Canterbury Park (CPHC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited consolidated financial statements for Q2 2025 and 2024, detailing balance sheets, operations, equity, cash flows, and notes Condensed Consolidated Balance Sheets Balance Sheet Summary | ASSETS (June 30, 2025) | Amount ($) | | :--------------------- | :--------- | | Cash and cash equivalents | 12,442,407 | | Restricted cash | 5,940,759 | | Short-term investments | 4,500,000 | | Total Current Assets | 27,908,761 | | Total Long-term Assets | 87,021,445 | | TOTAL ASSETS | 114,930,206 | | LIABILITIES AND STOCKHOLDERS' EQUITY (June 30, 2025) | Amount ($) | | Total Current Liabilities | 14,350,398 | | Total Long-term Liabilities | 16,979,197 | | TOTAL LIABILITIES | 31,329,595 | | Total Stockholders' Equity | 83,600,611 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 114,930,206 | - Total assets increased from $109,922,782 as of December 31, 2024, to $114,930,206 as of June 30, 2025, representing a 4.55% increase. Total liabilities increased from $25,834,108 to $31,329,595, a 21.27% increase, primarily driven by current liabilities[7] Condensed Consolidated Statements of Operations Statements of Operations Summary | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :-------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Total Net Revenues | 15,665,734 | 16,202,395 | 28,807,366 | 30,300,384 | | Total Operating Expenses | 15,233,916 | 15,080,180 | 27,725,877 | 27,416,295 | | INCOME FROM OPERATIONS | 431,818 | 1,122,215 | 1,081,489 | 2,884,089 | | Net Other Loss | (910,224) | (641,929) | (2,040,105) | (955,649) | | (LOSS) INCOME BEFORE TAXES | (478,406) | 480,286 | (958,616) | 1,928,440 | | INCOME TAX BENEFIT (EXPENSE) | 151,000 | (142,000) | 332,000 | (592,000) | | NET (LOSS) INCOME | (327,406) | 338,286 | (626,616) | 1,336,440 | | Basic (loss) earnings per share | (0.06) | 0.07 | (0.12) | 0.27 | | Diluted (loss) earnings per share | (0.06) | 0.07 | (0.12) | 0.27 | | Cash dividends declared per share | 0.07 | 0.07 | 0.14 | 0.14 | - The company reported a net loss of $327,406 for the three months ended June 30, 2025, compared to net income of $338,286 in the prior year, and a net loss of $626,616 for the six months ended June 30, 2025, compared to net income of $1,336,440 in the prior year. This decline is primarily due to decreased total net revenues and increased net other loss[9] Condensed Consolidated Statements of Stockholders' Equity Stockholders' Equity Summary | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :------------------ | :-------------------- | | Common Stock | 50,860 | 50,367 | | Additional Paid-in Capital | 29,797,790 | 28,940,887 | | Retained Earnings | 53,751,961 | 55,097,420 | | Total Stockholders' Equity | 83,600,611 | 84,088,674 | - Total stockholders' equity decreased from $84,088,674 at December 31, 2024, to $83,600,611 at June 30, 2025, primarily due to a net loss of $626,616 and dividends declared of $718,843 for the six months ended June 30, 2025, partially offset by stock-based compensation and 401(k) stock match[10] Condensed Consolidated Statements of Cash Flows Cash Flows Summary | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net cash provided by operating activities | 7,755,896 | 7,010,463 | | Net cash used in investing activities | (2,377,059) | (6,688,846) | | Net cash used in financing activities | (683,089) | (696,899) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | 4,695,748 | (375,282) | | Cash, cash equivalents, and restricted cash at end of period | 18,383,166 | 25,466,472 | - Net cash provided by operating activities increased to $7,755,896 for the six months ended June 30, 2025, from $7,010,463 in the prior year. Net cash used in investing activities significantly decreased from $6,688,846 in 2024 to $2,377,059 in 2025, primarily due to lower additions to land, buildings, and equipment[12] Notes to Condensed Consolidated Financial Statements 1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Canterbury Park Holding Corporation operates a Racetrack and Casino in Shakopee, Minnesota, offering seasonal live horse racing, year-round simulcast operations, and 24/7 card games (poker and table games) on up to 80 tables. Key revenue sources include Casino operations, pari-mutuel operations, and food and beverage sales, with additional revenue from land development (Canterbury Commons™) through mixed-use opportunities and joint ventures[14] - The company's revenue recognition policy for Casino and pari-mutuel wagering involves identifying performance obligations, determining transaction price, allocating it, and recognizing revenue when obligations