Churchill Downs, Incorporated · NASDAQ:CHDN
Churchill Downs — Investor Presentation (September 2022)
75 slides from Churchill Downs's investor presentation, Sep 7, 2022
Slide 1: Investor Presentation September 2022
Exhibit 99.1 Investor Presentation September 2022
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements made in this presentation contain various “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of terms suc
Slide 3: Table of Contents
Table of Contents § Business Overview and Case for Investing § Peninsula Pacific Entertainment Acquisition § Announced Project Capital Investments § Segment Overviews: – Live and Historical Racing – TwinSpires – Gaming § Capital Management § ESG § Appendix 3
Slide 4: Business Overview and Case for Investing
Business Overview and Case for Investing 4
Slide 5: Business Overview
Business Overview Churchill Downs Incorporated (“CDI”) Overview We have a unique and diverse collection of entertainment assets that generate high margins with significant Adjusted EBITDA and Free Cash Flow Churchill Downs Historical Racing Racetrack (“CDRT”) Machines (“HRMs”) TwinSpires Casino Gami
Slide 6: Business Overview: P2E Acquisition
Business Overview CDI Overview Peninsula Pacific Entertainment (“P2E”) Acquisition § Provides substantial scale and expands historical racing geographic diversification § Immediately accretive to earnings per share and free cash flow High quality assets § Colonial Downs Racetrack in New Kent, Virgin
Slide 7: Case for Investing
Case for Investing Case for Investing Significant Capacity for Diverse Organic Growth The Kentucky Derby Growth § Iconic and irreplaceable asset§ Expansion of HRM properties in § Strong free cash flow generation Kentucky, Virginia, New Hampshire, with disciplined maintenance § Consistent high margin
Slide 8: Kentucky Derby
148 Kentucky Derby 8 CuurcHILL Downs
Slide 9: 148th Kentucky Derby: 2022 Derby Week
th 148 Kentucky Derby 2022 Derby Week th Derby celebrations returned leading up to the 148 Kentucky Derby § Thunder over Louisville returned to the Louisville waterfront with hundreds of thousands of spectators for the first time since 2019 § Derby Week nightlife was back in full force, using procee
Slide 10: 148th Kentucky Derby: Ratings and Record Handle
th 148 Kentucky Derby 2022 Derby Week Delivered strong NBC television ratings and viewership th for the 148 Kentucky Derby § 19.0 million peak viewership was the largest Kentucky Derby peak audience since 2017 th § 16.0 million average viewership was the 8 consecutive year the 1 event has topped 15
Slide 11: Peninsula Pacific Entertainment Acquisition
Peninsula Pacific Entertainment Acquisition 11
Slide 12: P2E Acquisition Transaction Overview
P2E Acquisition Transaction Overview Transaction §We have entered into an agreement to acquire substantially all of the assets of Overview P2E for total consideration of $2.75 billion § Debt funding necessary for transaction was completed on April 13, 2022: – $800 million Sr. Secured Delayed Draw Te
Slide 13: Virginia - Existing Properties to Be Acquired
P2E Acquisition Virginia - Existing Properties to Be Acquired CDI will acquire: 1 Property State HRMs § Colonial Downs Racetrack in New Kent, Virginia Colonial Downs Racetrack VA - § Six successful and growing Rosie’s Gaming Emporium Colonial Downs / Rosie’s VA 600 New Kent historical horse racing f
Slide 14: Virginia Development Rights
P2E Acquisition Virginia Development Rights Dumfries Project § CDI will acquire the rights to build a large gaming resort and hotel, the Dumfries Project, with up to Existing HRMs: 2,687 1,150 HRMs in Northern Virginia and potential for Future HRMs: expansion up to 1,800 HRMs after initial build out
Slide 15: New York and Iowa Assets
P2E Acquisition New York and Iowa Assets del Lago Resort & Casino Hard Rock Hotel and Casino Sioux City § Waterloo, New York§ Sioux City, Iowa 1 1 § Gaming floor :§ Gaming floor : - 1,700 slots - 639 slots - 80 table games - 20 table games § 205-room hotel§ 54-room hotel § Nine restaurants / bar are
Slide 16: P2E Acquisition Valuation
P2E Acquisition P2E Acquisition Valuation Multiple Investment Existing Properties ($ billions) § Adjusted for: 10.5x $2.75 – Corporate Synergies – Run rate for recently expanded/opened locations Future Development § Dumfries Project $0.6 - $0.8 § Rosie’s Emporia § Additional 513 HRMs at up to 4 addi
Slide 17: Announced Project Capital Investments
Announced Project Capital Investments 17
Slide 18: Summary of Announced Project Capital Investments
