The decision to bail on the business of running online sports betting sites appears to be working out relatively well for the owner of the Kentucky Derby.
Churchill Downs Inc. (CDI) announced its fourth-quarter and full-year 2022 financial results on Wednesday, with the Louisville-based company reporting record net revenue and profit of approximately $1.8 billion and $439.4 million, respectively, up 13% and 76% compared to 2021. Adjusted earnings, meanwhile, were up 22% in 2022, to a record $763.6 million.
On a quarterly basis, net revenue for CDI was $480.1 million for the three months that ended December 31, up from $364.8 million a year earlier. Net income for the fourth quarter of 2022 was $1 million, far less than the $43.3 million booked a year earlier.
However, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for Q4 was $180.7 million, up from $127 million in 2021. Moreover, within the company's TwinSpires division, net revenue was lower year-over-year but adjusted earnings for the online wagering division were up $12.1 million year-over-year for the fourth quarter, to $25 million.
This was "due to a $14.3 million increase from our Sports and Casino business primarily due to decreased marketing and promotional activities,” CDI said in a press release.
Trending in the same direction
The same trend was reported for CDI's full-year results, as TwinSpires recorded lower revenue in 2022 compared to 2021, but adjusted earnings of $114.1 million, up from $82.7 million.
CDI has pulled back from the consumer-facing online sports betting business over profitability concerns while remaining involved in retail wagering and providing technology to help other companies take action on horse races. Although TwinSpires is taking online bets on horse races in more than 30 states, its mobile sportsbook is now only available in Arizona and Pennsylvania.
Churchill Downs announced the online sports betting and casino exit in February 2022. Since then, it is finding success in the B2B arena, as CDI has struck deals with DraftKings and FanDuel to help the two bookmakers offer wagering on horse races. For example, CDI and DraftKings announced in late November that they had a multi-year partnership for a standalone app, DK HORSE.
CDI’s subsidiary, TwinSpires, is providing the advance deposit wagering (ADW) technology to make DK HORSE a reality. The horse-racing app is scheduled to launch before the 149th Kentucky Derby in May.
“We believe the depth and quality of our online offering through TwinSpires is unmatched in horse racing,” CDI CEO Bill Carstanjen said in a press release. "We are excited to establish this relationship with DraftKings and to deliver a full end-to-end white label ADW solution that will introduce their significant base of sports betting customers to horse racing wagering.”
A look back at #KyDerby 137 pic.twitter.com/2XM9jBBYai
— Churchill Downs (@ChurchillDowns) February 20, 2023
CDI is also trying to monetize the access it has to online sports betting markets in the U.S. One such deal was announced in early January, when CDI said its Presque Isle Downs & Casino in Pennsylvania had struck a multi-year agreement with a wholly-owned U.S. subsidiary of bet365 for online sports betting and iGaming market access in the Keystone State.
“Our relationship with bet365 enables us to maximize the value of our company’s sports betting and iGaming market access in Pennsylvania,” Carstanjen added in a press release.
CDI has been dabbling in the real estate market as well, having recently finalized the sale of its property in Arlington Heights, Illinois to the NFL’s Chicago Bears for $197.2 million.
