. Overall, CDI’s revenues fell short of the $647 million consensus by 0.68%, while its Earnings Per Share came in at $1.07 versus an expected $1.08.

Share Repurchase Program and Dividend Update

In a bid to recalibrate its capital strategy, particularly amid its broader income uncertainty, CDI has had to pause several high-profile development projects at its Churchill Downs Racetrack.

These have included delaying the completion of the Skye and Conservatory enhancements. However, the planned upgrades of its Finish Line Suites and The Mansion remain on schedule ahead of the upcoming 152nd Kentucky Derby next month.

Among other headlines following CDI’s Q1 results was the confirmation of a new $500 million share repurchase program previously approved in March. In Q1 alone, Churchill Downs successfully repurchased nearly 800,000 shares, an expenditure calculated at $89.4 million, and paid out its 14th consecutive annual dividend increase.

Financially, Churchill Downs Incorporated has demonstrated stable liquidity, reporting that after an amended credit agreement to reduce borrowing costs, its net debt is four times its annual EBITDA. Nevertheless, investors have seen the CDI share price fall by 8.9% in the last month, a notable decline given the S&P 500’s 6.6% overall decline.

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In a move that progresses a prior pledge of placing horse racing at the forefront of a five point transformation plan, the transaction will also see the company gain the Henderson-based entity’s opportunity to construct a track extension facility in nearby Owensboro, Kentucky.

Ellis Park, which celebrated 100 years of racing this year, also features a gaming facility venue with approximately 300 historical racing machines.

“This is an exciting announcement for the horse racing industry, the cities of Henderson and Owensboro, and the entire commonwealth of Kentucky,” said Kentucky Governor Andy Beshear. 

“Churchill Downs has proven it has the experience, resources, and desire to reinvigorate Ellis Park into a premier racing destination and provide unmatched gaming entertainment.”

Alongside this transaction, CDI has commenced planning for investments in both the Ellis Park racing infrastructure and to construct Owensboro Racing & Gaming.

This latter venue will have 600 HRMs, a simulcast wagering centre, and multiple food and beverage offerings, and forms part of an expected $75m outlay in Kentucky’s Henderson and Daviess Counties over the next 12 months.

“We are very enthused to welcome Ellis Park to the Churchill Downs racing family,” added Bill Carstanjen, Chief Executive Officer of CDI. 

“Our team is committed to building a summer meet at the ‘Pea Patch’ that keeps more Kentucky-bred horses and Kentucky-based trainers’ in their home state while attracting top horse racing talent from across the country to the Bluegrass State each July and August.”

The closing of the transaction is contingent upon approval by the Kentucky Horse Racing Commission. If change of control is approved, the parties expect to close the transaction shortly thereafter.

“This investment will ensure our Kentucky horsemen and women have the best year-round racing circuit in the country and create jobs throughout the region and state,” added Beshear. “Churchill Downs is a great corporate citizen and an important part of Team Kentucky.”

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One key facet of this will be a renewed focus on driving a profitable online TwinSpires horse racing business amid a much detailed exit from online sports betting and igaming.

This would see the group become a distributor of horse racing content through a business-to-business model that would enable “the online distribution of horse racing content to millions of new customers who have opened online sports wagering accounts”.

“We believe fundamentally that horse racing content should and will become available over time on sports wagering platforms to reach every wagering customer across the US,” Carstanjen commented.

Adding: “Given our expertise and extensive knowledge of pari-mutuel wagering on horse racing, we have the technical expertise, access to racing content, and technology to seamlessly integrate pari-mutuel wagering into existing third-party online sports wagering platforms. 

“We will also provide user interfaces and ancillary services that may be necessary or desired by online sports wagering platforms.”

With a number of key partnerships said to be forthcoming before the close of the year, CDI notes that the strategy would enable key sponsorships to be established and drive incremental content fees for its racetracks.

“Our TwinSpires strategy going forward will be to maintain and grow our existing TwinSpires platform, while growing the distribution of online horse racing content to the millions of us sports betting customers who have been acquired by sports betting platforms over the past couple of years,” it said.

Alongside this, a number of “major organic investments” were outlined which will deliver projects of $90m, $76m, and $148m at the Churchill Downs Racetrack, Derby City Gaming, and Turfway Park, respectively.

Furthermore, a $260m dollar development regarding Queen of Terre Project Haute Casino Resort, which was purchased last month, will be finalised during late 2023.

The casino will have up to 1,000 slots, 50 table games, a high limit gaming lounge and a sports bar along with several food and beverage venues. 

Carstanjen also reaffirmed that the $2.48bn purchase of substantially all of the assets” of Peninsula Pacific Entertainment is on track to close before the end of the current year, with the gain of Chasers Poker Room in Salem, New Hampshire anticipated during the third quarter.

