Canterbury Park Holding Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. The company operates a Minnesota racetrack, simulcast wagering business and unbanked-card casino, and pursues real estate development. Live racing is seasonal and generally runs May through September. Figures below are unaudited.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net revenue | $14.10 million | $13.30 million |
| Income from operations | $1.76 million | $1.55 million |
| Net income | $998,000 | $2.77 million |
| Diluted EPS | $0.20 | $0.56 |
| Operating cash flow | $1.62 million | $5.82 million |
| Capital additions to land, buildings and equipment | $2.22 million | $1.01 million |
| Adjusted EBITDA (non-GAAP) | $3.21 million | $2.82 million |
Revenue increased 6.0% and operating income rose about 13.4%; operating margin was approximately 12.5%, versus 11.7%. Net income fell about 64%, and net margin was approximately 7.1%, versus 20.8%. The decline largely reflects the prior-year equity-investment gain on insurance proceeds, rather than weaker operating income. Adjusted EBITDA increased 14.0%; the company reports this non-GAAP measure as a supplemental measure, not a substitute for GAAP results.
Casino revenue grew 3.5% to $10.06 million, pari-mutuel revenue grew 3.6% to $1.17 million, food and beverage revenue increased 17.5% to $1.73 million, and other revenue increased 16.1% to $1.14 million. Management attributed casino and pari-mutuel improvement partly to less adverse weather than in Q1 2023, and food and beverage growth to large special events and catering.
Financial position and liquidity
- At March 31, 2024, cash and cash equivalents were $20.23 million, restricted cash was $4.05 million, and short-term investments were $5.00 million. Cash, cash equivalents and restricted cash totaled $24.28 million, down from $25.84 million at year-end.
- Total assets were $105.58 million; total liabilities were $22.91 million; stockholders’ equity was $82.68 million.
- The company had no balance outstanding on its revolving credit line. The amended facility provides up to $5 million and matures January 31, 2027; the company reported covenant compliance. Finance and operating lease obligations totaled approximately $226,000.
- Operating cash flow declined to $1.62 million, including a $2.25 million decrease in accounts payable. The prior-year period included $3.60 million of employee retention credit cash receipts. Investing activities used $2.71 million; financing activities used $470,000, including dividends.
- The company declared a $0.07-per-share dividend in each comparative quarter.
Material changes, outlook and risks
- Operating expenses rose 5.0% to $12.34 million. Salaries and benefits increased 4.7%, depreciation and amortization 15.7%, and professional and contracted services 24.7%; advertising and marketing fell 52.3% as the company intentionally reduced spending.
- Other income and loss shifted from $2.26 million of income to a $314,000 loss, primarily because Q1 2023 included insurance-related income from the Doran Canterbury I joint venture. Q1 2024 included an $852,000 equity-investment loss. Net interest income increased to $539,000.
- Management believes available cash, the credit facility, operating cash flow and potential land-sale proceeds will cover regular operations and planned development for at least the next 12 months. It expects to invest approximately $15 million in stable-area improvements over the next two years. No specific revenue or earnings guidance is provided.
- For the 2024 live meet, the company guaranteed $23,000 purses per overnight race to support field size and racing quality. The company expects an overpayment that may be reimbursed only if additional purse funding is secured within five years through gaming, new revenue streams or legislative action.
- The company has an indemnity obligation of up to $7 million relating to Doran Canterbury I debt guarantees, payable only if the lender demands payment from Doran’s guarantor. It also has future member-loan and capital-support exposures to joint ventures.
- The company recorded a $14.19 million TIF receivable, including interest. Reimbursement depends on future tax-increment revenues; the maximum TIF note is $17.59 million, and the full reimbursement is not guaranteed. Management reported no allowance was needed.
- Risks include gaming and racing regulation, competition, consumer spending, weather, racing participation and safety, wage and inflation pressures, real estate development and partner performance, and the collectability of TIF reimbursements. The filing reports no material changes to previously disclosed risk factors, no applicable legal proceedings, and effective disclosure controls.
Key facts for investors to verify
- Whether casino and event-driven revenue growth continues, particularly after live racing resumes seasonally.
- The causes and cash-flow implications of lower operating cash flow, including working-capital timing and capital spending.
- Progress, total cost and expected funding for the approximately $15 million stable-area plan and other Canterbury Commons projects.
- Actual 2024 purse overpayments and whether qualifying future funding becomes available for reimbursement.
- Collectability and timing of the TIF receivable, and the financial condition and obligations of the real estate joint ventures, including the $7 million indemnity exposure.
- Availability and terms of the $5 million revolving facility, covenant compliance, and the board’s future dividend decisions.