Churchill Downs, Incorporated · NASDAQ:CHDN
Churchill Downs — Investor Day (November 2018)
86 slides from Churchill Downs's investor day presentation, Nov 2, 2018
Slide 1: Investor Conference November 2, 2018
Investor Conference November 2, 2018 Exhibit 99.1
Slide 2: Opening Video
https://hayes502.box.com/s/p85oqp372zhvvnbcdhsiyj8y7aq0e0ls Opening Video
Slide 3: Agenda
Forward Looking StatementsNick Zangari Welcome and Introduction of PresentersBill Carstanjen Company Overview and the Case for InvestingBill Carstanjen Segment Overviews and Growth Strategies The Kentucky DerbyKevin Flanery TwinSpiresBill Mudd Casino PropertiesAustin Miller Additional Growth Opportu
Slide 4: Forward Looking Statements
Forward Looking Statements 4 CuurcHii, Downs
Slide 5: Forward-Looking Statements
Forward-Looking Statements Information set forth in this presentation contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), which provides certain “safe harbor” provisions. All forward-looking statements made in this pre
Slide 6: Use of Non-GAAP measures
This presentation includes certain “non-GAAP financial measures” as defined in the Securities and Exchange Commission’s Regulation G. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is included in the appendix of this presentation. Use of Non-GAAP
Slide 7: Welcome and Introduction of Presenters
Welcome and Introduction of Presenters
Slide 8: Executive Presenters
Bill Carstanjen Chief Executive Officer Marcia Dall EVP & Chief Financial Officer Bill Mudd President & Chief Operating Officer Chief Executive Officer since Sept. 2014; Director since 2015 President and COO, Mar. 2011 – Sept. 2014; COO, Jan. 2009 – Mar. 2011 EVP, General Counsel & Chief Development
Slide 9: Presenters: Flanery, Zangari, Miller
Kevin Flanery SVP, President Churchill Downs Racetrack Nick Zangari VP, Investor Relations, Treasury, and Risk Management Austin Miller SVP, Casino Operations President of Churchill Downs Racetrack since July 2009 (13th in history) SVP – National Public Affairs and Communications from Mar. 2008 - Ju
Slide 10: Strategy Overview and the Case for Investing
Strategy Overview and the Case for Investing
Slide 11: Company Overview: The Kentucky Derby
The Kentucky Derby The longest continuously held annual sporting event in the United States Company Overview
Slide 12: Company Overview: TwinSpires.com
Company Overview TwinSpires.com The largest, legal online wagering platform in the U.S. BET ANYWHERE, ANYTIME BET ANYWHERE, ANYTIME Bet on racetracks all around the world. TOP RACING DATA Leading source of online data SIMPLE, FAST WAGERING Place multiple bets at a time LIVE STREAMING Be a part of th
Slide 13: Company Overview: Regional Casino Properties
Company Overview Regional Casino Properties Seven casinos located in six states with ~8,000 gaming positions and three hotels 14 off-track betting facilities (OTBs) with 12 offering video poker
Slide 14: The Case For Investing
Iconic asset - The Kentucky Derby Industry leading, diversified business platforms Continuous organic growth opportunities Ongoing expansion opportunities Strong balance sheet and financial performance Proven management team The Case For Investing
Slide 15: Iconic asset - The Kentucky Derby
Iconic asset - The Kentucky Derby The Case For Investing The magic and mystique of The Kentucky Derby is irreplicable – creating once-in-a-lifetime experiences for our guests
Slide 16: Industry leading, diversified business platforms
Industry leading, diversified business platforms The Case For Investing The Kentucky Derby First of three Triple Crown events delivering: highest attendance highest wagering consistent profitable growth over the past nine years TwinSpires Largest legal online wagering platform in the U.S. Multiple b
Slide 17: Continuous organic growth opportunities
Continuous organic growth opportunities The Case For Investing Create and enhance guest experiences to enable greater pricing differentiation Capital investments to convert general admission guests to reserved seating Expand Derby Week offerings and attractions Leverage “Roads to the Derby” to attra
