Churchill Downs, Incorporated · NASDAQ:CHDN
Churchill Downs — Non-Deal Roadshow (August 2013)
27 slides from Churchill Downs's roadshow presentation, Aug 14, 2013
Slide 1: Midwest Non-Deal Roadshow
Prepared For: Investor Relations (NASDAQ: CHDN) August 15-16, 2013 Bill Mudd, EVP and CFO Mike Anderson, VP Finance & IR Midwest Non-Deal Roadshow
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: ["anticipate,"] ["intend,"] ["plan,"] ["goal,"]
Slide 3: Use of Adjusted EBITDA as a non-GAAP measure
Use of Adjusted EBITDA as a non-GAAP measure Churchill Downs Incorporated (CDI or Company) began using “Adjusted EBITDA” during the three months ended June 30, 2013 as a key performance measure of results of operations for purposes of evaluating performance internally. The Company believes the use o
Slide 4: Three distinct segments: Racing, Gaming & Online Entertainment
($millions) 2012A Revenue $223 $139 Adjusted EBITDA $64 $41 Adj. EBITDA Margin 29% 30% ($millions) 2012A 1H 2013 Revenue $302 $185 Adjusted EBITDA $54 $59 Adj. EBITDA Margin 18% 32% Churchill Downs Incorporated operates in three distinct segments We are a diversified Racing, Gaming, & Online Enterta
Slide 5: Racing Operations: We own premier Thoroughbred Racetracks
5 Racing Operations: We own 4 premier Thoroughbred Racetracks Our debt and equity is back-stopped with valuable real estate • 336 acres in western Chicago suburb, Arlington Heights • Operates 11 OTB’s • 20 minutes form O’Hare airport • Metra commuter train stop on property - easy access to other sub
Slide 6: Racing Operations Adjusted EBITDA has grown despite industry declines
6 Racing Operations Adjusted EBITDA has grown despite industry declines Revenues Adjusted EBITDA 2012 v 2010 (2)% +45% boxshadowdwn Wagering on U.S. Thoroughbreds in 2012 was up 1% Y/Y, first total year increase since 2006 - 2012 U.S. Industry still down 20% from 2008 according to The Jockey Club On
Slide 7: The Kentucky Oaks & Derby profits come from many sources
7 The Kentucky Oaks & Derby profits come from many sources Sources of Derby Week Profitability (Illustrative Approximations) Wagering, net of purses & pari-mutuel taxes Premium Tickets / Other Sponsorships TV / Radio Licensing F&B, Merchandise, Parking, ProgramsGeneral Admissions boxshadowdwn Premiu
Slide 8: Kentucky Derby continues economic growth / popularity
8 Kentucky Derby continues economic growth / popularity 2013 Derby Week results prove the resiliency and brand power of this iconic entertainment event boxshadowdwn Record Derby Week Adjusted EBITDA for the fourth consecutive year, up $5.8 mil. in Adjusted EBITDA - Kentucky Derby Week Adjusted EBITD
Slide 9: 2014 Kentucky Derby growth expected from new venues / seating expansion
9 2014 Kentucky Derby growth expected from new venues / seating expansion Continued growth and popularity of Kentucky Derby Week fuels expansion efforts boxshadowdwn In July 2013, we announced a $14.5 mil. expansion project at Churchill Downs Racetrack - New Grandstand Terrace & Rooftop Garden - 51,
Slide 10: What is The Kentucky Oaks & Derby worth?
10 Sports League Number of Teams Enterprise Value ($B) EBITDA ($ millions) EV / EBITDA (multiple) 30 $18.2 $432 ($14.4 Avg./Team) 42.0x 32 $33.2 $979 ($30.6 Avg./Team) 33.9x 30 $11.8 $175 ($5.8 Avg./Team) 67.4x 30 $7.2 $127 ($4.2 Avg./Team) 56.9x 9 $1.3 $58 ($6.4 Avg./Team) 22.0x Total 131 $71.6 $1,
Slide 11: Gaming: Our properties are relatively new and in mature markets
11 Gaming: Our properties are relatively new and in mature markets Growing our Gaming Business thru development and acquisitions • Located in Miami Gardens Florida, near Sun Life Stadium • Greenfield construction, opened January 2010 • 1,210 Slot Machines • 29 Poker Tables Calder Casino Harlow’s Cas
Slide 12: Gaming Adj. EBITDA growth driven by greenfield development & acquisitions
12 Gaming Adj. EBITDA growth driven by greenfield development & acquisitions Acquisition & development focused on ROI ($ in millions) $30 $59 $64 2010 2011 2012 $142 $213 $223 $35 $41 1H 2012 1H 2013 $111 $139 Revenues Adjusted EBITDA Y/Y% +26% +19% Adjusted EBITDA Margin % 21% 28% 29% 31% 30% 1,400
Slide 13: 2013 Gaming Adj. EBITDA expected growth driven by Riverwalk acquisition
13 2013 Gaming Adj. EBITDA expected growth driven by Riverwalk acquisition Newest property in Vicksburg with a superior design and high quality amenities boxshadowdwn Acquired Riverwalk Casino Hotel in Vicksburg, MS in October 2012 for $145.6 million - Expected to add approximately $55 million in re
Slide 14: Acquired Oxford Casino in Oxford, Maine in 3Q
