Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the Liberty Media Corporation 2020 q1 earnings call back during the presentation. All participants will be in a listen-only mode afterwards. We looked at the questions and answers session during that time. If you have a question, please press star one on your telephone as a reminder. This conference is being recorded today May 7th. I would now like to turn the conference over to miss Courtney Channon Chief pull up a portfolio officer and Senior vice president of investor relations, please go ahead ma'am. Thank you for forwarding would like to remind everyone that this call includes certain forward-looking statements within the meaning of the private Securities will be with Warmack is 1995 actual events and results could differ materially due to a number of risks and uncertainties include not to mention that our most recent form 10-K and 10-q filed with the SEC these forward-looking statements speak only as in the date of this call and Liberty Media expressly disclaims any obligation or undertaking to December 3rd.

Any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty media's expectations with regard thereto or any change in events conditions or circumstances on which any such statement in a call. We will discuss certain non-gaap Financial measures including adjusted and adapted requiring definitions and reconciliations for Liberty Media and Sirius XM schedule one and she can be found at the end of the earnings press release the issue today, which is available on our website now, I'd like to turn the call over to Android mode say Liberties president and CEO. Thank you and good morning song on the call. We will have on the one chairman and CEO Jay scary and Liberty Chief accounting officer. Brian Lumley first. Let me say that hopefully were all healthy and safe.

Second I'd like to thank and salute our employees and management.

I want delivery medium between April 27th. We spoke with the many of you sent this in us and obviously we had a conference call right after that so I won't go into detail, but I'd like to reiterate why this was beneficial to both of the shareholders for the formula one group first month free computer play provided additional liquidity and reduce debt and delivery SiriusXM requiring for Windridge Live Nation interests, like a complimentary business office tracker at a compelling price. We still have ample liquidity. We are pleased with the stock market reaction since all stocks of the month.

Trying to let me Sirius XM.

1 second time shares that we acquired as part of the real tribution Liberty SiriusXM. We purchased $98 in stock from February 1st through April 30th.

And effectively bought the Sirius XM shares 83-73 look through Chrysler.

Our ownership SiriusXM as of April 24th stood at 72.2%

I know that we have stopped I was purchased as part of the reactivation but I expect both close of the planned rights offering an early June. We will look to start repurposing wage stock again.

a nagging discount anybody is an opportunity and one we will continue to take advantage of

SiriusXM continue to report the stock and we approached 80% ownership of SiriusXM. I expect the opportunity made way.

including the

Now looking at Sirius XM itself. It continues to operate very well during the coding crisis. It is lost Innovative new program including a 24/7 covid-19 publishing hotline nine new limited run Channels with iconic honest artists, including the prince channel with music and exclusive content like a never-before-heard off of a conceptual radio show Prince created for the Sirius XM channel back in 2005.

Howard Stern has done great and Innovative interviews, including a 2 hour plus session with Tom Brady from Derek Jeter's house in Florida.

Subscription-based business model we have in Sirius XM has proved resilient some paying that adds $69,000 to nearly thirty four point eight million subscribers.

and the 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 not

turn the formula one room I'm sure you have all missed as a by F One racing hopefully you've got a little taste by watching or re-watching both seasons of drive to survive on dead and we expect you all of you watch the virtual GP this past weekend there was an epic battle between Alex album and Charles Clark they pass and repass each other several times with album finally taking the win the final results highlighted the next generation of F1 drivers album Russell of Leclerc exciting and going to be bringing four years to come the F1 team has done a great job navigating the crisis and working on the 2020 calendar they are planning an early July start in Austria and Chase we'll talk more about

We continue to evaluate beneath the business, but definitely want to be opportunity to combine synergistic address that we can add and we think we're well-positioned to do so.

Trying to Live Nation does not report 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 the community.

Out of the Braves. We are working close to the Major League Baseball to see how we can put a season together. We appreciate how the commissioner teams and players are working together towards that time. Everyone is even see baseball the charge.

The Braves players are people too.

Doing Zoom sessions with the trainers medical staff and manager Brian snitker.

