Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Liberty Media Corporation 2020, Q1 earnings call. During the presentation, all participants will be any listen only mode.
We will conduct a question to answer session. During that time. If you have a question. Please press star one on a telephone.
This conference is being recorded today may 7th I would now let's turn the conference over to MS. Courtney John <unk> portfolio Officer, and senior Vice President Investor Relations. Please go ahead.
Thank you for we again, we'd like to remind everyone that this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act like 95, actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent form 10-K, and 10-Q filed with the FTC. These forward looking statements speak only.
Yes in the data on this call and Liberty media expressly disclaims any obligation or anything.
We didn't have any any updates or revisions to any forward looking statement contained herein.
Like any change in Liberty Media's expectations with regard there too or any change in events conditions or circumstances on which any such statements.
All we will discuss certain non-GAAP financial measures, including adjusted OIBDA and adjusted EBITDA.
Definitions and reconciliations for Liberty media in Syria Second act that catalyst one into can be found at the end of the earnings press release issued today, which is available on our website.
I'd like to turn the call Overeating right, let's say the Rees President and CEO. Thank you and good morning.
Speaking on the call we will have formula one German Geo Chase Carey.
And Liberty Chief Accounting Officer, Brian.
First let me say I hope you all healthy.
Second I like to like enjoyed all employees and management system impressive job managing.
Right.
Now on Liberty media.
We completed the Reattribution.
Our like nations taken other assets and liabilities between the portable one group and Liberty Sirius XM.
Exactly.
As a pure play.
Provided additional liquidity would use debt.
For Liberty Sirius XM.
More importantly ones, it's like nation interest, but the complementary business.
It's very successful tracker.
At a compelling price.
I'll have ample liquidity [noise].
We are pleased with the stock market reaction since all stocks have outperformed the often pieces remains.
Turning to Liberty Sirius XM.
Including the Olympic some shares that we acquired.
As part of the Reattribution.
Liberty Sirius XM repurchased $98 million of stock from February 1st through April 30.
And effectively bought these Sirius XM shares 80, 373 looks in place over this period.
Sure.
Our ownership of Sirius XM.
Some people 24 stood at 72.2%.
I know that we have stopped or were purchased as part of the reattribution.
But I expect post close up being planned rights offering early June we just look to start repurchasing at West XM stop again.
The nagging discount to any be is an opportunity and what we will continue to take advantage of.
At Sirius XM <unk> continued to repurchase stock and we approach 80% ownership of Sirius XM I expect the opportunity they wait.
Now looking at Sirius XM itself.
Continues to operate very well during the cold and crisis.
Just launched innovative new program, including a 24 seven coping 19th always channel at hotline.
Nine new limited what channels with iconic arc honest artists, including the French channel with music and exclusive content like never before before hurt demo of a conceptual radio show brings created for the Sirius XM channel back in 2005.
Howard Stern has done great innovative interviews, including a two hour plus session when Tom Brady from Derek Jeter his house in Florida.
Subscription based business model, we haven't Sirius XM has proved resilient.
So paying that ads grew 69000 to nearly 34.8 million total subscribers.
Thank you very strong liquidity and cash flow of Sirius XM has shown through we still have 1.75 billion of available on our revolving credit facility, which is often tool.
Turning to Formula One group I'm sure you all mr., thereby F. One racing hopefully you've gotten a little taste by watching or wait watching post season applied to survive on Netflix.
And we expect to all of you watched the virtual GP. This past weekend, there was an epic battle between how its album and Charles Clarke.
Past repatha each other several times without boss finally, taking away.
The bottom resolves highlighting the next generation F. One drivers Alba Russell Mcclurkin.
<unk>.
One of these rolling that's for years to come.
Yes, one team has done a great job navigating the crisis and working on the 2020 calendar.
They are planning in early July start in Austria Chase will talk more about that.
We continue to evaluate the needs of the business, but definitely want to be opportunistic and find it interesting assets that we can add that we think we're well positioned to do so.
Turning to live nation.
Not reported until after the market today, So obviously won't comment on results, but I want to say, we are pleased with the announced actions they have taken to build liquidity.
Not at the Braves.
We are working closely with major league baseball to see how we can put the season together.
Appreciate how the commissioner teams and players are working together towards that solution everyone. As you can see baseball the chart.
The Braves players are eager to they've been doing zoom sessions, we've been trainers medical staff.
And manager Brides Nicole.
There have also been in celebration of 25 years since the Braves.
1994, I will series titled the 95 players joined Zoom reunion, while watching the final getting six on Fox sports Southeast.
Fans were able to watch the zoom life.
As well.
So with that I'm going to turn it over to Brian for more on our financial results. Thank you, Greg and good morning, everyone.
The earnings release has our cash and debt balances by tracker as of March 31st since we completed the Reattribution in April as Greg discussed a replay of the margin the F. One revolver today.
I'll walk through liquidity is that it's a pretty serious and formula One group at March 31st on a pro forma basis for these two transactions.
The media Sirius XM Formula one formula one emigres or in compliance with all that covenants as at March 31st.
Given the uncertain impact to cope with 19 F. One right and the Braves are monitoring their ability to comply with their debt covenants in future periods.
We are in positive discussions with respective lenders.
