Higher Derby revenues contribute to record second-quarter net income for CDI

Churchill Downs Inc. had record net income of $78.3 million in the second quarter of 2017, in large part due to higher revenues for the company during Kentucky Derby week and a strong performance for its account-wagering operation, according to financial documents released by the company late on Wednesday.

In a statement accompanying the financial documents, Churchill officials said that this year’s Kentucky Derby week generated $9 million more in revenue than the Derby week last year, driving total racing revenue for its four tracks to $175.7 million for the quarter, up 6.6 percent from $164.7 million in the second quarter last year. Operating expenses for the racing segment during the quarter were $76.5 million, according to the financial statements, for a gross operating margin of nearly $100 million.

The second quarter of 2017 is typically the best for Churchill’s racing operations, which include Churchill Downs in Louisville, Arlington Park near Chicago, Fair Grounds in New Orleans, and Calder Race Course in Miami, which is currently generating negligible revenue as a racetrack under a lease to a competing racetrack company. That is principally because of the tremendous amount of revenue generated by the Derby, the most high-profile race in the U.S.

Churchill Downs alone generated $136.7 million in the quarter, according to the financial statements, a number that exceeds the revenue generated by each of Churchill’s other segments during the quarter, including its account-wagering operation, its mobile-gaming unit, and its casinos. Churchill has focused on leveraging the Derby for the past decade, devoting tens of millions of dollars to renovations to the Louisville track that have been designed to capitalize on ticket demand from a variety of income strata.

Churchill’s account-wagering company, TwinSpires, also had a strong quarter, with revenue of $80.5 million, up 17.7 percent compared with revenue of $68.4 million in the second quarter of last year. Operating expenses increased 24.2 percent, however, from $41.4 million to $51.4 million. Churchill said that handle through TwinSpires was up 19.5 percent during the quarter, with a 34 percent increase in active players.

Churchill’s mobile-gaming company, Big Fish, saw revenues decline 10.1 percent, from $125.2 million in the second quarter of last year to $112.6 million this year. In the statement accompanying the financial documents, Churchill said that customers of the games offered by Big Fish have been migrating from pay-to-play games to free games. Operating expenses for Big Fish during the quarter were $89.4 million, plus $9.9 million in research and development costs.

Revenue from Churchill’s casino properties, including casinos at Fair Grounds and Calder, totaled $88.3 million in the quarter, up 4.6 percent. Casino expenses were up 2.6 percent, to $62.1 million.