Churchill Downs Inc. Posts $118M Second-Quarter Loss

Its gaming and racing business slowed by the COVID-19 pandemic, which included the postponement of the Kentucky Derby Presented by Woodford Reserve (G1) to Sept. 5, Churchill Downs Inc. posted a net loss of $118.8 million in the second quarter of 2020, the company reported July 29. 

Last year during the second quarter, CDI had net income of $107.1 million. Net revenue was also much higher during the same time frame last year, $477.4 million, which plunged to $185.1 million in the second quarter of 2020.

The Kentucky Derby and the week of the Derby at Churchill Downs are some of the most lucrative portions of the year for CDI, which has rescheduled its Derby week to Sept. 1-5 this year. In late June, CDI announced that fans would be permitted in a limited capacity with approval from local and state health officials.

Since that time, following a rise in COVID-19 cases across the country, Kentucky Gov. Andy Beshear has imposed added restrictions meant to slow the spread of COVID-19 in the state. He closed bars in an announcement issued this week and recommended that people traveling to Kentucky from COVID-19-troubled states self-quarantine for 14 days upon arrival. 

Speaking July 30 during a company conference call with investors, CEO Bill Carstanjen stated CDI still intends to host the Derby with fans, though sharply reduced from its customary attendance. The event, which drew 150,729 people last year, attracts visitors from across the United States and the world. 

"As we've previously announced, to ensure the safety of our guests, team members, and everyone else involved, and in close collaboration with state and local authorities and medical professionals, we will have fewer guests this year at Derby," he said during prepared remarks. "We are absolutely committed to ensuring a safe environment, and significantly reducing the size of the crowd is an important step to doing so. We will implement best practices and protocols that we've observed from around the world, and we'll make adjustments all the way up to Derby Day itself as we find ways to improve. There will be more announcements on our plans in the coming days and weeks."

The rescheduled Derby could boost CDI's financials over the second half of the year, though Carstanjen cautioned the Derby and its supporting days will not be as financially rewarding this year. Patrons not wishing to attend the Derby have had their tickets refunded or had their value applied to the 2021 Derby, general admission sales have been suspended, and sponsorship will decrease this year, Carstanjen said.

Though the second quarter was poor, as it was for most gaming companies, CDI officials said they were pleased with the growth of betting on Twinspires.com, their largest advance deposit wagering platform. Officials also were encouraged by the volume of gaming play per device at some of their casinos and gaming facilities, which are operating under limited capacity.

Online wagering revenue for CDI was up 26.8% for the quarter, from $95.6 million last year to $121.2 million. This spike came during a vast reduction in on-track and simulcast betting across the country that left ADWs as the primary outlets for wagering amid COVID-19.

CDI aims to combine its Twinspires.com horse racing business with BetAmerica.com, another platform it owns, for growth in the sports-wagering market.

Carstanjen added that CDI plans to have a historical horse racing facility in Newport, Ky., operational in October to fuel purses at Turfway Park when the Northern Kentucky track begins its meet in December. Turfway is being rebuilt into a racing and gaming facility at a cost of $200 million—counting its acquisition price—$45 million higher than originally planned, Carstanjen said. CDI expects the track's new Tapeta surface will be completed by the end of August. 

CDI does not see the same racing value in Arlington International Racecourse, the racetrack it owns just outside Chicago, located about 15 miles from Rivers Casino, which it co-owns in the same market. Racing is underway this summer at Arlington, and an agreement is in place with horsemen for a 2021 season, but its long-term future is in peril.

"That land will have a higher and better purpose for something else at some point, but we want to work constructively with all of the constituencies in the market to see if there's an opportunity to move the license or otherwise change the circumstances so that racing can continue in Illinois," Carstanjen said.