On a pro forma basis Liberty Sirius XM group had attributed cash restricted cash and liquid investment.
$139 million, excluding 52 million of cash restricted cash held directly at Sirius XM.
We have 870 million of Undrawn margin lung capacity.
Okay.
The value of the serious exam and live nation stock held at Liberty Sirius XM as it makes it.
It was 21 billion.
Which excludes valuable admission call spread held at Formula One group, which was valued at 165 million at the time of the Reattribution and will be money market.
We have 2.1 billion in principle amount of data against these homes.
Total Liberty Sirius XM group that is 11.1 billion, which is which includes 7.9 billion of data at Sirius XM.
This debt balance excludes the 750 million intergroup long owed to the Formula one which is expected to be bags with proceeds from rights offering, which we intend to watch on me.
Today at one floaters and the balance under its revolving credit facility using cash on hand.
During its full capacity of 500 million.
Oklahoma for this repayment Formula one group had attributed cash and liquid investments.
1.4 billion at the corporate level. This excludes 536 million of cash held directly.
Total Formula One group attributed principal amount of debt was 3.6 billion, which includes 2.9 billion.
[noise], leaving 688 million.
Up once told meant that the covenant whether ratio is to find enough ones credit facilities for covenant calculation the six times.
Quarter.
As compared to a maximum allowable leverage ratio of 8.25 times for both the term loan and revolving credit facility.
Please note these leverage ratios are for the Formula one operating business nothing Formula One group.
The term loan financial Covenant cuts in current space not me.
We are having positive discussions with the RCM lenders to temporarily moved this covenant from an EBITDA base [laughter].
Payment of the Rcs combined with the Reattribution gives us more flexibility in renegotiating the maintenance covenant on them.
Lastly to the Braves at quarter end raise group had attributed cash liquid investments in restricted cash and 343 million.
Attributed principal amount of debt of 698.
With that I'll turn it over to chase to discuss formula.
Thank you Brian.
We entered 2019 with great momentum, we're ready for our biggest season, yet was 22 races. We are ready to race in Australia, but it was necessary to cancel the event that the last minute for reasons related to cope with 19.
This global pandemic cuts at a significant impact a formula one were adjusting and respond to get numerous ways that are in the best interest of our fans employees partners and constituents, while focusing on the formula one business for the long term.
Let's walk through all the actions we've taken.
One of the first actions we took as the sport was to move the teams summer break up the March and April as we wanted to have ultimate flexibility to race during the normal summer break in August on Tuesday, the Twentyth in March the Phase World Motor Sport Council approved to further extension the shutdown period for 35 to 63 days to be taken during the month.
March April May and Georgia.
During this breaking this season, we were inspired see several UK based formula one teams come together for project Pitlane. This is part of a larger UK industry wide focus to manufacture and deliver respiratory devices to support the national need.
No one has the unique ability to reach rapidly respond to engineering it technological challenges.
Focused on its core skills of rapid design prototype manufacture test unskilled assembly.
These efforts have proved fruitful in that go with it has been given for two of project Pitlane, two initiatives, including ventilator sit or predict being produced by several teams plus a breathing aid being manufactured by Mercedes or.
We are grateful for the team's efforts and supporting the national need.
It further actions F. One the F. I hear you an all 10 teams unanimously agreed to delay the introduction of the 2021 technical regulations until 2022 and to keep the majority of their existing twentytwenty cars into the 2021 season.
This will reduce costs for all teams at this time when they would usually be investing and working on the cars for the 2021 season.
We have further been working with the 5 million teams to strengthen the long term future formula one let array of new technical sporting and financial regulations that will improve the competition in action on the track it make it a healthier business for all involved particularly as we work through the issues created by Cobot 19.
One of the key areas of focus has been the cost cap on team expenses, we previously Atlanta to cap of 175 million for 2021, but now expect to move forward with a significantly lower cap.
Just like our teams formula one it's been evaluating our cost structure weights and difficult decisions for load over 50% of our workforce on April 1st with senior executives, taking a voluntary cash to pay.
We froze all hiring and pay review plans and also suffered a number of initiatives we plan to pursue this year.
We recognize there may be lose a bit of time in implementing some of these plants, where we felt the current uncertainties warranted the actions.
As Brian mentioned, we're actively engaged with lenders have a revolving credit facility to address potential issues related to our quarterly leverage covered.
They've been very supportive as we work together to identify potential changes to the covenant to enable us to navigate through the possible scenarios, including the remote possibility of no racing in 2020, and we expect to agree to necessary changes in due course.
We've been working tirelessly since Australia, and we're actively engaged with our promoters and putting together a potential twentytwenty rates calendar.
We have two primary challenges.
Fine locations, where we can hold the race and determining how we transport all necessary parties and their equipment to that location for race.
We're in discussion with all of our promoters. This Wallace and tracks that are not currently on our 2020 calendar to ensure we explore all options.
Our goal is to launch the season on the weekend of July 4th and fifth in Austria is likely that we raised the weekend of July 11th and Twelveth in Austria as well.
In the advanced stages of putting together a schedule of additional European races through early September including races. During the traditional August break.
Well then plan to race in your Asia Asia. The Americas in September October November before finishing in the Gulf in Bahrain Abu Dhabi in December.
