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Churchill Downs reports Q4 and full year results25 February 2015LOUISVILLE, Kentucky -- (PRESS RELEASE) -- Churchill Downs Incorporated (CHDN) (CDI or Company) today reported business results for the fourth-quarter and full year ended Dec. 31, 2014. Q4 Highlights Record net revenues of $168.3 million, a 4% increase over fourth-quarter 2013 Record Adjusted EBITDA of $28.5 million, up 47% over fourth-quarter 2013 Completed acquisition of Big Fish Games on December 16 2014 FULL YEAR Highlights Record net revenues of $812.9 million, a 4% increase over 2013 Record Adjusted EBITDA of $202.5 million, up 15% over 2013 Record Kentucky Oaks & Derby Week Adjusted EBITDA, an $8.8 million increase over 2013 MANAGEMENT COMMENTARY "The Company produced record net revenues and Adjusted EBITDA results for both the fourth-quarter and the full year of 2014," said CDI Chief Executive Officer Bill Carstanjen. "While we closed our acquisition of Big Fish Games in December, our record performance over the course of 2014 was largely driven by our racing, casino and TwinSpires.com businesses. We look forward in 2015 to continuing the momentum in our traditional businesses as well as the new contributions of Big Fish Games and its exceptional team." During the fourth-quarter of 2014, CDI net revenues increased $5.9 million, or 4%, from the prior year primarily due to the acquisition of Big Fish Games on December 16, 2014, offset by the loss of revenues from the cessation of pari-mutuel operations at Calder Race Course. Adjusted EBITDA for the quarter increased $9.2 million due to the acquisition of Big Fish Games, the improvement in profitability related to the cessation of pari-mutuel operations at Calder Race Course and an increase in Adjusted EBITDA related to CDI's share of operating income from Miami Valley Gaming (MVG). Below the Adjusted EBITDA line, several Big Fish Games acquisition-related charges totaling $14.7 million impacted earnings (loss) and earnings (loss) per share figures. They consist of non-recurring transaction-related expenses of $6.4 million, adjustments of $3.8 million associated with the change in fair value of the earn-out and deferred founder liabilities recorded since the acquisition date, and $4.5 million reflecting the change in Big Fish Games deferred revenue primarily resulting from business combination accounting rules. Additionally, asset impairment charges of $4.8 million reflect $3.2 million for our investment in Luckity, which ceased operations during the quarter and $1.6 million for our unsuccessful attempt to obtain a New York gaming license in the Capital Region. Partially offsetting the unfavorable adjustments to earnings was a $4.6 million decline in share-based compensation to the prior year and pre-opening costs of $2.4 million incurred for MVG's opening during December 2013. During the year-ended December 31, 2014, CDI net revenues increased $33.6 million, or 4%, as revenues from the acquisitions of Oxford Casino and Big Fish Games coupled with a strong Kentucky Oaks & Derby week were partially offset by a decline in Racing Operations revenues from the cessation of pari-mutuel operations at Calder Race Course during the second half of the year and declines in revenues from certain other casino properties during the year. Adjusted EBITDA increased $26.3 million, or 15%, driven by increases of $11.8 million and $11.1 million from the Oxford Casino acquisition and the late 2013 opening of MVG, respectively. In addition, increased profitability from Kentucky Oaks & Derby week of $8.8 million and from the acquisition of Big Fish Games of $3.8 million more than offset the declines in TwinSpires.com from the loss of Texas resident wagering in September 2013 and new online pari-mutuel taxes imposed by New York on January 1, 2014. During the fourth-quarter of 2014, Casino revenues remained flat as revenue increases at Oxford Casino were offset by declines at other casino properties. Casino Adjusted EBITDA increased $3.9 million, or 21%, primarily due to the inclusion of a full quarter of our share of operating income from MVG, which opened in December 2013, and improvements in profitability at our Oxford facility. During the year-ended December 31, 2014, Casino revenues increased $31.5 million, or 11%, as revenues from the Oxford acquisition were offset by declines at our other casino properties due to general economic weakness during a majority of the year, a decline in wagering at our Louisiana properties which mirrored declines in the New Orleans market as a whole and the closure of poker operations at Calder Casino. Adjusted EBITDA during the year increased $20.5 million, or 25%, due to the increase in Oxford Adjusted EBITDA of $11.8 million and CDI's share of operating income from MVG of $11.1 million. Improvements were