Churchill Downs’ new casinos shine, online wagering stalls


churchill-downs-casinos-online-gambling-sports-bettingCasino and betting operator Churchill Downs Incorporated (CDI) saw its annual revenue top the $1b mark for the second year in a row despite flat online wagering operations.

Figures released Wednesday show CDI generated revenue of $280.6m in the last three months of 2019, a 28% rise over Q4 2018. Adjusted earnings were up 72% to a record $73.8m while adjusted net income rose 95% to $16.8m. That said, actual net income attributable to CDI fell nearly two-thirds to $4m.

A similar schism was on full display in the FY19 results, which shows revenue up 32% to $1.33b, adjusted earnings up 37% to a record $451.4m and adjusted net income up 19% to $179m. Actual net income attributable to CDI was down 61% to $137.5m.

Like many gaming operators, CDI has spent the past few years frantically wheeling and dealing, acquiring properties from rivals, selling off pieces of itself while venturing into new businesses and markets, with all the associated tax adjustments, financing charges and earn-out payments.

The net result is not a question of comparing apples and oranges, but throwing apples, oranges and several other fruits in a food processor and letting the blades fly. Blend ‘em all, let God sort ‘em out.

At any rate, CDI’s Gaming (aka casino) segment reported revenue up 40% to $168.3m in Q4, while adjusted earnings spiked 83.6% to $68.3m. For 2019 as a whole, revenue jumped 54% to $694.8m while earnings were up over $100m to $281m.

CDI’s relatively new Pennsylvania operations accounted for nearly 88% of Q4’s revenue gains, while nearly 94% of FY19’s revenue gain came via Pennsylvania and CDI’s assumption of full ownership of Maryland’s Ocean Downs. CDI also credited its new BetAmerica sports betting brand for boosting attendance at its Mississippi properties.

CDI’s Online Wagering unit, which includes both the TwinSpires advance deposit wagering (ADW) business and BetAmerica’s online sports betting and casino action, reported flat revenue of $61.8m in Q4 while adjusted earnings were down nearly one-quarter to $12.2m. For 2019, revenue was flat at $291.6m while earnings slipped 16% to $66.3m.

TwinSpires’ performance suffered due to “the exit of certain existing high volume with low margin customers” from its Isle of Man-based Velocity Wagering Services unit. Excluding Velocity, TwinSpires’ handle was up 7.8% but active players fell 5.4%.

BetAmerica’s net revenue was a mere $600k last year, largely due to iGaming operations in New Jersey. The BetAmerica brand has also launched online in Indiana and Pennsylvania but the costs of building out this business continue to make it a money-loser for the foreseeable future.

As for the ‘Churchill Downs’ racetrack segment, revenue improved 40% to $42.2m in Q4, with all but $400k of this gain coming via Derby City Gaming, which offers pseudo-slots known locally as ‘historical racing’ machines. Adjusted earnings nearly tripled to $9.2m, with Derby City’s gains smoothing over an earnings decline from racetrack operations.