Announced Project Capital Investments Summary of Announced Project Capital Investments Target $ Project Completion millions May 2023 $90 The § Turn 1 Experience Kentucky § Paddock / Under the Spires May 2024 $185 - $200 Derby § Derby City Gaming Expansion and Hotel Late 2022 / 2Q’23 $76 § Derby City
Slide 19: Project Capital Investments at Churchill Downs Racetrack
Announced Project Capital Investments Project Capital Investments at Churchill Downs Racetrack Multi-year Announced Capital Investments Turn I Project Paddock / Under the Spires § Infield seating Potential Major § Renovate additional reserved seating areas Future Projects § Hotel 19
Slide 20: Turn 1 Experience at Churchill Downs Racetrack
Announced Project Capital Investments Turn 1 Experience at Churchill Downs Racetrack th Creating a new Turn 1 experience for the 149 Kentucky Derby in May 2023 § $90 million project providing additional permanent stadium seating and new track-level hospitality club replacing current temporary Oaks a
Slide 21: Paddock Project at Churchill Downs Racetrack
Announced Project Capital Investments Paddock Project at Churchill Downs Racetrack th Enhancing the Paddock experience for nearly every guest for the 150 Kentucky Derby in May 2024 § $185 - $200 million with a payback period of < 8 years § 3,600 new premium reserved seats and 3,250 new standing room
Slide 22: Derby City Gaming Expansion
Announced Project Capital Investments Derby City Gaming Expansion Expanding the Derby City gaming floor and building a new hotel § $76 million investment that will add 135,000 square feet of new space to the facility § 41,000 square-foot gaming floor expansion expected to be completed by late 2022 –
Slide 23: Derby City Gaming Downtown
Announced Project Capital Investments Derby City Gaming Downtown Creating a Derby City Gaming annex in Downtown Louisville § $80 million, 43,000 square-foot entertainment venue § Annex of Churchill Downs Racetrack § Located in the heart of Downtown Louisville, diagonal from the Kentucky Internationa
Slide 24: Turfway Park HRM Facility
Announced Project Capital Investments Turfway Park HRM Facility Constructed a new HRM entertainment venue § Located in Florence, Kentucky 1 § Up to $148 million investment in a state-of-the-art HRM facility § Opened with 857 HRMs with ability to expand to 2 1,200 in the future § Amenities include sp
Slide 25: New Hampshire Charitable Gaming Facility
Announced Project Capital Investments New Hampshire Charitable Gaming Facility Acquisition and build-out of new HRM venue § Up to $150 million investment in acquisition and build- out of a new venue § Located in Salem, New Hampshire approximately 30 minutes from downtown Boston § Following the acqui
Slide 26: Louisiana HRM Expansion
Announced Project Capital Investments Louisiana HRM Expansion Covington Fair Grounds off-track wagering facilities (“OTBs”) are adding HRMs under legislation approved by Louisiana Governor on June 21, 2021 Fair Grounds Fair Grounds currently has installed Race Course LaPlace 1 207 HRMs across 11 OTB
Slide 27: Queen of Terre Haute Casino Resort
Announced Project Capital Investments Queen of Terre Haute Casino Resort Building the new Queen of Terre Haute Casino Resort § Awarded Vigo County casino license in January 2022 § Up to $260 million investment § 50-acre parcel of land off I-70 at the State Road 46 exit on the far-east side of Terre
Slide 28: Pending Land Sales: Illinois and Florida
Pending Land Sales Illinois and Florida Land Sales Combined $488 million in proceeds from pending land sales Florida § On November 22, 2021, we announced an agreement with Link Logistics to purchase 115.7 acres of our land near Calder Casino for $291 million and closed the sale of the land on June 1
Slide 29: Live and Historical Racing Segment
Live and Historical Racing Segment 29
Slide 30: Live and Historical Racing Segment Overview
Live and Historical Racing Segment Overview Live Racing Historical Racing Facilities Churchill Downs Derby City Gaming Key metrics Racetrack 1 Derby City Gaming Downtown Home of the 1 2019 2021 1H’22 $ in millions Kentucky Derby Revenue $292 $431 $363 v. ’19 +47% v. 1H’19 +69% 2 Turfway Park HRM Tur
Slide 31: The Kentucky Derby Overview
The Kentucky Derby The Kentucky Derby Overview The Kentucky Derby utilizes the magic and mystique of Churchill Downs to create unique experiences for our guests Historic Americana Sophisticated Luxury Contagious Excitement Living Traditions 31
