Canterbury Park Holding Corporation Reports 2023 Second Quarter Results

SHAKOPEE, Minn., Aug. 10, 2023 (GLOBE NEWSWIRE) — Canterbury Park Holding Corporation (“Canterbury” or the “Company”) (NASDAQ: CPHC), today reported financial results for the three and six months ended June 30, 2023.

($ in thousands, except per share data and percentages)

(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.

Management Commentary
“Canterbury Park’s second quarter results represent a continuation of the stable trends in our business as our performance exceeded pre-COVID levels and was in-line with our expectations, given the impact of higher costs and a reduced racing calendar. Second quarter net revenue of $16.3 million and adjusted EBITDA of $2.0 million resulted in adjusted EBITDA as a percentage of revenue of 12.4%. While below recent quarters reflecting the impact of higher costs and a reduction in racing days compared to last year, we believe adjusted EBITDA as a percentage of revenue will rebound over the balance of 2023 and continue to exceed historical pre-COVID levels due to the proactive initiatives undertaken during the pandemic to improve our cost structure and operating efficiency.

“Casino revenue rose 3.9% over the prior year as higher visitation and spending trends more than offset lower table games hold for the quarter. Our 54-day live racing meet began on May 27 and, in the quarter, we ran 15 days compared to 25 in the prior-year period. Pari-mutuel revenue declined 31.8% year-over-year primarily due to a significant decline in out-of-state handle on Canterbury Park races. This decline reflects less racing days, lower purses and reduced marketing support related to the expiration of the SMSC Cooperative Marketing Agreement. The reduction in live racing days also impacted Food & Beverage revenue, which declined 5.6% year-over-year even as admission revenues remained strong.

“Development activity at Canterbury Commons remains on track as we continue to attract broad interest in our vibrant lifestyle community from diverse parties. During the second quarter of 2023, we completed the $8.8 million sale of 37 acres of land to Swervo Development Corporation (“Swervo”) which cleared the way for it to begin development of a state-of-the-art amphitheater. Canterbury Park’s development partner, Greystone Construction (“Greystone”), completed the Badger Hill Brewery and Bravis Modern Street Food restaurant in July 2023, both of which have opened to very positive customer response. We are delighted that these venues diversify the on-site options and believe they will help drive further traffic to Canterbury Commons. ‘Live, Work, Stay, and Play’ is at the heart of our development approach, and we believe there is much more excitement to come as we work with new development partners that share our vision and enthusiasm for Canterbury Commons.

“We remain on track to deliver solid financial results over the balance of 2023 as our business benefits from the operating practices and infrastructure we’ve put in place to drive continued growth. Our strong balance sheet and stable cash flow generation continues to position us to return capital to shareholders through our quarterly cash dividend while we also continue to actively evaluate potential strategic transactions that would create new value for our shareholders. We believe that the future of Canterbury Park remains bright.”

Canterbury Commons Development Update
In April 2023, the Company completed the sale of approximately 37 acres in the northeast corner of the property to Swervo for the development of a state-of-the-art amphitheater. Construction is expected to begin later this summer with an anticipated opening in 2025. Canterbury is also making initial progress with the first phase of its barn relocation and redevelopment plan, which among other things will free up land surrounding the amphitheater and facilitate the creation of an entertainment district around the venue.

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.
• Construction on the Omry, featuring 147 units of senior market rate apartments, continues with first occupancy expected in September 2023.

Residential and commercial construction updates related to prior land sales include:

• Pulte Homes of Minnesota continues to sell units within the 63-unit first phase of its new row home and townhome residences, with development of the 45-unit second phase expected to begin in Fall 2023.
• Lifestyle Communities expects to begin in early 2024 construction of 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 Second Quarter Operating Results
Net revenues for the three months ended June 30, 2023 decreased 8.1% to $16.3 million, compared to $17.8 million for the same period in 2022. The year-over-year decrease reflects an increase in Casino revenue of 3.9%, or $389,000, which was more than offset by decreases in Pari-mutuel and Food & Beverage revenue of 31.8% and 5.6%, respectively, due primarily to a 40% decrease in live race days compared to the same period last year.

Operating expenses for the three months ended June 30, 2023 were $15.3 million, an increase of $196,000, or 1.3%, compared to operating expenses of $15.1 million for the same period in 2022. The year-over-year increase reflects higher payroll expense and professional services expenses, which more than offset lower purse and marketing expenses driven by the expiration of the Cooperative Marketing Agreement at the end of 2022.

Gain on sale of land for the three months ended June 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 loss from equity investment of $622,000 for the three months ended June 30, 2023. For the three months ended June 30, 2022, the Company recorded a loss from equity investment of $534,000. 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 income tax expense of $2.1 million for the three months ended June 30, 2023 compared to income tax expense of $619,000 for the three months ended June 30, 2022. The Company recorded net income of $5.3 million, or diluted earnings per share of $1.07, for the three months ended June 30, 2023 compared to net income and diluted earnings per share for the three months ended June 30, 2022 of $1.8 million and $0.36, respectively.

Adjusted EBITDA, a non-GAAP measure, for the three months ended June 30, 2023 was $2.0 million compared to adjusted EBITDA of $3.6 million for the same period in 2022.

Summary of 2023 Year-to-Date Operating Results
Net revenues for the six months ended June 30, 2023 decreased 5.6% to $29.6 million, compared to $31.4 million for the same period in 2022. The year-over-year decrease reflects decreases in Casino and Pari-mutuel revenues of $257,000 and $1.3 million, respectively, partially offset by an increase in Food & Beverage revenue of $260,000.

Operating expenses for the six months ended June 30, 2023 were $27.0 million, an increase of $730,000, or 2.8%, compared to operating expenses of $26.3 million for the same period in 2022. The year-over-year increase reflects higher payroll expense, utilities expense, and professional services expenses in the six months ended June 30, 2023, which more than offset lower purse and marketing expenses as compared to the six months ended June 30, 2022.

Gain on sale of land for the six months ended June 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 from equity investment of $1.2 million for the six months ended June 30, 2023 compared to a loss from equity investment of $774,000 for the six months ended June 30, 2022. The net gain for the six months ended June 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 income tax expense of $3.2 million for the six months ended June 30, 2023 compared to income tax expense of $1.2 million for the six months ended June 30, 2022.

The Company recorded net income of $8.1 million, or diluted earnings per share of $1.64, for the six months ended June 30, 2023 compared to net income and diluted earnings per share for the six months ended June 30, 2022 of $3.5 million and $0.73, respectively.

Adjusted EBITDA was $4.5 million for the six months ended June 30, 2023. Adjusted EBITDA was $7.1 million for the same period in 2022.

Additional Financial Information
Further financial information for the second quarter ended June 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 August 11, 2023.

Use of Non-GAAP Financial Measures
To 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, depreciation and amortization related to equity investments, interest expense related to equity investments, and grant money received from the Minnesota COVID-19 relief package. 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 Park
Canterbury 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.

– Financial tables follow –