14 Acquired Oxford Casino in Oxford, Maine in 3Q Closed on Oxford Casino acquisition on July 17, 2013 boxshadowdwn Oxford Casino opened in June 2012, and is located approximately 35 miles northwest of Portland, ME boxshadowdwn Completed an expansion of its gaming floor in Oct 2012 bringing total slo
Slide 15: 2014 Gaming Adj. EBITDA growth driven by new Ohio Gaming & Racing Facility
15 2014 Gaming Adj. EBITDA growth driven by new Ohio Gaming & Racing Facility Partnering with Delaware North on a $272 million development in an attractive gaming market boxshadowdwn 1Q 2012 – announced a Joint Venture (“JV”) with Delaware North Companies (“DNC”) to purchase Lebanon Raceway license
Slide 16: Online Business has grown organically as customers shift wagering behavior
16 Online Business has grown organically as customers shift wagering behavior $19 $41 $45 2010 2011 2012 $121 $165 $183 $25 $25 1H 2012 1H 2013 $97 $95 Revenues Adjusted EBITDA 2012 v 2010 +51% +139% Y/Y% (1)% - % boxshadowdwn Online wagering has grown ~8% to ~14% faster than the industry through 4Q
Slide 17: Proven ability to grow Revenues & Adjusted EBITDA
17 Proven ability to grow Revenues & Adjusted EBITDA $87 $145 $158 $585 $697 $732 -50 50 150 250 350 450 550 650 750 0 20 40 60 80 100 120 140 160 180 200 2010 2011 2012 Revenues Adjusted EBITDA boxshadowdwn All three segments showed Adjusted EBITDA growth in 2012: - Racing Operations up 13% - Derby
Slide 18: Investment Rationale Summary
18 Investment Rationale Summary boxshadowdwn Disciplined, Shareholder-Focused Management Team - Diverse backgrounds with multi-industry, technology and international experience - Proven record of capital allocation, revenue & earnings growth boxshadowdwn Diversified portfolio of Racing, Gaming, Onli
Slide 19: Appendix
Appendix 19 CuurcHiLt Downs
Slide 20: Recent actions provide greater flexibility for borrowing / stock repurchase
20 Recent actions provide greater flexibility for borrowing / stock repurchase Amended bank facility adds credit capacity, stock repurchase plan adds option for use of free cash boxshadowdwn CDI Board of Directors approved April 2013, subject to state regulatory approvals boxshadowdwn Received final
Slide 21: Illinois & Kentucky provide future gaming growth options
21 Illinois & Kentucky provide future gaming growth options Gaming expansion is currently a major topic of political discussions in both states boxshadowdwn Attractive location - Approximately 25 miles from downtown Chicago, with train state on property - ~9 miles from Des Plaines Casino (> $700 win
Slide 22: How It Works (Luckity)
22 How It Works Step 1: Customer plays one of many Luckity games Step 2: Game play is mapped to pari- mutuel wagering pools Step 3: Live horse race generates results and real cash prizes Step 4: Customer account is credited with real cash winnings based on actual payouts from pari-mutuel pools Lucki
Slide 23: Reconciliations – Adjusted EBITDA 2010
23 Reconciliations –Adjusted EBITDA 2010 Reconciliation of Segment Adjusted EBITDA to earnings (loss) from continuing operations: ($ in millions) 2010 2010 2010 2010 2010 1Q 2Q 3Q 4Q Full Year Racing Operations (12,653)$ 49,811$ 1,539$ (104)$ 38,594$ Gaming 5,124 6,788 8,014 9,695 29,621 Online Busi
Slide 24: Reconciliations – Adjusted EBITDA 2011
24 Reconciliations –Adjusted EBITDA 2011 Reconciliation of Segment Adjusted EBITDA to earnings (loss) from continuing operations: ($ in millions) 2011 2011 2011 2011 2011 1Q 2Q 3Q 4Q Full Year Racing Operations (12,183)$ 59,852$ 1,949$ (2,454)$ 47,163$ Gaming 18,341 13,126 13,509 13,658 58,634 Onlin
Slide 25: Reconciliations – Adjusted EBITDA 2012
25 Reconciliations –Adjusted EBITDA 2012 Reconciliation of Segment Adjusted EBITDA to earnings (loss) from continuing operations: ($ in millions) 2012 2012 2012 2012 2012 1Q 2Q 3Q 4Q Full Year Racing Operations (11,053)$ 67,423$ 2,101$ (4,049)$ 54,422$ Gaming 19,773 14,992 12,624 16,778 64,168 Onlin
Slide 26: Reconciliations – Adjusted EBITDA 2013
26 Reconciliations –Adjusted EBITDA 2013 Reconciliation of Segment Adjusted EBITDA to earnings (loss) from continuing operations: ($ in millions) 2013 2013 2013 1Q 2Q 1H Racing Operations (11,257)$ 70,517$ 59,260$ Gaming 22,008 19,365 41,373 Online Business 11,335 14,091 25,426 Other Investments / C
Slide 27: Management team
27 Bill Carstanjen, President & COO Bob Evans, Chairman & CEO Alan Tse, EVP & General Counsel Bill Mudd, EVP & CFO boxshadowdwn CEO since 2006 boxshadowdwn Diverse background – strategy consulting, software, private equity boxshadowdwn Technology-focused boxshadowdwn Led CDI’s diversified growth str