“Our current plans contemplate opening a new facility with up to 800 gaming positions including HRM and table games, with the potential to add more after we opened,” he noted on the latter of those.

“We aren’t ready to announce the schedule yet. We will provide an update on our next earnings call.”

The final stage of the five-stage strategy saw a brief update issued on the sale of 116 acres next at the Calder Casino in Arlington Park property for $291m.

“We intend to utilise a real property we have already purchased for Derby City Gaming Downtown and the Queen of Terre Haute casino as well as real property we will be purchasing as part of the P2E acquisition and various 1031 exchange transactions to defer the tax on the gains from the sale of the Calder land,” Carstanjen closed.

“We’re also still on track to sell the 326-acre Arlington Park property to the Chicago Bears for $197m in the first quarter of 2023, pending completion of remaining conditions. We plan to utilise temporary one to change transactions to defer the tax on the gain on this sale as well.”

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The casino and entertainment operator is aiming to use certain proceeds of the sale to purchase property as part of the previously announced Peninsula Pacific Gaming acquisition, as well as “planning to use certain proceeds of the sale to purchase or invest in replacement property that qualifies as an internal revenue code §1031 transaction”.

With regards to the former, earlier in the year CDI detailed a definitive purchase agreement, which is expected to close by the end of the year, that will see the group “acquire substantially all of the assets” of Peninsula Pacific Entertainment for $2.48bn.

The agreement comprises interests within Virginia and New York, as well as the operations of Illinois’ Sioux City casino property.

However, CDI does retain ownership of approximately 54 acres of land on which the company’s wholly-owned Calder Casino sites. The company may sell 15-20 acres of land in the Miami Gardens area in the future for retail development.

In April, CDI suggested that its performance through the first quarter of the year backed-up a decision to exit the US’ online sports betting and casino scene, and transition its digital strategy to that of horse racing.

February saw the operator detail its exit within a six month time frame, stating that it does not see a path that the business model delivers predictable and acceptable margins “for at least several years”.

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The company has reported a best quarterly performance across revenue, net income and adjusted EBITDA across the year’s first quarter, with the former up 10.93 per cent to $364.1m (2021: $324.3m).

Net income closed the January to March time frame up 14.25 per cent to $42.1m (2021: $36.1m), as AEBITDA increased 13.93 per cent to close at $128.5m (2021: $110.6m).

This comes during a quarter that saw CDI announce agreements to acquire all of the assets of Peninsula Pacific Entertainment for total $2.485bn, as well as Chasers Poker Room in Salem, New Hampshire, which came alongside development plans for a total investment of up to $150m. 

Furthermore, the first two phases of a previously announced $90m expansion of Rivers Casino Des Plaines has also been completed.

On a segmented basis, gaming continues to be the largest contributor after recording Q1 revenue of 179.2m, up 14 per cent from 2021’s $154m due to certain capacity restrictions during the prior year that were no longer in place at Oxford, Calder, and Presque Isle.

Adjusted EBITDA increased 9.54 per cent to $91.1m (2021: $82.4m), driven by increased net revenue and a $3.1m rise from equity investments, both of which were due to the aforementioned capacity restrictions.

CDI’s live and historical racing division saw revenue increase 25.8 per cent to $87.2m (2021: $64.7m), primarily due to increases of $11m at Oak Grove Racing, Gaming and Hotel, $9.9m from Derby City Gaming, and $1.9m at Newport Racing & Gaming, reflecting overall growth and elimination of COVID mandated restrictions. Adjusted EBITDA rose 34.4 per cent to $27.9 (2021: $18.3m).

Finally, TwinSpires contributed revenue of $101.4m down 3.5 per cent from $105m year-on-year, with a $6.9m drop in horse racing partially offset by a $3.3m uptick across the sports betting and online casino division.

The former, says CDI, dropped due to patrons returning to brick and mortar facilities, while the latter benefitted from expansion into additional states. 

Adjusted EBITDA narrowly increased to $24.1m (2021: $23.1m), which is attributed to a $3.7m rise across sports and casino due to decreased marketing and promotional activities.

Earlier this year, CDI disclosed its intention to withdraw from the B2C online sports betting and gaming space over the course of the next six months.

The operator stated that the decision had been made as it does not see a path that the business model delivers predictable and acceptable margins “for at least several years”.

This came as the group reflected that it “had high hopes for the potential to build a profitable business in the space” upon the overturning of PASPA in 2018.

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This has seen Maureen Adams promoted to fill the aforementioned role as well as Ryan Jordan becoming senior vice president of real estate development, with Miller to officially leave the company on March 1, 2021.