They've also been in celebration of twenty-five years since the Braves 1994 World Series titles the 95 players joined a zoo reunion while watching the final game 6 a.m. Fox Sports South East and we're able to watch the zoom Live on YouTube as well. So with that I'm going to turn off the Bryan for more on our financial results. Thank you Greg and good morning. Everyone. Your earnings release has are cash and that balance is by tractor as of March 31st, since we completed the attribution in April, it's right discuss and repave the Martians of the F1 revolver today Thursday through the quiddity that it's already SiriusXM and formula one group. That's March 31st on a pro-forma basis for these two transactions.

Liberty

Formula formula 1 and the Braves or you can find with all that government as of March 31st given the uncertain impact of covid-19. F one in Gray and the Braves are monitoring their ability to confirm a future. We are in positive discussions with their respective lenders.

On a pro-forma basis Liberty SiriusXM group had attributed cash restricted cash and $139 excluding $52 million of cash restricted cash El Dorado. And we have eight hundred seventy Million drawing March is lung capacity.

The value of the serious examination stock held at least. Text them as of May 6th was $21 billion, which excludes the value of the Live Nation call spread formula one group home value that $165 million at the time of the reservation and we'll be mark-to-market quarterly. We have two point 1 billion and principal amount of debt again, please hold.

SiriusXM route is 11.1 billion which is which includes 7.9 billion updated SiriusXM the step balance excludes the 750 million in a blown over to the formula one group is expected to repay the proceeds from the lights offering between time to watch on a

Today at 1 had a balance under its revolving credit facility using cash on hand restoring its full capacity of 500 million pro forma for this repayment. Formula one group have a good cash and like with investment of 1.4 billion at the corporate level this excludes 536 million of cash L directly in Formula One.

Toyota formula one group attributed principal amount of debt is 3.6 billion which includes two point nine billion a day leaving 688.

F one where the ratio as to find it up one credit facility for Covenant calculations the six times at the end of the quarter as compared to the maximum allowable leverage ratio based off the term loan and the revolving credit, please note the 11th ratios are for the Formula One operating business number formula.

Turn alarm Financial covenants in current space not me.

We're having positive discussions with the RCF lenders to temporarily move this Covenant from an even a base.

Payment of the RCF combined with the ocean is this more flexibility in and renegotiating the maintenance Covenant?

Lastly to the Braves the quarter-end the group at attributed cash liquid Investments and restricted cash of $343 and a tribute principal amount of debt. 698

With that, I'll turn it over to chase discuss, Formula One.

Thank you Brian. We entered 2019 with great momentum and we're ready for our biggest season yet with twenty two races. We were ready to race in Australia, but it was necessary to cancel the event at the last minute for reasons related to covid-19 This Global pandemic. Is that a significant impact of Formula One and we're adjusting and responding in numerous ways that are in the best interests of our fans wage 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 Acts

if we took is a sport was to move the team summer break up to March and April as we wanted to have ultimate flexibility to race during the normal summer break in August on Tuesday the 28th of March the World sport Council approved to further extension of the shutdown. From 35 to 63 days to be taken during the month of March April May and June

during this break in the season we were inspired to see several uk-based Formula One teams come together for project pit Lane this is part of a larger UK industry-wide Focus to manufacture and deliver respiratory divorce is to support the national need formula one has the unique ability to rapidly respond to engineering and technological challenges and is focused on its core scales of Rapid design prototype manufacturer test and skilled assembly these efforts have proven fruitful and it go ahead has been given for two of the project bit lands initiatives including ventilators that are produced being produced by several teams month plus a breathing Aid being manufactured by Mercedes we're grateful for the team's efforts and supporting the national need

Further actions F1 the FIA and all Ten teams unanimously agreed to delay the introduction of the 20 21 technical regulations until 2022 and to keep the majority of their existing 20 20 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.

