Churchill Downs Q2 revenue achieves new high but net income drops

Churchill Downs
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Churchill Downs Incorporated reported record revenue for the second quarter of 2023, however, net income dropped considerably compared to the previous year.

During the quarter, the company said that its live and historical racing and gaming segments achieved new adjusted EBITDA highs, helping CDI achieve a new record in overall adjusted EBITDA.

Reporting its Q2 results, Churchill Downs declared a record net revenue for the quarter of $768.5m, up 32 per cent year-over-year in comparison to Q2 2022’s performance of $582.5m, following significant gains across the aforementioned divisions.

The company’s adjusted EBITDA reached a new high as well, coming in at $363.7m, a 25 per cent increase compared to the previous year’s $291.2m thanks to the performances of live and historical racing and gaming segments.

However, net income declined considerably, falling by 58 per cent to $143m in comparison to Q2 2022’s $339.3m due to after-tax gains and increases.

CDI noted that net income was impacted by a $193.6m after-tax gain on the sale of the Calder property in 2022, an $18.5m after-tax increase in costs in 2023 due to Presque Isle impairment, and a $6m after-tax net increase in all other nonrecurring expenses.

Excluding the after-tax gains and increases listed above, the company stated that its Q2 net income increased by $21.8m YoY due to a $43.9m after-tax increase primarily driven by operation results, while also being partially offset by a $22.1m after-tax increase in interest expense associated with higher outstanding debt balances.

Taking a look at CDI’s Q2 results per segment, live and historical racing revenue rose by 48 per cent to $408m (2022: $275.9m), while adjusted EBITDA for the segment increased by 36 per cent to $223.5m (2022: $163.9m).

The company highlighted a record Derby Week all-sources handle when the Churchill Downs Racetrack ran the 149th Kentucky Derby, contributing to adjusted EBITDA and the debut of the new First Turn Experience.

The performance of the live and historical racing segment could be expected to keep improving into the future, as a new 123-room hotel with dining facilities was opened at Derby City Gaming and Hotel in Louisville, Kentucky in June.

CDI has also recently announced that the Jockey Club Suites at Churchill Downs Racetrack will receive a $14m renovation, to be completed in time for the 150th Kentucky Derby in May next year.

The company’s gaming segment also saw YoY improvements in revenue and adjusted EBITDA, with revenue rising by 34 per cent to $247.9m (2022: $184.5), while adjusted EBITDA improved by 16 per cent to $123.4m (2022: $106.8m).

Increases in both figures were attributed to the New York and Iowa properties acquired in the P2E Transaction, partially offset by a decrease from other gaming properties.

As for TwinSpires operations, the segment’s revenue slightly increased to $139.1m (2022: $138.5m) while adjusted EBITDA stayed flat at $33.9m (2022: $33.9m), impacted by the B2B horse racing expansion strategy and the decision to exit the direct online sports and casino business in Q1 2022.

CDI also stated that it closed an offering of $600m of 6.75 per cent senior notes due 2031 on April 25, 2023, and that effective May 22, 2023, the company’s common stock was split two-for-one with a proportionate increase in the number of its authorised shares of common stock.