Hope to have a calendar with 15 to 18 races. We expect the early part of the calendar to be races without fans.
Well, we hope to be able to allow fans to attend into latter part of the year.
We are working with the F. <unk> local authorities in other experts to determine the steps to procedures necessary to safely transport everyone to each race location.
To enable those individuals to operate because in a safe and secure manner.
We feel increasingly positive about the number of locations that will be able and want to hold the race this year.
Our work in the travel and other logistical issues related to each country or work in progress.
The economics of races, particularly ones with fans will clearly very from existing agreements and we're actively engaged on this front too.
We've been working closely with the F.I. I want to get sent that all the teams to change the calendar without a formal vote amongst the teams and this was formally approved by the World Motor Sport Council and Formula one.
This will allow for a stream process as we reshuffle the calendar and appreciate the teams support.
But oh small whats plus moment of the season, we're pleased that our teams quickly pivoted and launched a new formula One E Sports virtual Grand Prix series, featuring a number of current formula one drivers and celebrities.
To date, Charleston, Clerk Church, Russell and Tony what she if any easing Lando Norris, Alex Albans, Carlos signs Junior, Illinois, Nicholas the Ti Le TV at all being on the grid along with former F. One drivers such as Jenson button, Johnny a bear and eco Kalkan Berman.
They've been joined by England's Cricket World Cup Winter, Ben Stokes musician, Liam pain professional golfer, Ian Poulter, and six time Olympic gold medalists or Chris Hoy to name a few.
He's racism run in place of every postponed Grand Prix City. The series utilizes the official Formula One 2019 PC video game developed by code Masters individuals are impressive.
The races to provide a great racing and entertaining payment value would likely commentary.
<unk> Clarke what his debut race after receiving the game just three weeks earlier, then when the next rates as well and we're excited to see new rivalries emerge.
The broadcast is available on the official Formula one you to Twitch and Facebook channels as well as marquee TV broadcasters, such as Sky sports in the UK E.S.P. in in the U.S. and we've experienced strong engagement through.
Through the first three races digital cumulative views reached 12.9 million and total viewership, including TV estimates reached 16.3 million.
The virtual Grand Prix, even trend that number one on you tube UK.
We will continue with these virtual GPS until we return to racing.
There were also pleased with the response to the second season of drive to survive, which debuted on Netflix at the end of February the season provided unprecedented access to the teams and drivers.
We saw the drama the driver switch from gasoline to al bond mid season at Red Bull.
Kind of seems to action or the what rates in Germany, and learn more about Williams challenging season.
We are in advanced discussions for season, three and the team is ready to capture foot footage and twentytwenty.
In news that May have been overlook due to covert 19, we welcomed aramco, that's a long term global partner to Formula one.
We announced this agreement on March 10th and Aramco as their six global partner alongside DHL Emirates, Heineken Perrelli and Rolex.
Look forward to sharing her expertise to identify opportunities for the advancement of sustainable fuels enhanced engine efficiencies in emerging mobility technology.
The steel includes trackside branding at most races and title rights to three ground present, 2020 and exposure on or digital platforms.
Further in this area we welcome Ben Thank US is there a new director of commercial partnerships at the end of February then joins us from Heineken free matters, there worldwide sponsorship team in partnership with Formula One.
On the distribution front, we announced a multiyear media rights deal extension to Canada with Bell Media's TSN and Rds, which goes through the end of the 2024 season.
Our fan base continues to grow in Canada. The 2019 season audience is cross T.N. Rds grew 19%, 19% year over year in coverage across the two networks reached nearly 5.3 million Canadian viewers.
We've been in regular contact with our commercial partners broadcasters sponsors and other partners.
These partners if almost all been very supportive.
Conversations with them regarding the 2020 season, they're not as advanced as those of us for promoters as we need to determine our modified calendar to have more substantive conversations I.
A number of agreements that provisions related to the number of races, although that number races is well below our originally planned 22.
These are all valued long term partners that we expect to resolve any potential potential contractual issues and affair and straightforward banner.
We had been in the final stages to completing the conquered agreement when Corona virus crisis turned everything on its head.
Started to put the conquer the backburner for the short term and prioritize addressing issues related Twentytwenty first.
As we move forward with the Twentytwenty calendar and finalize recognized regulatory changes with the teams. We will once again returned to completing the Concord agreement in the immediate future.
Obviously, we're still dealing with a lot of uncertainty regarding the short term and the Corona buyers were increasingly confident although there are no guarantees that we will have a twentytwenty championship season.
Fan support has been great there seems to be an incredible pent up enthusiasm for racing to begin.
The same time, we're also looking beyond this year to a 2021 season.
The long term contractual nature, a formula one help provide long term stability at a time of uncertainty.
We continue discussions for potential new races are reached renewals for 21 and are going well.
We also continue discussions with other new or existing commercial partners.
We expect the impact of the chronic viral crisis on the broader world will extend into the future, but we feel we're well positioned to return to the growth curve. We were on a few months ago and look forward to the better future for all of us.
I recognize everyone would like revised projections for 2020 at this point, all we have or sensitivities, where the range of potential results based on many variables what is clear as the 2020 results will be significantly below original spec expectations.
I'll leave it it's equally clear that we can manage through twentytwenty, whether without racing and more importantly that our business can quickly return to our prior expectations at 2021 and beyond now I'll turn it back to Greg.