Further been working with the FBI and teams to strengthen the long-term future of Formula One with an array of new technical sporting and financial regulations will improve the competition and action on the track and make it a healthier business all evolved particularly as we work through the issues created by covid-19. One of the key areas of focus has been the cost cap on team expenses. We previously infected a cap of $175 million for twenty Twenty-One, but now expect to move forward with a significantly lower cap.

Just like our teams formula one has been evaluating our cost structure made some difficult decisions and furloughed over 50% of our Workforce on April 1st with senior Executives taking a voluntary cut to pay off. We froze all hiring and pay review plans and also deferred a number of initiatives. We plan to pursue this year. We recognize we may lose a bit of time and implementing some of these plans that we we felt the current uncertainties warranted the actions as Brian mentioned were actively engaged with lenders of our revolving credit facility to address potential issues related to our quarterly leverage government. They were 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 2028. 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 2020 race calendar.

We have two primary challenges.

Identifying locations where we can hold the race and determining how we transport all necessary parties and their equipment to that location for erase. We're in discussion with all of our promoters as well as some 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 Fourth and Fifth in Austria. It's likely that we race the week of July eleventh and Twelfth in Austria as well. We're in the advanced stages of putting together a schedule of additional European races through early September including races during the traditional August break. We will then plan to race in your Asia Asia and the Americas in September October November before finishing in the Gulf in Bahrain in Abu Dhabi in December. We hope to have a calendar with fifty in June eighteen races. We expect the early part of the calendar to be racist without fans, but we hope to be able to allow fans to attend in the latter part of the year. We are working with the FIA local dead.

Parties and other experts to determine the steps and procedures necessary to safely transport everyone to each Race location and to enable those individuals to operate and be housed in a safe and secure manner.

You feel increasingly positive about the number of locations that would be able and want to hold the race. This year are working to travel and other logistical issues related to each country or a work-in-progress home economics of races particularly ones with fans will clearly Barry from existing agreements and we're actively engaged on this front too.

You've been working closely with the FIA with the consent of all the teams to change the calendar without a formal vote amongst the teams and this was formally approved by the world Motorsport Council and formula one wage will allow for a stream process as we reshuffle the calendar and appreciate the team support.

Post Malone with the parts department of the Season we are pleased that our teams quickly pivoted and launched a new Formula One Esports virtual Grand Prix series featuring a number of current Formula One drivers and celebrities month-to-date Charles Leclerc George Russell Antonio cheap and easy Lando Norris Alex album, Carlos Sainz Jr. Nicholas latifi all been on the grid along with farmer. F one drivers such as Jenson Button and Johnny a bear and Nico hulkenberg. They've been joined by England Cricket World Cup winner Ben Stokes musician Liam Payne professional golfer Ian Poulter and 6 time with the gold medalist sir. Chris Hoy to name a few these races run in place of every postpone Grand Prix. The series utilizes the official Formula 1 2019 PC video game developed by codemasters individuals or impresses. The race is to provide a great racing & entertainment value with Lively commentary.

Charles Leclerc what his debut raised have to receiving the game. Just three weeks earlier than the one the next race as well and we're exceeded to see new rivalry submerge. The broadcast is available on the official form on YouTube Twitter and Facebook channels as well as Marky TV broadcasters such a Sky Sports in the UK and ESPN in the US and we've experienced strong engagement through the first three races digital cumulative use reached 12.9 million and total viewership including TV estimates reach 16.3 million the virtual even trended number one on YouTube UK. We will continue with these virtual GPS until we return to racing.

You're also please.

What the response to the second season of drive to survive which debuted a Netflix at the end of February the season provided unprecedented access to the teams and drivers. We saw the drama of the driver switch from the athlete album season of Red Bull behind-the-scenes action of the wet rates in Germany and learn more about Williams challenging season. We are in advanced discussions for season three and the team it's ready to capture footage in 20.

And that may have been overlooked due to covid-19. We welcomed aramco as a long-term Global partner to Formula One. We announce this agreement on March 10th and a ram kothur six Global partner. Alongside d a m Hammer. It's Anakin Pirelli and Rolex. We look forward to sharing our expertise to identify opportunities for the advancement of sustainable fuels Advanced engine efficiencies in emerging Mobility technology is still includes Trackside branding at most races and title rights to three grand prix's and twenty-twenty and exposure on our digital platforms.