Slide 32: The Kentucky Derby - By The Numbers
The Kentucky Derby The Kentucky Derby - By The Numbers Broad ranging in-person appeal and significant broadcast interest creates long-term support for iconic entertainment event Appeals to all ages NBC’s Most Watched Program Since Super Bowl LVI Age Range of § 19 million peak viewership - largest au
Slide 33: Month Long Celebration Leading Up to the Kentucky Derby
The Kentucky Derby The Month Long Celebration Leading Up to the Kentucky Derby Through various non-affiliated organizations, spring kicks off with a month of events celebrating the Kentucky Derby Kentucky Derby Thunder Over Festival Marathon Louisville A Boston Marathon The largest annual qualifying
Slide 34: The Lead Up to the Kentucky Derby
The Kentucky Derby The Lead Up to the Kentucky Derby Derby Week Unique Derby Week Experiences Saturday: Opening Night Experiences at the Track: The annual kickoff to Derby week § Tours of the Paddock area features night racing and § Backstretch Tour at Dawn at entertainment Churchill Downs Tuesday:
Slide 35: The Kentucky Derby Growth Strategy
The Kentucky Derby The Kentucky Derby Growth Strategy A Premier International Sporting / Entertainment Event Kentucky Derby Growth Strategy Derby Week Revenue Other Broadcast Leverage unique experiences and make strategic capital investments License / Sponsorship § Enhance guest experience to enable
Slide 36: Sponsorship Strategy
The Kentucky Derby Sponsorship Strategy Building relationships with sponsors targeting luxury, lifestyle and technology categories for both onsite experiences and Derby parties around the globe Official partners include Woodford Reserve, Longines, Ford and BMW Majority of sponsorship revenue dollars
Slide 37: Strategic Capital Investments to Enhance Guest Experience
The Kentucky Derby Leverage unique experiences and make strategic capital investments Capital Enhance Investments Guest Enable Price to Enable Experience Differentiation Segmentation Conversion to all-inclusive 2021 experience for all reserved PPP seating Homestretch Club – 3,250 premium all-inclusi
Slide 38: Three Unique Roads to the Derby
The Kentucky Derby Three unique Roads to the Derby for a horse to qualify in one of 20 coveted Derby starting positions United States Japan European Horses compete for a Horses compete for one Horses compete for one Derby starting position Derby starting position Derby starting position through 37 r
Slide 39: Historical Racing Machine Overview
Historical Racing Machines Historical Racing Machine Overview A historical horse racing machine (“HRM”) is a gaming device that uses the results of previously run horse races to approximate the gaming experience of Class II and Class III machines § Top game titles / themes are from Aristocrat, Light
Slide 40: Historical Racing Machine Overview - Kentucky
Historical Racing Machines Historical Racing Machine Overview - Kentucky Nine racing licenses have been awarded by the Kentucky Horse Racing Commission (“KHRC”) and are each allowed to have a main facility and one “annex” facility within a 60 mile radius of the licensed racetrack § CDI has been awar
Slide 41: Historical Racing Machine Overview - Virginia, New Hampshire, Louisiana
Historical Racing Machines Historical Racing Machine Overview In Virginia, Colonial Downs is the only entity eligible to operate HRMs in the state and is permitted to operate HRMs at up to 10 “satellite facilities” with a statewide limit of 5,000 HRMs § P2E currently has 6 facilities with 2,687 HRMs
Slide 42: Churchill Downs Racetrack and Derby City Gaming
Historical Racing Machines Churchill Downs Racetrack and Derby City Gaming Derby City Gaming § Operates at Churchill Downs Racetrack’s ancillary training facility in Louisville, Kentucky 1 – Décor pays homage to our deep history in horse Opened Sep. 2018 2H’23 racing Total investment 2 3 $78 $80 – C
Slide 43: Oak Grove Racing, Gaming & Hotel
Historical Racing Machines Oak Grove Racing, Gaming & Hotel Located off of Hwy 24 on the KY / TN border Annex § ~55 miles from Nashville, Tennessee (pop. ~670,000) Opened Sep. 2020 § Across the street from Fort Campbell, the second 1 largest military base in the U.S. (pop. ~200,000) Total investment
Slide 44: Turfway Park and Newport Racing & Gaming
Historical Racing Machines Turfway Park Racing & Gaming and Newport Racing & Gaming Turfway Park Racing & Gaming Renovation 1 § Up to $148 million investment in a state-of-the-art HRM facility Opened Sep. 2022 Oct. 2020 § Opened September 1,2022 Total investment 1 2 Up to $200 $37 ($ millions) § Wil