Thank you Jason Thanks Bye.
To be listening audience. We appreciate your continued interest in Liberty media and hope you all staying safe and healthy.
And with that operator, I'd like to open up for questions.
Thank you, Sir and once again, if you'd like to ask the question Star one at this time well take our first question from Jeff well the check with pivotal research group.
Oh, good morning, guys I had one for Greg on why wouldn't you chase.
After you get a very strong as all the charter yet again in there.
Obviously aggressively cutting aggressively retired the shares.
Wanted to focus on your 25% on ship can't be charter, which quickly if I'm wrong, you're sort of bumping up against.
When you get that cap or are you comfortable piss figuring in charter share retirement or do you feel like you can work with charter management's potentially like you to go over that cat.
And then chase if you could provide more color.
Broadly on racing fans the effect on reached Moshi and sponsorship <unk> advertising geez, obviously, the rigs fees are going to decline materially.
But other benefits to regime on tracks to weather motor seem to subsidize are paid that government.
Thanks.
Well I'll go first Jeff Thanks for the question first there's.
Since our holdings are really in two buckets, it's not clear that were assumed to be up against the cap and that it's not clear wouldn't the buckets are both coutts counted secondly, there is some time on that repurchase until we come up against that.
We have had begun some discussions about how to adjust that because it's not necessarily in the interests of shareholders of charter or charter to have us selling so we'll see how that goes.
We are long term holders the charter we like charter, we certainly don't want to be in a position of being required to sell charter stock.
And I guess I'm not going my front that you know I think clearly races without fan surveyed yep.
More it's much more significant impact on the promoter side than the broadcasting and sponsorship side in many ways I think.
Racing without fans you don't get first and foremost for.
You know the broadcast digital sponsorship side, the fans wall connect and through various platforms.
And it made it was actually when you watch race, even that alive for as many people watch it on television and television screens anyway I.
I think in terms of ready the promoter side clearly these are very different events without fans and that'll be reflected I mean, we've talked about these being weak long spectacles multi day events. The city involved the track involved without fans at any of that it's clearly a very different.
Yeah, it's very different opportunity, it's a very different event.
And we recognize that so I think these are unprecedented situations and so I think with promoters. There's a more significant change I think with up the broadcasters that sponsors you know they do look at as the season as a whole place as you know there yeah. There are contracts that you know have provisions tied to a number of races. It's below what.
We'd have so we'd have some room, there, but but we feel we can deliver quality event for those we think can make up grape events, but like fans won't be there and so again the impact is gonna be significant more significant in the pillars.
Thanks.
Thanks, So much of Bryan Goldberg with Bank of America.
Oh thanks.
Shades, just a follow up on the promoter side.
At one you know I'm just curious.
Given all the complexities involved for promoters either.
Without bands or even when fan start to return.
What are some of the measures you know that one could potentially undertake.
Work with promoters to ensure.
Yeah.
Good spectacle bands and do you expect any changes long term changes to the rates promoter.
Revenue contract model I give a delta beds and then secondly, just on sponsorship I was wondering given some more color and yet you know lot of markers had been in Transmode last several weeks, but as the world starts to reopen in sports content looks to be more demand than ever.
Just wondering if you could update us it gives us more color on the tone of the sponsorship market right now.
Around.
All such reserves.
So you know for I mean first on the long term impact I mean, you know whether schroders responses.
We kind of look we're we're planning to be business is business. That's we plan to it in 2021, so yeah. That's our that's our.
Our expectation.
In terms of managing.
Through.
These events.
Right now we expect the European events largely be without fan. So that's how we're planning it without fans, we're obviously dealing with different.
Issues, we still have to deal with how do we get the teams there how do we get the necessary personnel, there and secure their safe.
We're working with the country host regulators, we're working with the property authorities, we need testing procedures transportation and procedures actually had a fairly long conference call. This morning, with an array of parties putting that in place.
Yeah, focusing first on Austria, because it's the first race, but talking through all our.
Tentative European races. So I think we feel yeah, we're making good headway on having.
Races that can be secure unsafe for everybody without fans, which again is is what we expect in Europe. I think gives you get two events with fans.
That's probably weve <unk>, we probably made.
'cause, it's a little further on the schedule.
You know, we haven't made as much halfway into some degree it's tough to have those discussions because we can't you <unk> you don't really get.
Guidelines, yet I think this.
Yes, you have so little visibility and you know when it's so fluid it's difficult to have discussions with authorities I mean, we can sort of start to work through what we think maybe possible in terms of decide space.
Spacing and otherwise step managed traffic flows if we had them.
But you really not going to if you're trying to talk to people out what you can do in September and October right now that to September October November.
Those are more difficult discussions because there is still there trying to figure out what the due in June and July So I think the.
The issues.
In terms of how we'd how we manage the fan part of it I.
I, probably ones will have in the in going as we get closer to that races were that'd be a realistic possibility.
But since they're not getting the you know again, they're not.
It's sort of the July August I think we're planning races that are racist without fans and making sure. We can we can go forward with those and some degree nobody knows what the landscape. You know is and you pick up get different different stories in different places as you look at <unk>.
Today, they're opening up an array of places so you know public gatherings.
