Formula One Group
Q1 2021 Earnings Call Transcript

Published: 7 May 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media Corporation 2020 (sic) Q1 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, May 7. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer. Please go ahead.

[Courtnee Chun:]

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in Liberty Media's most recent Forms 10-K and 10-Q or Liberty Media acquisitions form S-1 registration statement filed with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Media and Liberty Media acquisition expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Media or Liberty Media Acquisition Corporations' expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial for Liberty Media and SiriusXM, including adjusted OIBDA and adjusted EBITDA. The required definitions and reconciliations for Liberty Media and SiriusXM Schedules 1-3 can be found at the end of the earnings press release issued today, which is available on Liberty Media's website. Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

[Greg Maffei:]

Thank you, Courtnee, and good morning to all of you out there. Today, speaking on the call besides myself, will have Formula One's President and CEO, Stefano Domenicali; and Liberty's Chief Principal Financial Officer, Brian Wendling. Beginning with Liberty SiriusXM, we continued our share repurchases, purchasing $114 million across LSXMA and LSXMK shares from February through April. The discount stubbornly remains, and we repurchased at a look-through price of - an series of just over $4 per share. We do expect to continue to take advantage of that stubborn discount opportunity. Our ownership of SiriusXM as of April 26 stood at 77.3%. And looking at SiriusXM itself, they are off to a fast start this year with self-pay sub growth of 83%. Trial starts in the first quarter were the highest in the company's history, and they recorded record low first quarter churn. We're also experiencing rapid growth in off-platform advertising revenue. 360L, the next-generation platform is now in 2 million vehicles, providing valuable data and offering engaging features. We expect it will be about 25% of this year's installs. We are now the largest digital ad platform in North America, reaching almost 2/3 of online audio listeners. We're also continuing at SiriusXM, our extension in the podcast segment with our acquisition of 99% invisible, furthering our content creation capabilities. Turning to Live Nation. You may have seen in today's earnings release from them, concerts are back and a high demand for dates in 2021. In fact, we have booked twice as many shows in '21 as we did in '19. Luke Bryan, the 2021 ACM Entertainer of the Year is going on tour and the Railbird Festival with headliner David Matthews Band is another notable addition. Following up on acquiring the majority stake in Veeps, we've begun our [indiscernible] platform and started equipping 60-plus contract venues to offer turnkey live streaming events. We continue to help artists expand revenue and creative opportunities, connecting them with more fans via Veep and other means. Looking at the Formula One Group, we've had phenomenal racing this season, as Stefano will outline a little bit more in a minute. It's exciting to see the battle between Lewis and Max. It's going to be a very competitive year also for third place and the constructor championships lots of exciting racing. The teams continue to execute well given the ongoing challenges from the pandemic. Turkey will replace Canada in June, showing the sustained demand to expand GPs. We've also extended our agreements with Canada and Japan. Looking forward to the first - we are looking forward to the first spread qualifying race in July at Silverstone and there'll be two more of those during the rest of the season. Drive to survive, our programming on Netflix, continued to grow in popularity in its third season, and it's also getting recognized on the award circuits, both in the U.S. and Canada. And finally, we look forward to seeing all of you in Miami in 2022. Turning to Braves. After a slow start to the season, our record is just under 500, and we are close third in the NL East. A game and half out of first place. We were helped by sweeping the Nets over the last three games. Braves are number-one in home runs this season and also number-one in average attendance almost 16,000 per game. That is if you exclude Texas, which we'd be third, including Texas. Ron Acuna was named National Player of the month for April. Pablo Sentiva had three pinch at home runs in April, the most by any Braves player in a calendar month for - in its franchise history. And as of today, we expect to expand capacity to 100% of fans after opening the season at 33%. Notably, in partnership with Emory Healthcare that Braves are offering vaccine shots before and during games against Philly. Fans who get vaccinated at those games will receive two free tickets to future Braves games as well. And finally, the Braves looking at the battery kits and crop is expected to occupy their office space in July and Papa John's later in the summer. Demand for remaining office space remains very strong. And the Aloft and Omni Hotels had high occupancy on Friday night and Saturday games or nights in March with several sellouts on game nights. We continue to make good progress on Almac to SPAC. The SPAC market has changed in the way we believe is to our benefit as some of the euphoria of January and February has deflated. We believe recent weakness in the pipe market plays well for Liberty, given our strong balance sheet, our capabilities with investors and the support that we have. Finally, we wanted to share with you that we have recently published our SASB disclosure on our website as a part of our ongoing ESG efforts. So with that, I'd like to turn it over to Brian discuss our financial results in a little more detail.

