Churchill Downs Incorporated
Image: Shutterstock

Churchill Downs Incorporated has doubled down on investments across its live and historical racing units as M&A activity continued in Q3. 

Live and Historical racing proved to be a high-performing business unit during Q3 for CDI, which has made significant investments in the unit through M&A activity. 

Posting its Q3 trading report, CDI posted total corporate revenues reached $383.1m for the three-month period ending Sep 30, down 2.5 per cent from Q3 2021’s figure of $393m. 

Similarly, net income was slashed by 7.2 per cent to $57m, down from $61.4m in the same period last year. 

But broken down by segment, it is clear to see the reasoning behind the racing investment, as revenues grew by 25.6 per cent in this segment up to $102.4m from $81.5m just a year ago. Adjusted EBITDA in racing also grew 25.4 per cent to $34.5m. 

Racing success was attributed to an increased handle from holding more live race days in the third quarter of 2022 as compared to the same quarter of 2021.

The gaming unit, the most lucrative business unit in terms of both revenue and EBITDA, was relatively flat in terms of revenue which hit $185.9m for Q3, stagnant from Q3 2021’s $185.6m. 

This slight increase was primarily down to tough comparatives, considering a repeat of Hurricane Ida did not occur in Q3 of 2022 which severely impacted Fair Grounds and Ocean Downs. 

Adjusted EBITDA for the gaming unit was up slightly to $111.6m, attributed to a $1.4m increase in equity investments offset by a $500,000 decrease in wholly-owned gaming properties. 

The TwinSpires unit saw revenues fall slightly to $107.4m from $109m last year, however, adjusted EBITDA for the period climbed from $22.1m to $31.1m, an increase of 40.7 per cnet attributed to a vast reduction in online marketing and promotional spending.

The company noted three key acquisitions made during Q3 to grow its business and diversify its offering across the US.

This includes purchasing Chasers Poker Room in Salem New Hampshire, with a total investment package of around $150m and plans to develop an ‘expanded charitable gaming facility in Salem’. 

Moreover, CDI acquired Ellis Park in Henderson Kentucky for $79m cash. The racetrack purchase features 300 historical racing machines and the firm also ‘assumes the opportunity to construct a track extension facility in Owensboro, Kentucky. 

Finally, CDI has agreed a deal to acquire Peninsula Pacific Entertainment (P2E) for a total consideration of $2.75bn, covering Colonial Downs Racetrack in New Kent, Virginia, six historical racing entertainment venues across Virginia, del Lago Resort & Casino in Waterloo, New York, and Hard Rock Hotel & Casino in Sioux City, Iowa.

This acquisition of P2E also includes rights in Virginia to develop up to five HGRM venues in the state with up to 2,300 HRMs.

Due to decreasing marketing spending and increasing revenues in the racing unit, CDI celebrated record Q3 adjusted EBITDA of $163.2m

However, CDI’s total net income came down by 7.2 per cent to $57m, which was impacted by a $2.4m after-tax expense increase relating to transaction, pre-opening and other expenses, net; and a $1.4m after-tax reduction in the benefit related to its equity portion of the non-cash change in the value of Rivers Des Plaines’ interest rate.