Churchill Downs Inc. (CDI), which owns the Kentucky Derby, announced record first-quarter net revenue of $560 million and a record adjusted EBITDA of $223 million.
CEO Bill Carstanjen shared the figures during a quarterly earnings call last Thursday, just a few days before the upcoming Kentucky Derby race.
Net revenue increased by $128.6 million from CDI’s live and historical racing properties in the first quarter of 2023 ($215.8 million) compared to the first three months of 2022 ($87.2 million).
Carstanjen mentioned historical horse racing (HHR) as a key strategic focus for the next five to 10 years. The company operates historical racing machines in Kentucky, Louisiana, and Virginia and plans to expand its HHR footprint in New Hampshire.
Up-and-down quarter for TwinSpires
TwinSpires, CDI’s online wagering platform, saw net revenue decrease by $5.1 million in the first quarter of 2023. The company said exiting the direct online sports and casino business in early 2022 is the reason for the decline.
Carstanjen added the “bottom line improved significantly” because of that decision. TwinSpires adjusted EBITDA increased $5.3 million in the first quarter ($29.4 million) compared to 2022 ($24.1 million..
B2B offerings revolve around Kentucky Derby
CDI expects its B2B business to accelerate in the second quarter. DraftKings and FanDuel recently signed deals with CDI to integrate horse racing into their apps using TwinSpires technology.
“We’re very encouraged to see the early benefits of our decision to deliver racing content to FanDuel and DraftKings,” Carstanjen said during Thursday’s call.
Castanjen asked investors for ‘patience,’ pointing to the Kentucky Derby and Triple Crown as critical checkpoints in the second quarter before looking deeper into the financial impact of these new partnerships.
Capital improvements take shape for 2023 Kentucky Derby
Churchill Downs racetrack has been getting a facelift as of late. Construction is finished on a new seating and entertainment structure around the Kentucky Derby’s iconic first turn.
The venue has 5,300 covered stadium seats plus room for an additional 2,000 fans inside the first-floor dining room.
The paddock, where horses parade before each race, is also being renovated. Though it will be used for the Kentucky Derby on Saturday, the project will not be complete. Carstanjen says the project remains on schedule and will be finished for the 150th Kentucky Derby in May 2024.
Kentucky sports betting legislation top of mind
Gov. Andy Beshear signed Kentucky sports betting into law on March 31. Carstanjen told investors on Thursday’s call CDI has been anticipating legalized sports betting for a while now.
“We designed our facilities thinking this may happen in Kentucky at some point. So we’ve already built the sports bars,” Carstanjen said. “It’s not material to the scale of the company. But it’ll help each of (our) properties from the contribution of the sports wagering piece and the additional traffic it drives to the rest of the facility.”
Will KY sports betting create more Kentucky Derby fans?
The legislation runs all Kentucky sports betting licenses through the state’s horse racing tracks. Each facility can partner with up to three online operators and open a retail sportsbook at the track:
- Churchill Downs
- Cumberland Run (new racing facility)
- Ellis Park
- Keeneland
- Kentucky Downs
- Oak Grove Racing and Gaming
- Red Mile
- Revolutionary Racing (facility under construction)
- Turfway Park
Kentucky Senate Majority Leader Damon Thayer, who sponsored sports betting legislation HB 551 in the Senate, told LSR he is optimistic that legal sports betting will create new customers for horse racing.
“Putting retail sportsbooks at race tracks will expose sports bettors to pari-mutuel wagering on horses,” Thayer said. “Sports bettors are pretty social, so when they gather around to make a bet, they will see live racing, simulcast, and historical racing machines and have an opportunity to become horse racing fans. This does not mean all of them, but even a percentage will be good for horse racing.”
There is a push to have sports betting up and running in Kentucky by the start of the NFL betting season. The legislation requires a launch prior to Dec. 31, 2023.
