Canterbury Park Holding Corporation (“Canterbury” or the “Company”)
(NASDAQ: CPHC), today reported financial results for the three and
nine months ended September 30, 2023.
($ in thousands, except per share data and
percentages)
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
Change |
|
|
2023 |
|
|
2022 |
|
Change |
|
Net revenues |
$19,269 |
|
$22,292 |
|
-13.6 |
% |
|
$48,910 |
|
$53,705 |
|
-8.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income |
$1,136 |
|
$2,921 |
|
-61.1 |
% |
|
$9,199 |
|
$6,450 |
|
42.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA(1)(2) |
$2,850 |
|
$5,341 |
|
-46.6 |
% |
|
$7,352 |
|
$12,452 |
|
-41.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Basic EPS |
$0.23 |
|
$0.60 |
|
-61.7 |
% |
|
$1.87 |
|
$1.33 |
|
40.6 |
% |
| Diluted EPS |
$0.23 |
|
$0.60 |
|
-61.7 |
% |
|
$1.86 |
|
$1.32 |
|
40.9 |
% |
(1) Adjusted EBITDA, a non-GAAP measure,
excludes certain items from net income, a GAAP measure. Non-GAAP
financial measures are not intended to be considered in isolation
from, a substitute for, or superior to GAAP results. Definitions,
disclosures, and reconciliations of non-GAAP financial information
are included later in the release.(2) Adjusted EBITDA in the three
and nine-month periods ended September 30, 2023, was impacted by
professional fees related to long-term strategic growth initiatives
totaling approximately $0.7 million and $1.0 million,
respectively.
Management
Commentary“Canterbury Park’s third quarter results
represent a continuation of solid Casino segment performance offset
by higher operating costs and our previously disclosed reduced
racing calendar compared to the year-ago period. Third quarter net
revenue of $19.3 million and adjusted EBITDA of $2.9 million
resulted in adjusted EBITDA as a percentage of revenue of 14.8%.
Adjusted EBITDA as a percentage of revenue rebounded nicely from a
recent low in the 2023 second quarter, and we expect our improved
cost structure and operating efficiencies will stabilize this
metric at an approximate mid- to high-teens percentage. Adjusted
EBITDA and adjusted EBITDA as a percentage of revenue were also
impacted by professional fees related to long-term strategic growth
initiatives.
“Casino revenue rose 1.8% over the prior year as
we saw relatively stable customer visitation and spend,
particularly at the upper end of our database. Pari-mutuel revenue
declined 28.0% year-over-year primarily due to a significant
decline in out-of-state handle on Canterbury Park races as a result
of decreased field sizes as well as weather impacts and
cancelations that reduced the number of races during the period by
12% compared to the same period last year. In addition, food &
beverage revenues were negatively impacted by the live racing
cancelations as well as having fewer events this year compared to
last year’s third quarter, particularly with Twin Cities Summer Jam
not taking place in the third quarter of 2023 as it did during the
third quarter of 2022.
“Development activity at Canterbury Commons™
continued to expand with a broad array of partners bringing
exciting amenities to our vibrant lifestyle community and exploring
new opportunities. Swervo Development Corporation (“Swervo”) has
begun full-scale development of its state-of-the-art amphitheater
with significant activity underway on the 37-acre site. Further,
the initial success of the Badger Hill Brewery and Bravis Modern
Street Food restaurant are drivers of traffic to Canterbury Commons
and helping us make good on our promise of ‘Live, Work, Stay, and
Play’ across the broader Canterbury Commons development.
“Our Casino business continues to deliver steady
financial results and the operating practices and infrastructure
we’ve put in place have allowed us to adapt to the changing
environment in our operations. At the same time, we continue to
leverage our strong balance sheet and stable cash flow generation
as we return capital to shareholders through our quarterly cash
dividend. Going forward, we are actively evaluating opportunities
to further optimize our return of capital while simultaneously
exploring additional ways to create new value for our shareholders.
As we continue to execute on our five-year strategic plan focused
on growing Casino revenue, we are also actively pursuing new
opportunities that would diversify and grow our business, including
through potential strategic transactions and initiatives. We are
committed to continue to build a bright future for Canterbury
Park.”
