10-Q: Canterbury Park Q3 Revenue Dips, CEO Salary Reduced

Canterbury Park Holding Corporation reported a decline in Q3 2025 net revenues and net income, alongside a temporary salary reduction for its CEO.

Summary

• Total net revenues for the three months ended September 30, 2025, were $18.3 million, a 5.0% decrease compared to $19.3 million in the same period of 2024.
• Total net revenues for the nine months ended September 30, 2025, were $47.1 million, a 5.0% decrease compared to $49.6 million in the same period of 2024.
• Net income for the three months ended September 30, 2025, was $487,000, a 75.9% decrease from $2.0 million in the prior year's quarter.
• The company reported a net loss of $139,000 for the nine months ended September 30, 2025, compared to net income of $3.4 million in the same period of 2024.
• Basic earnings per share for Q3 2025 was $0.10, down from $0.40 in Q3 2024, and a basic loss per share of $0.03 for YTD 2025, down from earnings of $0.67 in YTD 2024.
• Adjusted EBITDA decreased by 14.2% to $2.8 million for Q3 2025 and by 25.6% to $6.6 million for YTD 2025.
• Casino revenue decreased by 9.7% for Q3 and 7.3% for YTD 2025, primarily due to increased competition and a lower average collection revenue rate in table games.
• Food and beverage revenue increased by 13.1% for Q3 and 3.9% for YTD 2025, driven by increased catering operations for special events and a new point-of-sale system.
• Pari-mutuel revenue decreased by 2.7% for Q3 and 7.4% for YTD 2025, attributed to fewer live race days and lower simulcast revenues.
• Randall D. Sampson, President and Chief Executive Officer, voluntarily proposed a 20% reduction in his annual base salary from November 9, 2025, to March 28, 2026.
• The barn relocation and redevelopment plan is substantially complete, with minimal expenditures remaining.
• The company holds a TIF receivable of approximately $20.161 million as of September 30, 2025, with payments expected late Q4 2025 or early Q1 2026.
• Real estate joint ventures show progress, with Phase II of Triple Crown Residences 93% leased and Phase I 52% leased; The Omry at Canterbury senior apartments are 98% leased.

Sentiment

Score: 3

Explanation: The company reported significant declines in net revenues, net income, and Adjusted EBITDA, resulting in a net loss year-to-date. Core gaming and racing operations are struggling with increased competition and declining popularity, necessitating higher marketing spend. While real estate development shows some progress, it's not offsetting the operational declines, and equity investments are generating losses. The CEO's voluntary salary reduction underscores the financial pressure. Despite highlighting liquidity and asset values, the deteriorating operational performance and profitability trends suggest a negative outlook.

Positives

• Food and beverage revenue increased by 13.1% for the three months and 3.9% for the nine months ended September 30, 2025, due to increased catering and a new point-of-sale system.
• The barn relocation and redevelopment plan is substantially complete, with over 300 new stalls in operation.
• Construction of the 19,000-seat amphitheater by Swervo Development Corporation is progressing, with a full season opening scheduled for summer 2026.
• Phase II of The Doran Group's Triple Crown Residences at Canterbury Park is 93% leased, and Phase I is 52% leased, indicating strong residential demand.
• The Omry at Canterbury senior market rate apartments are 98% leased.
• Boardwalk Kitchen & Bar, a new restaurant and entertainment venue, opened in late June 2025 to positive customer reception.
• A new 28,000 square-foot commercial office building in the Winners Circle development is complete and 66% leased.
• The company maintains strong liquidity with $16.990 million in cash, cash equivalents, and restricted cash as of September 30, 2025.
• No borrowings were outstanding on the company's $5 million revolving line of credit as of September 30, 2025, and it is in compliance with financial covenants.
• The company has over $20 million in TIF receivables on its balance sheet, with payments expected to begin late Q4 2025 or early Q1 2026.

