Record-Breaking Kentucky Derby Wagering Despite Economic Uncertainties
Record-Breaking Wagers Placed for Kentucky Derby, EBITDA Slightly Lagging Behind 2024 Estimates
Posted on: May 5, 2025, 02:45h.Last updated on: May 4, 2025, 08:28h.
Todd Shriber @etfgodfather | Financial | Gaming Business | Mergers and Acquisitions
In the face of poor weather, US tariff volatility, and analyst-cited modest drops in ticket sales, Churchill Downs (NASDAQ: CHDN) reported another year of skyrocketing Derby wagering.
The Kentucky Derby saw a staggering all-sources betting figure of $234.4 million, surpassing the previous record of $210.7 million set last year. The overall Kentucky Derby Day program also hit a new record with $349 million, well ahead of the $320.5 million recorded in 2024. For the Derby week at large, all-sources handle clocked in at $473.9 million, easily sweeping past the previous all-time high of $446.6 million set last year. Churchill Downs' TwinSpires unit also raked in new records, handling a whopping $108.0 million in wagers for Kentucky Derby Day, compared to last year's record of $92.1 million.
Churchill Downs revealed that the adjusted EBITDA for the Derby would rank as one of the operator's two best results in history. However, it's projected to be $2 million to $4 million below the record pace set last year. Shares of Churchill Downs have dipped 16.60% over the past month, a period that encompasses the company's first-quarter earnings report, causing a massive sell-off.
A Look at Derby's Impact on Churchill Downs
The operator's construction plans have hit a snag due to uncertainty in the US economy, with tariffs adding to the construction costs and logistical delays. Originally planning to spend up to $400 million this year on enhancing the Conservatory, the infield, and the Skye, those plans have now been placed on hold.
The temporary halt in construction projects and lingering economic uncertainties might have weighed on the minds of some potential Derby attendees, contributing to a perceived drop in ticket sales in the final 30 days leading up to the event. Whether it be the unclear construction landscape or unfavorable weather conditions, some analysts attribute the ticket sales slowdown as the primary cause for a decrease in earnings.
The Long-Term Outlook for Churchill Downs and the Derby
Tariffs have created a ripple effect, influencing numerous gaming sectors, with some land-based gaming venues reportedly bearing the brunt of the tariffs' consequences. Although the ongoing tariff situation has rattled the equity markets, the Derby remains a crucial growth driver for Churchill Downs. The operator is believed to be weighing its options carefully before progressing with capital investments that would further boost its growth potential.
"The growth trajectory for Churchill Downs remains long and positive, and capital investment should continue," notes Jefferies analyst David Katz in a recent note. "The continued investment in more seating and revenue-generating amenities should have a long-term impact," Katz further adds, emphasizing that the Derby's key role in the Churchill investment thesis remains unaltered.
Enrichment Data:
- The economic headwinds presented by tariffs have increased construction costs and logistical delays, creating economic uncertainty.
- Churchill Downs' paused $900 million renovation project included the addition of 20,000 new seats and 36 luxury suites.
- There has been a decrease in lower-tier ticket sales, and overall attendance is expected to remain consistent with past years, though with less spending per consumer.
- Sports wagering revenue has experienced a decline due to reduced consumer confidence in certain areas of the operation.
- The company has announced a temporary halt on projects, retaining a commitment to prudent capital investments in the face of evolving economic conditions.
- Despite poor weather, US tariff volatility, and lowered ticket sales predictions, Churchill Downs' Kentucky Derby wagering soared to a record-breaking $234.4 million, much higher than the previous year's $210.7 million.
- Sports betting, specifically Churchill Downs' TwinSpires unit, recorded new highs, managing $108.0 million in Kentucky Derby Day wagers, surpassing the previous record of $92.1 million.
- Financial analysts have noted the adjusted EBITDA for the Derby as one of the operator's best results, albeit slightly below last year's record.
- Economic uncertainties and tariffs have put a temporary hold on Churchill Downs' planned $400 million construction projects, such as enhancing the Conservatory, the infield, and the Skye.
- Despite the halt in construction and potential ticket sales drop due to economic uncertainties and unfavorable weather, sports events like the Derby remain integral to Churchill Downs' long-term growth strategies.
- In the face of tariffs altering gaming sectors, the Derby continues to act as a significant growth driver for Churchill Downs, prompting the operator to meticulously weigh capital investment options.
- Jefferies analyst David Katz suggests that Churchill Downs' growth outlook remains positive in the long term, with continued investment in more seating and revenue-generating amenities poised to have a significant impact on the company's future.