Canterbury Commons Development
UpdateSwervo broke ground and construction is underway on
its state-of-the-art amphitheater which is expected to open in
2025. Canterbury has also received approval for the first phase of
its barn relocation and redevelopment plan which is expected to
take approximately one year to complete.
Residential and commercial construction updates
related to joint ventures include:
- Greystone completed an 11,000
square-foot brewery, taproom (Badger Hill) and Mexican restaurant
(Bravis Modern Street Food) in July 2023.
- Doran Properties Group continues
its development of Phase II of the upscale Triple Crown Residences
at Canterbury Park, with initial occupancy anticipated in January
2024.
- The Omry at Canterbury, featuring
147 units of senior market rate apartments, received a certificate
of occupancy for approximately half of the units and initiated
move-ins in September. The remaining units are anticipated to be
complete by year end.
- A new 10,000 square-foot commercial
building within the Winner’s Circle development received planning
and city council approval in October. The project is anticipated to
have three tenants and Greystone Construction, the development
sponsor, has targeted the inclusion of two restaurant groups and a
fitness group within the building. Pending financing and firm
commitments from one or two tenants, the project is expected to
break ground in late 2023 and open in late 2024.
Residential and commercial construction updates
related to prior land sales include:
- Pulte Homes of Minnesota has begun
development of the 45-unit second phase of its new row home and
townhome residences.
- Lifestyle Communities expects to
break ground in spring or summer of 2024 for Artessa at Canterbury
Park, a cooperative community featuring a 44-unit building and over
5,000 square feet of amenity spaces.
- Greystone is expected to complete
the Next Steps Learning Center late 2023.
Developer and partner selection for the
remaining 40 acres of Canterbury Commons continues, with additional
uses potentially including offices, retail, a hotel, and
restaurants.
Summary of 2023 Third Quarter Operating
ResultsNet revenues for the three months ended September
30, 2023, decreased $3.0 million, or 13.6%, to $19.3 million,
compared to $22.3 million for the same period in 2022. Casino
revenue was up 1.8%, or $185,000. This slight increase was more
than offset by decreases in pari-mutuel, food & beverage, and
other revenue of 28.0%, 15.4%, and 35.5%, respectively. The
decrease in pari-mutuel revenue was driven by a continued decrease
in out-of-state handle due to smaller field sizes and less races.
Food & beverage revenues declined primarily due to Twin Cities
Summer Jam not taking place in the third quarter of 2023 as it did
during the third quarter of 2022. Other revenues decreased
primarily due to revenues earned during the three months ended
September 30, 2022, as part of the cooperative marketing agreement
that expired by its terms on December 31, 2022.
Operating expenses for the three months ended
September 30, 2023, were $17.5 million, a decrease of $422,000, or
2.4%, compared to operating expenses of $17.9 million for the same
period in 2022. The year-over-year decrease reflects lower purse
expenses related to decreased pari-mutuel revenue. Food &
beverage cost of goods sold decreased with the similar decrease in
food and beverage revenues. Marketing expenses decreased due to the
expiration of the cooperative marketing agreement. These decreases
in operating expense were somewhat offset by higher payroll
expense, due primarily to annual wage increases, and increased
professional expense related to the long-term strategic growth
initiatives noted above.
The Company recorded a loss from equity
investment of $674,000 for the three months ended September 30,
2023. For the three months ended September 30, 2022, the Company
recorded a loss from equity investment of $500,000. The losses from
equity investments in both periods were primarily related to the
Company’s share of depreciation, amortization, and interest expense
from the Doran Canterbury joint ventures.
The Company recorded interest income, net, of
$537,000 for the three months ended September 30, 2023, an increase
of $314,000, or 141%, compared to interest income, net, of $223,000
for the same period in 2022. With the continued strength of
Canterbury’s balance sheet, the Company has increased interest
income due to transferring available cash into certificates of
deposit and money market funds as well as recording additional
interest accrued on the TIF receivable and member loans.
The Company recorded income tax expense of
$533,000 for the three months ended September 30, 2023, compared to
income tax expense of $1.2 million for the three months ended
September 30, 2022. The Company recorded net income of $1.1
million, or diluted earnings per share of $0.23, for the three
months ended September 30, 2023, compared to net income and diluted
earnings per share for the three months ended September 30, 2022,
of $2.9 million and $0.60, respectively.