So I think will this is a situation where it in terms of dealing with large crowds.
Clearly no more you know week to week as you go forward and so it's it's very much managing up a real time process.
In terms of the sponsors I think right look I think him anyway sponsors we've been in touch with them all.
So we know what the calendar or is it stuff to have a subset of conversation about how do we modify their what races. They have titled races that they all have sub components to their agreements.
So that's why we've started most have been keeping them up to speed again, we could not be feel better about them.
The support we've gotten the enthusiasm from them I think in many ways like we're dealing with.
When you look at global companies, but I think we'll we'll clearly our big sponsors are they're not.
When you think first and foremost, whereas the where's the real impact everybody talks about in the current a virus it's small business.
In reality, we don't get if that's not our core sponsorship our relationship are big brands entities that.
You know they have a future interest you know looking figured how do they get back down to a get back to business as you know as it was so our <unk>. Our sponsors are quite enthusiastic quite supportive and Ah you know again, you know we look forward to advancing discussions with them as we as we know.
No more about the specifics of our 2020 calendar.
Thank you very much.
Our next question from Bryan Kraft with Deutsche Bank.
Hi.
Questions for Greg I guess first scenario, where you consider an RMT of your live nation state, particularly now that the value that make up to get to 50% chloroform ownership the smaller than it's been a few years, whereas that strategically critical to keep inside of the or underneath the liberty media.
And then the second question is on Liberty Sirius you mentioned that you suspect in a the discount to narrow once you get to 80% is that because of tax consolidation or relative trading liquidity between the chairs or that there might be a change in capital allocation that Sirius XM once you guys.
That 80% threshold. Thanks.
So on that first went Brian Thank you for the questions.
To do an RMT, our shareholders would need to end up with 51% ownership of the spine company and you know I don't think we would.
We would use.
Our priority right now the capital we would use less exam.
Two.
Capture the discount go after that I don't think we'd want to use that Argentina stock and I think over the long term one of the reasons why we did this reattribution as we can't get strategic and there are things in ways that live nation N series will be able to work together that benefited both so I I don't think well.
On R&D is not.
You're right mathematically easier, it's still a reach and would require us to put up capital that we have other ideas, what we want to do with it.
On why the 80% Yeah, I think you'll see a lot of potential for all of the things you mentioned to drive the factor, including free flow of capital up to the LSXM will probably on the margin make us more willing.
It or dividends and push for dividends at serious, particularly if the gap.
That's where it is today and you can look at the relative value of when stock is more attractive to purchase Sx mrls actually.
Great maybe just one follow up you can you quantify what the tax rate would be on the dividends today, you know what the dividends received exclusion that you're getting.
Got it.
Albert are you on the line.
[noise] Oh, it's roughly.
70%, so it's pretty lumpy.
I was kind of stand out, but I want to get the authority to verify thank you.
Yeah, Yeah, there's one Albert that's it thank you.
Yeah, we Albert blesses everything or thank goodness.
That's correct X. I wonder.
All right next well go to Virginia with Evercore.
Thanks.
A couple of question, so obviously youre targeting to get a schedule for 2020, but you know.
December 31st set at the end of the risk on the or can you move to January I know that.
Typically stuff in March so are we kind of looking at basically December 31 to try and meet all your requirements on.
Backup commitments also.
Second.
Fleet as being a lot more liquidity at home in the one.
Yeah, introducing and at the same time lot, becoming a team probably with no.
Probably fundable working capital maybe in trouble have you been approached on you know subsidizing be seems outside of bank rolling them to seasoned Scotts and is that something that no one would do.
Okay.
So on the on the first yeah, I think we right now our TARP current targeted plan has is finishing in December later in December then your original plan, so sort of more like the 13th 14th in December.
But we.
You know are evaluating it will consider so certainly finishing a january is an option. The we couldn't do that we can do that I think if we can we'd like to finish in December we'd obviously it stick a fairly long break through the holidays, you're not going to race and the holiday weeks.
But it is an option available to us.
That we'd again have to work through whether promoters and yeah worth a lot an array of parties to get there.
But it is something we've considered and talked about but I'd say at this point our goal.
Yes, again to the finish a couple of weeks later than our original date, but to finish and sort of mid December head of the holidays.
Yeah, I think in terms so that the teams obviously it was as I said 2020, you know for us and the teams is not going to be you know what we're not going to have the results.
<unk>.
We're gonna have three him when we started the year for expected that when we started the year and up you know I think everybody is doing what they can to shored up and up you know I talked about the cost cutting initiatives.
As we move forward and can solidify what we are doing it right now there's too many moving parts. So we're not.
You got to there's somebody what Ifs you know I don't think you can.
You know, it's it's constructive to try to yeah address parts of it I think we need to get far enough along and these plans to know where we're at.
You know, we expect to that the team step.
To be taking the right initiatives to get them through it I think all of US recognized in many ways look priority one in many ways is too.
When we got to 2021 is to have the sport.
Get back on track it was on at the beginning of the year for 2021, and that's our goal and that's where we're committed to get too and certainly managed through this year as best as possible you know what we need to there's been speculation at this point on to what degree do we need to up helped support.
Select teams you know we care about the teams, but no. Those discussions you know we've not we've not had to date I think we'll see where things are as we go along but I think too many moving parts right now it up.
