Churchill Downs, Incorporated · NASDAQ:CHDN
Churchill Downs — Wells Fargo Securities 2015 Gaming Forum
31 slides from Churchill Downs's conference presentation, Dec 2, 2015
Slide 1: Wells Fargo Securities 2015 Gaming Forum
Prepared For: Investor Relations (NASDAQ: CHDN) December 3, 2015 Bill Carstanjen, Chief Executive Officer Marcia Dall, EVP and Chief Financial Officer Mike Anderson, VP Finance & IR / Treasurer Wells Fargo Securities 2015 Gaming Forum Boston, MA
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provi
Slide 3: Forward-Looking Statements (continued)
3 excess costs and time delays; the increased concentration in the slot machine manufacturing industry and corresponding increase in costs; the impact of unfavorable changes in the advance deposit wagering regulatory environment; the uncertainty and volatility in the domestic and foreign legal envir
Slide 4: Churchill Downs is a diversified gaming, racing & online entertainment company
Churchill Downs is a diversified gaming, racing & online entertainment company Casinos … six casinos1 & two hotels with approx. 6,750 gaming positions2 located in 5 different states 4 Big Fish Games … one of the world’s largest producers and distributors of PC, Mac and mobile casual games, acqui
Slide 5: Key investment highlights
5 Key investment highlights 1 Includes Miami Valley Gaming, 50% owned Ohio joint venture 2 Based on last twelve months (“LTM”) Adjusted EBITDA as of 9/30/15, excluding pro-forma impact of Big Fish Adjusted EBITDA for LTM 3 Based on LTM 9/30/15 vs. 2010 Strong balance sheet backstopped with valuabl
Slide 6: The company is diversified across its business portfolio
6 The company is diversified across its business portfolio… Source: Company filings 1 Net revenue by business unit (LTM 9/30/15)2 Adj. EBITDA by business unit (LTM 9/30/15)2 Racing 22% Casinos 33% TwinSpires 16% Other Investment -2% Big Fish 27% Net revenue by business unit (2008) Adj. EBITDA by bus
Slide 7: History of successful acquisitions followed by rapid deleveraging
0.2x 1.5x 0.7x 1.4x 3.6x 0.8x 1.4x 2.1x 3.8x 1.9x3 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM 9/30/15 Total debt / EBITDA 7 … and has a history of successful acquisitions followed by rapid deleveraging Leverage and acquisition history Source: Compan
Slide 8: Experienced, proven management team
Bill Carstanjen, Chief Executive Officer Paul Thelen, EVP Marcia Dall, EVP & CFO Bill Mudd, President & COO Named CDI’s 12th CEO in Aug 2014 Served as COO since 2009, President & COO since March 2011, with CDI for ~10 years total Formerly with GE Capital M&A background with Cravath, Swaine &
Slide 9: Growth strategy and recent developments
Derby and Oaks ■ Presenting sponsorship renewal (Yum! Brands), new 5-yr deal through 2020 ■ Media sponsorship renewal (NBC), new 10-yr deal through 2025 Big Fish acquisition extends presence as a leading digital entertainment provider ■ Positions us at the forefront of a rapidly growing mobile g
Slide 10: Capital allocation and financial strategy
Free cash flow and leverage ■ Continue disciplined maintenance capital spending ■ Cash from operations used for accretive acquisitions, share repurchases, dividends and debt repayment Balance sheet ■ Maintain appropriate levels of operating cash on hand to run our brick-and-mortar casino gaming
Slide 11: Big Fish Games
Big Fish Games acquired in Dec 2014 $485 million in up-front consideration, plus up to $350 million in an earn-out based on 2015 Adj. EBITDA performance (2015 Adj. EBITDA above base value of $51.2 million multiplied by 9x) Big Fish Games has distributed more than 2.6 billion games from a growing
Slide 12: Big Fish is a diversified games company
12 Social Casino Casual and Mid-Core Free-to-Play Premium Paid Game Example Big Fish Casino Vegas Party Slots Gummy Drop! Dungeon Boss Lifeline Mystery Case Files Description Casino-style games such as blackjack, poker, slots, craps and roulette All non-casino game types including casual and mid
Slide 13: Mobile social casino game market continues to grow
13 Mobile social casino game market continues to grow Global mobile and online gaming revenue growth expected to continue Social Casino is one of the largest genres of mobile and online games Superdata, a provider of market intelligence covering the market for free-to-play gaming, estimates th
Slide 14: Big Fish Casino is a platform, not a single game
14 Big Fish Casino is a platform, not a single game Big Fish Casino delivers a steady flow of new games they own and develop thru an in-house studio – A new slot product is launched approximately every two weeks Big Fish Casino is the only platform that offers multiple casino games with synchron
Slide 15: Big Fish Games early contribution exceeds internal expectations
15 ($ millions) First three full quarters under CDI, Big Fish Games produces approx. $82 million in Adj. EBITDA 1 Data per CDI’s earnings releases for quarterly periods ended 3/31/15, 6/30/15 and 9/30/15 2 Big Fish Games bookings for period ended September 30, 2014 not included in the consolidated f
Slide 16: Casinos: Growth through development and acquisition
