Churchill Downs Incorporated (CHDN) Bundle
Understanding Churchill Downs Incorporated (CHDN) Revenue Streams
Understanding Churchill Downs Incorporated’s Revenue Streams
The financial landscape of Churchill Downs Incorporated is characterized by diverse revenue streams. For the nine months ended September 30, 2024, the company reported net revenue of $2,110.1 million, a significant increase from $1,900.5 million for the same period in 2023. This represents a year-over-year growth of 11.0%.
Breakdown of Primary Revenue Sources
The following table summarizes the net revenue by segment for the third quarter and the nine months ended September 30 for 2024 and 2023:
| Revenue Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change (in millions) | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) | Change (in millions) |
|---|---|---|---|---|---|---|
| Live and Historical Racing | $252.4 | $225.5 | $26.9 | $991.5 | $849.3 | $142.2 |
| TwinSpires | $118.7 | $112.4 | $6.3 | $392.7 | $347.8 | $44.9 |
| Gaming | $270.3 | $244.9 | $25.4 | $787.9 | $744.4 | $43.5 |
| All Other | $2.6 | $0.2 | $2.4 | $4.5 | $0.7 | $3.8 |
| Eliminations | ($15.5) | ($10.5) | ($5.0) | ($66.5) | ($41.7) | ($24.8) |
| Total Net Revenue | $628.5 | $572.5 | $56.0 | $2,110.1 | $1,900.5 | $209.6 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate highlights the overall performance of the company. For the nine months ended September 30, 2024, the Live and Historical Racing segment saw an increase of $142.2 million, driven by a record-breaking Derby Week and the opening of new properties. The Gaming segment contributed an increase of $43.5 million, primarily due to the opening of the Terre Haute Casino Resort in April 2024. The TwinSpires segment increased by $44.9 million, largely attributable to Exacta growth.
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue is as follows:
- Live and Historical Racing: 46.9% of total revenue
- TwinSpires: 18.6% of total revenue
- Gaming: 37.3% of total revenue
- All Other: 0.2% of total revenue
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams for the nine months ended September 30, 2024, compared to the previous year include:
- The Live and Historical Racing segment increased due to a record-breaking Derby Week, contributing $38.6 million to the increase.
- The Gaming segment's growth was primarily influenced by the Terre Haute Casino Resort, which added $66.3 million to revenue.
- TwinSpires experienced an increase of $38.6 million attributed to Exacta, alongside a $5.5 million increase from online sports betting.
Overall, the financial health of the company reflects a robust growth trajectory across its various segments, underscoring its successful expansion and operational strategies.
A Deep Dive into Churchill Downs Incorporated (CHDN) Profitability
A Deep Dive into Churchill Downs Incorporated's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was approximately 68.1%, compared to 66.4% for the same period in 2023. This reflects an increase driven by higher revenues across segments.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 20.0%, consistent with the margin from the previous year. This stability indicates effective cost management despite rising operational expenses.
Net Profit Margin: The net profit margin for the same period was 10.4%, slightly up from 10.2% in 2023, showing a marginal improvement in profitability.
Trends in Profitability Over Time
In the nine months ended September 30, 2024, net income attributable to the company was $355.1 million, compared to $359.7 million for the same period in 2023, reflecting a decrease of $4.6 million. However, the adjusted EBITDA increased by $117.8 million, reaching $922.6 million compared to $804.8 million in 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $65.4 million | $61.0 million | $4.4 million |
| Adjusted EBITDA | $235.3 million | $218.2 million | $17.1 million |
| Operating Income | $125.9 million | $112.3 million | $13.6 million |
Comparison of Profitability Ratios with Industry Averages
The company's gross profit margin of 68.1% exceeds the industry average of 50%, indicating strong revenue generation relative to cost of goods sold. The operating profit margin aligns closely with the industry average of 20%, suggesting competitive operational efficiency.
Analysis of Operational Efficiency
Operating income for the nine months ended September 30, 2024, was $582.2 million, an increase of $124.4 million from $457.8 million in the same period last year. This growth is attributed to increased revenues from the Live and Historical Racing segment, primarily driven by a record-breaking Derby Week.
The following table illustrates the operating expenses across key segments:
| Segment | Operating Income (Q3 2024) | Operating Income (Q3 2023) | Change |
|---|---|---|---|
| Live and Historical Racing | $93.0 million | $80.9 million | $12.1 million |
| TwinSpires | $42.5 million | $33.9 million | $8.6 million |
| Gaming | $123.3 million | $122.3 million | $1.0 million |
Overall, the results showcase a positive trajectory in profitability metrics, indicating effective cost management and operational efficiency, particularly in the Live and Historical Racing segment.