are satisfied. For loyalty programs, a liability is allocated based on the stand-alone redemption value of points[23][24] 2. STOCK-BASED COMPENSATION - The company suspended performance awards under its Long Term Incentive Plan (LTI Plan) from 2020-2025, instead granting deferred stock awards to retain executives. Non-employee directors receive restricted and deferred stock grants, generally vesting 100% one year after grant[30][32] Employee Deferred Stock Awards | Employee Deferred Stock Awards (Six Months Ended June 30, 2025) | Shares | | :------------------------------------------------ | :----- | | Non-Vested Balance, December 31, 2024 | 43,790 | | Granted | 27,400 | | Vested | (12,505) | | Forfeited | (4,950) | | Non-Vested Balance, June 30, 2025 | 53,735 | - Stock-based compensation expense for the six months ended June 30, 2025, was approximately $331,000, up from $271,000 in the prior year. Unrecognized stock-based compensation expense totaled $1,185,000 as of June 30, 2025, expected to be recognized over approximately 3.8 years[36] 3. NET INCOME PER SHARE COMPUTATIONS Net Income Per Share Computations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income (numerator) | $(327,406) | $338,286 | $(626,616) | $1,336,440 | | Weighted average basic shares outstanding | 5,060,543 | 4,984,953 | 5,050,003 | 4,975,889 | | Basic (loss) earnings per share | $(0.06) | $0.07 | $(0.12) | $0.27 | | Diluted (loss) earnings per share | $(0.06) | $0.07 | $(0.12) | $0.27 | - Basic and diluted EPS for the three and six months ended June 30, 2025, were $(0.06) and $(0.12) respectively, a decrease from $0.07 and $0.27 in the comparable periods of 2024, reflecting the net loss incurred[38] 4. GENERAL CREDIT AGREEMENT - The company's general credit and security agreement was amended on January 31, 2024, extending the maturity date to January 31, 2027, and reducing the maximum borrowing under the revolving credit line from $10,000,000 to $5,000,000. The line of credit is collateralized by receivables, inventory, equipment, and general intangibles, with a negative pledge agreement on certain real property[39] - There were no borrowings under the credit line during the three and six months ended June 30, 2025, and the outstanding balance was $0 at both June 30, 2025, and December 31, 2024[39] 5. OPERATING SEGMENTS - The company operates four reportable segments: horse racing, Casino, food and beverage, and development. These segments are managed separately due to differing products, services, and production processes, with horse racing and Casino segments regulated by the Minnesota Racing Commission[40] Segment Net Revenues from External Customers | Segment Net Revenues from External Customers (Six Months Ended June 30, 2025) | Amount ($000s) | | :------------------------------------------------ | :------------- | | Horse Racing | 6,129 | | Casino | 18,681 | | Food and Beverage | 3,997 | | Development | — | | Total | 28,807 | Segment Income (Loss) Before Income Taxes | Segment Income (Loss) Before Income Taxes (Six Months Ended June 30, 2025) | Amount ($000s) | | :------------------------------------------------ | :------------- | | Horse Racing | (1,174) | | Casino | 1,971 | | Food and Beverage | 720 | | Development | (2,476) | | Total | (959) | 6. COMMITMENTS AND CONTINGENCIES - The company has increased its maximum indemnification obligation under a Contribution and Indemnity Agreement with Doran affiliates for Doran Canterbury I, LLC debt financing to $7,500,000 as of December 18, 2024. A new indemnity agreement for Doran Canterbury II, LLC debt financing was also entered into, with a maximum indemnification of $1,000,000[43][44] - For the 2025 live race meet, the company guaranteed an additional $500,000 of purse monies, with potential for up to $1,500,000 more if additional purse revenues are secured. The company recorded a receivable of $140,000 for the anticipated 2025 overpayment, believing reimbursement is likely from future purse supplements, especially with proposed sports wagering legislation[46][47][48] - The company is obligated to construct infrastructure improvements within a Tax Increment Financing (TIF) District and will be reimbursed by the City of Shakopee from future tax increment revenue, up to specified maximum amounts. As of June 30, 2025, a TIF receivable of approximately $19,819,000 was recorded, with management believing it is fully collectible[50][65] 7. REAL ESTATE DEVELOPMENT - The company is involved in several equity method joint ventures for real estate development, including Doran Canterbury I, LLC (321-unit apartment complex, 27.4% equity), Doran Canterbury