[Brian Wendling:]

Thank you, Greg, and good morning, everyone. Liberty SiriusXM Group had attributed cash, restricted cash and liquid investments of approximately $1 billion, excluding $67 million of cash and restricted cash held at SiriusXM. This balance is prior to paying the Formula One Group, $384 million to settle the Live Nation call spread in April. The settlement of the Live Nation call spread was a nontaxable transaction among the tracking stock groups. We also have $1.1 billion of undrawn margin loan capacity at the parent level. Note that a portion of our cash will be used in 2021 to repay our 2.25% Live Nation exchangeable bonds. Based on the fair value of the bonds at quarter end, the amount of cash used would be $514 million. As of May 6, the value of the SiriusXM stock held by Liberty SiriusXM Group was nearly $19 billion, and the value of the Live Nation stock held was $5 billion. We have $3.2 billion in principal amount of debt against these holdings. Total Liberty SiriusXM Group attributed principal amount of debt is $13.2 billion, which includes $9 billion of debt held directly at SiriusXM. Formula One Group had attributed cash and liquid investments of $1.4 billion at quarter end. This excludes the $429 million of cash that's held directly at the F1 opco. Post quarter end, Formula One Group received the additional $384 million that we just discussed and proceeds related to the Live Nation call spread. Total Formula One Group attributed principal amount of debt was $3.6 billion, which include the $2.9 billion of debt held directly down at F1, leaving $724 million at the corporate level. And F1's $500 million revolver remains undrawn. Please note that during the three months ended March 31, '21, F1 began reclassifying certain components previously reported and other revenue into primary F1 revenue to better align with the way management currently evaluates the business. Components reclassified in the primary F1 revenue generally related to F1 TV subscriptions, certain F2 and F3-related fees, broadcast origination and support fees and digital advertising among others. Additional detail on this reclass, including the impact to the years ended 12/31/'19 and '20 can be found in Schedule 3 to our earnings release, which will be posted on website. At quarter end, the Braves Group had attributed cash, liquid investments and restricted cash of $218 million and attributed principal amount of debt of $676 million. Liberty and our consolidated subsidiaries are in compliance with their debt covenants at quarter end. And with that, I'll turn it over to Stefano to discuss Formula One.

[Stefano Domenicali:]

