Churchill Downs - $CHDN - Earnings Analysis: Record financial results in 2024 with significant growth in revenue and net income.

Business Model

Churchill Downs Incorporated generates revenue through a diversified portfolio, including live horse racing events (such as the Kentucky Derby), historical racing machines (HRMs), online wagering platforms (TwinSpires), casino gaming across several states, and various related services like food and beverage, hotel accommodations, and event-related services.

Revenue Sources

• Live and Historical Racing: Revenue from pari-mutuel wagering on live and historical races, admissions, sponsorships, television rights, and food and beverage services.
• Wagering Services and Solutions: Revenue from online horse race betting through TwinSpires, sports betting operations, and technology services like United Tote and Exacta.
• Gaming: Revenue from casino properties including slot machines, table games, video lottery terminals, video poker, hotel services, and food and beverage.

Revenue Distribution by Channel

• In 2024, Live and Historical Racing contributed $1,225.6 million in net revenue, Wagering Services and Solutions contributed $469.5 million, and Gaming contributed $1,039.1 million.

Income Statement Analysis

• Revenue increased by 11.2% in Q4 2024 compared to Q4 2023, driven by growth across all segments.
• Operating income increased by 19.4%, indicating improved operational efficiency.
• Net income increased by 24.5%, reflecting higher profitability.

Balance Sheet Analysis

• Total assets increased by 4.6%, reflecting capital investments in new projects.
• Total shareholders' equity increased by 21.3%, primarily due to retained earnings and addition of redeemable noncontrolling interest.
• Total liabilities increased by 2.2%, reflecting increased borrowings for capital projects.

Cash Flow Analysis

• Net cash provided by operating activities increased by 27.5% due to higher net income and changes in working capital.
• Net cash used in investing activities decreased by 24.1% due to decreased capital expenditures.
• Net cash used in financing activities increased, primarily due to decreased net proceeds from long-term debt and increased share repurchases.

Capital Allocation

The Company returned $218.3 million to shareholders through share repurchases and dividends in 2024. The Company increased its annual dividend by 7% in 2024, marking the fourteenth consecutive year of dividend increases. The Company also invested $547.0 million in capital expenditures, including maintenance and project capital, focusing on growth projects like the expansion of Churchill Downs Racetrack and new HRM venues.

Management Commentary

We delivered all-time record net revenue and record adjusted EBITDA up 11% and 13%, respectively, over the record results from 2023.

We have several guiding principles as we develop Churchill Downs’ Racetrack that we believe will continue to propel us forward over the next several years.

While we are constantly evaluating our security precautions in an effort to ensure the safety of the public, no security measures can guarantee safety and there can be no assurances of avoiding potential liabilities.

Regional gaming consumer behavior in fourth quarter remained consistent with recent quarters. We see strength at the higher end with rate of play and weakness at the lower end and with unrated play across our properties.

Overall Sentiment: Overall, management expresses optimism about future growth and plans while also acknowledging certain challenges in regional gaming markets.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.