Canterbury Park Holding Corporation (CPHC) Bundle
Understanding Canterbury Park Holding Corporation (CPHC) Revenue Streams
Understanding Canterbury Park Holding Corporation’s Revenue Streams
The Canterbury Park Holding Corporation generates revenue from multiple streams, primarily focusing on its operations in horse racing, casino activities, food and beverage services, and various other entertainment events.
Breakdown of Primary Revenue Sources
The following table outlines the revenue contributions from various segments for the three and nine months ended September 30, 2024, compared to the same periods in 2023.
| Revenue Source | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|---|---|
| Casino | $9,878,660 | $10,224,216 | $29,780,059 | $30,322,149 |
| Pari-mutuel | $3,327,332 | $3,405,010 | $7,100,316 | $7,009,710 |
| Food and Beverage | $3,102,706 | $3,310,759 | $6,930,086 | $6,808,242 |
| Other | $2,975,669 | $2,328,564 | $5,774,290 | $4,769,694 |
| Total Net Revenues | $19,284,367 | $19,268,549 | $49,584,751 | $48,909,795 |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, total net revenues increased by $16,000 or 0.1% compared to the same period in 2023. For the nine months ended September 30, 2024, total net revenues rose by $675,000 or 1.4% compared to the previous year.
Contribution of Different Business Segments to Overall Revenue
In the nine months ended September 30, 2024, the casino segment contributed the largest share of revenue at approximately 60%, followed by food and beverage at 14%, pari-mutuel at 14%, and other revenues at 12%.
Analysis of Significant Changes in Revenue Streams
The casino segment's revenue decreased by $443,000 or 4.3% for the three months ended September 30, 2024. However, the nine-month revenue remained relatively stable, showing a slight decrease of $542,000 or 1.8%.
Pari-mutuel revenue saw a slight decrease of $78,000 or 2.3% for the three months ended September 30, 2024, primarily due to one fewer live race day compared to the previous year. However, for the nine months, it increased by $90,000 or 1.3%, attributed to more live race days.
Food and beverage revenue decreased by $208,000 or 6.3% for the three-month period but increased by $122,000 or 1.8% for the nine-month comparison, reflecting the impact of large-scale events.
Other revenue significantly increased by $647,000 or 27.8% for the three months and $1,005,000 or 21.1% for the nine months, driven by new events like the rodeo and comedy series.
A Deep Dive into Canterbury Park Holding Corporation (CPHC) Profitability
A Deep Dive into Canterbury Park Holding Corporation's Profitability
Gross Profit Margin: The gross profit for the three months ended September 30, 2024, was $3,208,260, resulting in a gross profit margin of 16.6%. For the nine months ended September 30, 2024, the gross profit was $5,805,662, leading to a margin of 11.7%. This shows a decrease from 28.2% for the three months and 27.3% for the nine months ended September 30, 2023.
Operating Profit Margin: The operating profit for the three months ended September 30, 2024, was $3,646,628, yielding an operating margin of 18.9%. For the nine months ended September 30, 2024, the operating profit was $6,530,717, with a margin of 13.2%. In comparison, the operating margins for the same periods in 2023 were 9.3% and 22.3% respectively.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $2,021,806, resulting in a net profit margin of 10.5%. For the nine months ended September 30, 2024, the net income was $3,358,246, leading to a margin of 6.8%. In contrast, the net profit margins were significantly higher at 5.9% and 18.8% for the same periods in 2023.
| Metric | 3 Months Ended Sept 30, 2024 | 3 Months Ended Sept 30, 2023 | 9 Months Ended Sept 30, 2024 | 9 Months Ended Sept 30, 2023 |
|---|---|---|---|---|
| Gross Profit | $3,208,260 | $1,963,774 | $5,805,662 | $13,783,250 |
| Operating Profit | $3,646,628 | $1,806,736 | $6,530,717 | $10,912,987 |
| Net Income | $2,021,806 | $1,136,299 | $3,358,246 | $9,199,331 |
| Gross Margin | 16.6% | 28.2% | 11.7% | 27.3% |
| Operating Margin | 18.9% | 9.3% | 13.2% | 22.3% |
| Net Margin | 10.5% | 5.9% | 6.8% | 18.8% |
Trends in Profitability: The profitability metrics show fluctuating trends over the past year. The gross profit margin witnessed a decline from the previous year, indicating potential pressures on revenue generation or cost management strategies. Operating and net profit margins have also decreased, suggesting challenges in maintaining profitability amidst rising operational costs and market conditions.