Slide 18: Ongoing expansion opportunities
Ongoing expansion opportunities The Case For Investing Derby City Gaming – 900 machine facility opened in Louisville, KY on Sept. 14, 2018 Oak Grove – Potential for up to 1,500 machine facility in Oak Grove, KY (~1 hour north of Nashville, TN) if approved by Kentucky Horse Racing Commission Potentia
Slide 19: Strong balance sheet and financial performance
Strong balance sheet and financial performance The Case For Investing Low leverage provides financial flexibility Strong free cash flow Consistent growth in Adjusted EBITDA from continuing operations Disciplined project capital investment to generate industry leading return on invested capital
Slide 20: Proven management team
Proven management team The Case For Investing Proven, results driven leadership team focused on creating shareholder value over the long-term CDI team has unique combination of diverse, yet complementary strengths and talents Average tenure at CDI is ~10 years Racing site leaders have an average of
Slide 21: Strong Board of Directors
Bill Carstanjen Director since 2015 CDI President and COO, 2011 – 2014; COO, 2009 - 2011 CDI EVP, General Counsel & Chief Development Officer, 2005 - 2008 Former Executive of GE Began career as attorney with Cravath, Swaine, & Moore LLP in NYC The Case For Investing Strong Board of Directors Daniel
Slide 22: The Kentucky Derby
The Kentucky Derby 2 Cuurcim. Downs
Slide 23: Years of evolving tradition
The Kentucky Derby 144 Years of evolving tradition! The Kentucky Derby is an Iconic and Irreplaceable Asset 1875 - Opened by Meriwether Lewis Clark, Jr. 1895 – The Twin Spires are built 1902 – Matt Winn takes charge & makes a profit
Slide 24: The Kentucky Derby mystique and magic
The Kentucky Derby The Kentucky Derby utilizes the mystique and magic of Churchill Downs to create unique experiences for our guests Historic Americana Sophisticated Luxury Contagious Excitement
Slide 25: The Kentucky Derby Guest Profile
The Kentucky Derby Guest Profile 53 35 Most Significant Age Cohort 25-44 Household income ~$140K/year Net Worth ~$1.4 million 45% college degree 49% traveled >200 miles ~70% female The Kentucky Derby Attracts guests from across the U.S. and internationally Attracts all demographics Source: 2018 Kent
Slide 26: Derby Week continues to set records
The Kentucky Derby Week continues to set records $ in millions In millions of viewers at Peak ‘14 ‘15 ‘16 ‘17 ‘18 ‘14 ‘15 ‘16 ‘17 ‘18 ‘14 ‘15 ‘16 ‘17 ‘18 The Kentucky Derby 2nd all time high 4th consecutive all time high 17.5 19.1 17.9 17.9 15.3 $311 $254 $263 $267 $285 375 In thousands 377 349 365
Slide 27: Consecutive years of record Adjusted EBITDA
The Kentucky Derby Week has delivered 9 consecutive years of record Adjusted EBITDA Decrease from ‘08 to ‘09 due to ticketing process issue - not recession The Kentucky Derby
Slide 28: The Kentucky Derby Growth Strategy
The Kentucky Derby Growth Strategy Leverage unique experiences and make strategic capital investments Enhance guest experience to enable pricing differentiation for ~60,000 reserved seats Execute capital investments to enable segmentation of ~110,000 guests who do not have a reserved seat Expand Der
Slide 29: Major capital improvements at Churchill Downs since 2010
Nearly $170 million in major capital improvements at Churchill Downs in past nine years 2010Permanent Lighting for Track 2013 Paddock Plaza and The Mansion Big Board and Grandstand Pavilion Winners Circle Suites and The Courtyard Stakes Room and Turf Club Loft at Aristides Lounge and 2nd Floor Clubh
Slide 30: Future build-out of facility
Rooftop Lounge Infield Gate Colonnade Future build-out of facility supports long-term growth of The Kentucky Derby 2019 Hotel Premium renovations 1st Turn building Paddock Grandstand amenities Infield seating Future Concepts The Kentucky Derby Rooftop Lounge Infield Gate Colonnade
Slide 31: Ticketing driver of Derby Week revenue