II, LLC (300 additional apartment units, 27.4% equity), Canterbury DBSV Development, LLC (multi-use development, 61.87% equity), and Trackside Investments, LLC (restaurant and entertainment venue, 50% equity)[51][53][55][57][58] Equity Investment Loss (Six Months Ended June 30, 2025) | Equity Investment Loss (Six Months Ended June 30, 2025) | Amount ($) | | :------------------------------------------ | :--------- | | Doran Canterbury I, LLC | (1,836,000) | | Doran Canterbury II, LLC | (975,000) | | Canterbury DBSV Development, LLC | (134,000) | | Trackside Investments, LLC | (18,000) | | Total Loss from Equity Investment | (2,963,000) | - The total estimated cost of TIF eligible improvements to be borne by the Company was reduced to an amount not to exceed $17,592,881 under the First Amendment to the Redevelopment Agreement. The Company expects to substantially complete these improvements by July 17, 2027, and will be reimbursed by future tax increment revenue[63][64] 8. LEASES - The company leases office equipment under finance leases and horse racing equipment under operating leases. Lease costs for operating leases were $11,276 for the six months ended June 30, 2025, and total lease expenses for short-term leases were $250,613 for the same period[67][69] Lease Terms and Discount Rates | Lease Type | Weighted Average Remaining Lease Term (Years) - June 30, 2025 | Weighted Average Discount Rate (%) - June 30, 2025 | | :--------- | :------------------------------------------------ | :--------------------------------------- | | Finance | 3.5 | 8.5 | | Operating | 0.3 | 8.0 | Lease Maturities | Lease Maturities (June 30, 2025) | Operating Leases ($) | Finance Leases ($) | | :----------------------- | :------------------- | :----------------- | | 2025 remaining | 16,952 | 22,223 | | 2026 | — | 44,447 | | 2027 | — | 44,447 | | 2028 | — | 44,251 | | Total minimum lease obligations | 16,952 | 155,368 | | Present value of minimum lease payments | 16,731 | 134,005 | 9. RELATED PARTY RECEIVABLES - The company has made member loans to Doran Canterbury I and Doran Canterbury II joint ventures, totaling approximately $4,039,000 as of June 30, 2025, with accrued interest of $1,082,000. Interest income from these loans was $184,000 for the six months ended June 30, 2025[75] - The company expects full reimbursement for these member loans and other related party receivables ($19,000 as of June 30, 2025) as the joint ventures achieve positive cash flow and in the following year, respectively[75][76] 10. SUBSEQUENT EVENTS - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing changes to U.S. corporate income tax law, including permanent 100% bonus depreciation, immediate expensing of domestic R&E, and modifications to business interest expense limitations. The company is currently evaluating the impact of this legislation on its consolidated financial statements[77] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of Q2 2025 and 2024 financial condition, results, revenue, expenses, EBITDA, liquidity, and risks Overview - Canterbury Park Holding Corporation operates the only facility in Minnesota offering live pari-mutuel thoroughbred and quarter horse racing, alongside year-round simulcasting and unbanked card games (poker and table games) at its Casino, which operates 24/7[80][81] Operations Review for the Three and Six Months Ended June 30, 2025 Revenues Total Net Revenues | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :---------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Total Net Revenues | 15,666,000 | 16,202,000 | (537,000) | (3.3%) | | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :---------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Total Net Revenues | 28,807,000 | 30,300,000 | (1,493,000) | (4.9%) | Casino Revenue Casino Revenue | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Total Casino Revenue | 9,489,000 | 9,845,000 | (356,000) | (3.6%) | | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :------------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Total Casino Revenue | 18,681,000 | 19,901,000 | (1,220,000) | (6.1%) | - The decrease in Casino revenue is primarily attributed to a decrease in 'drop' due to increased competition and a lower average collection revenue rate in table games, partially offset by an increase in other table games revenue from progressive jackpot revenue[84] Pari-Mutuel Revenue Pari-Mutuel Revenue | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :--------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Total Pari-Mutuel Revenue | 2,263,000 | 2,599,000 | (336,000) | (12.9%) | | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :--------------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Total Pari-Mutuel Revenue | 3,342,000 | 3,773,000 | (431,000) | (11.4%) | - The decline in pari-mutuel revenue is mainly due to fewer live race days (14 in 2025 vs. 17 in 2024) and lower simulcast revenues, which are linked to fewer overall race days at other tracks nationwide[86] Food and Beverage Revenue - Food and beverage revenue decreased by 1.6% ($33,000) for the three months and 3.5% ($136,000) for the six months ended June 30, 2025, compared to the same periods in 2024, primarily due to lower Casino revenues and fewer live race days[88] Other Revenue - Other revenues increased by 11.4% ($189,000) for the three months and 10.5% ($295,000) for the six months ended June 30, 2025, driven by higher admission revenue from large-scale special events in the first half of 2025[89] Operating Expenses - Total operating expenses increased by 1.0% ($154,000) for the three months and 1.1% ($310,000) for the six months ended June 30, 2025, compared to the same periods in 2024[90] - Purse expense: Decreased by 14.8% ($341,000) for three months and 12.8% ($472,000) for six months, due to decreased Casino and pari-mutuel revenues[91] - Salaries and benefits: Increased by 1.6% ($111,000) for three months and 2.1% ($270,000) for six months, due to annual wage and minimum wage increases[92] - Depreciation and amortization: Increased by 10.9% ($97,000) for three months and 10.2% ($178,000) for six months, due to placing larger fixed assets into service for barn relocation and redevelopment[93] - Advertising and marketing: Increased by 40.8% ($165,000) for three months and 36.5% ($200,000) for six months, due to new Casino promotions[94] - Professional and contracted services: Increased by 10.5% ($151,000) for three months and 4.1% ($110,000) for six months, due to increased live racing regulation costs from the Horseracing Integrity and Safety Authority[95] Other Income (Loss), Net - Net other loss increased by $268,000 to $910,000 for the three months and by $1,084,000 to $2,040,000 for the six months ended June 30, 2025, primarily due to depreciation expense and debt service costs from the Doran Canterbury II joint venture becoming fully operational in Q2 2024[96] Income Taxes - The company recorded an income tax benefit of $151,000 for the three months and $332,000 for the six months ended June 30, 2025, compared to an expense of $142,000 and $592,000 respectively in 2024. This shift is mainly due to a decrease in income before taxes from operations and a federal interest income tax refund in Q1 2025[97] Effective Tax Rates | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 31.6% | 29.6% | 34.6% | 30.7% | Net (Loss) Income Net (Loss) Income and EPS | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :-------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net (Loss) Income | (327,000) | 338,000 | (627,000) | 1,336,000 | | Basic and Diluted EPS | (0.06) | 0.07 | (0.12) | 0.27 | EBITDA EBITDA Reconciliation | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :-------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | NET (LOSS) INCOME | (327,406) | 338,286 | (626,616) | 1,336,440 | | EBITDA | 28,632 | 836,789 | 36,629 | 2,597,402 | | ADJUSTED EBITDA | 1,873,203 | 2,407,353 | 3,812,485 | 5,620,371 | - Adjusted EBITDA decreased by 22.2% ($534,000) for the three months and 32.2% ($1,808,000) for the six months ended June 30, 2025, primarily due to an overall decrease in income from operations. Adjusted EBITDA as a percentage of net revenue was 12.0% and 13.2% for the three and six months ended June 30, 2025, respectively, down from 14.9% and 18.5% in 2024[100] Contingencies - The company is analyzing various options for developing its underutilized land and expects available funds to cover near-term feasibility and predevelopment costs. Substantial costs may be incurred during this process[101] Liquidity and Capital Resources - The company's primary liquidity sources are cash flow from operations and a revolving line of credit, which was amended to $5,000,000 with a maturity date of January 31, 2027. No borrowings were outstanding as of June 30, 2025, and the company was in compliance with financial covenants[102] - Cash, cash equivalents, and restricted cash increased to $18,383,000 at June 30, 2025, from $13,687,000 at December 31, 2024. The company expects current funds, credit line, and future land sales to cover operations and planned development expenses for at least the next twelve months, including remaining costs for barn relocation ($1,000,000) and TIF financing ($1,555,000)[103] Operating