Further in this area we welcome them Pincus. Is there a new director of commercial Partnerships at the end of February then joins us from Heineken where you manage their worldwide sponsorship team in partnership with Formula 1 month on the distribution front. We announced the multi-year media rights deal extension to Canada to spell media's TSN and RDS, which goes through the end of the 2024 season. Our fan base continues to age in Canada. The 2019 season audience is crusty n n and r d s four ninety percent 19% year-over-year and coverage across the two networks reached nearly 5.3 million Canadian years. We've been in regular contact with our commercial Partners broadcasters sponsors and other partners these Partners have almost all been very supportive our conversations with them regarding a 2020 season. They're not as advanced as well. As of the promoters is we need to determine are modified calendar to have more substantive conversations.

A number of agreements that Provisions related to the number of races, although that number of races as well below are originally planned 22. These are all valued long-term partners and we expect to resolve any potential potential contractual issues in a fair and straightforward manner.

We had been in the final stage just to completing the Concorde agreement when the coronavirus crisis turned everything on its head. We decided to put the Concorde on the back burner for the short-term and prioritize addressing issues related 21st, as we move forward with the 2020 calendar and finalize regular regulatory changes with teams. We will once again returned to completing the Concorde agreement in the immediate future.

Obviously, we're still dealing with a lot of uncertainty regarding the short-term and the coronavirus we're increasingly confident of other no guarantees that we will have a 2020 Championship season off fan support has been great and 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 of Formula One help provide long-term stability at a time of uncertainty. We continue discussions for potential new races or race renewals for 21 and are going well. We also confirm discussions with other new or existing commercial Partners. We expect the impact of the coronavirus crisis on the broader world will extend into the future that we feel we're well positioned to return to the growth curve on a few months ago and look forward to the better future for all of us.

Iraq connects everything went to like

Ice projections for 2020 at this point all we have our sensitivities where the range of potential results based on many variables. What is clear is the 2020 results will be significantly below original expectations. But we believe it is equally clear that we can manage through 2020 weather without racing and more importantly that our business can quickly returned to our prior expectations in 2021 and Beyond and I'll turn it back to Greg.

Thank you, and thank you for calling to the listening audience. We appreciate your continued interest in Liberty Media and hope you all staying healthy and with an operator page up the questions.

Thank you, sir. And once again, if you'd like to ask the question, it is star one at this time. We'll take our first question from Jeff Walter check with pivotal research group.

Good morning, guys. I had one for Greg and went to chase after you get a a very strong result of Chartered it again and obviously aggressively continue to aggressively retire the shares and I wanted to focus on your 25% ownership Tap & Trotter, which correct me if I'm wrong, you're sort of bumping up against when you hit that cap. Are you comfortable participating in Charter share a time or do you feel like you can work with Charter Management's potentially allow you to go over that cap. And then Chase if you could provide more color broadly on racing without fans the effect on Race promotion and sponsorship and advertising fees. And obviously the rates fees are going to decline materially but all their benefits to racing on tracks to where the promoter fee is subsidized are paid by the government.

I'll go first Jeff. Thanks for the question first. There's since our Holdings are really two buckets. It's not clear that we're a soon-to-be up against the cap and then it's not clear with buckets are both counts counted. Secondly. There is some time on that real purchase till we come up against that third. We have had begun to discussions about how to adjust off cuz it's not necessarily in the interest of the shareholders of Charter or Charter to have us selling so we'll see how that goes. We are long-term hold of the charter. We like Charter we certainly don't want in a position of being required to sell Charter stock.

