Churchill Downs posts ‘record’ Q3 EBITDA as M&A activity continues

Churchill Downs Incorporated
Image: shutterstock

Churchill Downs Incorporated has highlighted its bustling M&A activity during Q3 as it posted record figures for adjusted EBITDA, with costs slashed across its business in the wake of falling revenues. 

Publishing its Q3 financial report, the company noted three key acquisitions made during Q3 to grow its business and diversify its offering across the US. 

Churchill Downs makes three purchase agreements in Q3

This includes purchasing Chasers Poker Room in Salem New Hampshire, with a total investment package of around $150m and plans to develop an ‘expanded charitable gaming facility in Salem’. 

Moreover, CDI acquired Ellis Park in Henderson Kentucky for $79m cash. The racetrack purchase features 300 historical racing machines and the firm also assumes the opportunity to construct a track extension facility in Owensboro, Kentucky. 

Finally, CDI has agreed a deal to acquire Peninsula Pacific Entertainment (P2E) for a total consideration of $2.75bn, covering Colonial Downs Racetrack in New Kent, Virginia, six historical racing entertainment venues across Virginia, del Lago Resort & Casino in Waterloo, New York, and Hard Rock Hotel & Casino in Sioux City, Iowa.

This acquisition of P2E also includes rights in Virginia to develop up to five HRM venues in the state with up to 2,300 HRMs.

The additional investment into live and historical racing is self-evident when breaking down the total financial performance of the company during Q3. 

Record EBITDA despite falling revenues

Total corporate revenues reached $383.1m for the three-month period ending Sep 30, down 2.5% from Q3 2021’s figure of $393m. 

Similarly, net income was slashed by 7.2% to $57m, down from $61.4m in the same period last year. 

But broken down by segment, it is clear to see the reasoning behind the racing investment, as revenues grew by 25.6% in this segment up to $102.4m from $81.5m just a year ago. Adjusted EBITDA in racing also grew 25.4% to $34.5m. 

Racing success was attributed to an increased handle from holding more live race days in the third quarter of 2022 as compared to the same quarter of 2021.

The TwinSpires unit saw revenues fall slightly to $107.4m from $109m last year, however, adjusted EBITDA for the period climbed from $22.1m to $31.1m, an increase of 40.7% attributed to a vast reduction in online marketing and promotional spending. 

Finally, the gaming unit, the most lucrative for CDI, was relatively flat in terms of revenue which hit $185.9m for Q3, stagnant from Q32021’s $185.6m. Adjusted EBITDA for the gaming unit was up slightly to $111.6m, attributed to a $1.4m increase in equity investments offset by a $500,000 decrease in wholly-owned gaming properties. 

Due to decreasing marketing spending and increasing revenues in the racing unit, CDI celebrated record Q3 adjusted EBITDA of $163.2m

However, CDI’s total net income came down by 7.2% to $57m, which was impacted by a $2.4m after-tax expense increase relating to transaction, pre-opening and other expenses, net; and a $1.4m after-tax reduction in the benefit related to its equity portion of the non-cash change in the value of Rivers Des Plaines’ interest rate.