CHDN.NASDAQChurchill Downs INC
10-K: Churchill Downs Incorporated Reports Strong 2024 Results Driven by Growth in Live and Historical Racing, Wagering, and Gaming Segments
Sentiment:
Annual Results
Churchill Downs Incorporated (CDI) announces strong financial results for 2024, marked by significant revenue and Adjusted EBITDA growth across its Live and Historical Racing, Wagering Services and Solutions, and Gaming segments.
Summary
- Churchill Downs Incorporated (CDI) reported a net revenue increase of $272.6 million, reaching $2.7 billion in 2024.
- Operating income increased by $145.0 million to $709.0 million.
- Net income attributable to Churchill Downs Incorporated rose by $9.5 million to $426.8 million.
- Adjusted EBITDA increased by $135.3 million to $1.2 billion.
- The Live and Historical Racing segment saw Adjusted EBITDA increase by $99.2 million, driven by a record-breaking Kentucky Derby and growth in HRM venues.
- The Wagering Services and Solutions segment's Adjusted EBITDA increased by $33.5 million, primarily due to the Exacta business.
- The Gaming segment's Adjusted EBITDA increased by $18.3 million, mainly due to the opening of the Terre Haute Casino Resort.
- The company invested approximately $460 million to construct The Rose Gaming Resort in Dumfries, Virginia, which opened in November 2024.
- The Terre Haute Casino Resort in Terre Haute, Indiana, opened in April 2024, representing an investment of approximately $290 million.
- In April 2024, CDI sold 49% of United Tote to NYRA Content Management Solutions, LLC.
- The company repurchased $65.3 million of shares under its share repurchase program in 2024.
- The company's five-year total shareholder return for 2024 was 97.6% compared to 94.9% for the Russell 1000 and 97.0% for the S&P 500.
Sentiment
Score: 8
Explanation: The document presents a positive outlook with strong financial results and strategic investments. While it acknowledges risks, the overall tone is optimistic and confident in the company's future performance.
Positives
- Strong growth in net revenue and Adjusted EBITDA across all segments.
- Successful completion and opening of The Rose Gaming Resort and Terre Haute Casino Resort.
- Strategic monetization of online sports betting market access in select states.
- Continued ESG efforts with promotion of responsible gaming and community investments.
- Increased annual cash dividend on common stock by 7%.
Negatives
- Inclement weather in January 2024, regional gaming softness, and increased competition negatively impacted the Gaming segment.
- A $3.9 million write-off of HRMs in Virginia that are no longer in use.
- All Other Adjusted EBITDA decreased $15.7 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses driven by enterprise growth.
Risks
- Economic conditions may affect consumer confidence and discretionary spending.
- Changes in tax laws could result in additional tax liabilities.
- A lack of confidence in the integrity of core businesses or any deterioration in reputation could affect the ability to retain customers.
- Inability to attract and retain key and highly qualified and skilled personnel, as well as disruptions in the general labor market, could impact the ability to successfully develop, operate, and grow the business.
- The company faces significant competition, and competition levels are expected to increase.
- Cybersecurity breaches could lead to government enforcement actions or other litigation, potential liability, or otherwise harm the business.
- The development of new venues and the expansion of existing facilities is costly and susceptible to delays, cost overruns, and other uncertainties.
- Debt facilities contain restrictions that limit flexibility in operating the business.
- Increases to interest rates (due to inflation or otherwise), disruptions in the credit markets, or changes to credit ratings may adversely affect the business.
Future Outlook
The company remains committed to delivering strong financial results and long-term sustainable growth, supported by strong cash flow and a solid balance sheet.
Management Comments
- In 2024, we delivered strong performance while continuing the execution of several organic investments that we believe will provide long-term sustainable value creation.
- We remain committed to delivering strong financial results and long-term sustainable growth.
- Our businesses generate strong cash flow, and we have a solid balance sheet that supports our organic growth as well as strategic acquisitions that we believe will create long-term value for our shareholders.
Industry Context
The company operates in a highly competitive industry with many participants, including traditional and Native American casinos, VLTs, state-sponsored lotteries, and other forms of legalized gaming. The removal of the ban on sports wagering has led to increased competition in that market.