This will end an eight-year stint in this role and 15-year tenure with the company, which started as president of Fair Grounds Race Course & Slots in New Orleans, Louisiana, where he led the design, construction and opening of the company’s first casino gaming operation. 

In 2010, Miller was named president of Calder Casino in Miami Gardens, Florida, before transitioning to corporate headquarters in Louisville, Kentucky, in 2013.

“Austin has been central to the growth and evolution of CDI over the years,” said Bill Mudd, president and chief operating officer of CDI. 

“His bold and creative vision for the company’s gaming properties will have an enduring impact. I am grateful for his leadership during a transformative time and wish him nothing but the best in his retirement.”

Adams, who will fill the void left by Miller, previously served as vice president of gaming operations, where she oversaw the day-to-day operation of eight gaming properties as well as the centralised marketing and analysis department

Adams’ career with CDI spans eight years and includes time as president and general manager of Calder Casino in Miami Gardens, Florida.

“Maureen brings over 25 years of gaming experience in finance, marketing, operations and leadership in 10 different states and 2 countries to this important role,” noted Mudd. 

“Not only does she bring a proven track record of success, Maureen has a keen aptitude for inspiring and developing her team to achieve both their personal and professional goals.”

Furthermore, Jordan’s responsibilities will include strategic planning at existing properties, as well as the leadership of design and construction for new properties across the company.

Jordan joined CDI in 2009 as vice president of operations for Churchill Downs Entertainment Group, and was later named general manager of Churchill Downs Racetrack.

“Ryan is the ideal candidate to lead the development of new properties across our portfolio,” added Mudd. “Throughout his 12-year career with the company he has successfully and consistently executed complex large-scale projects with a focus on operations, hospitality and entertainment.”

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Solidifying the recently temporary position, Murr’s now fixed role will see him responsible for the overall strategy and operations of the businesses. Moreover, the recently appointed president will also remain a senior vice president of CDI.

“I’ve been heavily involved with TwinSpires and our online gaming operations throughout my tenure at CDI,” expressed Murr. “I am passionate about these businesses and believe strongly in their future growth potential and strategic importance for CDI.”

During his 14-year tenure with the CDI, Murr has served in multiple leadership roles including president of United Tote, senior vice president and chief technology officer. 

Prior to joining CDI, Murr worked in information technology leadership roles at General Electric. He holds a bachelor’s degree in economics and a master of business administration from Bellarmine University.

“During his tenure with CDI, Ben has been an important leader in the growth across our operations,” noted Bill Carstanjen, chief executive officer of CDI. “He has been a key player throughout the extensive changes in our company over the last 14 years and will continue to move our TwinSpires and online businesses forward.”

Whilst securing Murr’s promotion, Churchill Downs Incorporated has stated that it will “move quickly” to fill the currently vacant positions of senior vice president and chief technology officer.

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The 43,000-square-foot venue will initially include 500 HRMs, a fresh-air gaming area and over 200 onsite parking spaces, as well as vowing to deliver unique bar concepts, a stage for music and live entertainment, and retail and merchandise store where guests can shop for Kentucky Derby-themed merchandise.

Construction on Derby City Gaming Downtown is slated to begin later this year with an anticipated opening date pencilled in for the early stages of 2023.

“Today, Churchill Downs becomes an important component of a downtown Louisville revitalisation that has been gaining momentum the last several years,” commented Louisville Mayor Greg Fischer. 

“Downtown is our community’s center, and as the economic engine of the region, our downtown also is our region’s center.

“Derby City Gaming Downtown will bring even more life to Fourth Street with just shy of an acre’s worth of space for more entertainment offerings, another stop for bourbon fans, a shopping outlet for Kentucky Derby merchandise and permanent jobs to downtown.

“Thank you, Churchill Downs, for your commitment, your investment and for your belief in our great city.”

Furthermore, CDI has also made a pledge of $1m to the West End Opportunity Partnership, a collaborative community-led initiative that will finance projects to kick start economic development and quality of life improvements in a district comprising nine West End neighborhoods. 

“CDI is committed to investing in the city of Louisville and today we are particularly excited to announce this new downtown entertainment venue,” explained Bill Carstanjen, CEO of CDI. 

“Our HRM expansion will be a win for the entire community in the Louisville area and will create $10m to $12m per year in additional purse money for Churchill Downs Racetrack. 

“It is important that Louisville is a city that is thriving — a great place to live, work and visit and we are committed to helping create economic vibrancy for every area of our community. 

“The West End Opportunity Partnership and our collaboration with OneWest can help us responsibly and sustainably achieve that vision.”

