Churchill Downs Incorporated (CDI) returned to profit in the first half of its financial year as revenue almost doubled year-on-year following the easing of novel coronavirus (Covid-19) restrictions in the US.
Revenue for the six months to June 30 amounted to $839.4m, up 91.6% from $438.0m in the corresponding period last year.
CDI said this increase was primarily due to the withdrawal of many Covid-19 measures, with these having severely impact its performance in H1 of 2020. Last year, its casinos, racetracks and gaming facilities were forced to temporarily close in mid-March in response to state orders to combat the spread of Covid-19.
However, CDI was able to operate its land-based facilities throughout the first half of this year, albeit with some restrictions, including capacity limits and social distancing, still in place.
Gaming was the main source of income for CDI in H1, with revenue here rising 84.5% to $338.0m. Live and historical racing revenue rocketed 365.2% to $239.1m, TwinSpires revenue climbed 23.6% to $235.3m and other revenue more than doubled from $13.0m to $27.0m.
CDI said its performance in H1 was also helped by the running of the Kentucky Derby, which was in 2020 moved to later in the year due to the pandemic.
Operating expenses were up 46.1% to $657.3m, but the increase in revenue meant CDI was able to post an operating profit of $182.1m, compared to a loss of $12.0m in 2020, while adjusted earnings before interest, tax, depreciation and amortization (EBITDA) jumped 302.7% to $343.9m.
CDI benefited from $20.1m in additional income, courtesy of its equity in businesses in which it doesn’t hold a controlling stake, meaning profit before tax reached $202.2m, up from a loss of $53.7m last year.
The operator paid $57.8m in income tax, resulting in net profit of $144.4m for the first half, compared to a $142.2m loss in 2020. However, CDI noted that last year’s performance was harmed by a $96.1m loss from discontinued operations, prior to which its loss for the period was $46.2m.
Turning to the second quarter and revenue for the three months to June 30 amounted to $515.1m, up 178.3% year-on-year.
Gaming revenue rocketed 398.7% to $186.0m, revenue from live and historical racing hiked 654.9% to $175.9m, Twinspires revenue was up 11.8% to $135.6m and other revenue 450.0% to $17.6m.
Operating expenses more than doubled to $379.7, but adjusted EBITDA also climbed 675.1% to $233.3m, while CDI turned an operating loss of $400,000 to a profit of $135.4m.
After accounting for $14.5m in additional income, profit before tax was $149.9m, compared to a $31.5m loss last year. CDI paid $41.6m in income tax, leaving a net profit for the quarter of $108.3m, in contrast to a $118.8m loss in 2020.
Meanwhile, CDI has announced details of two initiatives that will see it carry out major work on two of its leading venues.
Three multi-year capital investments will take place at its flagship Churchill Downs Racetrack in Kentucky, with a target to complete two of the projects in time for next year’s Kentucky Derby in May 2022.
These will include both the renovation and updating of the grandstand area as part of the Homestretch Club. Some 30 trackside lounges will be placed along the rail, as well as 66 terraced dining tables, over 2,600 Stadium Club seats and five VIP hospitality lounges.
A new ‘Turn 1 Experience’ will introduce permanent all-inclusive stadium seats at Churchill Downs, with views of the Kentucky Derby walkover. This will include over 5,000 covered seats, a 50,000sq ft hospitality venue and two new concourse areas.
In addition, CDI will redesign the paddock area of the course to feature new seating areas and reduce congestion. CDI said this is in the early design stage and is hoping to complete in time for the 150th Kentucky Derby in May 2024.
Elsewhere, CDI will spend $76.0m on an expansion of its Derby City Gaming location, also in Kentucky, to include a new hotel, gaming positions and other amenities.
The project will add 135,000sq ft of new space and open an additional 200 gaming positions, as well as a VIP gaming space, new sports bar, stage for live entertainment and a restaurant and bar.
The adjoining five-story hotel tower will include 123 rooms with 108 standard guest rooms, 14 corner suites and a VIP suite.
Construction on the project is scheduled to begin in early 2022, pending approval by the City of Louisville. The expanded gaming floor is expected to open in late 2022 and the hotel in the spring of 2023.