CDI's 2018 revenues buoyed by racing, account wagering

Churchill Downs Inc. had adjusted net income of $151.3 million in 2018, a 61 percent increase over the company’s adjusted net income in 2017, according to financial statements released on Wednesday night, with revenue from its flagship racetrack and its market-leading account-wagering company up sharply.

Net revenue for the year was $1.01 billion, up 14 percent over 2017, according to the statements, with revenue from Derby week at Churchill Downs up $21 million and revenue from the company’s on-line wagering segment up $34.8 million to $291.5 million. Revenue from the company’s casinos was up $60.7 million during the year.

Comparisons of Churchill’s 2018 performance to its results for 2017 are complicated by a number of transactions completed during 2018, including its nearly $1 billion sale of Big Fish Games and several other complex transactions, along with accounting adjustments based on the impact of federal and state tax changes contained in legislation passed late in 2017.

As a result, Churchill released several net income figures for 2018. Net income from both continuing and discontinued operations was $352.8 million, for example, while net income, unadjusted for various factors, was $182.6 million.

Total revenue from the company’s racing operations increased by 6.8 percent, from $276.6 million in 2017 to $295.4 million, bolstered by the $21 million increase in revenue from Churchill. Revenue from its two other operating racetracks, Arlington Park outside of Chicago and Fair Grounds in New Orleans, slipped slightly.

For the on-line wagering segment, which includes the operations of Twinspires.com, Churchill said that handle during the year jumped 8.3 percent, which was five percentage points higher than overall handle growth in the industry for 2018. Adjusted earnings before interest, taxes, depreciation and amortization for the segment increased $8.4 million to $72.8 million.

Revenues were up across the board for the company’s casino properties. Total revenue from the casinos was $411.2 million, which includes $25.9 million in new revenue from the company’s purchase of Ocean Downs in Maryland.

At the end of the year, Churchill had $173.3 million in cash, compared to $85.5 million at the beginning of the year. Although Churchill recorded a sharp decline in long-term debt during the year, the company reached a deal late last year to purchase a majority stake in Illinois’s best-performing casino, with the transaction expected to cost approximately $407 million at the time it closes in mid-2019, the company said.

During the fourth quarter, Churchill repurchased $32 million of its own stock, under a program approved by its board of directors in October that authorized up to $300 million in stock buybacks. In 2015 and 2017, the company used a total of $300 million to buy back nearly 1 million shares held by the Duchossois family. Both deals were reached privately.

Churchill also approved a 3-for-1 stock split last year, with the split becoming effective on Jan. 27. In early trading on Thursday, Churchill’s stock was down approximately 4 percent to $92.50. Churchill’s stock had been steadily gaining in value in the run-up to the Wednesday earnings announcement, but most of that gain reflected the overall run-up in stocks following widespread profit-taking in the market late in 2018 that pushed most share prices lower.