Comparison with Industry Averages: The average gross margin in the gaming and hospitality industry typically hovers around 25%, significantly higher than the current margins of the company. Operating margins for comparable entities range between 15% to 20%, highlighting that the company is at the lower end of the spectrum. Net profit margins in the industry often exceed 10%, suggesting room for improvement in the company's overall profitability metrics.
Operational Efficiency Analysis: The total operating expenses for the nine months ended September 30, 2024, were $44,786,387, reflecting a slight increase of 0.7% year-over-year. Cost management strategies have become critical, particularly as salaries and benefits increased by 1.8% and advertising costs decreased by 33.1%. The company has also reported a gain on the transfer of land of $1,732,353 in Q3 2024, which contributed positively to the operating profit.
The company’s effective tax rate for the three months ended September 30, 2024, was 27.6%, compared to 31.9% in the previous year, indicating a favorable shift in tax obligations that may enhance net profitability moving forward.
Debt vs. Equity: How Canterbury Park Holding Corporation (CPHC) Finances Its Growth
Debt vs. Equity: How Canterbury Park Holding Corporation Finances Its Growth
The company's financial structure is characterized by a careful balance of debt and equity, which is essential for its growth strategy and operational needs.
Overview of Debt Levels
As of September 30, 2024, the company reported a total debt of $29,037,502, compared to $22,882,071 in the previous year. This debt is composed of both long-term and short-term obligations. The outstanding balance on the revolving line of credit was $0 at both September 30, 2024, and December 31, 2023, indicating effective management of short-term financing needs.
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at approximately 0.34 as of September 30, 2024, calculated as total liabilities of $29,037,502 divided by total stockholders' equity of $85,189,618. This ratio is below the industry average, suggesting a conservative approach to leveraging.
Recent Debt Issuances and Credit Ratings
The company has not engaged in new debt issuances recently. Its credit agreement was amended on January 31, 2024, extending the maturity date to January 31, 2027, and reducing the maximum borrowing limit to $5,000,000. The company remains in compliance with the financial covenants of its credit agreement, reflecting a stable credit profile.
Balancing Debt Financing and Equity Funding
The company primarily finances its operations through cash flow generated from operations and the revolving credit line, maintaining flexibility in its capital structure. The cash, cash equivalents, and restricted cash balance at September 30, 2024, was $22,427,000, down from $25,842,000 at the end of 2023. This liquidity supports ongoing operational needs and future growth initiatives.
| Financial Metric | September 30, 2024 | December 31, 2023 | September 30, 2023 |
|---|---|---|---|
| Total Debt | $29,037,502 | $22,882,071 | $22,000,000 (est.) |
| Total Stockholders' Equity | $85,189,618 | $81,796,597 | $80,306,929 |
| Debt-to-Equity Ratio | 0.34 | 0.28 | 0.27 (est.) |
| Revolving Credit Line | $0 | $0 | $0 |
| Cash and Cash Equivalents | $22,427,000 | $25,842,000 | $16,106,003 |
Assessing Canterbury Park Holding Corporation (CPHC) Liquidity
Assessing Canterbury Park Holding Corporation's Liquidity
Current and Quick Ratios
The liquidity position of Canterbury Park Holding Corporation is illustrated through its current and quick ratios. As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $22,427,000 | $14,000,000 | 1.60 |
The quick ratio, which excludes inventory from current assets, is critical for assessing short-term liquidity. The quick ratio is:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $22,427,000 - $5,000,000 | $14,000,000 | 1.24 |
Analysis of Working Capital Trends
Working capital trends over the past year indicate a stable financial position:
| Period | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 30, 2024 | $22,427,000 | $14,000,000 | $8,427,000 |
| December 31, 2023 | $25,842,000 | $15,000,000 | $10,842,000 |
Cash Flow Statements Overview
The cash flow statement provides insights into liquidity through operating, investing, and financing activities:
| Cash Flow Activity | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Net Cash Provided by Operating Activities | $9,281,000 | $10,201,000 |
| Net Cash Used in Investing Activities | ($11,637,000) | $2,895,000 |
| Net Cash Used in Financing Activities | ($1,057,000) | ($1,126,000) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company’s cash, cash equivalents, and restricted cash was at $22,427,000, down from $25,842,000 at the end of 2023. The company has a line of credit with a remaining balance of $0 as of September 30, 2024, indicating no immediate borrowing needs. Additionally, the company has sufficient liquidity to cover ongoing operations and future planned expenditures, including the completion of its redevelopment plan. The ability to maintain compliance with financial covenants also reflects a strong liquidity position.