Comparison to Industry Standards
- The Companys five-year total shareholder return for 2024 was 97.6% compared to 94.9% for the Russell 1000 and 97.0% for the S&P 500.
- The company competes with other gaming operators such as Las Vegas Sands, MGM Resorts International, and Caesars Entertainment Corporation.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Equity Award Deferral Plan | Amended and Restated Churchill Downs Incorporated Equity Award Deferral Plan (Effective December 31, 2024) | December 31, 2024 | Allows certain individual employees who are management or highly compensated employees of the Company may elect to defer settlement of RSUs, PSUs, and other share based awards granted pursuant to the 2016 Plan. |
Legal Proceedings
- The Company intends to vigorously defend the constitutionality of the HHR Act.
Related Party Transactions
- On December 18, 2023, the Company entered into an agreement with an affiliate of TDG to repurchase 1,000,000 shares of the Company's common stock, for $123.75 per share in a privately negotiated transaction, for an aggregate purchase price of $123.8 million.
Stakeholder Impact
- Shareholders: Positive impact due to strong financial performance and increased dividend.
- Employees: Potential for career development and skill enhancement.
- Customers: Enhanced entertainment experiences through new and improved facilities.
- Communities: Increased investments and support for local initiatives.
Next Steps
- The Company is investing up to $85 million to renovate the Starting Gate Pavilion and Courtyard to enhance the existing grandstand and provide improved amenities for the 151st Kentucky Derby in May 2025.
- The Company plans to open Marshall Yards Racing & Gaming in the first quarter of 2026.
- The Company plans to expand Rosie's Richmond HRM venue to accommodate a total of 1,200 HRMs in the third quarter of 2025.
- The Company plans to open the Roseshire in Henrico County in the fourth quarter of 2025.
- The Virginia Derby to be held in March 2025 as a qualifying race to the Kentucky Derby.
Key Dates
| Date | Description |
|---|---|
| 1875 | Thoroughbred racing has been conducted at Churchill Downs Racetrack since 1875. |
| March 19, 2008 | Rights Agreement, dated as of March 19, 2008 by and between Churchill Downs Incorporated and National City Bank |
| December 27, 2017 | The Company completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 |
| March 25, 2019 | The Company completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured Notes that mature on April 1, 2027 |
| January 1, 2020 | Churchill Downs Incorporated Restricted Stock Unit Deferral Plan, effective January 1, 2020 |
| March 17, 2021 | The Company completed an offering of $200.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 |
| April 13, 2022 | A wholly owned subsidiary of the Company completed an offering of $1.2 billion in aggregate principal amount of 5.75% Senior Unsecured Notes that mature on April 13, 2030 |
| September 2, 2022 | The Company completed the Chasers Transaction |
| September 26, 2022 | The Company completed the Ellis Park Transaction |
| November 1, 2022 | The Company completed the acquisition of substantially all the assets of Peninsula Pacific Entertainment LLC |
| February 15, 2023 | The Company closed on the sale of the Arlington property in Arlington Heights, Illinois, to the Chicago Bears |
| April 25, 2023 | The Company completed an offering of $600.0 million in aggregate principal amount of 6.75% senior unsecured notes that mature on April 25, 2031 |
| August 22, 2023 | The Company completed its acquisition of Exacta Systems, LLC |
| January 2, 2024 | The repurchase of the shares of Company's common stock pursuant to the 2023 Stock Repurchase Agreement closed on January 2, 2024 |
| April 2024 | The Company closed on the sale of 49% of the United Tote Company to NYRA Content Management Solutions, LLC |
| November 2024 | The Company opened The Rose Gaming Resort approximately 30 miles south of Washington D.C. |
| December 31, 2024 | Amended and Restated Churchill Downs Incorporated Equity Award Deferral Plan Effective December 31, 2024 |
| February 14, 2025 | The Company closed the seventh amendment of the Credit Agreement |
| April 22, 2025 | Portions of the Registrants Proxy Statement for its Annual Meeting of Shareholders to be held on April 22, 2025 are incorporated by reference herein in response to Items 10, 11, 12, 13 and 14 of Part III of Form 10-K. |
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.