Adjusted EBITDA, a non-GAAP measure, for the
three months ended September 30, 2023, was $2.9 million compared to
adjusted EBITDA of $5.3 million for the same period in 2022.
Summary of 2023 Year-to-Date Operating
ResultsNet revenues for the nine months ended September
30, 2023, decreased $4.8 million, or 8.9%, to $48.9 million,
compared to $53.7 million for the same period in 2022. The
year-over-year decrease reflects decreases in Casino, pari-mutuel,
food & beverage, and other revenues of $72,000, $2.6 million,
$342,000, and $1.8 million, respectively. Reasons for the
year-to-date decreases are similar to the reasons described above
in the third quarter results.
Operating expenses for the nine months ended
September 30, 2023, remained relatively flat at $44.5 million, a
slight increase of $307,000, or 0.7%, compared to operating
expenses of $44.2 million for the same period in 2022. The
year-over-year increase reflects higher payroll expense and
professional services expenses in the nine months ended September
30, 2023, which more than offset lower purse and marketing expenses
as compared to the nine months ended September 30, 2022.
The gain on sale of land for the nine months
ended September 30, 2023, was $6.5 million and was related to the
sale of 37 acres to Swervo for the future development of an
amphitheater. The Company recorded a gain on sale of land of
$12,000 in the nine-month period ended September 30, 2022.
The Company recorded a gain from equity
investment of $562,000 for the nine months ended September 30,
2023, compared to a loss from equity investment of $1.3 million for
the nine months ended September 30, 2022. The net gain for the nine
months ended September 30, 2023 is related to insurance proceeds
received related to a claim by the joint venture against a third
party while the losses from investments in the prior period were
primarily related to the Company’s share of depreciation,
amortization, and interest expense from the Doran Canterbury joint
ventures.
The Company recorded interest income, net, of
$1.4 million for the nine months ended September 30, 2023, an
increase of $813,000, or 131%, compared to interest income, net, of
$621,000 for the same period in 2022. With the continued strength
of Canterbury’s balance sheet, the Company has increased interest
income due to transferring available cash into certificates of
deposit and money market funds as well as recording additional
interest accrued on the TIF receivable and member loans. The
Company also recognized interest related to employee retention
credit funds that were received during the nine months ended
September 30, 2023.
The Company recorded income tax expense of $3.7
million for the nine months ended September 30, 2023, compared to
income tax expense of $2.4 million for the nine months ended
September 30, 2022.
The Company recorded net income of $9.2 million,
or diluted earnings per share of $1.86, for the nine months ended
September 30, 2023, compared to net income and diluted earnings per
share for the nine months ended September 30, 2022, of $6.5 million
and $1.32, respectively.
Adjusted EBITDA was $7.4 million for the nine
months ended September 30, 2023 compared to $12.5 million for the
same period in 2022.
Additional Financial
InformationFurther financial information for the third
quarter ended September 30, 2023, is presented in the accompanying
tables at the end of this press release. Additional information
will be provided in the Company’s Quarterly Report on Form 10-Q
that will be filed with the Securities and Exchange Commission on
or about November 13, 2023.
Use of Non-GAAP Financial
MeasuresTo supplement our financial statements, we also
provide investors with information about our EBITDA and Adjusted
EBITDA, each of which is a non-GAAP measure, and which exclude
certain items from net income, a GAAP measure. We define EBITDA as
earnings before interest, taxes, depreciation and amortization. We
define Adjusted EBITDA as earnings before interest income, income
tax expense, depreciation and amortization, as well as excluding
gain on sale of land and disposal of assets, depreciation and
amortization related to equity investments, interest expense
related to equity investments, and gain on insurance proceeds
relating to equity investments. Neither EBITDA nor Adjusted EBITDA
is a measure of performance calculated in accordance with generally
accepted accounting principles ("GAAP"), and should not be
considered an alternative to, or more meaningful than, net income
as an indicator of our operating performance. See the table below,
which presents reconciliations of these measures to the GAAP
equivalent financial measures. We have presented EBITDA as a
supplemental disclosure because we believe that, when considered
with measures calculated in accordance with GAAP, EBITDA gives
investors a more complete understanding of our operating results
before the impact of investing and financing transactions and
income taxes, and it is a widely used measure of performance and
basis for valuation of companies in our industry. Other companies
that provide EBITDA information may calculate EBITDA differently
than we do. We have presented Adjusted EBITDA as a supplemental
disclosure because we believe it enables investors to understand
and assess our core operating results excluding the effect of these
items and is useful to investors in allowing greater transparency
related to a significant measure used by management in its
financial and operational decision-making. Adjusted EBITDA has
economic substance because it is used by management as a
performance measure to analyze the performance of our business and
provides a perspective on the current effects of operating
decisions.
