Churchill Downs Inc. (CDI), the parent company of the Kentucky Derby, doubled down on live horse racing—and it’s paying off. The week before the 149th Run for the Roses, the company’s stock is up 41% year to date.
Last week, CDI ($CHDN) reported a record $559.5 million in revenue in Q1, beating Wall Street expectations. This was driven by its live and historic racing segment, which brought in $214.4 million—more than double the segment’s revenue last year ($86 million). The net income is $155.7 million, over three times last year’s $42.1 million.
In 2021, Churchill Downs’ earnings report showed a loss of $31.9 million on online sports betting, so it made a series of strategic shifts. The Louisville-based company closed its online sports betting platform, TwinSpires Sportsbook, effectively exiting the online sports betting space (the online horse racing gambling platform of TwinSpires remains open).
However, the company continues to deliver technology and racing content to existing betting platforms. Last November, DraftKings launched DK Horse, a betting vertical. The deal is said to be a 60-40 revenue share where Churchill Downs receives 60% of revenue from wagers taken through DK Horse. A similar deal has been struck with FanDuel.
“Although our top line declined, our bottom line improved significantly,” CEO William Carstanjen said during last week’s investor call. In the first quarter of 2023, TwinSpires, CDI’s online horse-racing gambling platform, brought in $96.3 million, compared to $101.4 million for the same quarter last year.
Churchill Downs Inc. continues to bet on horse racing going forward. In addition to their existing racetracks in Kentucky, Florida, New Orleans and Indiana, the company is building two new horse racing machine (HRM) venues in Virginia—one near the North Carolina border and another in northern Virginia, 30 miles south of Washington, D.C.—and has the right to open three additional HRM facilities in the state. The company is also building a casino and event center in Richmond, Va., and Salem, N.H.
The Kentucky General Assembly legalized sports betting in the state at the end of March, which means Churchill Downs will soon grow its HRM properties across its home state. The company expects this will happen in the second half of 2023.
In addition to these projects, the owner of the Kentucky Derby is almost finished with the $200 million redevelopment project of the landmark Churchill Downs racetrack. A new VIP seating area with 5,300 covered stadium seats at the first turn and an additional 2,000 reserved indoor dining seats will debut at Saturday’s race.
“All of the covered stadium seats are sold. And more than three quarters of the indoor reserved seats are also sold,” Carstanjen said during the investor call. “Based on advanced reserved ticket sales, and other metrics available at this time, we expect to deliver record derby week results.”
Churchill Downs remains on course to complete the paddock renovation in time for the 150th Derby in 2024.
No matter who takes the rose garland home, CDI is on course to win big on Saturday.
