Canterbury Park Holding Corporation (CPHC) is a diversified entertainment company that operates a premier racetrack and casino facility in Shakopee, Minnesota. With a rich history spanning over three decades, CPHC has established itself as a leading player in the regional gaming and hospitality industry, offering a unique blend of pari-mutuel wagering, unbanked card games, and a variety of food and beverage options.
Business Overview
CPHC's operations are centered around its Canterbury Park Racetrack and Casino, which features year-round pari-mutuel wagering on simulcast and live horse races, as well as a 24/7 casino offering a variety of poker and table games. The company's three largest revenue streams are from its casino operations, pari-mutuel operations, and food and beverage sales. CPHC also derives additional revenue from related services and activities, such as admissions, advertising signage, publication sales, and other entertainment events.In addition to its core racing and gaming operations, CPHC is actively engaged in the development of its underutilized land surrounding the racetrack, known as Canterbury Commons. The company has obtained and is pursuing several mixed-use development opportunities for this land, directly and through joint ventures, further diversifying its revenue streams.
Financial Performance
For the fiscal year ended December 31, 2023, CPHC reported annual net income of $10,563,249, annual revenue of $61,436,858, annual operating cash flow of $11,566,877, and annual free cash flow of $3,658,914. These strong financial results demonstrate the company's ability to generate consistent profitability and cash flow from its diversified business model.In the first quarter of 2024, CPHC continued its positive momentum, reporting net income of $998,154, a 6.0% increase in total net revenues to $14,098,000, and adjusted EBITDA of $3,212,919, a 14.0% increase compared to the same period in 2023. The company's casino revenue increased by 3.5% year-over-year, driven by improved attendance, while pari-mutuel revenue and food and beverage revenue also saw increases of 3.6% and 17.5%, respectively.
Segmental Performance
CPHC operates four reportable segments: horse racing, casino, food and beverage, and development. The horse racing segment, which includes simulcast and live horse racing operations, contributed $2,138,000 in net revenues for the first quarter of 2024, a slight increase from the prior-year period. The casino segment, the company's largest revenue generator, reported net revenues of $10,056,000, up 3.5% year-over-year. The food and beverage segment saw a 17.5% increase in net revenues to $1,904,000, driven by higher catering and special event activity. The development segment, which encompasses the company's real estate initiatives, reported a segment loss of $673,000 for the quarter.Liquidity and Capital Resources
As of March 31, 2024, CPHC had a cash, cash equivalents, and restricted cash balance of $24,281,000, and no outstanding balance on its $5,000,000 revolving credit facility. The company believes that its available funds, combined with cash generated from operations and future land sales, will be sufficient to satisfy its ongoing liquidity and capital resource requirements for the next twelve months.CPHC is actively investing in the development of its Canterbury Commons project, with plans to invest approximately $15 million in a stable area improvement plan over the next two years. The company expects to finance these improvements using a combination of its current operating resources, existing credit facility, and potentially, third-party financing sources.
Real Estate Development
CPHC's real estate development segment is a key growth driver for the company. Through its joint ventures with Doran Companies and Greystone Construction, the company is actively developing the Canterbury Commons project, which encompasses approximately 140 acres of underutilized land surrounding the racetrack.The Doran Canterbury I and Doran Canterbury II joint ventures have completed the development of 621 apartment units, with additional phases planned for the future. The Canterbury DBSV joint venture is developing a multi-use project on a 13-acre parcel, including residential, commercial, and retail components.
These real estate initiatives are expected to generate additional revenue streams and diversify CPHC's business model, reducing its reliance on the core racing and gaming operations.
Risks and Challenges
While CPHC has demonstrated strong financial performance and a diversified business model, the company faces several risks and challenges, including:- Potential declines in discretionary consumer spending due to economic downturns or other factors beyond the company's control.
- Increased competition from other gaming and entertainment options in the region.
- Regulatory changes, such as increases in gaming taxes or restrictions on operations, that could adversely impact the company's profitability.
- Reliance on the successful execution of its real estate development strategy, which is subject to various market and economic conditions.
- Potential disruptions to its operations due to inclement weather, equipment failures, or other operational issues.
Outlook and Guidance
CPHC has not provided specific financial guidance for the upcoming fiscal year. However, the company's management has expressed confidence in the company's ability to continue its positive momentum, driven by the strength of its core racing and gaming operations, the growth of its food and beverage segment, and the ongoing development of Canterbury Commons.The company's investment in the stable area improvement plan, as well as its continued focus on enhancing the customer experience and diversifying its revenue streams, are expected to support CPHC's long-term growth and profitability.