About Canterbury ParkCanterbury
Park Holding Corporation (Nasdaq: CPHC) owns and operates
Canterbury Park Racetrack and Casino in Shakopee, Minnesota, the
only thoroughbred and quarter horse racing facility in the State.
The Company generally offers live racing from May to September. The
Casino hosts card games 24 hours a day, seven days a week, dealing
both poker and table games. The Company also conducts year-round
wagering on simulcast horse racing and hosts a variety of other
entertainment and special events at its Shakopee facility. The
Company is also pursuing a strategy to enhance shareholder value by
the ongoing development of approximately 140 acres of underutilized
land surrounding the Racetrack that was originally designated for a
project known as Canterbury Commons™. The Company is pursuing
several mixed-use development opportunities for the remaining
underutilized land, directly and through joint ventures. For more
information about the Company, please visit
www.canterburypark.com.
Cautionary Statement
From time to time, in reports filed with the
Securities and Exchange Commission, in press releases, and in other
communications to shareholders or the investing public, we may make
forward-looking statements concerning possible or anticipated
future financial performance, business activities or plans. These
statements are typically preceded by the words “believes,”
“expects,” “anticipates,” “intends” or similar expressions. For
these forward-looking statements, we claim the protection of the
safe harbor for forward-looking statements contained in federal
securities laws. Shareholders and the investing public should
understand that these forward-looking statements are subject to
risks and uncertainties which could affect our actual results and
cause actual results to differ materially from those indicated in
the forward-looking statements. We report these risks and
uncertainties in our Annual Report on Form 10-K for the year ended
December 31, 2022 filed with the SEC and subsequently filed
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
They include, but are not limited to: sensitivity to reductions in
discretionary spending as a result of downturns in the economy; the
termination of the Cooperative Marketing Agreement with the
Shakopee Mdewakanton Sioux Community and the purse enhancement
payments and marketing payments made under such agreement; the
occurrence of epidemics, pandemics, outbreaks of disease, and other
adverse public health developments; the inability to attract a
sufficient number of horses and trainers; a lack of confidence in
core operations resulting in decreasing customer retention and
engagement; personal injury litigation due to the inherently
dangerous nature of horse racing; material fluctuations in
attendance at the Racetrack; material changes in the level of
wagering by patrons; any decline in interest in horse racing or the
unbanked card games offered in the Casino; competition from other
venues offering racing, unbanked card games or other forms of
wagering; competition from other sports and entertainment options;
increases in compensation and employee benefit costs; higher than
expected expense related to new marketing initiatives; the impact
of wagering products and technologies introduced by competitors;
the general health of the gaming sector; legislative and regulatory
decisions and changes; our ability to successfully develop our real
estate, including the effect of competition on our real estate
development operations and our reliance on our current and future
development partners; temporary disruptions or changes in access to
our facilities caused by ongoing infrastructure improvements;
inclement weather and other conditions affecting the ability to
conduct live racing; technology and/or key system failures;
cybersecurity breaches; the failure to receive reimbursement for
certain public infrastructure improvements we have committed to
undertake; the general effects of inflation; our ability to attract
and retain qualified personnel; dividends that may or may not be
issued at the discretion of our Board of Directors; and other
factors that are beyond our ability to control or predict.