It really engage with any specificity on that.
Thank you.
No. It's like a question from Penn Sunburn with Morgan Stanley.
Hi, Good morning Chase just continuing this discussion.
Can you give us any sense for what the sponsorship revenues are looked like this year with a 15 to 18 race calendar at least you know relative to your original expectations I assume it's lower but I just wondering if there's any way to dimensionalize that and Andres promotion. If you have races with fans later this year as she mentioned is your goal would there be.
Any impact on race promotion fees for Liberty It would seem like that's pretty close to what we used to consider normal and then I just wanted to ask Greg Greg you made a comment on the calls a couple of weeks ago about the cash at Liberty Formula One.
I think he's there were the word potentially.
At the Opco sourcing it benefits liquidity at the Holdco and potentially the I've got didn't know if there's any restrictions on cash sitting back and forth that we should be thinking about.
Thanks.
So on on promotion.
Yeah, but the promotion, it's probably more tied to sort of obligations, whether its signage time on screen.
You know titles.
So.
And certainly we have ex that we've said before we have excess capacity material excess capacity at the left at the 22 race level, we're raising it obviously is that the number races goes down.
It puts some pressure on that capacity clearly there at the margins there some issues, we've got to manage through whether its you know without races, and their hospitality that won't exist at some but I think at its core we feel we can we go a long way towards I think our our plans already go a long way towards.
Meeting what no what are what our sponsors would want to want to be gaining through the sport. This year. So so I think we we are working to achieve what we think would meet.
The.
The expectations of of our sponsors.
Yeah, but at the end of it I mean, he's a relationship. These are long time him and he's the long term relationships most of our sponsors our long term yeah, we'll sit down as partners to find a fair fair path forward, we want them to feel good about what we do but equally you know we haven't ablation deliver certain value if we deliver it we expect that.
Yep got receive fair value for it but yeah, we will approach as partners I think if you get to.
If you get to promoters or with fans.
You know certainly that does get much closer to that business. It norm you know they're different cases is it a race that what's gonna be.
Held in the spring it has moved to the fall that obviously.
Has that.
Implications in terms of selling tickets and the like yeah, right now probably most of our promoters even the ones those guys aren't aren't really selling tickets given the uncertainties then probably nobody is buying a lot of tickets given.
The uncertainties so.
It's not yeah with everything that exists out there, it's not sort of.
Its not business as usual, but I think to the degree we have races. The fans I.
Got it gets you also get the question is it race with fans as you know what or is it race with fans with certain conditions around those fans. So.
So I think all those things.
You know we have to you know we have to engage on yeah, but yeah. Yeah I think the way again, we approached 2020 is we you know yes, we have agreements in place, but these are long term partners we expect.
Great deep they've all been very supportive we want to be fair and addressing this we want to get fair value, but be fair to them and first and foremost make scherping 2021, we've got the business in 20 to 20 looking like you know we expected it to look.
Four months ago.
And up.
And have the same future we expected to have four months ago said really what we're managing through you know is a short one time event for US we think the strengthened this sport the interest and to support the support and interest so he's got whether it's for fans our partners.
You know can enable us to get back there.
Nothing there won't be some lasting impacts, but I think the strength of events like ours I think fans will come back I think events like ours will continue.
To rising rises strength and I think the type of partners we have.
Seem to be more support if that ever even if it even if you have a degree of a shakeout in the economy. So so we will we will certainly expect to get fair value. This year, but again, we're not going up we're not gonna play Hardball you know, we're going to spend where did the other things as partners, but you know with high priority to making sure.
Sure I kind of give away sponsored study whether it's the teams are proud owner sponsors were not going up you know where to behind you how candy to everybody.
No we're gonna be expected be treated fairly but we're going to deal with it as adults.
And with the expectation that 2021, it's got again looked like the business you know, we all knew four months ago.
Thank you.
Greg anything on that language.
Oh, I'm, sorry, I'm not sure what language. Your your follow up just about the up and down I'm sorry.
Yes not language.
Yeah, there are no restrictions on Juan.
Holdco, putting pushing money down to the Opco, there are or can be restrictions under certain circumstances for the opco pushing money.
Got it thank you.
Oh My next question comes from Zacks Silver with B. Riley.
Alright, great I think hitting the question first from for Chase you talked about 2021.
Potentially being a big here for broadcast renewals.
Certainly the global pay TV ecosystem is not and you into cobot. So I guess, what I'm curious about is whether you can give us a help that sent to the health of some of those pay TV partners and their ability to every new deals with you guys at attractive terms for both parties.
Yeah, I mean were yeah. It's obviously a lot of discussions that's as people are navigating through the short term and sort of gotten input.
A bit bought up yeah, yeah, yeah bid on a back burner I don't think again or you know everything sort of become very short term.
Yeah, I think the Paytv universe will come through this made in many ways you're talking about you pay TV, which is really part of a wider digital universe.
You know one of the few Winterson. This period, you know what seems to be digital platforms and Ah you know that are being creek increased important to increase the value on.
Great content on you know these write a platform. So yeah, we're continuing to have a discussions with them I think we feel good about that space.
But I think everybody's you know I think in the very short term, which really means the last month.
