Churchill Downs earnings call recap

The top line

Net revenue rose 16.3% to $337.8m and adj. EBITDA rose 28% $156.1m.
Live racing and historical racing (HRM) was up 14.6% to $81.5m; TwinSpires was down 19.6% to $102.2m and gaming was up 38.8% to $185.6m.

Easy does it: CEO Bill Carstanjen said the group would remain cautious in how it approached OSB and icasino. He said the focus was on expanding the footprint “smartly and efficiently and then evaluating what works from a marketing perspective,” and once again discounted any possibility that CHDN might enter any kind of marketing arms race when it comes to recruiting OSB and icasino players.

Twin winnings: With the 2020 Kentucky Derby taking place in September instead of May, Twin Spires was down 19.6% YoY but up 31% vs. 2019 (active uniques +23%). The analysts at Macquarie said the group could leverage Twin Spires with its emerging OSB and igaming business “to build larger customer acquisition channels”. “We believe the high barriers to entry makes horseracing an attractive segment for those with exposure to the industry,” they added. President and COO Bill Mudd said the pandemic had seen online horse racing numbers peak at c70% during 2020 and had now normalized to c50%.

Received loud and clear: Speaking of horse racing and competitors coming into the market, Carstanjen gave the notion polite but short shrift. New operators “need the approval of the content creators” such as the racetracks and breeders and this meant high barriers to entry. In other words, any new brand would get no help whatsoever from CHDN in getting approved. Discretion was obviously the better part of valor as none of the analysts asked for his opinion on New Jersey recently legalizing fixed-odds horse racing betting.

Free movement: The Arlington racetrack sale to the Chicago Bears and upcoming sale of 116 acres around the Calder Casino in Florida (expected to bring in ~$116m) will help finance CHDN’s key projects focused on its flagship racetrack, Derby City Gaming outlets and Rivers des Plaines and Fair Grounds properties. Carstanjen said the group would leverage their “geographic density”. “It’s important that customers can enjoy seamless movement and spend across facilities,” he said.

“We never made it a focus, but within Kentucky it’s apparent that we can leverage it and we can add an extra facility in Oak Grove.” “These are exciting times, we have strong cash flow and monetization of underutilized assets that enable us to invest in new opportunities.”

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