Total Derby Week CAGR= 8.7% 2016 2017 Derby Week Revenue 2018 2015 2014 Ticketing CAGR 9.8% The Kentucky Derby Ticketing remains significant driver of Derby Week revenue Ongoing buildout of facility enhances guest experiences and enables greater pricing differentiation Adding additional capacity pro
Slide 32: Aligning with partners that exemplify The Kentucky Derby
Our strategy is to align with partners that exemplify The Kentucky Derby The Kentucky Derby Brown-Forman Presenting sponsor of The Kentucky Derby 5-year agreement through 2022 Longines Presenting sponsor of The Kentucky Oaks 5-year agreement through 2022
Slide 33: Sponsor categories and sponsorship revenue
The Kentucky Derby Historically focused on single brand within diverse categories of sponsors Now successfully integrating complimentary brands within a category 2018 Sponsors 2017 2018 Beer Sponsorship Revenue 47% Growth 2019E
Slide 34: 2019 Sponsorship Update
The Kentucky Derby Multi-year sponsorships with staggered renewals supports long-term profitability and stability of earnings 99% of 2018 sponsorship revenue dollars is contractually committed for 2019 Building relationships with new sponsors in the pipeline to grow sponsorship revenue for 2019 2019
Slide 35: Three unique Roads to the Derby
Three unique Roads to the Derby for a horse to qualify in one of 20 coveted Derby starting positions The Kentucky Derby Started in 2016 Horses compete for one Derby starting position through four Japanese races Announced in 3Q’17 Horses compete for one Derby starting position through seven European
Slide 36: Experienced Kentucky Derby leadership team
The Kentucky Derby We have an experienced leadership team focused on The Kentucky Derby Proven, results driven leadership team focused on growing Adjusted EBITDA over the long-term The Churchill Downs team has a diverse set of strengths and talents President has a legal background, state government
Slide 37: TwinSpires
TwinSpires 7 CuurcHii, Downs
Slide 38: TwinSpires Overview and Key Metrics
TwinSpires Wagering$1,386 Revenue$287 Adj. EBITDA$72 Launched in 2007 Official mobile betting partner of the Kentucky Derby, the Breeders’ Cup World Championships, and Churchill Downs Racetrack Benefits from CDI ownership of United Tote and Brisnet TwinSpires delivers handicapping data, live race vi
Slide 39: Online horseracing wagering penetration potential
U.S Horseracing Total Wagering U.S. Online Wagering Online Wagering TwinSpires Online Wagers1 as % of Total Horseracing Wagers Online horseracing wagering has potential for additional market penetration 1 ADW excludes Velocity wagering Total Horseracing Wagers in the United States $ in Billions 2008
Slide 40: TwinSpires handle growth over the past decade
$ in millions TwinSpires handle has grown significantly over the past decade Elimination of Texas wagers after Sept. 2013 Illinois wagers halted for 1H’13 Launched TwinSpires in April 2007 29% CAGR TwinSpires 1 1 Based on trailing twelve months ended September 30, 2018
Slide 41: Attracting new and younger fans to horseracing
We are attracting new fans and younger fans to horseracing Based on survey of August 2017 new customers 20% wager regularly at a Race Track or OTB TwinSpires Registration Year Median New Player Age New Fans
Slide 42: TwinSpires' strategic advantages
TwinSpires TwinSpires’ strategic advantages Linkage to The Kentucky Derby and the other Triple Crown / Breeders’ Cup events Inexpensively acquire new customers each year with an affinity for horseracing Leverage premier content from The Kentucky Derby to acquire other horseracing content Business in
Slide 43: Betting on 132,000 races at racetracks 365 days a year
TwinSpires offers betting on 132,000 races at 330 racetracks 365 days a year TwinSpires San Felipe Risen Star Gotham Rebel Arkansas Derby Road to Kentucky Derby Triple Crown Summer Season Metropolitan Handicap Belmont Sprint Jockey Club Gold Cup Stephen Foster Fleur de LIs Beverly D. Claiborne Breed
Slide 44: Betting 24/7 from countries worldwide