Activities - Net cash provided by operating activities for the six months ended June 30, 2025, was $7,756,000, driven by a net loss of $627,000, depreciation and amortization of $1,918,000, a loss from equity investment of $2,963,000, and increases in payable to horsepersons and deferred revenue, partially offset by increases in accounts receivable and TIF receivable[104] Investing Activities - Net cash used in investing activities for the six months ended June 30, 2025, was $2,377,000, primarily due to additions to land, buildings, and equipment ($2,032,000), TIF eligible improvements ($486,000), and an increase in related party receivables ($396,000), partially offset by proceeds from short-term investments ($5,000,000)[106] Financing Activities - Net cash used in financing activities for the six months ended June 30, 2025, was $683,000, mainly due to cash dividends paid to shareholders ($0.07 per share declared) and payments for taxes related to equity awards[108] Critical Accounting Estimates - Management made no changes to the company's critical accounting estimates during the quarter ended June 30, 2025. The primary critical estimate discussed is the allowance for doubtful accounts for the Property Tax Increment Financing (TIF) Receivable[111] - As of June 30, 2025, the TIF receivable was approximately $19,819,000. Management believes this receivable is fully collectible, based on an annual collectability analysis that projects future tax increment revenue from completed development projects to exceed the company's infrastructure improvement costs[114][115] Forward-Looking Statements - Risks include challenges in implementing growth strategy, sensitivity to consumer spending, decreased live racing profitability, difficulty attracting horses/trainers, significant competition, declining popularity of horse racing, and potential impact of integrity issues[118] - Operational risks involve inclement weather affecting live racing, changes in governing laws (e.g., gaming taxes), extensive regulation, reliance on joint venture partners (Doran, Greystone), and challenges in executing real estate development strategy[118][122] - Financial and other risks include obligations for TIF district improvements (reimbursement dependent on future tax revenue), competition from other real estate developers, inflation effects, ability to attract/retain qualified personnel, discretion over future dividends, and cybersecurity risks to information technology and customer data[118][122] Item 3. Quantitative and Qualitative Disclosures about Market Risk No applicable quantitative and qualitative disclosures about market risk are reported - The company has no applicable quantitative and qualitative disclosures about market risk[120] Item 4. Controls and Procedures Confirms effective disclosure controls and procedures, with no significant changes in internal control over financial reporting in Q2 2025 - The President and CEO, Randall D. Sampson, and CFO, Randy J. Dehmer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[121] - There have been no significant changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[123] PART II. OTHER INFORMATION Item 1. Legal Proceedings No applicable legal proceedings are reported for the period - No legal proceedings are applicable for the reporting period[125] Item 1A. Risk Factors Refers to risk factors from the 2024 Form 10-K, with no material changes reported - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[126] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds are reported - No unregistered sales of equity securities and use of proceeds are applicable[127] Item 3. Defaults Upon Senior Securities No defaults upon senior securities are reported - No defaults upon senior securities are applicable[128] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[129] Item 5. Other Information No director or officer adopted or terminated trading arrangements during Q2 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[130] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including certifications, press releases, and XBRL financial information - Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2, 32)[136] - Press Release dated August 7, 2025, announcing 2025 First Quarter Results (Exhibit 99.1)[136] - Financial information formatted in Inline eXtensible Business Reporting Language (XBRL) for the condensed consolidated financial statements and notes (Exhibits 101, 104)[136] Signatures - The report was duly signed on August 8, 2025, by Randall D. Sampson, President and Chief Executive Officer, and Randy J. Dehmer, Chief Financial Officer[134]