Churchill Downs Inc. executives said July 29 that coming out of the pandemic a significant number of horseplayers are staying online to wager, as opposed to returning to tracks or simulcast outlets.
During a conference call with investors and analysts on the company's second-quarter results, CDI executives provided in-depth discussion on pari-mutuel wagering at the company's popular advance-deposit wagering site TwinSpires.com.
As COVID-19 restrictions kept people away from tracks and simulcast outlets last year, ADW sites saw a surge in business. Many of those players are sticking with the mobile and online wagering possible through an ADW like TwinSpires.
During the conference call, CDI president and chief operating officer Bill Mudd said that while some horseplayers have returned to brick and mortar outlets to wager on racing, about half of the customers TwinSpires picked up during the pandemic are sticking with the ADW. He noted that the industry has seen four straight quarters of growth, which also is a good trend, whether people are betting at a track or simulcast site or through an ADW.
"What we're seeing is about half of those people that went online (during the pandemic) are staying online," Mudd said, noting that players are continuing to wager either at TwinSpires or at tracks or simulcast outlets. "We're growing the entire customer base and we're also keeping a good percentage of those people that decided to wager online when they could no longer go to brick and mortar facilities. Those people that are not (continuing to bet through TwinSpires) are going back to brick and mortar facilities so I think it's a win across all parts of the business."
Because of racing cancellations and pandemic restrictions that were in place in last year's second quarter as well as the return of the Kentucky Derby Presented by Woodford Reserve (G1) to this year's second quarter after it was postponed to September last year comparisons are difficult, but TwinSpires saw a bump in second-quarter net revenue from $121.7 million last year to $135.9 this year.
Despite that $14.2 million bump in net revenue, TwinSpires saw its adjusted earnings fall to $23.1 million for the second quarter this year, compared with $38.7 million for the second quarter last year. CDI executive vice president and chief financial officer Marcia Dall attributed the $15.6 million reduction in adjusted earnings this year to money spent on marketing and advertising expenses associated with the Derby.
Dall noted that CDI typically makes its biggest marketing and advertising push for TwinSpires around the Derby and the company expects that commitment to pay off in the months ahead. Mudd said the company has enjoyed strong results from such efforts.
"Whenever you think about horse racing and TwinSpires online, it's much like what you're seeing in online sports betting. You're taking the (advertising and marketing) expenses in the current period to generate growth in the future," Mudd said. "Every year we get an opportunity to deploy large amounts of investment around (the Derby). An event like the Derby is bigger than any other event in horse racing, and every year we keep pushing more into the marketing spend and we keep getting good returns."
In outlining company plans on mobile sports wagering, CDI CEO Bill Carstanjen called TwinSpires the "most profitable digital asset in the online gaming space."
Also of note during Thursday's conference call:
• Paced by strong performance of its gaming properties, CDI enjoyed a strong second quarter—seeing record net revenue of $515.1 million.
• CDI officials repeated that there have been a number of bids on the Arlington International Racecourse property.
"Regarding Arlington Park, we've received numerous bids from interested parties for the land, and are working through the process to select the final winning bid," Carstanjen said. "We will provide an update when we have selected the winning bidder."
Carstanjen also noted that CDI has begun the process to sell excess land around its Calder Casino, the former Calder Race Course property. CDI now conducts Jai-Alai there in addition to gaming. In recent years, CDI leased the facility to The Stronach Group to conduct its Gulfstream Park West race meet. Horses also stabled and trained there.
The opportunity to monetize these properties, Carstanjen noted, would only add to the company's strong balance sheet that includes significant cash and liquidity. Later on the call, Dall noted that money from the property sales could be used to reinvest in the company, pursue acquisitions, or as a return to shareholders.
• Also during Thursday's call, CDI officials provided more detail on plans to build another off-site historical horse racing facility in the Louisville area. CDI already offers the very successful Derby City Gaming outlet, which will now see a hotel added.
Earlier this year it abandoned plans to add a hotel and HHR games at Churchill Downs racetrack while noting it was interested in placing a second facility in the Louisville area. On Thursday CDI officials said they're looking at the downtown area.