TwinSpires offers betting 24/7 from 16 countries 3AM 4AM 5AM 6AM 7AM 8AM 9AM 10AM 11AM 12PM 1PM 2PM 3PM 4PM 5PM 6PM 7PM 8PM 9PM 10PM 11PM 12AM 1AM 2AM Hours in EST Australia UAE Mexico South Africa Canada New Zealand Japan Hong Kong Argentina Ireland France United Kingdom Uruguay USA West West East
Slide 45: Data-driven acquisition, retention and activation
We leverage data to drive user acquisition, retention and activation We have the unique ability to create once in a lifetime experiences at The Kentucky Derby TwinSpires User acquisition User acquisition User acquisition VIP Events Trophy Presentations Winner’s Toasts Behind the Scene Tours
Slide 46: U.S.-based online gaming team
TwinSpires We have a U.S.-based team with robust real-money online gaming experience 12 years experience in marketing, retention, and optimization in sports, casino, poker, and racing 18 years of experience in real money mobile and online gaming Formerly Founder and SVP of Product and Operations at
Slide 47: Casino Properties
Casino Properties 47 Cuurcim. Downs
Slide 48: Casino Properties Overview and Key Metrics
Casino Properties Gaming Positions~8,000 Revenue$389 Adj. EBITDA$168 Wholly owned casino margin30.5% Seven casinos and three hotels in six states Six wholly owned and one joint venture Local brands and community connection Smaller bets in diverse geographic and economic environments BetAmerica Sport
Slide 49: Casino properties' strategic advantages
Casino Properties Our casino properties’ strategic advantages Local approach Unique brands and marketing strategies Menus and offerings reflect local tastes Promotions catered to customer base Loyal player base Business intelligence analytics Utilize analytics on customer behavior to optimize custom
Slide 50: Local flavored brands create customer loyalty
Casino Properties Local flavored brands create customer loyalty South Florida tropical theme Latin influence on menu and décor Employees engage customers in Spanish and English Maine mountain lodge motif Seafood and local beer focus Employee uniforms reflect more relaxed local atmosphere
Slide 51: Ocean Downs gaming floor before and after
After The Casino at Ocean Downs Casino Properties Corporate gaming expertise supports effective layout of gaming floors and selection of slot machines to enhance customer experience and optimize floor profitability Before
Slide 52: Experienced casino leadership team
Casino Properties We have an experienced casino leadership team Proven, results driven casino leadership team focused on growing Adjusted EBITDA over the long-term Core Corporate casino leadership team has an average of ~26 years of gaming industry experience in multiple disciplines Property leaders
Slide 53: Additional Growth Opportunities
Additional Growth Opportunities
Slide 54: Growth Opportunities - Organic Growth
Growth Opportunities – Organic Growth Organic Growth Opportunities The Kentucky Derby strategic capital investments Enhance guest experience to enable pricing differentiation for ~60,000 reserved seats Execute capital investments to enable segmentation of ~110,000 guests who do not have a reserved s
Slide 55: Historical Racing Machines in Kentucky
Growth Opportunities – Historical Racing Machines In 2010, Kentucky’s Horse Racing Commission enacted regulations to permit wagering on historical horse races on historical racing machine (“HRM”) terminals in Kentucky Permitted to have an HRM facility if awarded one of 9 horseracing licenses in Kent
Slide 56: What is a Historical Racing Machine
A historical horse racing machine is a gaming device that uses a pari-mutuel math model to approximate the gaming experience of Class II and Class III machines Existing Kentucky HRM facilities utilize HRM machines produced by PariMax Holdings and Exacta Gross Commission / Day / Machine1 Kentucky His
Slide 57: Derby City Gaming
$65 million 85,000 square feet historical racing machine (“HRM”) facility 900 historical racing machines at opening Décor pays homage to Churchill Downs Racetrack’s deep history in horse racing Center bar with large format televisions, two food venues, and outdoor gaming patio CDI partnered with Ain
