Churchill Downs boosted by gaming growth in third quarter results

Churchill Downs boosted by gaming growth in third quarter results

Friday, November 2, 2018 Posted by News Team
Finance
Operator also reveals plans for Pennsylvania iGaming and sports betting launches

Churchill Downs Incorporated (CDI) has reported a 12% increase in revenue for the three months ended September 30th, with a decline in the operator’s racing business offset by growth in casino gaming. 

Revenue for the quarter grew to $221.3m, of which $105m was generated from CDI’s casino business. 

The division was boosted by an $8.1m contribution from the Ocean Downs casino, which was consolidated into its results from September 1st as a result of an asset swap that saw it divest its interest in Saratoga Casino Holdings. 

The online horse racing betting site TwinSpires also enjoyed a strong quarter, with revenue rising 9% to $72.1m. This was due in part to handle growth, as well as the adoption of a new revenue recognition standard which resulted in changes between the classification of net revenue and marketing and content operating expenses.

However, CDI’s racing business struggled in Q3, with revenue down marginally to $41m. This was blamed on a $1.4m decline in revenue from the operator’s Arlington racetrack, driven by lower attendance resulting from bad weather. However, this was partially offset by a $0.5m increase from the Churchill Downs track resulting from increased handle. 

Operating expenses for the period rose 18% to $200.8m, leaving CDI with an operating profit of $20.5m for the quarter, down 24% year-on-year. 

However, the operator’s post-tax profit was boosted by a net gain on the Ocean Downs-Saratoga Casino Holdings transaction of $42.3m.

It also benefitted from a $6.2m decrease in income tax provision due to a cut in the federal statutory tax rate from 35% to 21%, and a $2.7m fall in net interest expense associated with lower outstanding debt balances. 

This offset a $6.5m decrease in operating income stemming from the $5.0m termination fee relating to the cancelled deal for the Lady Luck Casino in Vicksburg, Missisippi, and the $5.3m that would have been generated from Big Fish Casino. The social gaming business was sold to Aristocrat Technologies in a $990m deal in January 2018.

This resulted in net income growing from $16.7m in Q3 2017 to $56.3m. 

The company also provided an update on its iGaming and sports betting plans, noting that during the quarter it opened BetAmerica-branded sportsbooks at its two Mississippi venues. CDI has also struck an agreement to launch an iGaming site in New Jersey under Golden Nugget’s licence, and has worked with Eldorado Resorts to apply for online slots and table games licences via the soon-to-be-acquired Presque Isle Downs venue in Pennsylvania.

“We are also very interested in sports wagering [in Pennsylvania] and we will file for that license when we have clarity on our transaction closing date,” CDI chief executive Bill Carstanjen said. “It is worth noting that a sports wagering license would allow brick and mortar sportsbook at Presque Isle Downs as well as an online offering available throughout the state. 

“As we’ve discussed previously, our TwinSpires team will be responsible for running our online wagering business utilizing the SBTech platform,” he continued. “Our TwinSpires team includes strong talent from iGaming markets outside of the United States with deep experience in sports wagering and online casino products.”

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