Churchill Downs Inc. net income declines 7.2 percent in third quarter

Churchill Downs Inc. had net income of $57.0 million in the third quarter of 2022, a 7.2 percent decline compared to the same quarter last year, according to financial statements released Wednesday.

Total revenues in the quarter were $383.1 million, down 2.5 percent from net revenue of $393.0 million in 2021. This year’s revenue number was negatively impacted by the shuttering of Churchill’s Arlington Park outside of Chicago.

Among its segments, Churchill had growth in its live racing and historical racing division, with total revenues of $102.4 million during the quarter, up 25.6 percent compared to $81.5 million in net revenue last year. Churchill said in notes accompanying the financial documents that additional days of racing at its flagship track in Louisville during the quarter accounted for some of the increase, along with strong growth at its Kentucky casinos, which operate historical horse racing machines.

Revenue for Churchill’s account-wagering business was down slightly, at $107.4 million in this year’s third quarter, compared to $109 million in the third quarter last year. Churchill said that this year’s number was negatively impacted by the loss of $3.4 million from its sports-betting business, which Churchill shuttered earlier this year.

According to Churchill, revenue from its Twinspires horse racing operation was up $1.8 million compared to the third quarter of last year, and the company attributed the growth to “increased handle from our high-wagering volume customer base.” That is a reference to professional groups who use sophisticated computer programs to place thousands of bets on races daily, with their margins softened by significant rebates.

In a conference call conducted Thursday morning, Bill Carstanjen, the chief executive officer of Churchill, said that the company would continue to seek deals with sports-betting companies to gain space on their apps for horse racing. In the quarter, Churchill reached a deal with FanDuel to offer racing content on its sports-wagering app.

Carstanjen said that partnering with sports-betting operators would give the company a cost-effective opportunity to reach more “casual fans” of horse racing, while relying on Twinspires.com to provide “full-service” operations to core fans.

“Creating both casual horseplayers and serious horseplayers is always in the best interest of Churchill Downs,” Carstanjen said.

For its “gaming segment,” which includes all casinos outside of Kentucky, Churchill reported flat revenues of $185.9 million, up $300,000 compared to the third quarter of last year.

In the quarter, Churchill had interest payments of $36.2 million, up from $21.7 million last year. For the first nine months of the year, interest payments have climbed to $92.6 million, compared to $63.1 million in the first nine months of last year.

Churchill said in its notes that the company repurchased nearly 300,000 shares of stock during the quarter, at an average price of $204.04. At the beginning of the quarter, Churchill’s stock price was $197.36, and by the end of the quarter the price had fallen to $184.15.

On the conference call, Carstanjen provided a brief update on the company’s plan to sell Arlington to the Chicago Bears, saying that the sale is “still on track pending completion of remaining conditions.” Churchill reached the deal last year and has said that the deal is expected to close in the first quarter of next year. The city of Chicago has begun exploring ways to keep the team at the city-owned Soldier Field.

Following the conference call, the New York Gaming Commission held a meeting in which it approved Churchill’s license application to operate the del Lago Casino in upstate New York. The casino is included in a deal Churchill reached earlier this year to acquire most of the assets of Peninsula Pacific Entertainment, including Colonial Downs in Virginia and its offtrack betting parlors.

Carstanjen said on the conference call that Churchill has already received the approvals from regulators in Virginia and Iowa necessary for the transaction to conclude, and he said that the sale would close “shortly” after New York granted its approval.