Slide 45: TwinSpires Segment
TwinSpires Segment 45 CuurcHILL Downs
Slide 46: TwinSpires Growth Strategy
TwinSpires TwinSpires Growth Strategy Grow core TwinSpires horse racing customers § Leverage linkage to Kentucky Derby to efficiently acquire customers § Utilize in-house development team to continue to enhance superior technology platform § Utilize analytics on customer behavior to drive efficient
Slide 47: TwinSpires Horse Racing
TwinSpires Horse Racing TwinSpires Horse Racing TwinSpires Horse Racing business is a well-proven, profitable, and growing platform built on pari-mutuel wagering economics Key metrics Strategic Advantages 2 $ in millions 2019 2021 1H’22 Linkage to the Kentucky Derby § Inexpensively acquire new custo
Slide 48: Horse Racing Industry Handle Growth
TwinSpires Horse Racing Horse Racing Industry Handle Growth 1 Industry handle grew significantly since 2019 and wagering has shifted online 2 U.S. Online Wagering Other Horse Racing Wagering Annual Growth 1H’22 Growth $ in billions $ in billions +12% $12.2 -1% +24% $11.0 $10.9 $5.1 $6.3 +11% $5.7 $6
Slide 49: TwinSpires Handle Growth
TwinSpires Horse Racing TwinSpires Handle Growth 1 TwinSpires Horse Racing handle has also grown significantly since 2019 Annual Growth Quarterly Growth $ in millions $ in millions $1,977 $1,962 $1,064 $1,006 $1,456 $899 2019 2020 2021 1H'20 1H'21 1H'22 +18% VPY: +36% -0.8% VPY: -5% V’19: +36% +35%
Slide 50: TwinSpires Horse Racing Content
TwinSpires Horse Racing TwinSpires Horse Racing Content TwinSpires Horse Racing offers betting on ~165,000 races at 360 racetracks 365 days a year Arkansas Road to Derby San Felipe the Derby Rebel Triple Crown Breeder’s Cup The Resorts World Casino Challenge The Fourstardave Sword Dancer Jockey Club
Slide 51: TwinSpires Horse Racing Content: 16 Countries
TwinSpires Horse Racing TwinSpires Horse Racing Content TwinSpires typically offers wagering 24/7 on racetracks from 16 countries France Ireland United Kingdom USA East East USA West West Uruguay Mexico Canada UAE South Africa New Zealand S. Korea Japan Australia Hong Kong Saudi Arabia Singapore 3AM
Slide 52: TwinSpires Sports and Casino Strategy
TwinSpires Sports and Casino TwinSpires Sports and Casino Strategy CDI will maintain its retail sportsbooks, exit B2C online sports betting and casino business, and monetize online market access rights Jurisdiction CDI Property 1 Mississippi Harlow’s and Riverwalk Casinos 2 Pennsylvania Presque Isle
Slide 53: Gaming Segment
Gaming Segment 33 CuurcHILL Downs
Slide 54: Gaming Segment Regional Gaming Properties
Gaming Segment Regional Gaming Properties Diverse portfolio of gaming properties Strategic advantages Local approach § Unique Brands and marketing strategies Key metrics § Menus and offerings reflect local tastes § Promotions catered to local customer base § Loyal player base $ in millions 1 2019 20
Slide 55: Wholly-Owned Gaming Properties
Gaming Properties Wholly-Owned Gaming Properties Seven wholly-owned regional gaming properties and one management contract 1 Slots & Video Retail 1 1 Property State Acres Poker / VLTs Tables Racetrack Hotel Sportsbook 2 Calder Casino FL 54 1,100 - - - - 3 Fair Grounds Slots and VSI LA 145 1,600 -P -
Slide 56: Equity Investment - Miami Valley Gaming
Gaming Properties Equity Investment – Miami Valley Gaming (50% Ownership) Property § Located on 120 acres in Lebanon, OH (North of Cincinnati, south of Dayton) 1 § ~2,250 video lottery terminals and four dining facilities § Joint venture (50/50) with Delaware North Completed two growth projects in 2
Slide 57: Equity Investment - Rivers Casino Des Plaines
Gaming Properties Equity Investment – Rivers Casino Des Plaines (61% Ownership) Premier casino located on 21 acres in Des Plaines, Illinois (~17 miles from Chicago) CDI invested $407 million for 61% equity investment on March 5, 2019 in a joint venture with Rush Street Gaming, LLC Property 1,2 § 1,9
Slide 58: Capital Management
Capital Management 58 CuurcHILL Downs
Slide 59: Capital Management Philosophy
Capital Management Capital management philosophy based on creating long-term shareholder value Maintain broad and expedient access to the capital markets § Ideal target is 3.0x-4.0x net leverage - willing to go higher for a strategic investment Engage in open and active dialogue with rating agencies
Slide 60: Capital Projects