You know whatever is six weeks since this really occurred declared everybody would like to have a little more than a little more visibility towards.
What that.
What things are going to look like in three months six months you know what have you, but I think discussions in interest you know the themes. We've had about the value of unique sports content unique event content sports content like ours.
Global nature.
You know is seems to be get realistically you know as strong as ever.
What is the impact to the platforms, we deal with you know.
Yeah varies a bit around the world, but they're mostly big entities were not dealing with you know again small businesses.
We expect them to.
The come through this I think that subscriber side certainly the advertising world seems to be more impacted by the subscriber side sports Kim.
Yeah generally as.
You know because sort of I lean to the businesses the by sports authority lean more heavily on the subscriber scripts and it's going up to be supporting it then the ads the ads matter.
But I think advertising in sports will come back because I think again the type of entities that advertising sports I think are ones that are.
Are looking.
Anything anxious to come back.
And to support their product.
Got it that's helpful and.
<unk> change drag or for Brian or in their religious and apologies if we miss that slip that Reattribution asked for a couple weeks ago, but you guys. Just closed out of it you are paying down.
The remaining revolver balance today is there anything that you should read into that regarding your comments and managing cash burn valuations are going on and also.
Implications for talks you're out in that the one there's.
Yeah, I'm happy to comment and then Oh, we have wearable here as long as for that I look we have a obviously a lot of confidence in our.
Cash.
Position at the Formula One group.
And we certainly in the interim didnt need the extra money that we had drawn on the revolver prior to the Reattribution, we don't need that money today redrawn it in a surface caution and now.
We're not that need so rather than run a negative.
Spread on the borrowings we paid that money down we arent fruitful discussions with the lenders like would have covenants, which are less or at least for some period of time based not on inhibitor, but on liquidity.
And.
I think it's a measure of our confidence that will be successfully pay down the revolver or was there anything.
Got it thanks Craig.
Next question comes from John Tinker with Gabelli.
Hi, I'm could you still feel about baseball I think they've actually started playing games already in Korea and Taiwan.
Hi, how are you see that might go under the impact not having spectators incessantly.
And development revenues up the battery because we tell you.
You talked a little about so that's going now given that everything is close down thanks.
Yeah, I'm on baseball I.
Yes, there are people now following the Korean leads with new interest.
There are primers on.
I would watch how to watch the Korean League I have not embracing get fully I'm still waiting for a art art domestically become fourth MLP.
No I think they're looking as I said at a range of opportunities the most likely.
Well nothing's resolved it appears most likely there will be not the bubble concepts, which have their own things but.
You know late June start spring training early July without fans.
There are still issues to be resolved about.
What.
The payments will be to the players there.
There were agreements about.
I'm paying 170, and then sort of looking at pro rata, where the credit for the 170, but some of these things were based on the idea that fans would be attending and fans are not intending and there are just revenue streams are still need. These negotiations is about what the splits or.
I, obviously cant comment on that I. It's it's trace I had my line went dead, but sorry, just pulled back in.
Right.
And I'm thinking about once it and then.
So I think that's to be determined.
John and worked through.
But I think theres a positive attitude on all parties to try and get some positive resolution.
But that will obviously impact.
No impact profitability, even on a pro rata base that we're on there we're not able to have fans present, which is certainly the expectation. The early games will not have fans.
We've obviously had you know a major drop in activity at the battery I don't know, Brian There's any commentary you want to make an addition to that.
They were we're trying to work with our tenants there and Ah you can't comment on specifics, but we're trying to work with them where where appropriate.
To the extent, we're having games, but we don't have fans there could be some some impacts to their businesses and therefore, how that translates through US also you know we have parking revenue in there, which obviously would go down.
Showing up at none of these are overly material.
The Liberty media, as a whole and and really material right.
Thanks.
All right next question comes from David Karnovsky with JP Morgan.
Hi, Thanks for taking my question I, just heard from Chase I'm not Concord agreement, it's something that has to be completed prior than 2021 piece and I could formula one move to Ted maybe extend into it then agreement even for a short period and then Greg I think in the prepared remarks, you mentioned looking at.
So just sort of just like I said that they performed well I'm. Good just wondering if he could expand a little bit on this would this be focused mainly on motor sport or could it extending some other sports or rather than categories. Thanks.
Yes on the conquered agreement you know the reality is once you get to Twentytwenty 2021, I mean I'm sorry.
Yeah, we can Ah, yes, we can with <unk> actually I'm confident we can just you know unilaterally just.
He said up.
You know these are the rules about you know rules with wrote them before this is the structure that exists. So we don't have to extend anything we can essentially.
Yeah implement insight that if you're racing that's the kind of that's the terms on what's your your racing obviously, that's not we're looking to.
To conclude it with that with the teams but.
The conquered agreement when we put it fourth will be the conquered agreement that goes into effect.
2021, and you know we are able to up unilaterally do that.
Well move onto your and your hand and Ross with.
I'm sorry.
We have it we we lost a question there.
Pete just make sure we got.
Yeah No question was just.
Can you hear NIM are still on the one yep Yep got him yeah.
The question is just on your prepared remarks, I think you you mentioned looking at synergistic I synergistic or somebody got hurt.
Just wanted to know if this would echo.
Yeah, we'll look we.
There have been.
