Churchill Downs rides Kentucky Derby to record second quarter

July 27, 2017 5:13 PM
  • Aaron Stanley
July 27, 2017 5:13 PM
  • Aaron Stanley

Churchill Downs rode strong performances from the Kentucky Derby and its online horse wagering business to a record quarter across all major metrics, the company reported late Wednesday.

Story continues below

“While the record increases in adjusted EBITDA and these other metrics were significantly driven by another strong Kentucky Derby and by the performance of our casino segment, all of our segments including Big Fish and TwinSpires were up,” said Bill Carstanjen, chief executive of Churchill Downs, on a conference call with investors Thursday morning.

Net revenues for the quarter were up $13.4 million year-over-year to $451.9 million. This figure was bolstered by a $12.1 million jump from TwinSpires – Churchill’s online horse race wagering platform – and a $9.2 million increase in Kentucky Derby revenues.

“Despite the truly miserable weather on Derby Day, we had a truly fantastic Kentucky Derby week. This year’s Kentucky Derby set records for – among other things – net revenues, adjusted EBITDA and all sources wagering for the race, the entire derby day and the full week,” Carstanjen continued, adding that the race also delivered its largest media audience since 1989.

The record numbers came in spite of a lagging performance at Big Fish, the social casino acquired in December 2014, which grew revenues sequentially but was down $12.6 million year-over-year.

Adjusted EBITDA company-wide was up $12.8 million to a record $173 million. Net income grew 12 percent to $78.3 and earnings per share grew 17 percent to $4.81, both records.

TwinSpires grew revenues in the quarter from $68.7 million to $80.8 million and adjusted EBITDA from $18.8 million to $19.3 million, with jump being driven by a 34 percent increase in active players and a 19.6 percent increase in total handle. This handle figure, Churchill emphasized, bested the broader U.S. thoroughbred industry by 18.4 percent.

Total bookings – a metric that reflects the amount of virtual currencies goods and premium games purchased by customers – were down year-over-year from $127.8 million to $112 million, though they increased by $1.1 million sequentially from the first quarter.

The steepest drop in bookings came in casual and free play segments, which were down by $15.6 million, though the company said this was anticipated because of a $9.1 million reduction in user acquisition spending. Premium bookings were also down by $3.4 million, a development Churchill attributed to customers migrating from paid computer games to free-to-play mobile games.

“The better than expected results reflect some modest but encouraging improvements that should support the recent run up in the shares. We also believe the recent strength is supported by the addition of a new director to the board,” said David Katz, an analyst with Telsey Advisory Group, referring to Douglas Grissom, currently a managing director with Madison Dearborn Partners, a Chicago private equity firm and a veteran of Bain Capital, McKinsey and Goldman Sachs.

“We continue to believe the opportunity to continue driving incremental operating improvements in the business units remains and is well understood by the Street, while the prospects for broader strategies could present additional opportunities to capture value,” wrote Katz.

Churchill continued in its share repurchase program by buying back nearly 1.1 million shares at a cost of $171.7 million during the quarter.

Shares of Churchill closed Wednesday at $186.05, plunged in after-hours trading and opened Thursday at $175.65 before rebounding to as high as $192.85.

Aaron Stanley

https://www.clippings.me/aaronstanley

mobile: 612-220-7492