The coronavirus crisis kept horses off tracks, fans out of stands and bettors away from wagering windows during a good chunk of the first quarter — all dreary circumstances for racetrack and casino operator Churchill Downs.
The company’s marquee race, the Kentucky Derby, was moved from its traditional spring slot, Saturday, to Labor Day Weekend on Sept. 5.
Nevertheless, Louisville, Kentucky-based Churchill Downs earnings announcement Wednesday mixed a glimmer of optimism — saying its cash reserves can sustain the business for 12 months — with a grim warning — second-quarter results will likely suffer.
First-quarter results, reported after stock markets closed, were mixed. Revenue topped Wall Street forecasts, but adjusted earnings per share missed. Unadjusted results showed a steep quarterly loss, reversing year-earlier income.
In a statement, the company said its net loss of $23.4 million, or 26 cents per share, for the three months ended March 31, reversing year-earlier income of $11.6 million, or 29 cents per share.
Adjusted earnings per share, which filter out one-time costs, were 5 cents per share for the quarter, missing the 33 cents per share forecast, on average, by analysts surveyed by Seeking Alpha.
The company said a $20.2 million after-tax decrease, linked to the temporary closure of gaming facilities as a result of the COVID-19 pandemic, ravaged results.
Nevertheless, investors seemed to retain their optimism for Churchill Downs. The company’s shares rose $6.62, or 6.49%, Wednesday to close at $108.63 on the Nasdaq.
Churchill Downs’ quarterly adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that also excludes nonrecurring costs, were $55.3 million down 25.9% from $74.6 million a year earlier.
Revenue fell 4.7% to $252.9 million from $265.4 million but topped the $251.6 million forecast by Seeking Alpha-polled analysts.
As a precaution, Churchill Downs suspended operations some of its five racetracks and six casinos March 14. On March 25, the company temporarily furloughed employees at several casinos and tracks but continued to provide health, dental, vision, and life insurance benefits. Churchill Downs said non-furloughed workers’ salaries were cut, executive managers’ compensation was sliced more deeply, but gave no specifics. The cuts will remain until normal business returns, the company said.
Yahoo Finance said the company has 5,500 full-time employees.
Because of the business disruption, Moody’s Investors Service on March 25 downgraded Churchill Downs’ corporate family rating — a long-term gauge of debt default likelihood — to Ba3 from Ba2.
In the earnings statement, Churchill Downs CEO Bill Carstanjen said he was focused on his team and customers’ safety and health and that the company was working with regulators — community, state, and local — to gauge when to reopen its properties.
The Louisville Courier-Journal reported Wednesday that some activities at its namesake track may return soon. Kentucky Gov. Andy Beshear said the company can open its namesake track’s backside to horses May 11. However, the newspaper said it’s unclear whether the first open race day on the track’s calendar, May 14, can go off as planned. Stands will be fan-free either way.
Churchill Downs told the newspaper that horses will be allowed to ship starting May 11 to tracks in Arkansas and Florida. Tickets for previously scheduled May race dates will be refunded at point of purchase, the company said; tickets for June race dates will be addressed later.
Meanwhile, Carstanjen said experience and planning have paid off during the crisis.
“Our strong balance sheet and the deep experience and resilience of our team will enable us to emerge from these challenging times as a stronger company ready to execute on all of the growth opportunities we have shared with our investors,” Carstanjen said.
Race fans who had planned to spend Saturday drinking mint juleps and watching the home stretch won’t be completely out of luck. Churchill Downs said it will host a daylong virtual Kentucky Derby party with a computer-simulated race pitting the past 13 Triple Crown winners against one another. Several news outlets, including Louisville Business First, reported the company hopes to raise $2 million for COVID-19 emergency relief funds with the race.
Also, Louisville Business First reported, from 3 to 6 p.m. Saturday, NBC will rebroadcast the 2015 Kentucky Derby that began American Pharoah’s Triple Crown run and present horseracing programs.
Follow Matthew Crowley on Twitter @copyjockey
