8-K: Churchill Downs Inc. Achieves Record Revenue and Earnings in Third Quarter 2024

Churchill Downs Incorporated reported record net revenue, net income, and Adjusted EBITDA for the third quarter of 2024, driven by strong performance across its Live and Historical Racing, TwinSpires, and Gaming segments.

Summary

• Churchill Downs Incorporated (CDI) announced record financial results for the third quarter of 2024.
• Net revenue reached a record $628.5 million, up from $572.5 million in the same quarter of 2023.
• Net income attributable to CDI was a record $65.4 million, compared to $61.0 million in the third quarter of the previous year.
• Adjusted EBITDA also hit a record of $235.3 million, an increase from $218.2 million in the third quarter of 2023.
• The Live and Historical Racing segment saw a 12% increase in revenue and a 15% increase in Adjusted EBITDA.
• TwinSpires revenue grew by 6% and Adjusted EBITDA by 25% compared to the third quarter of 2023.
• Gaming revenue increased by 10%, while Adjusted EBITDA grew by 1% compared to the same period last year.
• The company opened The Rose Gaming Resort in Virginia on October 23, 2024, featuring 1,650 historical racing machines and a 102-room hotel.
• CDI ended the quarter with a net bank leverage of 4.0x and declared a $0.409 per share dividend, marking the fourteenth consecutive year of increased dividends.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to record financial results, growth across all segments, and increased shareholder returns. The opening of a new resort and continued expansion plans further contribute to the positive outlook.

Positives

• The company achieved record net revenue, net income, and Adjusted EBITDA in the third quarter of 2024.
• All three main segments, Live and Historical Racing, TwinSpires, and Gaming, showed revenue growth.
• The opening of The Rose Gaming Resort in Virginia adds a new revenue stream.
• The company has increased its dividend for the fourteenth consecutive year.
• The company has a share repurchase program with $170.9 million of repurchase authority remaining.

Negatives

• The Gaming segment's Adjusted EBITDA growth was only 1%, impacted by regional gaming softness and increased competition.
• The Louisville and Western Kentucky HRM properties experienced a $4.1 million decrease in Adjusted EBITDA.
• TwinSpires Horse Racing handle declined due to market access and shifts in race days at other tracks.
• Corporate expenses increased, leading to a decrease in Adjusted EBITDA for the 'All Other' segment.
• There was a $1.2 million decrease in Adjusted EBITDA due to the absence of business interruption insurance claim proceeds that were received in the third quarter of 2023.

Risks

• The company faces risks from economic conditions affecting consumer spending and access to credit.
• Increased competition in the gaming industry could impact future results.
• The company is exposed to risks related to technology changes and cybersecurity breaches.
• There are risks associated with the development of new venues and expansion of existing facilities.
• The company is subject to regulatory risks and changes in the regulatory environment.
• The company is exposed to risks related to interest rate increases and disruptions in credit markets.

Future Outlook

The company does not provide specific financial guidance but mentions various forward-looking statements regarding future performance and projects, which are subject to risks and uncertainties.

Management Comments

• The company reported record third quarter revenue and Adjusted EBITDA across both our Live and Historical Racing and Gaming segments and record third quarter Adjusted EBITDA in our TwinSpires segment.
• The company maintained its commitment to returning capital to shareholders by announcing the Board's approval of a $0.409 per share dividend.

Industry Context

The results reflect a strong performance in the gaming and racing industry, with CDI leveraging its diverse portfolio of assets. The growth in historical racing machines and online sports betting indicates a response to evolving consumer preferences and market trends. The opening of new resorts and expansion of existing facilities demonstrates a commitment to growth and market share.

Comparison to Industry Standards

• Churchill Downs' performance is strong compared to other regional gaming and racing operators.
• Companies like Penn Entertainment and Boyd Gaming, which also operate regional casinos, have seen similar trends in revenue growth, but Churchill Downs' focus on historical racing machines and online wagering provides a unique advantage.
• The 12% revenue growth in Live and Historical Racing is notable, as many traditional racetracks are facing challenges in attracting younger audiences.
• The 25% Adjusted EBITDA growth in TwinSpires is impressive, indicating a successful strategy in online wagering, which is a key growth area for the industry.
• The opening of The Rose Gaming Resort is a significant development, as it adds a new revenue stream and expands the company's footprint in the growing Virginia market. This is similar to other operators expanding into new markets to capture growth.

Stakeholder Impact

• Shareholders will benefit from increased dividends and potential share price appreciation.
• Employees may benefit from the company's growth and expansion.
• Customers will have access to new entertainment venues and services.
• Suppliers and creditors will benefit from the company's financial stability and growth.

Next Steps

• The company will continue to focus on the development of new venues and the expansion of existing facilities.
• The company will pay a dividend of $0.409 per share on January 3, 2025.
• The company will continue to execute its share repurchase program.
• The company will host a conference call on October 24, 2024, to discuss the results.

Key Dates

Keywords

Churchill Downs Incorporated, CHDN, Third Quarter Results, Net Revenue, Net Income, Adjusted EBITDA, Live and Historical Racing, TwinSpires, Gaming, Dividend, Share Repurchase, Historical Racing Machines, Casino Resort