Assets in the motor sports space. The traded we've looked at will continue to look at ones and around that I I don't want as you know our goal is to create a focused that one and if we saw some unbelievable opportunity that was synergistic outside of motor sports would be looking at sure you know, but our goal to try and create thing.
There were.
Number one.
Operating business the Formula one.
Ecosystem with what things we have around Formula one where we can provide synergistic value.
So that that would be our first priority.
Thank you.
Okay excellent you've Brandon Ross with flagship partners.
Thanks, Good morning for Greg what are the rationales for putting nation and be LS. That's on track or is it opens up opportunities for Syrian live nation to work more closely together.
Can you just explain what you could do now that there are under the same umbrella that you couldn't do before and why the tracker structure.
Fluids is what you can do operationally and then just for chase is it reasonable amount to it seems like you could be at 22 rates kids and 2021.
Thanks.
Well, Brian and I think you know the answer that question that Theres nothing structurally that was prohibited before there is now permitted but I do think that putting them together and doing things like bringing a.
Michael Rapino on the Sirius XM Board continued interactions continued alignment.
Potential for further work working together is enhanced by being the same tracker.
<unk>.
Got it bad and simple answer to you know 2021, maybe we don't have a magic number but the answer is yes may realistically again, yeah. We expect 2020 of our goal is to up 2021.
Look like the 2021, yeah, we planned back in January and we have.
Ultimately, we have renewals to be did put in place and we have some.
Some ongoing discussions with a couple of potential new races that we think would be a positive enhancement and up to.
The business for fans and.
And shareholders, but yeah, we expect 20 as I've said, we've got 2021 to look like the 2021, we were looking at you know in January and I'm. So certainly.
If we plan on 2000 2022 racist I'm than again, we don't have a magic number but.
Then we'd be planning on 22, we'd still be planning on 22 races.
Thank you Brad.
All right well take our last question from drew Borst with Goldman Sachs.
Thank you at a couple of questions for Chase.
Personally I'd ask about that the price fun for this year I think in normal course, it's usually variable to Pts EBITDA is the intention to keep it variable or are you intending to maybe how to deal with it hired some sort of fixed component because it would seem like because even though it's likely to be a lot lower that's the first question.
So again the price one is you know it was a contractual formula. So you know so the prize fund is what it is we realistically.
And we can't them, we couldn't you know a lot of unilaterally change. It if we chose so I think the you know the question, which I guess is you know with Oh part of question earlier as would we do something.
Yes, and then I guess to expand but that's it's a percentage of profit some profits will be down it. It means the prize fund will be down.
You know questions would we would do something to support them certain teams again, we're not the business of handouts, but.
No we want to.
Yeah, but that being said, we you know I think will.
Engage with all our partners and figure out how do we go forward in a way that makes sense for everybody, but but the price. When itself is you know is you know is defined by a contract that as a percentage of of coffee, but and.
As we know what that is I don't think we you know you know I don't think wheat.
You know really moved to the next level until we know what that EBITDA is obviously, we still have a lot of moving parts because they thought before you haven't settled the calendar. We don't know how many Facebook fans have races. So at this point yeah. We'd have you know we'd have a wide range of potential outcomes.
On the Ultimate prize funds I think when we have a better handle on that.
We'll see where we are and see if it's an appropriate if it's appropriate.
Or right for us to.
The do anything going on whether it's again, which within or for with the team or with.
You know or with any of our other partners, but we expect that you know if we expect to be.
Dealt with fairly in expect them to deal with us fairly.
And then you mentioned earlier about budget cap, probably coming down a little bit more beyond. The 175 is the idea that that's just sort of a one time reduction or is that something you think will be kind of that the new permanent on a go forward basis and if it is permanent.
Is that creating some new 10, some new tension between the big in the small teams.
I mean, I mean, certainly what we're putting in place is up.
The cost cap I'd call. It is a long term construct so it's not it's not spring a downturn ethical right back up it's a it's a constructs that you know is for the long term and Ah.
And I I don't think it creates tension and it creates I think respect. The fact that there are a number a team that's been significantly more than respect, but you know they will obviously have to manage through.
Challenges to.
You know to to get to the cap.
Yeah, I think we all 10 teams have agreed the intend to the cap ways to improve kinda yeah.
Yeah the goals.
Driven that drove the cap, which were improved competition better action.
And healthier business for everybody in it.
Half helped achieve that there have been different as I said, all along the different thoughts about the specifics it's a much more complicated sports to put a cap into then.
And sort of the team sports and U.S., you know well, where you just add up salaries. So you've got all here you've got all sorts of the moving parts that come out of the technology of the sports and the engineering of the you know the sport and so how you implement that cap is probably more the discussion then does the cap makes sense.
And again I'm sure they'll be pressures on teams that have to make significant changes to get to the cap, but I think there's been.
Unanimous agreement that the goal of the cap and those broad based goals our goals, we all share and that we have you know that it will help make the sport better for fans and everybody on it.
Thank you very much.
Yeah.
So operator, I think we're done with our question today. Thank you to listening audience and for your continued interest in Liberty media and we look forward to speak maybe you would get next quarter, if not sooner. Thanks.
Thanks very much.
Thanks, a lot.
And that does conclude today's conference we thank everyone again for their participation.
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