Churchill Downs posts record net income for second quarter

Churchill Downs Inc. had net income of $339.3 million in the second quarter of 2022, a record, though those results reflected an estimated net gain of $193.6 million on the sale of 115 acres of land on its Calder property in Miami, according to financial statements released on Wednesday.

Excluding the land sale, total revenue for the quarter was $582.5 million, compared to $515.1 million in the second quarter of last year. For the quarter, Churchill had strong gains for its Kentucky racing operations – which included revenues from Derby week and the results of operations from its Kentucky casinos – but revenues for its account-wagering business and for its other casinos operations were stagnant, according to the statements.

Revenue for the company’s live racing and Kentucky casino segment was $260.9 million, up from $175.9 million in the second quarter of last year. In a note accompanying the financial statements, Churchill said that the company had a $69.3 million increase in revenue for this year’s Derby week, which was held without capacity restrictions for the first time since 2019. Another $16.2 million came from increases in revenues generated by the company’s four historical horseracing operations in Kentucky, which operate slot-machine-like devices.

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For twinspires.com, Churchill’s account-wagering business, revenue was down $1.9 million, the company said, due to the migration of customers to bricks-and-mortar locations following the loosening of pandemic restrictions. Churchill also said that revenue from its sports betting operations declined $2.2 million compared to the second quarter of last year. Churchill announced in the first quarter that it planned to exit the sports-betting business.

On a conference call Thursday morning, Bill Carstanjen, chief executive officer of Churchill, said that the company will be pursuing partnerships with existing online sports-wagering operators to offer access to twinspires.com on their apps. The strategy is identical to one pursued over the last several years by the New York Racing Association, which has reached partnerships with Caesars that makes their horse racing betting app available to customers of the casino company’s sports-betting operation.

“We anticipate we will announce key partnerships by the end of the year,” Carstanjen said.

Revenues for casino operations outside of Kentucky declined marginally, from $186.0 million to $184.5 million, according to the financial statements. Churchill said that “the current economic climate” and various pandemic restrictions were to blame for the declines at the properties that saw business fall during the quarter.

Churchill reached an agreement to sell the Calder acreage in late November of last year, and the transaction closed in June. The gain on the sale was $274.6 million, and Churchill said in a statement that it planned to exploit the “like-kind” real-estate transaction section of tax law to defer some of the tax liability for the sale. As a result, Churchill estimated the after-tax gain on the Calder land at $193.6 million.

Earlier this year, Churchill reached an agreement to buy substantially all of the assets of Peninsula Pacific Entertainment, a casino company that owns Colonial Downs in New Kent, Va. Carstanjen said on the conference call that Churchill anticipates running as many as 50 live race dates at Colonial in the future, based on a state law that requires the operator of Colonial to run at least one race date for each 100 historical horse racing machines in operation at Colonial and its OTBs. Churchill’s plan is to eventually operate 5,000 of the devices at the Colonial properties, Carstanjen said.