Thank you, Brian, and good morning also from my side. So 2021 has begun with huge energy and momentum. In the past few weeks, we announced our segment rate in the U.S. in Miami Gardens with a huge and positive reaction from our fans, the teams and all our partners. I think the second wave in the U.S. starting in 2022, provides a great opportunity for our sport and we'll ensure we continue to increase our strong progress and fund growth there. Last week, we announced that we will have Saturday 100-kilometer sprint qualifying formats, our three races in 2021, following unanimous support from all the teams. The events will be exciting for all our fans, provide more on track action over a race weekend, and give our partners and the team's greater commercial opportunities. Silverton, one of the venues for the new format already reported a surge in ticket sale following news that they would be hosting one of this event. We have announced the three years extension of the Japanese Grand Prix. This has always been an important race for Formula One, and we cannot wait for the fans to cheer on their own new pit [Sonoda]. We have extended our partnership with the Canadian Grand Prix by two years. And welcomed the new announced last week by Data Bell Media has entered into agreement to acquire the Montreal-based Canadian race promoter Octane Racing Group which is a great news for the long-term future and development of the race in Canada. While the global situation is still fluid due to COVID-19 pandemic, Formula One has shown it is has the ability to overcome the issue thrown us and continue to race safely. Just last week, we provided this to be the case. While we are not able to race in Canada this year, we have secured the replacement race in Turkey at short notice, meaning we have not reduced the number of races in the calendar for 2021. It is very exciting to see the level of interest from both the new and historic locations to host the Grand Prix, and this gives us a possible option if required for 2021, but also good opportunities for the future. We have had very good conversation with all our promoters. And all of whom expect the races this season to go ahead as planned. And just this week we have had the confirmation that 1,000 fans will attend here in Barcelona, the Spanish Grand Prix. And that molecule will work on approximately 40% of the capacity to the Grand Star for the race in two weeks' time. Alongside the busy start of the year off the track, the racing on the track has been equally exciting and dramatic. We kicked off our 23 racing season in Bahrain and have had three races to-date, which, with close battles, overtaking and the pack closer together than in the recent years. As Ron has mentioned, with this battle for the Championship playing out this could be a golden year for Formula One. This season operating in Bahrain did not disappoint with Verstappen security proposition. It was a trailing race between Max and Lewis that was only decided in the final laps. There were also strong showings by Norris and Perez and the Japanese Yuki Tsunoda scored points in his first F1 race for AlphaTauri. And it looks like, yes, a promising career ahead. The battle for first continuing to McLaren where Max had an amazing start of the line in the rain and carried through for the win. Impressive given his start in third, behind his new teammate, Sergio Perez, Lando Norris made up for a mistake in qualifying and secured a spot on the program, showing the continuous strength of McLaren. Last week and in Portugal, Mercedes standard offers turned challenge the Red Bull as Lewis Hamilton clinched heartfelt victory [indiscernible] with both the starting of Paul and Lewis ahead of the Max Verstappen second the start of the race showed the Red Bull get passed the Mercedes of Hamilton before seven time champions pulled it off brilliant overtakes on both his teammate both his members started to clinch victory. It once, again shows, that there is a real battle underway for this year title, and we are on the - only the three races in. The competition for the third is also fierce in the constructor standing. McLaren is making the early pace. But many teams in the midfield have something to prove. And it is great to see Ferrari hitting tried again. The spectrum of Formula One is resonated with fans and engagement is very high. To date, we have data for the first races across the 24 principal markets we monitor, and this showed TV viewership growth over both 2020 and 2019, with particular strength in Italy, the Netherlands, France, the U.K., the U.S. and Spain. On the digital front, unique users for F1 web and app have been up 77% on the equivalent rates in 2020 and social engagement and also increased with over 30 million interaction in both of the first 2 race suite. We continue to grow our social needs following reached 36.5 million after Emilio GP, up from 35 million for the prior year-end. F1 TV, our OTT product, has also started the second strongly with the record viewing. Big concurrent view at each race weekend at around 3 times higher than the 2020 season average. And engagement measured by the minutes viewed over the course of the weekend is up more than 60% on the last year. We launched an update version of the app for the season that provides many additional features, including high bidder quality and allows us to control the viewing experience. This new version also makes it easier to find content in other collection which includes over 2,000 hours of footage and coverage of Air Grand Prix in the last 50 years, along with our latest series, F2, Chasing the Dream. F1 TV is now available in 188 territories with the premium F1 TV available in 85.Season 3 of Drive to Survive, the boot of March 19 and continues to build mass global popularity for the sport reaching number 1 on Netflix in 27 different countries and also globally. And on all utmost daily basis, we hear an ad about how the show was brought into new non-typical plans. It was great to revisit the 2020 season and see the back story of the virality of many drivers changes. I do highly recommend Episode 9, which is a terrifying exhilarating and expiring. The show was nominated for a sport Emmy for outstanding series sport documentary and made the short list of the documentary category for the U.K. broadcast awards. Heading into the season, we have had numerous sponsorship announcement, we were pleased to renew our global partnership with the DHL, a relationship, which now spans across several decades. This extended partnership will include enhanced involvement in F1 e-sports sites and a present of F1 digital channels. As official partner, we work in June, let's say, as the mark as a Citi card provider and Ferrari train to the official toast of Formula One. In addition, we announced advisers [indiscernible] and as official supplier and welcome global citizen as charity partner for our We Race as One initiative. We continue to engage fans through e-sports and have the very successful series of visual Grand Prix during the off-season. Current drivers, along with home stars and future prospects competed to win a share of the $100,000 price fronting their charities. As part of the continued effort to improve diversity and inclusion in Formula One, as part of our We Race as One initiatives, we announced optimal only qualification route for the F1 e-sports series pro championship. This is our first female only competition, and we hope it will encourage more drivers from the passionate and the talented feminine rating community with the goal of becoming the first ever female driver to be signed by an official F1 e-sports series. In closing, Formula one is off to a strong start in 2021. Building off the foundation put in place the last few years. The ecosystem is absolutely strong, and the competition on the track is trading. I want to thank all the dedicated employees of Formula One for their continuous diligence and hard work, and I hope you will watch the Spanish Grand Prix this weekend. Now I'll turn the call back over to you, Greg. Thank you very much.

[Greg Maffei:]

Thank you, Stefano, and thank you, Brian. To the listening audience, we appreciate your continued interest in Liberty Media. Hope you all stay healthy and safe. And with that, operator, we will open it up for questions.

[Operator:]

[Operator Instructions] We will now take our first question from Jeff at Pivotal Research. Please go ahead. Your line is open.

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We will now take our next question from Dan at Morgan Stanley. Please go ahead. Your line is open.

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So we will now take our next question from Bryan from Deutsche Bank. Please go ahead.

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So we will now take our next question from Vijay of Evercore. Please go ahead.

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We will now take our next question from David at JPMorgan. Please go ahead.

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We will now take our next question from David Beckel at Berenberg. Please go ahead.

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We will now take our next question from David Joyce at Barclays. Please go ahead.

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We will now take our next question from John at Gabelli. Please go ahead.

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So we will now take our final question for today's conference from Matthew at Benchmark. Please go ahead.

[Operator:]

This concludes today's call. Thank you for your participation. You may now disconnect.