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Firstly, this will see three major multi-year capital investments to transform key areas of Churchill Downs Racetrack, which aim to provide “new, unique and extraordinary guest experiences for the Kentucky Derby in the coming years”

Furthermore, a $76m expansion at Derby City Gaming will include the construction of a hotel, additional gaming positions and enlargement of current amenities at the facility in order to better serve and attract guests.

This will add 135,000 square feet of new space to the venue, and open with 200 additional gaming positions. The new space will be able to ultimately accommodate up to 400 new gaming positions and will include a VIP gaming space.

“Derby City Gaming continues to exceed the company’s expectations,” said Bill Carstanjen, CEO of CDI. “The expansion of this premier gaming property is intended to create an elevated experience for our guests that is inclusive of all their hospitality needs, and is anticipated to fuel ongoing growth in purse contributions for Churchill Downs Racetrack.”

Alongside these expansion projects, CDI has also reported record net revenue of $515.1m compared to $185.1m during 2020 when nationwide shutdowns due to the global health pandemic were being enforced.

Second quarter net income of $108.3m comes in contrast to a loss of $118.8m in the prior year’s quarter, with record adjusted EBITDA of $233.3m increasing from $30.1m one year earlier.

Breaking these figures down across the group’s key reporting segments, ‘Gaming’ revenue reached $186m (2020: $37.3m), primarily due to the temporary suspension of operations of all properties, and the loss of revenue at each, during the prior year.

Adjusted EBITDA increased to $119.8m (-$1.8m), driven by a $69.8m increase from wholly-owned gaming properties and a $51.8m rise from equity investments, both of which were due to increased operating efficiencies and the aforementioned temporary suspension.

TwinSpires’ revenue nudged forward to $135.9 (2020: $121.7m), due to a $7.2m increase from horse racing and a $7m uptick from sports and casino, the latter of which came as a result of expansion in additional states and increased marketing and promotional activities.

Adjusted EBITDA dropped from $38.7m to $23.1m, which CDI aligns to a $8.2m decrease from horse racing due primarily to an increase in marketing and advertising expense associated with the running of the 147th Kentucky Oaks and Derby with capacity restrictions.

This, it adds, was partially offset by an increase in net revenue, as well as a $7.4m increase in the loss from the sports and casino business due to increased marketing and promotional activities. 

The group’s ‘Live and Historical Racing’ segment scored the highest revenue outcome during the second quarter with $190.5m (2020: $30.3m), with adjusted EBITDA reaching $98.4m (2020: $3.6m).

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Net revenue for the quarter increased 28.2 per cent to $324.3m (2020: $252.9m), as net loss swung from 2020’s $23.4m to income of $36.1m, and adjusted EBITDA doubled to $110.6m (2020: $55.3m).

This comes after CDI suggested that it was focused on growth opportunities in its path to recovery, adding that it is attacking the year “with a relentless focus on strategic and organic growth opportunities.”

Breaking down those headline figures further, the company’s gaming segment took the lion’s share with revenue of $152m, representing a 4.18 per cent rise from $145.9m. 

Adjusted EBITDA came in at $82.4m (2020: $47.9m), driven by a $24.1m increase at wholly-owned gaming properties and a $10.4m uplift from equity investments.

The group’s Fair Grounds Race Course & Slots, located in New Orleans, came out on top in the gaming division with revenue of $38.3m, a 21 per cent rise from $31.6m, trailed by Pennsylvania’s Presque Isle Downs and Casino, where revenue dropped to $23.8m, (2020: $27m).

Further increases came the way of Maryland’s Ocean Downs Casino’s revenue of $20m (2020: $14.8m), as well as $14.4m (2020: $12m) at Riverwalk Casino Hotel and Harlow’s Casino Resort & Spa’s $14m (2020: $11.3m), both located in Mississippi.

Revenue drops were also felt at Florida’s Calder Casino, where revenue reached $20.9m (2020: $21.8m); Maine’s Oxford Casino Hotel where revenue finished up at $15.7m (2020: $20.1m); and Lady Luck Nemacolin, with the Pennsylvania property reaching $4.9m (2020: $7.3m).

The recently rebranded TwinSpires saw revenue surge 44.2 per cent to $99.7m (2020: $69.1), primarily driven by $92.7m (2020: $66.6m) derived from horse racing, with the remaining $7m (2020: $2.5m) coming from sports and casino.

Furthermore, the group’s renamed live and historical racing segment scored an 189.1 per cent revenue rise to $63.2m (2020: $21.8m), due to a $19.4m increase at Oak Grove as a result of the opening of the HRM facility in September 2020 and hotel in October 2020, and an $11.3m increase from Derby City Gaming, primarily due to the temporary suspension of operations in March 2020 as a result of the COVID-19 pandemic.

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