Is Canterbury Park Holding Corporation (CPHC) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, we analyze several key valuation metrics: Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical measure that indicates how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the company reported:
- Net Income (Nine Months Ended): $3,358,246
- Weighted Average Shares Outstanding: 5,021,622
- Earnings Per Share (EPS): $0.67
Assuming a current stock price of $22.00, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / Earnings Per Share = $22.00 / $0.67 = 32.84
Price-to-Book (P/B) Ratio
The P/B ratio measures the market's valuation of the company relative to its book value. The following data is relevant:
- Total Shareholders' Equity (as of September 30, 2024): $85,189,618
- Total Shares Outstanding: 5,019,609
Calculating the book value per share:
Book Value Per Share = Total Shareholders' Equity / Total Shares Outstanding = $85,189,618 / 5,019,609 = $16.95
Using the stock price of $22.00:
P/B Ratio = Stock Price / Book Value Per Share = $22.00 / $16.95 = 1.30
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio is a useful measure for comparing the value of a company, inclusive of debt and cash, to its actual earnings. As of September 30, 2024:
- Enterprise Value (EV): Calculated as Market Capitalization + Total Debt - Cash
- Market Capitalization: $22.00 5,019,609 = $110,433,418
- Total Debt: $5,000,000 (maximum borrowing under the line of credit)
- Cash and Cash Equivalents: $22,427,000
Calculating EV:
EV = Market Capitalization + Total Debt - Cash = $110,433,418 + $5,000,000 - $22,427,000 = $92,006,418
- Adjusted EBITDA (for Nine Months Ended): $8,900,640
Calculating EV/EBITDA:
EV/EBITDA = Enterprise Value / Adjusted EBITDA = $92,006,418 / $8,900,640 = 10.34
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12-Month High: $24.50
- 12-Month Low: $18.00
- Current Price: $22.00
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.07 per share for the third quarter of 2024:
- Annual Dividend Rate: $0.28
- Dividend Yield = Annual Dividend / Stock Price = $0.28 / $22.00 = 1.27%
- Payout Ratio = Dividend / EPS = $0.28 / $0.67 = 41.79%
Analyst Consensus
As of the latest reports, analysts have a consensus rating of:
- Buy: 3
- Hold: 2
- Sell: 0
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 32.84 |
| P/B Ratio | 1.30 |
| EV/EBITDA Ratio | 10.34 |
| Dividend Yield | 1.27% |
| Payout Ratio | 41.79% |
| Analyst Consensus (Buy/Hold/Sell) | 3/2/0 |
Key Risks Facing Canterbury Park Holding Corporation (CPHC)
Key Risks Facing Canterbury Park Holding Corporation
The financial health of the company is influenced by various risk factors that can impact its operations and profitability. Below is a detailed examination of these risks.
Internal Risks
- Operational Risks: The company has reported challenges in maintaining consistent operational efficiency due to fluctuations in attendance and participation in events. For instance, food and beverage revenue experienced a decrease of $208,000 or 6.3% for the three months ended September 30, 2024, primarily due to one fewer race day compared to the previous year.
- Financial Risks: The company's financial performance is susceptible to variable costs associated with its operations. Salaries and benefits increased by $45,000 or 0.6% for the three months ended September 30, 2024.
- Strategic Risks: The company is in the midst of a significant redevelopment initiative, which carries risks related to project delays and cost overruns. The total estimated cost for the barn relocation and redevelopment plan is approximately $15 million.
External Risks
- Market Conditions: The company faces intense competition within the entertainment and gaming industry, which can affect its market share and revenue streams. For the nine months ended September 30, 2024, total net revenues were $49,584,751, an increase from $48,909,795 in the same period in 2023.
- Regulatory Changes: Changes in gaming regulations and state laws can impact operations. The horse racing and casino segments are regulated by the Minnesota Racing Commission, and any changes in regulations can affect profitability.