Slide 58: Derby City Gaming Opening Day Key Metrics
Derby City Gaming Opening Day Growth Opportunities – Historical Racing Machines Key Metrics Sept. 14, 2018 – Oct. 31, 2018 Over 100,000 guests to-date Averaging over 3,300 guests per weekend day Served over 10,000 meals Over 750 new card sign-ups per day More than 38,000 customers in growing databas
Slide 59: Oak Grove, Kentucky HRM license application
Growth Opportunities – Historical Racing Machines Applied for 2nd HRM license for Oak Grove, Kentucky facility Up to $150 million investment Land Racetrack and enclosed grandstand / multi-purpose space 3,000 person capacity amphitheater and state-of-the art equestrian center HRM facility with up to
Slide 60: Sports Betting and iGaming Opportunity
Growth Opportunities – Sports Betting and iGaming Sport Betting and iGaming Opportunity We expect a number of additional states to enact legislation to allow sports betting In May 2018, the Supreme Court repealed the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) – effectively allo
Slide 61: CDI is well positioned in key states
CDI is well positioned in key states State Adult Population1 (million) CDI Property or 3rd Party Agreement CDI Sports Betting CDI iGaming California ~29.5 Card room agreement to offer online gaming business if legislation is approved TBD TBD Florida ~16.1 Calder Casino TBD TBD New York ~15.1 Agreeme
Slide 62: Growth Opportunities - M&A
Growth Opportunities – M&A We have demonstrated M&A is a core discipline of our team Regional casino assets with future growth potential Well positioned competitively – existing gaming and future gaming expansion Strategic growth potential into sports betting and iGaming Accretive to free cash flow
Slide 63: Presque Isle and Nemacolin acquisitions
Growth Opportunities – M&A Purchase price of $179 million 8.8x property TTM EBITDA1, net of cash acquired Immediately accretive to EPS On a 272 acre site in Erie, Pennsylvania Opened in Feb. 2007 Operates ~1,600 slot machines, 32 table games and a 7 table poker room in 153,400 sq. ft. facility Condu
Slide 64: Rivers Casino Transaction Summary
Growth Opportunities – M&A Rivers Casino Transaction Transaction Summary Will acquire at least 50.1% of Midwest Gaming Holdings, LLC (“Midwest Gaming”), the parent company of Rivers Casino Des Plaines (“Rivers Casino”), in Des Plaines, Illinois Property includes 44,000-square-foot single-level gamin
Slide 65: Rivers Casino Transaction Execution Steps
Growth Opportunities – M&A Rivers Casino Transaction Transaction Summary of Execution Steps CDI will purchase Clairvest Group Inc. (“Clairvest”) interests in Midwest Gaming for ~$291 million Equity holders of Casino Investors, LLC (“Casino Investors”) and High Plaines have tag-along rights to sell t
Slide 66: Rivers Casino Strategic Rationale
Growth Opportunities – M&A Rivers Casino Transaction Strategic Rationale Investment in premier gaming property With stable, predictable cash flows In unparalleled location in the Chicagoland market Attractive return on investment and accretive to free cash flow and EPS Potential upside if Illinois u
Slide 67: Calder Race Course and Casino Opportunity
Growth Opportunities – Calder Opportunity Calder Race Course and Casino Opportunity 170 acres of land remaining in Miami Gardens, Florida with casino and racetrack Near the Hard Rock Stadium, home of the Miami Dolphins In Nov. 2016, we closed the sale of 61 acres of excess real estate at Calder Race
Slide 68: Financial Highlights and Insights
Financial Highlights and Insights
Slide 69: Financial Highlights
15% CAGR Double-digit growth driven by organic investments and strategic acquisitions $ in millions Note: Audited financials excluding Big Fish Games. Revenues from Casino JV’s excluded from total CDI Revenues. 12% CAGR Financial Highlights $ in millions 3Q’18 YTD Financial Performance From Continui
Slide 70: Growth in cash flow from operations