Debt vs. Equity: How Churchill Downs Incorporated (CHDN) Finances Its Growth
Debt vs. Equity: How Churchill Downs Incorporates Finances Its Growth
As of September 30, 2024, the company's financial structure reveals significant insights into its debt levels and equity composition:
- Total Assets: $7,172.5 million
- Total Liabilities: $6,057.6 million
- Total Equity: $1,114.9 million
Overview of the Company's Debt Levels
The company's debt structure includes both long-term and short-term components:
- Long-term Debt: $1,695.7 million
- Current Maturities of Long-term Debt: $63.1 million
Debt-to-Equity Ratio
The debt-to-equity ratio for the company stands at:
- Debt-to-Equity Ratio: 5.43
This ratio indicates a higher reliance on debt financing compared to equity, which is significantly above the industry average of approximately 1.5 for similar companies in the gaming and entertainment sector.
Recent Debt Issuances and Credit Ratings
The company has engaged in various debt issuances, including:
- Interest Expense for Nine Months Ended September 30, 2024: $217.0 million
- Credit Ratings: B1 (Moody's) and B+ (S&P)
Debt Financing vs. Equity Funding
The balance between debt financing and equity funding is critical for the company's growth strategy. The company has utilized debt to fund significant capital expenditures, such as:
- Capital Project Expenditures for 2024: Estimated between $450.0 million and $550.0 million
The company also reported:
- Operating Cash Flows for Nine Months Ended September 30, 2024: $641.1 million
- Cash Flows Used in Financing Activities: $(216.7) million
| Debt Instrument | Carrying Amount (in millions) | Fair Value (in millions) | Interest Rate |
|---|---|---|---|
| Term Loan B-1 | 287.4 | 289.5 | Variable |
| Term Loan A | 1,181.4 | 1,187.4 | Variable |
| Revolver | 290.0 | 290.0 | Variable |
| 2027 Senior Notes | 597.3 | 595.7 | 5.0% |
| 2028 Senior Notes | 698.9 | 684.7 | 5.5% |
| 2030 Senior Notes | 1,187.3 | 1,195.2 | 6.0% |
| 2031 Senior Notes | 591.4 | 619.5 | 6.5% |
The company’s strategy illustrates a preference for leveraging debt for growth while maintaining a robust equity base to support operations and investments.
Assessing Churchill Downs Incorporated (CHDN) Liquidity
Assessing Churchill Downs Incorporated's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for the company was 0.55, calculated by dividing current assets of $387.4 million by current liabilities of $710.1 million. The quick ratio stands at 0.25, considering cash and cash equivalents of $152.7 million and accounts receivable of $93.2 million, against current liabilities.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was ($322.7 million) as of September 30, 2024, indicating a decrease from ($355.0 million) at the end of 2023. This trend reflects a tightening liquidity position as current liabilities have grown relative to current assets.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, shows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $641.1 | $498.8 | $142.3 |
| Investing Activities | ($415.8) | ($549.5) | $133.7 |
| Financing Activities | ($216.7) | $38.7 | ($255.4) |
The increase in cash flows from operating activities by $142.3 million was primarily driven by a decrease in cash used for working capital and an increase in operating income.
Potential Liquidity Concerns or Strengths
Despite the increase in operating cash flow, the company's current liabilities exceed current assets, highlighting a potential liquidity concern. The total liabilities were $6,057.6 million compared to total assets of $7,172.5 million, indicating a leverage ratio that could impact liquidity in adverse conditions.
Furthermore, the company’s ongoing capital projects are projected to require approximately $450.0 to $550.0 million in 2024, which could further strain liquidity if not managed effectively.
Is Churchill Downs Incorporated (CHDN) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Churchill Downs Incorporated (CHDN) provides insights into its financial health through key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for CHDN is 22.4, calculated based on a trailing twelve months (TTM) earnings per share (EPS) of $4.78.
Price-to-Book (P/B) Ratio
The P/B ratio is recorded at 4.3, reflecting the company's market value relative to its book value per share of $38.01.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 11.2, with an enterprise value of approximately $5.3 billion and an EBITDA of $472 million.
Stock Price Trends
Over the past 12 months, CHDN's stock price has seen the following trends:
- 12-month high: $283.00
- 12-month low: $151.00
- Current stock price: $207.50
Dividend Yield and Payout Ratios
The dividend yield for CHDN is 1.3%, with an annual dividend of $2.70 per share. The payout ratio is approximately 56.5%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
Analyst consensus on CHDN stock valuation is as follows:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 22.4 |
| P/B Ratio | 4.3 |
| EV/EBITDA | 11.2 |
| 12-Month High | $283.00 |
| 12-Month Low | $151.00 |
| Current Stock Price | $207.50 |
| Dividend Yield | 1.3% |
| Annual Dividend | $2.70 |
| Payout Ratio | 56.5% |
| Buy Recommendations | 10 |
| Hold Recommendations | 5 |
| Sell Recommendations | 1 |
Key Risks Facing Churchill Downs Incorporated (CHDN)
Key Risks Facing Churchill Downs Incorporated
The financial health of Churchill Downs Incorporated (CHDN) is influenced by various internal and external risks. These risks span industry competition, regulatory changes, market conditions, operational challenges, and financial uncertainties.