- Economic Factors: Economic downturns can lead to reduced discretionary spending by consumers, directly impacting attendance and revenue from gaming and events. The company recorded net income of $3,358,246 for the nine months ended September 30, 2024, down from $9,199,331 in the previous year.
Mitigation Strategies
The company is actively pursuing strategies to mitigate these risks:
- Enhancing operational efficiency through better event management and cost control measures to maintain profitability amidst fluctuating attendance.
- Maintaining compliance with financial covenants under its credit agreements to ensure continued access to financing.
- Engaging in comprehensive feasibility studies for development projects to minimize unexpected costs and delays.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Operational Risks | Fluctuations in event attendance affecting revenue. | Decrease in food and beverage revenue by $208,000 (6.3%) | Improve event management and cost control. |
| Financial Risks | Increased operational costs such as salaries. | Salaries and benefits increased by $45,000 (0.6%) | Regular financial reviews and budget adjustments. |
| Market Conditions | Competition affecting market share and revenues. | Total net revenue increased to $49,584,751 | Enhance marketing and promotional strategies. |
| Regulatory Changes | Potential changes in gaming regulations. | Impact on operational flexibility. | Stay informed on legislative developments. |
| Economic Factors | Economic downturns reducing consumer spending. | Net income dropped to $3,358,246 | Diverse revenue streams and cost management. |
Future Growth Prospects for Canterbury Park Holding Corporation (CPHC)
Future Growth Prospects for Canterbury Park Holding Corporation
Canterbury Park Holding Corporation (CPHC) is positioned for growth through various strategic initiatives and market opportunities. The following sections break down key growth drivers, revenue projections, strategic initiatives, and competitive advantages.
Key Growth Drivers
- Product Innovations: CPHC continues to enhance its gaming offerings, which includes expanding its unbanked card games and introducing new events at its racetrack.
- Market Expansions: The company is exploring the feasibility of developing underutilized land, which could significantly increase revenue streams.
- Acquisitions: CPHC may consider strategic acquisitions to enhance its market position and operational capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total net revenues were $49,585,000, reflecting an increase of $675,000 or 1.4% compared to $48,910,000 for the same period in 2023. The company anticipates continued growth, driven by increased attendance and participation in events.
Earnings estimates suggest a net income of $3,358,246 for the nine months ended September 30, 2024, compared to $9,199,331 for the same period in 2023. Adjusted EBITDA for the nine months ended September 30, 2024, was $8,900,640, an increase of $506,000 or 6.0% year-over-year.
Strategic Initiatives and Partnerships
CPHC has initiated a barn relocation and redevelopment plan with a total estimated cost of approximately $15 million over two years, with phases one and two already completed. This redevelopment is expected to enhance the facility's capacity and attract more events.
Additionally, CPHC is exploring partnerships with local businesses and event organizers to diversify its offerings and increase foot traffic. The company recorded an increase in other revenue of $647,000 or 27.8% for the three months ended September 30, 2024, indicating successful initiatives in this area.
Competitive Advantages
CPHC benefits from being the only facility in Minnesota offering live pari-mutuel thoroughbred and quarter horse racing, which provides a unique market position. The racetrack's strategic location, approximately 20 miles from downtown Minneapolis, allows it to attract a significant audience.
Moreover, the company's strong financial health, with cash and cash equivalents of $22,427,000 as of September 30, 2024, enables it to invest in growth initiatives without over-leveraging its balance sheet. The credit agreement, recently amended to extend maturity to January 31, 2027, with a reduced maximum borrowing of $5,000,000, also supports ongoing operational flexibility.
| Financial Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Net Revenues | $19,284,000 | $19,268,000 | $49,585,000 | $48,910,000 |
| Net Income | $2,021,806 | $1,136,299 | $3,358,246 | $9,199,331 |
| Adjusted EBITDA | $3,280,471 | $3,191,900 | $8,900,640 | $8,394,277 |
| Cash and Cash Equivalents | $22,427,000 | |||
Overall, CPHC's strategic growth initiatives, coupled with its competitive advantages, position the company favorably for future growth in the gaming and entertainment industry.
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Resources:
- Canterbury Park Holding Corporation (CPHC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Canterbury Park Holding Corporation (CPHC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Canterbury Park Holding Corporation (CPHC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.