partially offset by a decline in Adjusted EBITDA from Louisiana operations of $1.5 million and $0.6 million at our Mississippi casinos. During the fourth-quarter of 2014, TwinSpires revenues increased $0.3 million from the prior year on increased handle of 4% driven by organic customer growth. Total wagering on U.S. thoroughbred racing declined 4% for the fourth-quarter, meaning TwinSpires growth outpaced the industry by 8 percentage points. Adjusted EBITDA declined $0.6 million, or 5%, due primarily to new online pari-mutuel taxes in New York. During the year-ended December 31, 2014, TwinSpires revenues increased $5.8 million, or 3%, over the prior year, reflecting an increase of 3% in pari-mutuel handle compared to a total industry handle decline of 2.8%. Excluding the impact of wagering disruptions in Illinois and the loss of all online wagering in Texas for all of 2014, TwinSpires's handle increased 5.0% during the year, due in part to a 19% increase in unique players, and outpaced industry growth by 8 percentage points. TwinSpires Adjusted EBITDA decreased $3.8 million for the year was driven by a $5.4 million decline on the loss of Texas resident wagering, and a $3.9 million decline on new online pari-mutuel taxes in New York. These losses were partially offset by organic handle growth of 5%, the reinstatement of Illinois resident online wagering, and improvements in our investment in HRTV. During the fourth-quarter of 2014, CDI Racing Operations revenues declined $8.0 million, or 21%, primarily due to the cessation of pari-mutuel operations at Calder Race Course. Racing Operations Adjusted EBITDA improved $2.6 million during the quarter primarily as a result of the cessation of pari-mutuel operations at Calder Race Course. During the year-ended December 31, 2014, Racing Operations revenues decreased $12.8 million, or 5%, from the prior year. Calder revenues declined $17.5 million during the year primarily as a result of the closure of pari-mutuel operations in July 2014. Fairgrounds revenues declined $2.1 million due to inclement weather causing turf races to be moved to our dirt track and Arlington Park revenues declined due to tougher competition in the simulcast market. Partially offsetting these declines was an increase in Kentucky Oaks & Derby week revenues. Racing Operations Adjusted EBITDA increased $10.9 million, or 22%, due to increased profitability of $8.8 million generated by Kentucky Oaks & Derby week and improvements of Adjusted EBITDA at Calder of $3.3 million due to the cessation of pari-mutuel operations. Partially offsetting these gains was a loss at Churchill Downs, excluding Kentucky Oaks & Derby week, from declines in pari-mutuel revenues resulting from fewer starters per race. BIG FISH GAMES RESULTS (in millions): CDI acquired Big Fish Games on December 16, 2014. The revenues recognized subsequent to the acquisition, of $13.9 million, were generated from its Premium Paid, Casino and Free-to-Play Casual games. Big Fish Games generated Adjusted EBITDA of $3.8 million since its acquisition. Only the financial results since the acquisition are included in the consolidated results of the Company. The chart below includes fourth-quarter and full year bookings results for Big Fish Games. This chart is for informational purposes only as it includes pre-acquisition results. Therefore, a reconciliation to GAAP revenues is not provided. Bookings is a non-GAAP financial measure that is equal to the revenue recognized during the period plus the change in deferred revenue for the period. We record the sale of virtual goods, subscriptions, and paid downloads as deferred revenue and then recognize that revenue over the estimated average player life or as virtual goods are consumed. We use bookings as a leading indicator of revenue trends for the business. For the fourth-quarter, including results before CDI's acquisition, Big Fish Games total bookings increased $23.9 million, or 33%, driven by a $22.7 million, or 94%, increase in Casino. The gains were driven by a 77% increase in quarterly average paying users and a 9% increase in average bookings per paying user compared to the fourth-quarter of 2013. Partially offsetting this increase was a $9.6 million, or 23%, decline in our Premium Paid business driven by customers continuing to shift from paid PC games to mobile free-to-play games along with a strengthening U.S. dollar (USD) currency resulting in lower USD bookings. Free-to-play Casual bookings jumped $10.8 million on the successful introduction of Gummy Drop! on iOS in the third-quarter and Android in the fourth-quarter of 2014. Total year results, including results before CDI's acquisition, were similar with Casino bookings more than doubling to $157 million driven by a 56% increase in average quarterly paying users and a 29% increase in average revenue per paying user. |