And I guess on my front, you know, I think clearly races without fans have a you know, a more much more significant impact on the promoter side than the broadcasting a sponsorship side. And in many ways, you know, I think racing without fans, you know his first and foremost for you know, the the Broadcast Digital sponsorship side, the fans will connect with um, you know, and you know through various platforms and in many ways actually watch raise even at alive for as many people watch it on television and television screens. Anyway, you know, I think in terms of the Radio Shack motor side clearly either very different events without fans and that'll be reflected. I mean, you know, we've talked about these being week-long spectacles multi-day events the city involved the track involved without fans that any of that it's clearly a birth different, you know, it's very different, you know opportunity. It's a very different event and we recognize that so, you know, I think these are unprecedented situations and so I think with a promotion

There's a more significant change. I think with the the broadcasters a sponsors, you know, they do look at as the season as a whole. They said, you know, there there are contracts that, you know have Provisions wage to a number of races. It's below what we'd have so we have some room there.

But but we feel we can deliver a quality event, you know for those we can make a great event but live fans won't be there. And so again, the impact is going to be significant more significant on the floor so long.

Thanks so much. Brian Goldberg with Bank of America.

Thanks had a couple of Shades just a follow-up on the promoter side of F1. You know, I'm just curious given all the complexities involved for promoters off either without fans or even groups and start to return what are some of the measures, you know, the best one could potentially undertake to work with promoters to ensure know a good spectacle event. And do you expect any changes long-term changes for the race promoter Revenue contracts model as a result and then secondly just on sponsorship was going to give us some more color. I mean, you know, a lot of markers have been in triage mode the last several weeks, but the world starts to reopen and sports content with what's to be more in demand than ever. Just wondering if you could update us to give us what color on the tone of the stock market right now around such as yours. Thanks God.

So, you know, I mean first on the long-term impact, I mean, you know, whether it's relatives responses, you know, we work or plan to be business is business as we purchased it in 2021. So that's our that's our expectation in terms of managing, you know through these events took it now, we expect the European events to largely be without fans. So that's how we're planning it without fans. We're obviously dealing with different, you know issues. We still have to deal with how do we get the teams they're off the necessary personnel there and secure they're safe. We're working with the Country Host Regulators. We're working with the appropriate authorities. We need testing procedures transportation and Prestige actually had a fairly long conference call this morning with an array of parties putting that in place, you know focusing first on Austria cuz it's the first race, but talking through all are dead.

Head of European races. So I think we'd feel you know, we're making good Headway on having uh a races that can be secure and safe for everybody without fans. Come back again is is what we expect in Europe. I think as you get to events with fans, that's probably we we probably made cuz it's not a further on the schedule. You know, we have it made as much Headway in to some degree. It's tough to have those discussions cuz you know, we can't you don't really get guidelines yet, you know, this this issue has so little visibility and you know in his so fluid it's difficult to have discussions with authorities. I mean, we can sort of start to work through what we think may be possible in terms of spacing and otherwise manage traffic flows if we had them, but you really not going to you're trying to talk to people about what you can do is log

Temperature in October right now that the 7th of October November. Those are more difficult discussion.

Cuz they're still they're trying to figure out what to do in June and July. So I think the the issues in terms of how we'd how we'd manage. The fan part of it off are probably ones will have in the going as we get closer to that, you know races where that would be, you know, a realistic possibility, but since they're not in the you know, there's it's sort of July August. I think we're planning races that are you know races without fans and making sure we can we can go forward with those and Country. Nobody knows what the landscape you know is in, you know, you pick up a different different stories and different places as you know, you look at China today. They're opening up an array of places in public Gatherings. So, you know, I think well, this is a situation where in terms of dealing with larger crowds, you clearly know, you know more, you know week-to-week. Yep.

To go forward and so it's it's very much managing up a real-time process in terms of the sponsors. They've been great. Okay in many ways sponsors we've been in touch with them all until we know what the calendar stuff to have a substantive conversation about. You know, how do we modify? You know, they're you know, what races they have title race is that you know, they all have components to their agreements. Um, so you know, what we should have been keeping them up to speed again. We could not be feel better about them, you know the support we've got and the enthusiasm from them. I think in many ways like we're dealing with

Would you like global companies but I think will you know will clearly our big sponsors are you know, they're not.