Capital Management Capital Projects Projected Capital Investments Capital 2021 Actuals 2022 Forecast Maintenance $40 million $60-70 million Project $52 million $300 - 350 million § Oak Grove§ Turfway Park§ Queen of Terre Haute § Newport§ Churchill Downs§ DCG Downtown § Churchill Downs§ Derby City Ga
Slide 61: Investments Have Provided Strong Returns
Capital Management Our investments have provided strong returns creating long-term shareholder value Investment Payback Property Year ($ millions) Period Winner’s Circle Suites and Courtyard 2015 $4 < 5 years Turf Club / Stakes Room 2016 $18 < 5 years Ocean Downs Slot Floor Purchase 2017 $13 < 2 yea
Slide 62: M&A Is a Core Discipline
Capital Management We have demonstrated M&A is a core discipline of our team Typical M&A Target Screen Regional casino assets with future growth potential Well positioned competitively – existing gaming and future gaming expansion Accretive to free cash flow and earnings per share with returns above
Slide 63: $1.5 Billion of Capital Returned to Shareholders
Capital Management CDI has returned $1.5 billion of capital to shareholders over the last 7 years Dividends th § 2022 was the 11 consecutive increase in the dividend per share § $152 million paid to shareholders in dividends over the last 7 years Share Repurchases § Returned $1.38 billion to shareho
Slide 64: Environmental, Social, and Governance
Environmental, Social, and Governance 64
Slide 65: CDI Approach to ESG
ESG CDI Approach to Environment, Social and Governance (“ESG”) ESG Committee established to lead ESG initiatives § Cross-functional team led by CFO § CDI’s Nominating & Governance Committee provide oversight to the Committee and CDI leadership regarding CDI’s ESG strategy § Oversight of CDI’s respon
Slide 66: CDI Approach to Responsible Gaming
ESG CDI Approach to Responsible Gaming CDI is committed to promoting responsible gaming at all of our properties and online, for all of our products and services Team Members Customers and Guests We provide the knowledge and skills regarding: We provide information regarding: § Importance of respons
Slide 67: CDI Approach to the Environment
ESG CDI Approach to the Environment We have ongoing initiatives at our properties: § To lessen energy and water usage § To decrease our carbon emissions § To responsibly manage waste Examples of these initiatives include: § We are committed to installing LED lighting in all of our newly constructed
Slide 68: CDI Approach to Social
ESG CDI Approach to Social CDI is investing in the communities in which we operate § CDI contributes over $2.2 million annually via grants and in-kind donations to over 750 organizations § Each year, CDI donates Derby Week tickets and experiences to nonprofit fundraising auctions, resulting in > $2.
Slide 69: CDI Approach to Governance
ESG CDI Approach to Governance Strong Board of Directors – eight highly qualified members that play a vital role in the direction of CDI § 7 of 8 directors are independent § 2 of 8 independent directors are a woman or diverse § Fully independent Audit and Compensation committees § Board includes fin
Slide 70: Appendix
Appendix 70 CuurcHILL Downs
Slide 71: Management Team
Appendix ManagementTeam Bill Carstanjen Chief Executive Officer § Chief Executive Officer since Aug. 2014; Director since 2015 § President and COO, Mar. 2011 – Aug. 2014; COO, Jan. 2009 – Mar. 2011 § EVP, General Counsel & Chief Development Officer, July 2005 – Dec. 2008 § Former Executive of GE § B
Slide 72: Board of Directors
Appendix Board of Directors Alex Rankin Chairman of the Board § Independent Chairman since 2018 § Director since 2008 § Chairman of the Board of Sterling G. Thompson Company, LLC § President of Upson Downs Farm, Inc. § Chairman of James Graham Brown Foundation Bill Carstanjen § CEO since 2014; Direc
Slide 73: Board of Directors (continued)
Appendix Board of Directors (continued) Doug Grissom § Director since 2017 § Managing Director of Madison Dearborn Partners’ Business & Government Software and Services team § Previously with Bain Capital, McKinsey & Company and Goldman Sachs Daniel Harrington § Director since 1998 § Chair of Compen
Slide 74: Definition of Non-GAAP Financial Measures
Definition of Non-GAAP Financial Measures Churchill Downs Incorporated (the “Company”, “we”, “our”) uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance betwee
Slide 75: Reconciliation from GAAP to Non-GAAP Financial Measures
Reconciliation from GAAP to Non-GAAP Financial Measures Reconciliation of Comprehensive Income to Adjusted EBITDA 75
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