Churchill Downs Incorporated (CDI) posted record revenue for the second quarter of 2022 following the resumption of its live and historic racing segment, while saying it would pursue acquisitions with funds from a recent sale of lands.
The operator said its racing business had been helped by the easing of restrictions related to the novel coronavirus (Covid-19), with operations in the same period last year, as well as in the second quarter of 2020, affected by the precautionary measures put in place during the pandemic. .
However, this year guests were able to attend key racing events such as the Kentucky Derby at Churchill Downs Racecourse, as well as access to facilities at Oak Grove Racing, Gaming and Hotel, Derby City Gaming, Newport Racing & Gaming and Turfway Park with no restrictions.
Additionally, CDI said its Historic Racing Machine (HRM) properties benefited from the removal of capacity restrictions that were in place during the pandemic.
As a result, revenue from live and historical races increased 48.3% year-on-year to $260.9m (£214.5m/€255.7m) in the three month preceding June 30, 2022.
CDI noted that its other two segments did not perform as well, with revenue from its TwinSpires division down 2.9% to $138.5 million, due to the decision to exit the sports business and direct online casinos in the first quarter of 2022.
Games revenue also fell 0.9% to $184.3 million, with CDI saying this was due to current economic conditions, competitive pressures and a mask mandate at its Harlow factory that has not been withdrawn only at the beginning of June this year.
However, the impact of growth in the racing segment was such that overall revenue for the quarter increased 13.1% to $582.5 million, a record figure for the company.
Operating expenses in the second quarter increased slightly to $382.8 million. The sale of land near its Calder Casino in Florida brought in $274.6 million, bringing total other income to $280.2 million for the quarter. The company said it would use some of the funds from this deal to “invest in other replacement properties.”
As such, pre-tax profit was $479.9 million, up 220.2% from a year ago, while after paying $140.6 million in taxes, CDI ended up with $339.3 million in net profit, a 213.3% year-over-year increase and a new quarter. record for the company.
Additionally, CDI said adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also hit an all-time high quarterly of $291.2 million.
Looking at CDI’s first-half performance, group revenue for the six months to June 30 was $946.6 million, up 12.8% year-on-year .
This was again driven by racing growth, with revenue up 45.1% to $356.9 million. Games revenue also rose 7.0% to $361.6 million, but TwinSpires revenue fell 3.0% to $237.1 million.
Operating expenses increased slightly, but this was partially offset by $291.4 million in other earnings, again primarily due to the sale of the Calder Casino land.
Pre-tax profit more than doubled to $538.5 million, while net profit also rose more than 100% to $381.4 million. CDI also noted that adjusted EBITDA for the six months was 22.0% higher at $419.7 million.
Meanwhile, CDI offered an update on other acquisition activity that took place during the quarter, including its purchase of Peninsula Pacific Entertainment (P2E). In February, CDI reached an agreement to buy all assets for $2.49 billion.
The operator said it has obtained approval for the acquisition of the interest in the P2E Virginia properties from the Virginia Racing Commission. The deal is subject to customary closing conditions, including approval from the New York State Gaming Commission and the Iowa Racing and Gaming Commission, but CDI expects the transaction is completed before the end of 2022.
In March, CDI also entered into a definitive purchase agreement to acquire Chasers Poker Room, a New Hampshire charitable gaming facility. Following the conclusion of the deal, CDI said it plans to develop an expanded charitable gaming facility to accommodate HRMs.
The operator expects the total investment, including the purchase price, to be approximately $150.0 million, with the transaction expected to close in the third quarter of 2022.