HHR powers record Q2 for Churchill Downs Incorporated

Net revenue and adjusted EBITDA reached all-time highs at Churchill Downs Incorporated (CDI) during Q2 with historical horse racing (HHR) the standout performer.

Group revenue for the three months to 30 June grew 15.9% year-on-year to $890.7m (£690.9m/€821.5m).

While CDI’s three operating segments – live and historical racing, online racing platform TwinSpires and gaming – all grew, the first business was the standout performer.

Historical racing biggest single source of revenue for CDI
Revenue for live and historical racing grew 20.7% year-on-year after inter-company adjustments to $464.7m, underpinned by a $212.1m contribution from historical racing.

The live business benefitted from a record breaking Kentucky Derby Week at Churchill Downs Racetrack, leading to a 28.7% increase in racing event-related services to $176m.

Indiana opening aids gaming business
Churchill Downs’ gaming revenue climbed 11.5% to $274.2m, aided by the opening of the Terre Haute Casino Resort in Indiana.

Its casino floor opened in April, featuring 1,000 slot machines, 36 tables games, and a sportsbook, with a hotel and event centre following in May, and contributed $33.9m to the business segment’s Q2 total.

Del Lago Resort & Casino in New York was CDI’s best performing property in terms of revenue, bringing in $46.5m over the quarter.

Exacta acqusition pays off for TwinSpires
TwinSpires, CDI’s online horse race betting operation, added $137.4m after intercompany adjustments, a 10.4% improvement on Q2 2023.

TwinSpires benefitted from Exacta, the historical horse racing technology specialist, which CDI acquired for $250m in August 2023. The B2B operations accounted for $14.7m in additional revenue during the three month period.

Looking ahead, CDI chief executive Bill Carstanjen plans to continue growing TwinsSpires’ B2B operations.

“The distribution of horse racing content is a growth opportunity that we believe is important for the industry and for us over the longer term,” he said. “While we continue to invest in our B2B capabilities and relationships, our core B2C TwinSpires business continues to perform quite well as it focuses on committed horse players seeking a more immersive horse racing wagering experience.”

Net profit up 46.4% in Q2
Looking at costs, total operating expenses in Q2 were 3.3% higher year-on-year at $560.7m. Spending was higher in all areas, with live and historical racing costs the main outgoing at $221.4m.

CDI also reported $35.7m in finance costs, with $73.5m worth of interest expense more than offsetting $37.7m in equity in income of unconsolidated affiliates. As such, pre-tax profit for Q2 hit $294.3m, a rise of 47.7%.

The operator paid $84.1m in income tax and discounted $900,000 in income attributable to non-controlling interests. This left $209.3m in net profit attributable to CDI, an increase of 46.4% from last year.

In addition, adjusted EBITDA topped $444.8m for the quarter, up 22.3% year-on-year and another all-time high for CDI.

Arlington Heights sale skews CDI bottom line in H1
As to how CDI performed in the first six months of the year, net revenue was 11.6% higher at $1.48bn. 

Reporting figures for each business without inter-segment revenue, all business units grew in the first half. Live and historical racing revenue increased 18.4% to $709.8m, of which $424.2m came from historical racing.

Gaming revenue increased 11.2% to $258.3m, and TwinSpires revenue 3.5% to $513.4m.

CDI reported $60.2m in net finance costs, after $75.5m in equity in income of unconsolidated affiliates was flattened by $143.9m in interest costs.

The figures for the prior year were skewed by $114.0m in additional income from selling its Arlington Heights racecourse site in Illinois to the NFL’s Chicago Bears. 

Given the impact of the sale last year, it was not surprising to see pre-tax profit was lower. However, given the impact of CDI’s growth in H1 2024, pre-tax profit was only down 2.9% to $396.1m with net profit down 3% to $289.7m. Adjusted EBITDA improved by 17.2% to $687.3m, however.

CDI set for Churchill Downs Racetrack renovation
In other news at CDI, the operator has set out plans to renovate the existing grandstand at its Churchill Downs Racetrack. The project will cost up to $90m and begins next month, aiming to be completed in time for next year’s Kentucky Derby in May 2025.

Outdoor aluminium bleachers will be replaced by 8,300 new comfortable seating varieties. Updated seating options will include covered and uncovered stadium-style seats and new rail boxes along the dirt track’s outer rail.

Other upgrades include new permanent concessions, bars and wagering windows within the Grandstand Club and Grandstand Pavilion areas of the grandstand.

“Like all of our recent enhancements at Churchill Downs, the renovation of the grandstands represents our commitment to providing unique guest seating options while honouring the historic significance of the property in order to achieve a world class sports and entertainment experience for our guests,” Churchill Downs president Mike Anderson said.