Industry Competition
Competition within the gaming and racing industry is intense. The company faces competition from other racetracks, casinos, and online gaming platforms. As of September 30, 2024, the total revenue for the Gaming segment rose to $270.3 million, a $25.4 million increase compared to the previous year, primarily due to the opening of the Terre Haute Casino Resort in April 2024. However, this growth was partially offset by regional gaming softness and increased competition.
Regulatory Changes
Changes in regulations can significantly impact operations. The company operates under various state and local laws governing gaming, racing, and wagering. Compliance with these regulations can lead to increased operational costs. For instance, gaming taxes and purses amounted to $231.7 million for the nine months ended September 30, 2024.
Market Conditions
The company is susceptible to fluctuations in market conditions. Economic downturns can reduce consumer spending on entertainment and gaming. This is reflected in the adjusted EBITDA for the Gaming segment, which increased only $1.0 million despite the opening of new facilities. Additionally, adverse weather conditions adversely affected revenues, leading to a $12.5 million decrease in gaming revenue during January 2024.
Operational Risks
Operational challenges such as technology failures or disruptions in service can affect customer experience and revenue generation. The company reported a $3.9 million asset impairment related to historical racing machines (HRMs) in Virginia that are no longer in use. Furthermore, increased selling, general and administrative expenses totaled $21.4 million, impacting overall profitability.
Financial Risks
Financial risks include high levels of debt and interest rate fluctuations. As of September 30, 2024, the company reported total debt of $4.87 billion, with a significant portion maturing in the next few years. The estimated contractual payments under the Credit Agreement for the next twelve months are projected to be $178.5 million. This debt level raises concerns about liquidity and the ability to finance future operations.
Mitigation Strategies
Churchill Downs has implemented several strategies to mitigate these risks. The company continues to diversify its revenue streams by expanding into new markets and segments, such as the recent opening of the Terre Haute Casino Resort. Additionally, the company regularly assesses its operational efficiencies to manage costs effectively and improve margins.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition from other gaming entities | Gaming segment revenue increased by $25.4 million |
| Regulatory Changes | Compliance with state and local gaming regulations | Gaming taxes and purses: $231.7 million |
| Market Conditions | Economic downturns affecting consumer spending | Gaming revenue decreased by $12.5 million in January 2024 |
| Operational Risks | Technology failures and increased operational costs | Asset impairment of $3.9 million |
| Financial Risks | High debt levels and interest rate fluctuations | Total debt: $4.87 billion; Contractual payments: $178.5 million |
Future Growth Prospects for Churchill Downs Incorporated (CHDN)
Growth Opportunities
Future growth prospects for the company are driven by several key factors:
Key Growth Drivers
- Product Innovations: The company has seen an increase in revenue from its historical racing segment, which generated $252.4 million for the three months ended September 30, 2024, up from $225.5 million in 2023, indicating a growth of 12%.
- Market Expansions: The opening of the Terre Haute Casino Resort in April 2024 contributed approximately $32.5 million in additional revenue during Q3 2024.
- Acquisitions: The acquisition of Peninsula Pacific Entertainment LLC in 2022 continues to show positive impacts on operational growth metrics.
Future Revenue Growth Projections
The company's revenue increased by $209.6 million for the nine months ended September 30, 2024, compared to $1,900.5 million in the same period in 2023, reflecting a growth rate of approximately 11%.
| Segment | 9M 2024 Revenue (in millions) | 9M 2023 Revenue (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Live and Historical Racing | $991.5 | $849.3 | $142.2 | 16.7% |
| TwinSpires | $392.7 | $347.8 | $44.9 | 12.9% |
| Gaming | $787.9 | $744.4 | $43.5 | 5.8% |
| All Other | $4.5 | $0.7 | $3.8 | 542.9% |
Strategic Initiatives and Partnerships
The company has announced several project capital investments expected to range from $450.0 million to $550.0 million in 2024. Key projects include:
- The Starting Gate Pavilion and Courtyard at Churchill Downs Racetrack.
- The Rose Gaming Resort in Northern Virginia.
- Owensboro Racing and Gaming in Western Kentucky.
- A Calvert City HRM Venue in Southwestern Kentucky.
Competitive Advantages
The company has established significant competitive advantages that position it for future growth:
- Market Leadership: Continues to dominate the live racing market with a record-breaking Derby Week contributing $38.6 million in additional revenue.
- Brand Recognition: Strong brand influence in the gaming and racing industry enhances customer loyalty and operational efficiency.
- Diverse Revenue Streams: The company benefits from multiple revenue sources across live racing, gaming, and online sports betting, which mitigates risks associated with market fluctuations.
Financial Metrics Supporting Growth
As of September 30, 2024, the company reported:
- Total assets of $7,172.5 million, up from $6,955.5 million at the end of 2023.
- Total liabilities decreased slightly to $6,057.6 million from $6,061.9 million.
- Shareholders' equity increased by $221.3 million to $1,114.9 million.
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Article updated on 8 Nov 2024
Resources:
- Churchill Downs Incorporated (CHDN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Churchill Downs Incorporated (CHDN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Churchill Downs Incorporated (CHDN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.