Financial Highlights CDI has generated $32 million of growth in cash flow from operations excluding Big Fish / unusuals year-to-date 2018 $56 $4 $(33) $(37) Add back Big Fish cash flow from operations (incl. earn-out payments) 2017 $167 $130 2018 $135 $162 Cash Flow From Operations
Slide 71: Capital management philosophy
Financial Insights Capital management philosophy based on creating long-term shareholder value Maintain broad and expedient access to the capital markets Engage in open and active dialogue with rating agencies and institutional investors Investments focused on creating long-term shareholder value In
Slide 72: Derby investments provide strong returns
Financial Insights Derby investments provide strong returns creating long-term shareholder value Built in 2013 $4.6 million investment < 3 year payback Return Profile Renovated in 2016 $18.4 million investment < 5 year payback Return Profile Built in 2015 $4.3 million investment < 5 year payback Ret
Slide 73: Targeted casino investments favorable returns
Financial Insights Targeted casino investments enhance existing properties and provide favorable returns Opened Dec. 2017 $18 million investment < 3 year payback Return Profile Opened Nov. 2017 $27 million investment < 6 year payback Return Profile Purchased Aug. 2017 $13 million investment < 2 year
Slide 74: Nearly $1 billion of capital returned to shareholders
CDI has returned nearly $1 billion of capital to shareholders over the last 5 years Financial Insights 2019 will be the 8th consecutive increase in the dividend per share $97 million paid to shareholders in dividends over the last 5 years Dividends Share Repurchases Returned $899 million to sharehol
Slide 75: Eighth consecutive year of dividend growth
Financial Insights Eighth consecutive year of growth in dividends Board of Directors declared dividend of $1.63 per share (+ 7.2%) on October 30, 2018 Record date of December 7, 2018 Payment date of January 4, 2019 Note there were no dividends paid during fiscal year 2013 as there were 2 payments ma
Slide 76: Reauthorized $300 million share repurchase program
Reauthorized $300 million share repurchase program Financial Insights Includes $78 million remaining on prior $150 million share repurchase program from April 2017 Rationale: We believe in CDI’s long term growth prospects and ability to finance its growth initiatives Viewed as tax efficient way to r
Slide 77: 3-for-1 Stock Split
Board of Directors has approved a 3-for-1 Stock Split and proportionate increase in the number of authorized shares Financial Insights Record Date – January 11, 2019 Distribution Date – January 25, 2019 Trade at new post-split price – January 28, 2019 Rationale Enable CDI’s stock to be more accessib
Slide 78: Questions and Answers
Questions and Answers 7 Cuurcim. Downs
Slide 79: Closing Remarks
Closing Remarks n Cuurcim. Downs
Slide 80: Appendix
Appendix 80 Cuurcim. Downs
Slide 81: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures The Company uses non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of operations enables management an
Slide 82: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following: Adjusted EBITDA includes our portion of the EBITDA from our equity investments. Adjusted EBITDA excludes: Transaction expense, net whic
Slide 83: Reconciliation of Comprehensive Income to Adjusted EBITDA
Reconciliation from GAAP to Non-GAAP Financial Measures Reconciliation of Comprehensive Income to Adjusted EBITDA
Slide 84: Reconciliation of Comprehensive Income to Adjusted EBITDA
Reconciliation from GAAP to Non-GAAP Financial Measures Reconciliation of Comprehensive Income to Adjusted EBITDA
Slide 85: Reconciliation of Comprehensive Income to Adjusted EBITDA
Reconciliation from GAAP to Non-GAAP Financial Measures Reconciliation of Comprehensive Income to Adjusted EBITDA
Slide 86: Reconciliation of Comprehensive Income to Adjusted EBITDA
Reconciliation from GAAP to Non-GAAP Financial Measures Reconciliation of Comprehensive Income to Adjusted EBITDA