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Net profit rockets 191.9% at CDI after online betting growth in Q3


Churchill Downs Incorporated (CDI) has reported a 10.3% year-on-year increase in net revenue in the third quarter, as growth within its online betting business also helped drive net profit up 191.9% during the period.

Net revenue in the three months to September 30 amounted to $337.8m, up from $306.8m in the corresponding quarter last year.

CDI much of this growth was down to the success of its online wagering division, where revenue increased 79.6%. This was driven by its TwinSpires advance deposit wagering operations, with revenue reaching $54.1m after its handle jumped 68.8% to $253.7m.

The operator also saw growth from its Churchill Downs racetrack, with revenue rising 108.0% year-on-year to $68.0m.

Both Churchill Downs’ and the online wagering growth was down to the rescheduling of the Kentucky Derby, which was moved from its traditional date in May to August, as a result of restrictions related to the novel coronavirus (Covid-19) pandemic.

However, gaming did not enjoy such a strong quarter, with revenue falling 24.5% to $134.9m. CDI put this down to Covid-19 restrictions at its land-based casinos.

Calder Casino in Miami, Florida, was forced to temporarily close between July 2 and August 31, while its Oxford Casino in Maine, Presque Isle and Lady Luck sites in Pennsylvania, Ocean Downs in Maryland and Harlow’s in Refuge, Mississippi, all had to operate with reduced capacity.

Looking at spending for the quarter and total operating expenses were $288.3m, up 3.5% on $288.3m last year. CDI’s main outgoing was gaming, though costs here were reduced by 29.6% to $96.7m.

Churchill Downs spending jumped 56.8% year-on-year to $48.3m while online wagering spend hiked 60.0% to $83.5m. All other expenses were slightly down to $20.5m, but selling, general and administrative costs climbed by 12.8% to $38.8m.

This left CDI with an operating income of $49.5m for the quarter, up 78.1% on the previous year. The operator was also helped by $7.5m in additional income, primarily due to $27.6m in equity in income of unconsolidated affiliates, which more than offset $19.7m in interest expense.

Profit from continuing operations before tax was $57.0m, up 145.7% on last year, and after paying $13.9m in income tax, profit from continuing operations was $43.1m, an increase of 183.6% on Q3 of 2019.

When accounting for a $100,000 in net profit from non-controlling interests, this meant CDI ended the quarter with a net profit of $43.2m.

In terms of how Q3 impacted CDI’s year-to-date performance, net revenue for the nine months to the end of September was $775.8m, down 26.1% on last year, as CDI felt the impact of Covid-19 restrictions and closures earlier this year.

CDI saw Churchill Downs revenue fall 54.1% to $107.6m, while gaming revenue was down 39.1% to $319.7m. Online betting revenue was up 39.7% to $319.7m, but other revenue fell 44.0% to $34.1m.

Operating costs were 11.8% lower at $783.3m, but the decline in revenue meant operating profit was down 82.3% to $37.5m. CDI accounted for $46.2m in other expenses, which left it with an $8.7m loss before tax from continuing operations, compared to a $188.5 profit last year.

Tax benefits meant CDI’s loss after tax was cut to $3.1m, but this was down from a $133.5m profit last year. After accounting for a $96.1m loss from discontinued operations (net of tax), as well as $200,000 in net profit from its non-controlling interests, CDI ended the period with a comprehensive loss of $99.0m, compared to a $133.5m profit in 2019.