Churchill Downs Inc. Readies for 150th Kentucky Derby and Beyond

The Kentucky Derby will be the most visible production of Churchill Downs, Inc., in any year. That’s amplified this year with the 150th installment set for Saturday.

But while Churchill Downs Incorporated 128,20 +1,06% business will always be grounded in the old race track with the iconic twin spires, it will continue to push outward, CEO Bill Carstanjen said in a Q1 earnings call.

“When it comes to horse racing, it’s all about the Derby. That’s the opportunity to really reach deep into a broader customer base to recruit customers and interest them in horse racing.”

Modernization at Churchill Downs — particularly the Paddock Club — the addition of historical horse racing machine venues and more technology platforms are crucial in the process, he said.

“We’ll be hungry to find those areas where we can grow and improve move on,” he said of momentum heading in the Derby. “So part of what comes forward in the subsequent years is that piece, learning to use what we’ve done better, but also we’ll be looking at other projects and other parts of the facilities, and we’ll be looking for other ways to monetize everything about our facilities sponsorships, TV rights, better wagering opportunities, all the different categories that go into driving the entire pie. So it’s a process of constant improvement, but the key to unlocking it is the physical facility and the energy that our guests bring to that when they interact with it.”

Carstanjen said momentum is palpable after the completion of the Homestretch Club, First Turn Club and Paddock projects. Also, 2023 Derby week set an all-sources handle record of $412 million, topping the previous standard of $391.8 million. CDI reported a record first-quarter 2024 net revenue of $591 million.

“These investments illustrate what our team can dream, design, and execute to enhance the special experience expected at the Kentucky Derby by each of our guests,” Carstanjen said.

“Every year, we seek to surprise and delight our guests with something new and tangible as they explore Churchill Downs Racetrack. Paddock project has been a multiyear massive undertaking that fundamentally improves the entire venue. As we unveil it for its first Derby, we will undoubtedly find both operational opportunities to improve upon and new ancillary investments to give the customer more of what they tell us they value.

“We believe our $200 million investment in this transformative project will provide a foundation around which to further innovate for years to come.”

Other Bullet Points from the CDI Earnings Call

• Carstanjen teased a future “$60-80 million investment at Churchill Downs that would pay for itself in “6-to-8 years.” He said details would be unveiled in a July earnings call.
• Carstanjen announced “excellent returns on capital” from historical racing machine venues in Virginia and Kentucky and “acquisitions of related technology,” namely Exacta Systems, which powers it. A third HRM facility is scheduled to open near Owensboro, Ky., in 2025. The venue would be the company’s seventh in the state. CDI is permitted to open one more in Kentucky and is required to do so within 60 miles of Oak Grove. Churchill Downs has obtained the right to open up to 10 in Virginia.
• On the relationship with DraftKings to launch DK Horse and FanDuel to facilitate pari-mutuel wagering there.

“The relationships have gone very well. [The] ability of our teams to work together and make progress together has really been very satisfying,” he said. “I think it’s fair to say that the marketing around recruiting players, whether it be for horse racing, whether it be for a product like TwinSpires, that’s a single product asset just focuses on horse racing or if it with the case to DraftKings or FanDuel, a multiproduct platform.

“When it comes to horse racing, it’s all about the Derby. That’s the opportunity to really reach deep into a broader customer base to recruit customers and interest them in horse racing. So I think as we approach 2024, we’ve already seen some of the activities of not just DraftKings and FanDuel, but others around horse racing and around the Derby. And we encourage that, and I think a real check-in point on the progress really will come after we get a chance to reflect on the results we see for this year’s Derby.”