The forward-looking statements in this press
release speak only as of the date of this press release. Except as
required by law, Canterbury assumes no obligation to update or
revise these forward-looking statements for any reason, even if new
information becomes available in the future.
|
Investor Contacts: |
|
| Randy Dehmer |
Richard Land, Jim Leahy |
| Senior Vice President and Chief Financial Officer |
JCIR |
| Canterbury Park Holding Corporation |
212-835-8500 or cphc@jcir.com |
| 952-233-4828 or investorrelations@canterburypark.com |
|
- Financial tables follow –
|
CANTERBURY PARK HOLDING CORPORATION'S |
|
SUMMARY OF OPERATING RESULTS |
|
(UNAUDITED) |
| |
| |
Three months ended |
|
Nine months ended |
| |
September 30, |
|
September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| Operating Revenues: |
|
|
|
|
|
|
|
|
Casino |
$10,224,216 |
|
|
$10,039,527 |
|
|
$30,322,149 |
|
|
$30,394,387 |
|
|
Pari-mutuel |
|
3,405,010 |
|
|
|
4,730,827 |
|
|
|
7,009,710 |
|
|
|
9,599,070 |
|
|
Food and Beverage |
|
3,310,759 |
|
|
|
3,913,320 |
|
|
|
6,808,242 |
|
|
|
7,150,715 |
|
|
Other |
|
2,328,564 |
|
|
|
3,608,729 |
|
|
|
4,769,694 |
|
|
|
6,560,477 |
|
|
Total Net Revenues |
$19,268,549 |
|
|
$22,292,403 |
|
|
$48,909,795 |
|
|
$53,704,649 |
|
| Operating Expenses |
|
(17,461,813) |
|
|
|
(17,884,034) |
|
|
|
(44,486,784) |
|
|
|
(44,179,373) |
|
| Gain on Sale of Land |
|
- |
|
|
|
- |
|
|
|
6,489,976 |
|
|
|
12,151 |
|
| Income from Operations |
|
1,806,736 |
|
|
|
4,408,369 |
|
|
|
10,912,987 |
|
|
|
9,537,427 |
|
| Other (Loss)/Gain, net |
|
(137,437) |
|
|
|
(277,472) |
|
|
|
1,995,344 |
|
|
|
(653,247) |
|
| Income Tax Expense |
|
(533,000) |
|
|
|
(1,209,777) |
|
|
|
(3,709,000) |
|
|
|
(2,434,078) |
|
| Net Income |
|
1,136,299 |
|
|
|
2,921,120 |
|
|
|
9,199,331 |
|
|
|
6,450,102 |
|
| Basic Net Income Per Common
Share |
$0.23 |
|
|
$0.60 |
|
|
$1.87 |
|
|
$1.33 |
|
| Diluted Net Income Per Common
Share |
$0.23 |
|
|
$0.60 |
|
|
$1.86 |
|
|
$1.32 |
|
|
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED
EBITDA |
|
(UNAUDITED) |
| |
|
|
|
|
|
|
|
| |
Three months ended |
|
Nine months ended |
| |
September 30, |
|
September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| NET INCOME |
$1,136,299 |
|
|
$2,921,120 |
|
|
$9,199,331 |
|
|
$6,450,102 |
|
|
Interest income, net |
|
(536,904) |
|
|
|
(222,671) |
|
|
|
(1,433,353) |
|
|
|
(620,811) |
|
|
Income tax expense |
|
533,000 |
|
|
|
1,209,777 |
|
|
|
3,709,000 |
|
|
|
2,434,078 |
|
|
Depreciation |
|
831,379 |
|
|
|
747,267 |
|
|
|
2,308,272 |
|
|
|
2,234,790 |
|
| EBITDA |
|
1,963,774 |
|
|
|
4,655,493 |
|
|
|
13,783,250 |
|
|
|
10,498,159 |
|
|
Gain on insurance proceeds related to equity investments |
|
- |
|
|
|
- |
|
|
|
(2,528,901) |
|
|
|
- |
|
|
Gain on disposal of assets |
|
(19,265) |
|
|
|
- |
|
|
|
(19,265) |
|
|
|
- |
|
|
Gain on sale of land |
|
- |
|
|
|
- |
|
|
|
(6,489,976) |
|
|
|
(12,151) |
|
|
Depreciation and amortization related to equity investments |
|
438,011 |
|
|
|
445,181 |
|
|
|
1,313,986 |
|
|
|
1,340,856 |
|
|
Interest expense related to equity investments |
|
467,571 |
|
|
|
240,418 |
|
|
|
1,292,627 |
|
|
|
625,401 |
|
| ADJUSTED EBITDA |
$2,850,091 |
|
|
$5,341,092 |
|
|
$7,351,721 |
|
|
$12,452,265 |
|
Canterbury Park (NASDAQ:CPHC)
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Canterbury Park (NASDAQ:CPHC)
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