CPHC

Business Context and Reporting Period

Company: Canterbury Park Holding Corp (CPHC)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2026
Business Overview: CPHC operates a racetrack and casino in Shakopee, Minnesota, offering live and simulcast horse racing, unbanked card games, food and beverage services, and real estate development (Canterbury Commons). The company is a non-accelerated filer and smaller reporting company.

Key Financial Metrics

Debt & Liquidity: The company has a $5,000,000 revolving credit line with a maturity date of January 31, 2027. There were no borrowings outstanding as of March 31, 2026. The company maintains a strong liquidity position with over $16 million in cash, cash equivalents, and restricted cash.

Material Changes vs. Prior Period

• Revenue Growth: Total net revenues increased by $368,000 (2.8%) year-over-year.
  • Casino: Increased $49,000 (0.5%) driven by higher visitation and spend per visit, offset by a lower collection rate in table games.
  • Food & Beverage: Increased $224,000 (13.8%) due to more large-scale events and improved point-of-sale efficiency.
  • Pari-Mutuel: Decreased $60,000 (5.6%) primarily due to fewer race days at out-of-state tracks affecting simulcast revenue.
• Profitability: The company returned to profitability with Net Income of $170,000 compared to a Net Loss of $299,000 in Q1 2025. Operating income improved by $406,000.
• Expenses: Total operating expenses decreased slightly by $38,000 (0.3%). Salaries and benefits dropped $251,000 due to labor efficiency, while depreciation increased $117,000 due to new capital assets.
• Equity Investment Losses: Loss from equity investments decreased to $1.22 million from $1.57 million, attributed to increased leasing rates in joint ventures.

Outlook, Risks, and Contingencies

Management Commentary & Guidance:

• Management expects unrestricted funds, operating cash flow, and the credit facility to be sufficient for operations and planned development expenses for at least the next 12 months.
• Approximately $1.2 million in Tax Increment Financing (TIF) eligible improvements are expected to be spent over the next nine months.
• Adjusted EBITDA increased 35.6% to $2.85 million, representing 21.1% of net revenue.

Key Risks & Contingencies:

• Real Estate Development: Significant exposure to joint ventures (Doran Canterbury I & II). The company has indemnification obligations up to $7.75 million for Doran I and $2.75 million for Doran II. Joint ventures recorded net losses, resulting in equity method losses for CPHC.
• TIF Receivable: A significant receivable of $20.3 million is recorded for infrastructure improvements. Collectability depends on future tax revenues from the developed property; management currently believes no allowance is necessary.
• Purse Guarantees: The company recorded a $2.1 million receivable for overpayments of purses in 2024 and 2025, expecting reimbursement from future purse supplements or legislative action.
• Regulatory & Market: Risks include changes in gaming laws, competition, declining popularity of horse racing, and economic downturns affecting discretionary spending.

Investor Verification Checklist

• TIF Receivable Collectability: Verify the assumptions regarding future tax increment revenue generation from the Canterbury Commons development to support the $20.3 million receivable.
• Joint Venture Performance: Monitor the financial health of Doran Canterbury I and II joint ventures, given the significant equity losses and indemnification caps ($10.5 million total).
• Purse Reimbursement: Track legislative progress or new revenue streams required to reimburse the $2.1 million in overpaid purses.
• Cash Flow Sustainability: Confirm that operating cash flows remain sufficient to fund the remaining $1.2 million in TIF improvements without drawing on the credit line.
• Seasonality Impact: Assess the impact of the upcoming live racing season (May-September) on revenue, as Q1 is typically a non-racing period for live events.