Casinos: Growth through development and acquisition 16 1 In 2014 and LTM figures, Adj. EBITDA includes 50% share of MVGR’s operating income, MVGR net revenues not consolidated 2 For LTM period ended September 30, 2015 • Consists of 6 existing operations with ~5,600 slots/video lottery terminals, 54
Slide 17: Casinos: Our properties are relatively new and most are in mature markets
• Located in Miami Gardens, FL, near Sun Life Stadium • Convenient location off FL Turnpike • 1,130 slot machines • Among top 3 in slots market share for South FL pari-mutuel gaming facilities Casinos: Our properties are relatively new and most are in mature markets Calder Casino Harlow’s Casino Res
Slide 18: Kentucky Regional overview – KY & IL
Kentucky Regional overview – KY & IL Kentucky & Illinois gaming expansion provides significant upside opportunity *PLEASE DO NOT DELETE THIS TEXT BOX* This map was created using MapInfo. Updates and edits can be easily done using the MapInfo program, contact PPS to make edits. NOTE: This map cannot
Slide 19: TwinSpires: Despite pari-mutuel industry declines, online channel grows
TwinSpires: Despite pari-mutuel industry declines, online channel grows 19 1 In 1H 2013, TwinSpires stopped taking wagers from Illinois residents until June 2013 when Illinois resident wagering resumed with passage of new law in September 2013, TwinSpires stopped taking wagers from Texas residents a
Slide 20: TwinSpires wagering has grown faster than the pari-mutuel industry
TwinSpires wagering has grown ~3% to ~11% faster than the pari-mutuel industry, as customers continue to shift wagering channels due to convenience, accessibility & ease of use TwinSpires business has grown organically as customers shift wagering behavior ~27% wagered online ~11% wagered On-Track
Slide 21: Racing: Revenues continue downward slide, but margins have improved
Racing: Revenues continue downward slide, but margins have improved on Derby strength 21 1 In 2014 and LTM figures, Revenues and Adj. EBITDA were impacted by the leasing of Racing Ops at Calder (FL) starting in July 2014 2 For LTM period ended September 30, 2015 • Churchill Downs Inc. racetracks pro
Slide 22: Racing Operations: Own Thoroughbred Racetracks, leasing Calder ops
Racing Operations: Own 4 Thoroughbred Racetracks, leasing Calder ops Churchill’s debt and equity are back-stopped with valuable real estate in Florida and Illinois Arlington International Racecourse Calder Race Course Fair Grounds Race Course • 231 acres in Miami Gardens, FL with convenient access o
Slide 23: The Kentucky Derby continues to set records
Racing / Derby Record Derby Week Adjusted EBITDA for the sixth consecutive year, up $6 mil. in Adj. EBITDA over 2014 Derby attendance of 170,513, all-time high Derby wagering of $194.3 mil. all-time high (despite the 30% industry decline since the all-time industry high set in 2003) Televisi
Slide 24: The Kentucky Oaks & Derby profits come from many sources
Racing / Derby The Kentucky Oaks & Derby profits come from many sources Sources of Derby Week Profitability (Illustrative Approximations) Wagering Premium Tickets / Other Sponsorships TV / Radio Licensing F&B, Merchandise, Parking, Programs General Admissions Premium tickets are the largest contri
Slide 25: CD Racetrack recently announced $18 million in capital improvements
CD Racetrack recently announced $18 million in capital improvements ROI cap-ex project to enhance Derby experience, add high-end seating In September 2015, we announced an $18 million cap-ex project to modernize Turf Club and other premium areas to be complete prior to 2016 Derby & Oaks - Adds 774
Slide 26: Unique organically-growing assets & diversification drive overall growth
Unique organically-growing assets & diversification drive overall growth 26 $87 $145 $158 $176 $202 $305 2010 2011 2012 2013 2014 LTM $779 23% Revenues Adjusted EBITDA Adjusted EBITDA Margin % $813 $731 21% 22% 25% 15% $585 $697 5-year CAGR 14% 28% 13% ($ in millions) CDI has consistently grown to
Slide 27: CDI generates significant free cash flow
CDI generates significant free cash flow Management’s disciplined allocation of capital combined with significant free cash flow has kept CDI’s balance sheet pristine over the years Uses of cash over the years have included increased dividends, share repurchase, debt reduction and acquisitions
Slide 28: Appendix
Appendix 28
Slide 29: Churchill historical financial performance
$64 $59 $45 $158 $127 $128 $119 $223 2008 2009 2010 2011 2012 2013 2014 LTM 9/30/15 $67 $70 $87 $145 $158 $176 $202 $305 $312 14% 15% 15% 21% 22% 23% 25% 28% 2008 2009 2010 2011 2012 2013 2014 LTM 9/30/15 LTM 9/30/15 EBITDA Margin $466 $471 $585 $697 $732 $779 $807 2008 2009 2010 2011 2012 2013 LTM
Slide 30: Big Fish acquisition: Schedule of deferred payment and earnout obligations
30 Big Fish acquisition: Schedule of deferred payment and earnout obligations Source: Company figures Note: Excludes accrued interest on deferred payments and earnout 1 Assumes maximum earnout of $350.0 million achieved, which is based on 2015 Adjusted EBITDA performance Big Fish obligation schedule
Slide 31: q KENTUCKY
q KENTUCKY DERBY. if . - |] TWINSPIRES.COM = CHURCHILL DOWNS INCORPORATED
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