Negatives

• Total net revenues decreased by 5.0% for both the three and nine months ended September 30, 2025, compared to the same periods in 2024.
• Casino revenue declined by 9.7% for Q3 and 7.3% for YTD 2025, primarily due to increased competition and a lower average collection revenue rate in table games.
• Pari-mutuel revenue decreased by 2.7% for Q3 and 7.4% for YTD 2025, due to fewer live race days and lower simulcast revenues.
• Net income decreased by 75.9% for the three months ended September 30, 2025, and the company reported a net loss for the nine months ended September 30, 2025.
• Adjusted EBITDA decreased by 14.2% for Q3 and 25.6% for YTD 2025, primarily due to an overall decrease in income from operations.
• Loss from equity investments increased to $3.9 million for the nine months ended September 30, 2025, from $3.4 million in the prior year.
• Other revenues decreased by 11.1% for Q3 and 0.6% for YTD 2025, mainly due to admission revenue decreases related to concert events.
• Advertising and marketing costs increased by 18.6% for Q3 and 26.7% for YTD 2025, reflecting efforts to attract and retain players amidst increased competition.
• Professional and contracted services increased by 1.9% for Q3 and 3.2% for YTD 2025, partly due to increased live racing regulation costs from the Horseracing Integrity and Safety Authority.
• The CEO's voluntary salary reduction indicates financial pressures within the company.

Risks

• May not be successful at implementing its growth strategy.
• Business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of its control.
• Has experienced a decrease in revenue and profitability from live racing.
• May not be able to attract a sufficient number of horses and trainers to achieve above average field sizes.
• Faces significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities.
• Nationally, the popularity of horse racing has declined.
• A lack of confidence in the integrity of core businesses could affect the ability to retain customers and engage with new customers.
• Horse racing is an inherently dangerous sport and the racetrack is subject to personal injury litigation.
• Business depends on using totalizator services.
• Inclement weather and other conditions may affect the ability to conduct live racing.
• Subject to changes in the laws that govern the business, including the possibility of an increase in gaming taxes.
• Subject to extensive regulation from gaming authorities that could adversely affect the company.
• Relies on the efforts of its partner Doran for the development and profitable operation of its Triple Crown Residences at Canterbury Park joint venture.
• Relies on the efforts of its partner Greystone Construction for a new development project.
• May not be successful in executing its real estate development strategy.
• Obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue.
• Faces competition from other real estate developers.
• May be adversely affected by the effects of inflation.
• Success may be affected if not able to attract, develop and retain qualified personnel.
• The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties.
• Information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.
• Processes, stores, and uses personal information and other data, which subjects it to governmental regulation and other legal obligations related to privacy.

Future Outlook

The company expects to substantially complete the remaining developer improvements under the Redevelopment Agreement by July 17, 2027, and anticipates reimbursement for these costs. Management believes that current unrestricted funds, available credit, and potential future land sales will be sufficient to meet liquidity and capital requirements for regular operations and planned development expenses for at least the next twelve months. However, any additional significant real estate development, facility improvements, or strategic growth transactions would likely necessitate further financing, potentially through joint ventures, debt, or equity. Management also believes that additional purse supplements for horse racing will ultimately be secured through legislative action, specifically from revenues generated by sports wagering licenses.

Management Comments

• "The quarterly results were consistent with year-to-date trends as we remain focused on increasing casino traffic and our ongoing growth and development strategies."
• "We continue to take measures to improve operating efficiencies, particularly labor which is our largest expense, while pursuing opportunities to continue to grow our entertainment and hospitality businesses and develop our real estate."
• "The success of this venue [Boardwalk Kitchen & Bar], particularly the large outdoor patio located adjacent to the racetrack, is confirming the development opportunity of the unique experience and views of horses and the tracks greenspace."
• "This, coupled with our successful events business, is validating our proof-of-concept of drawing more visitors to our destination for entertainment, gaming, dining and other experiences as we continue to unlock the monetary value of our real estate through our Canterbury Commons development."
• "While our growth and efficiency initiatives are focused on maximizing cash flows from our existing gaming, F&B and entertainment operations, we believe that Canterburys record of consistent cash flow, return of capital through quarterly cash dividends and strong balance sheet are not reflected in our current valuation."
• "With the proven successes of our development and diversification initiatives and a pipeline of exciting growth opportunities, we remain committed to delighting our guests, serving our residents and delivering long-term value to shareholders."

