10-Q: Churchill Downs Incorporated Reports Q3 2024 Results, Revenue and Adjusted EBITDA Show Growth

Churchill Downs Incorporated (CDI) reported increased revenue and adjusted EBITDA for the third quarter of 2024, driven by growth in its Live and Historical Racing and TwinSpires segments.

Summary

• Churchill Downs Incorporated's net revenue for the third quarter of 2024 increased to $628.5 million, up from $572.5 million in the same period last year.
• The company's operating income for the quarter was $125.9 million, compared to $112.3 million in the third quarter of 2023.
• Net income attributable to Churchill Downs Incorporated was $65.4 million, a slight increase from $61.0 million in the prior year's quarter.
• Adjusted EBITDA for the quarter reached $235.3 million, up from $218.2 million in the third quarter of 2023.
• For the nine months ended September 30, 2024, net revenue totaled $2,110.1 million, compared to $1,900.5 million in the same period of 2023.
• Year-to-date operating income was $582.2 million, a significant increase from $457.8 million in the prior year.
• Net income attributable to Churchill Downs Incorporated for the first nine months of 2024 was $355.1 million, slightly down from $359.7 million in 2023.
• Adjusted EBITDA for the nine-month period was $922.6 million, compared to $804.8 million in the prior year.
• The company repurchased 67,139 shares of its common stock for $9.0 million during the third quarter of 2024.
• As of September 30, 2024, the company had $170.9 million remaining under its stock repurchase program.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong revenue and adjusted EBITDA growth, but there are some concerns about debt levels, regional gaming softness, and ongoing litigation. The sentiment is positive but not overly enthusiastic.

Positives

• The company experienced significant revenue growth in its Live and Historical Racing segment, driven by new properties and strong performance at existing locations.
• The TwinSpires segment showed strong growth, particularly due to the Exacta acquisition and the expansion of sports betting.
• The Gaming segment benefited from the opening of the Terre Haute Casino Resort, contributing to overall revenue growth.
• Adjusted EBITDA increased across multiple segments, indicating improved operational efficiency and profitability.
• The company has a substantial remaining repurchase authority under its stock repurchase program, which could provide support for the share price.

Negatives

• Net income attributable to Churchill Downs Incorporated decreased slightly for the nine months ended September 30, 2024, compared to the same period in 2023.
• The Gaming segment experienced some softness and increased competition in certain regions, impacting revenue.
• The company incurred a $3.9 million write-off of historical racing machines in Virginia.
• All Other Adjusted EBITDA decreased, driven by increased corporate compensation and administrative expenses.
• The company's total debt remains high at $4,866.9 million.

Risks

• The company is involved in litigation regarding the constitutionality of historical horse racing in Louisiana, which could negatively impact its operations in that state.
• The company is exposed to market risks, including changes in consumer confidence, discretionary spending, and interest rates.
• The company's business is subject to various federal, state, and international laws and regulations, which could change and impact operations.
• The company faces competition in the gaming and online wagering markets, which could impact its market share and profitability.
• The company's operations are subject to risks associated with technology, including cyber-security breaches and system failures.

Future Outlook

The company anticipates that cash flows from operations and availability of borrowings under its credit facility over the next twelve months will be adequate to fund its business operations and capital expenditures. The company expects project capital expenditures to be approximately $450.0 to $550.0 million in 2024.

Industry Context

The results reflect the ongoing trends in the gaming and entertainment industry, including the growth of online wagering and the expansion of regional casino gaming. The company's performance is also influenced by the competitive landscape and regulatory environment in each of its operating jurisdictions.

Comparison to Industry Standards

• Churchill Downs' revenue growth in the Live and Historical Racing segment is strong, likely outperforming many traditional racetrack operators who are not expanding into historical racing.
• The TwinSpires segment's growth, driven by Exacta, is comparable to other companies that have successfully integrated technology acquisitions to expand their online wagering platforms.
• The Gaming segment's performance, while showing growth from new properties, is facing similar challenges as other regional casino operators, including increased competition and regional economic softness.
• The company's Adjusted EBITDA growth is a positive sign, but it is important to compare it to peers like Penn National Gaming or Boyd Gaming to assess its relative performance.
• The company's debt levels are significant, and it is important to compare its leverage ratios to industry benchmarks to assess its financial risk.

Legal Proceedings

• The company is involved in litigation in Louisiana regarding the constitutionality of the 2021 Historical Horse Racing Act.

Stakeholder Impact

• Shareholders will benefit from the company's revenue and adjusted EBITDA growth, as well as the stock repurchase program and dividend payments.
• Employees may benefit from the company's growth and expansion, which could lead to job opportunities and career advancement.
• Customers will benefit from the company's continued investment in new and improved entertainment venues and online wagering platforms.
• Creditors will be impacted by the company's debt levels and its ability to meet its financial obligations.

Next Steps

• The company will continue to monitor the litigation in Louisiana regarding historical horse racing.
• The company will continue to invest in new properties and expansions, including the Starting Gate Pavilion and Courtyard at Churchill Downs Racetrack, The Rose Gaming Resort in Northern Virginia, Owensboro Racing and Gaming in Western Kentucky, and a Calvert City HRM Venue in Southwestern Kentucky.
• The company will continue to execute its stock repurchase program.
• The company will pay an annual cash dividend on January 3, 2025.

Key Dates

Keywords

Churchill Downs Incorporated, Gaming, Historical Racing, TwinSpires, EBITDA, Revenue, Horse Racing, Casino, Stock Repurchase, Financial Results