An upgraded clubhouse area at Churchill Downs

An upgraded clubhouse area at Churchill Downs

Coady Photography

Churchill Considers Historic Gaming Machines

After strong first quarter, company looks forward to Kentucky Derby week.

As Churchill Downs Inc. prepares for its biggest week of the year, the company also said it is considering adding historic gaming machines at the Louisville track or its Trackside Training Center.

The company's CEO, Bill Carstanjen, said during the first quarter conference call April 27 that it's considering adding the machines that already have been put in place at Kentucky Downs, Ellis Park, and the Red Mile, in a joint venture with Keeneland. Turfway Park officials have hinted they could announce plans to add the machines, which look like slot machines but determine winning combinations by formerly run horse races, with payouts based on pari-mutuel wagering.

"We are intrigued by the idea and continue to analyze it closely," Carstanjen said of the possibility of adding the games at Churchill or Trackside.

As for the approaching Kentucky Derby week, Carstanjen said a $16 million renovation to the track's clubhouse figures to turn heads. The renovations were made to a 95,000-square-foot area of the clubhouse.

New structures within that footprint include a fresh Twin Spires Club Elite Gold Room exclusive to VIP bettors that will be adjacent to an enlarged Champions Bar, complete with adjoining covered balconies that will feature table seating with a spectacular view of the paddock.

Additionally, the Aristides Lounge, formerly an unfinished space that was occasionally used for select events, will become a permanent fixture, outfitted with table seating and an enlarged wall of 90-inch flat-screen TVs. The space also will feature The Loft at Aristides Lounge which will provide guests with a more intimate dining and simulcast experience in a sectionalized room with half-walls.

"We have completed the $16 million clubhouse area," Carstanjen said on the conference call with investors and analysts. "The improvements will be apparent to everyone who passes by, but will especially be appreciated by 13,000 fans who use the facility on Derby day. We are excited about Saturday, May 6, and look to be in good shape."

For the first quarter, Churchill reported a $10.6 million increase in adjusted earnings, largely fueled by an $11.4 million increase from its Big Fish Games segment, which benefited from decreased user acquisition spending offset by lower revenue.

Also contributing to the increase were a $1.1 million increase from TwinSpires and a $1 million increase from its casinos segment. Partially offsetting the increases was a $2.3 million decline from the racing segment.

The racing segment saw a $2.3 million decline in net revenues to $26.1 million. A quarantine at Churchill-owned Fair Grounds Race Course & Slots negatively affected that track's performance by reducing field sizes, which resulted in reduced handle and contributed to the declines.

Some of the decline is more of a fluke though, as the track's biggest day, the April 1 TwinSpires.com Louisiana Derby (G2), fell in the second quarter and is not included in the first quarter result, after being included in the 2016 first quarter performance when the race was conducted in late March. The big day at Fair Grounds will provide a boost to Churchill's second quarter racing segment numbers.

Churchill's advance-deposit wagering platform, TwinSpires.com, enjoyed a $2.4 million increase in net revenue during the quarter to $52.3 million, up 4.8%. Its adjusted earnings improved 0.9% to $13.2 million. The company attributed the improvement to a 19.7% increase in active players and 6.8% increase in handle.

Carstanjen said TwinSpires.com is hyper-focused on player acquisition ahead of the Kentucky Derby and Triple Crown season.

"We market extensively around the Kentucky Derby, Triple Crown season, and the Breeders' Cup, since that is when the sport acquires new fans," Carstanjen said.