DEF 14A: Churchill Downs Reports Record Revenue and EBITDA, Eyes Continued Growth in 2024

Churchill Downs Incorporated (CDI) delivered record net revenue and Adjusted EBITDA in 2023, positioning the company for continued growth in 2024 and beyond.

Summary

• Churchill Downs Incorporated reported record net revenue of nearly $2.5 billion for 2023.
• The company's net income reached $417 million.
• Adjusted EBITDA exceeded $1.0 billion.
• Key strategic objectives included expanding the historical racing machine (HRM) business in Kentucky and Virginia.
• The company completed the acquisition of Exacta Systems.
• The sale of the Arlington Heights property to the Chicago Bears was finalized.
• Growth objectives for 2024 include completing the Paddock Project at Churchill Downs Racetrack.
• The Terre Haute Casino gaming floor is expected to open in early April 2024, with the resort opening in mid-May.
• The Rose Gaming Resort in Northern Virginia is slated to open in the late third quarter of 2024.
• Owensboro Racing & Gaming in Western Kentucky is expected to open in the first quarter of 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with record financial results and strategic growth initiatives. While there are some risks and a decrease in net income, the overall tone is optimistic and forward-looking.

Positives

• Record net revenue and Adjusted EBITDA demonstrate strong financial performance.
• Successful expansion of the HRM business indicates growth in key markets.
• Strategic acquisition of Exacta Systems is expected to drive operational efficiencies.
• Completion of the Arlington Heights property sale provides additional capital.
• Planned openings of new gaming and entertainment venues signal continued growth.
• The company's total shareholder return was 28% for 2023 compared to 26.5% for the Russell 1000 and 26.3% for the S&P 500.
• The company's five-year total shareholder return for 2023 was 237% compared to 106% for the Russell 1000 and 107% for the S&P 500.

Negatives

• Net income decreased by $22.1 million, or 5%, compared to fiscal year 2022.

Risks

• The letter to shareholders and the accompanying proxy statement contains various forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
• Important factors, that could cause actual results to differ materially from expectations are described under the heading Risk Factors in our most recent Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission.

Future Outlook

The company anticipates continued growth in 2024 and beyond, driven by strategic investments, new venue openings, and expansion of existing operations.

Management Comments

• The Company accomplished several key strategic and operational objectives, firmly positioning us for growth in 2024 and beyond.
• We believe we are poised to pursue many growth opportunities in the coming yearsdeveloping greenfield and organic opportunities, executing acquisitions within our strategic areas of focus and, of course, continuing to grow the Kentucky Derby.
• CDIs discipline and commitment to growth while maintaining one of the strongest balance sheets in the industry is how our Company will continue to create and deliver long-term shareholder value to you.

Industry Context

CDI's performance reflects the ongoing expansion and diversification of the gaming and entertainment industry, with a focus on historical racing machines and regional casino gaming.

Comparison to Industry Standards

• The company's peer group for 2023 included Aristocrat Leisure Limited, Boyd Gaming Corporation, Caesars Entertainment, Inc., DraftKings Inc., Flutter Entertainment PLC, Gaming and Leisure Properties Inc., Madison Square Garden Entertainment Corp, MGM Resorts International, PENN Entertainment, Inc., Red Rock Resorts Inc., Light & Wonder, Inc., and Wynn Resorts, Limited.
• The company's total shareholder return was 28% for 2023 compared to 26.5% for the Russell 1000 and 26.3% for the S&P 500.
• The company's five-year total shareholder return for 2023 was 237% compared to 106% for the Russell 1000 and 107% for the S&P 500.

Related Party Transactions

• On December 18, 2023, the Company entered into an agreement with CDI Holdings, LLC, an affiliate of The Duchossois Group, Inc. (TDG) to repurchase 1,000,000 shares of the Companys Common Stock from TDG in a privately negotiated transaction at a price per share equal to $123.75, for an aggregate purchase price of $123.75 million.

Stakeholder Impact

• Shareholders are expected to benefit from the company's continued growth and strong financial performance.
• Employees may benefit from the company's expansion and development opportunities.
• Customers will have access to new and improved entertainment experiences.
• Communities where the company operates may benefit from increased investment and job creation.

Next Steps

• Complete the new world-class Paddock Project at Churchill Downs Racetrack.
• Celebrate the grand opening of the Terre Haute Casino gaming floor in early April 2024 and open the Resort in the middle of May.
• Open The Rose Gaming Resort in Northern Virginia in the late third quarter of 2024.
• Open Owensboro Racing & Gaming in Western Kentucky in first quarter of 2025.

Key Dates

Keywords

Churchill Downs Incorporated, Kentucky Derby, Adjusted EBITDA, Historical Racing Machines, Gaming, Casino, Revenue, Net Income, Expansion, Acquisition