Industry Context

The company operates in a competitive gaming and entertainment market, facing challenges from other racing and gaming operations, as well as broader entertainment options. The decline in casino revenue due to increased competition and the national decline in horse racing popularity reflect ongoing industry trends. In response, the company is actively diversifying its revenue streams through real estate development and new entertainment venues (e.g., Boardwalk Kitchen & Bar, upcoming amphitheater) to create a multi-faceted destination, a common strategy for traditional gaming operators seeking to enhance visitor engagement and unlock asset value.

Management Changes

Corporate Governance

Related Party Transactions

• The company has made member loans to the Doran Canterbury I and Doran Canterbury II joint ventures totaling approximately $4,241,000 as of September 30, 2025.
• Accrued interest on these member loans totaled $1,181,000 as of September 30, 2025, with the company recording interest income of $98,000 for Q3 2025 and $283,000 for YTD 2025.
• The company expects to be fully reimbursed for these member loans as the joint ventures achieve positive cash flow.
• Related party receivables of approximately $19,000 as of September 30, 2025, for various related costs, expected to be reimbursed in the following year.
• The company is obligated under an Indemnity Agreement with Doran affiliates for Doran Canterbury I, to reimburse loan guarantors up to a maximum of $7,500,000 as of September 30, 2025.
• The company is obligated under an Indemnity Agreement with Doran affiliates for Doran Canterbury II, to reimburse loan guarantors up to a maximum of $1,000,000 as of September 30, 2025.

Stakeholder Impact

• Shareholders: Experienced a significant decline in net income and a net loss year-to-date, negatively impacting shareholder value, despite continued quarterly cash dividends of $0.07 per share. The company emphasizes its undervalued assets (cash, TIF receivables, real estate joint ventures).
• Employees: Salaries and benefits were essentially flat for Q3 but increased 1.2% YTD due to annual wage increases and state minimum wage hikes. Stock-based compensation and 401(k) stock match continue.
• Customers: Benefit from a new point-of-sale system improving food and beverage service, new casino promotions aimed at retention, and upcoming entertainment venues like Boardwalk Kitchen & Bar and the amphitheater designed to enhance the overall experience.
• Horsepersons: Purse expense decreased due to lower Casino and pari-mutuel revenues. The company guaranteed additional purse monies for the 2025 live race meet and recorded a receivable for overpayment, with potential reimbursement from future purse supplements.
• Creditors: The company maintains compliance with financial covenants and has no outstanding borrowings on its $5 million line of credit, indicating a stable position regarding its credit obligations.

Next Steps

• Continue efforts to increase casino traffic and implement growth and development strategies.
• Implement measures to improve operating efficiencies, particularly labor costs.
• Explore additional entertainment and hospitality opportunities for remaining trackside parcels.
• Progress on the market analysis study with Hunden Partners to identify the highest and best use for 25 acres of prime land near the amphitheater.
• Swervo Development Corporation's 19,000-seat amphitheater is scheduled to open for a full season in the summer of 2026.
• Expect to receive payments for TIF receivables late in Q4 2025 or very early in 2026.
• Expect to substantially complete the remaining developer improvements under the Redevelopment Agreement by July 17, 2027.
• Management believes additional purse supplements will be obtained through legislative action providing revenues from sports wagering licenses.

Key Dates

Recommendation

The company's financial performance for Q3 and YTD 2025 shows significant deterioration, with substantial declines in net revenues, net income (and a year-to-date net loss), and Adjusted EBITDA. The core casino and pari-mutuel segments are struggling with increased competition and declining industry trends, necessitating higher marketing expenditures. While real estate development projects are progressing, they are not yet offsetting the operational weaknesses, and equity investments are contributing to losses. The voluntary salary reduction by the CEO further signals internal recognition of financial challenges. Despite highlighting liquidity and asset values, the negative operational trajectory and profitability concerns warrant a 'sell' recommendation for a seasoned investor.

Keywords

Canterbury Park, CPHC, Quarterly Report, Gaming, Horse Racing, Casino, Real Estate Development, Canterbury Commons, Minnesota, Shakopee, Pari-mutuel, Adjusted EBITDA, TIF, Doran Companies, Boardwalk Kitchen & Bar, Amphitheater