Q3 2020 Liberty Media Corp Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Liberty Media Corporation, Twentytwenty <unk> quarterly earnings call.
I think the fact that there's some all participants will be in listen only mode. After.
Afterwards, we will conduct a question and answer session at.
At this time, if you have a question please press star.
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Hi, Bert discomfort doesn't seem to be caught that November December.
I would now like to turn the call over the course me Tom Ti, but for do you all see Sir. Please go ahead.
Good morning.
Again, we'd like to remind everyone. On this call include certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
I will address the results could differ materially due to a number of risks and uncertainties.
No as mentioned in our most recent forms.
Your 10-Q filed with the FTC.
These forward looking statements speak only as of the date of this call and Liberty media expressly disclaims any obligation or undertaking.
Any updates or revisions to any forward looking statement contained herein.
Any change in Liberty Media's expectations with regard there.
Or any change in events conditions.
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Such statements.
On today's call, we will discuss certain non-GAAP financial measures, including adjusted.
And adjusted EBITDA.
Definitions and reconciliations for Liberty media injuries.
Why didn't you can be found at the end.
Today, which is available on our website.
I've already registered Burbridge on Liberty Investor meeting on Thursday November 19, we will cover Liberty media.
On Friday November 20 will include jury Jeep Liberty broadband from 11 am today.
Easter.
After the presentations on those days.
Along with that.
Right.
These pre submitted questions by Friday November 13, two Investor day, the Green Dot Com you can find the link to register and all of these details on our home page now I'd like to turn the call over to Gregory Libertys, President and CEO.
Thank you and good morning.
Turning to begin the call was wonderful.
That's true.
Chase Carey.
And Liberty Chief accounting.
That's.
Right.
I'd again like to recognize and thank our management team. Some point could have done such an impressive job managing through this cold and lighting courses.
Start with Liberty Sirius XM, where.
Where we restarted share repurchases during the quarter purchasing 110 million cost.
Okay shares from Arc Orchestra October.
These discounts definitely remains but we will take advantage of it as we can.
Repurchase jury any looks in place of $3 to 66 cents per share.
As I said, we expect to continue to take advantage of the discount opportunity.
Yep.
I told her 20 at Sirius XM stood at 74.4%.
My name's focused on getting to 80% ownership level, it's Gerry let me.
At Sirius XM itself like our other subscription businesses Sirius XM has proved resilient during the current crisis.
Self pay net add subscribers during the quarter were 169000, and we expect by year end to be 90% about original projections.
2020.
New car penetration increased to 78%.
With our recent OEM agreements I expect penetration to be over 80% in the next few months and even higher in the years to come.
During the quarter Sirius XM returned capital of $544 million primarily through.
The purchase of its own stock.
Also announced the Jennifer which will become the new CEO in January Jim Meyer was done so I, probably will remain with us as vice chairman and.
And Sean Sullivan joined Us as CFO.
Jennifer has been with serious since 2002 and has a tremendous breadth of experience, including SVP of finance, Chief marketing officer, and president of sales marketing and operations.
She is the natural successor the gym.
We all look forward to working with her in her new role.
Sean.
Your appointment has been met with a resounding positive feedback inside and outside the paddock.
I am not going to comment on live nation now because it reports later today, but.
Returning to the Braves is amazing seasons embrace they twigs third third street in a league title in one in a wildcard handheld divisional series.
We went seven games into the Nlcs against the eventual World series winning Dodgers.
It was sad to see it and before we got to the World series, but we are confident that the future is bright for our team.
Some other notable accolades include pretty Freeman reserved receiving a big name player of the year and nationally outstanding player in the 2020 players Choice Awards being named Baseball America player of the year and named a finalist for the National League MVP the.
The winter of which will be announced on November 12th.
A lot of Laconia Junior led the NL within 11 43 at that ratio to home runs.
You also had a 19 homeland legal home runs in his career who needed the mostly off all runs through players first three seasons in history eclipsing Barry bonds.
Congrats also to Max free.
First Golden Glove his career.
A few battery updates 96% of the battery is open since January we've opened seven new concepts, representing 100000 square feet of new.
Capability in retail.
And the weekly vehicle traffic in October is on par with pre covid levels.
And year to date, we're at 85%.
[noise] [noise] [noise] [laughter], Gary would you like to continue on.
The speakers Dialling that Kim please okay. So.
Everybody's on other than the demo people, okay ill continue.
Okay. Okay.
Never mind Okay.
Go ahead.
I don't know, whether where we cut off on Jay as you can tell us how far it got cut off and Brian went like.
So.
You just talking about cash going out at the Formula One I think sort of finishing up on the $500 million and it was actually the sentence would cut off if one's revolve our $500 million revolvers undrawn.
Why don't we let me, let Brian give any kind of that.
More sense just wanted to start with the data formula one Brian repeat that PDP limits redundant for if you will going to chase after that okay.
Thanks, hopefully not valued by Formula One group had attributed cash and liquid investments of 1.4 billion at quarter end.
Which excludes a $139 million cash formula $1.41 group attributed principal amount of debt was 3.6 billion, which includes a $2.9 billion got held directly at one level, leaving 730 million of debt at the corporate level and as Jay just pointed out at one $500 million revolver is undrawn.
Sorry.
Lastly onto the brands group at quarter end and attributed cash liquid investments and restricted cash of $240 million and attributed principal amount of debt.
114 million the Braves amended debt agreements related to the team revolver in ballpark funding during the quarter securing covenant relief through March 31, 2020 to September 32021, respectively.
We expect grades to be out of compliance at year end on a small mix use loan and are working with the counterparty on the necessary waivers.
Note that we previously received a waiver on such covenants through Q3.
Now I'll turn it over to chase to talk about Formula today.
Thanks, Brian.
We're proud of the way the Formula one our teams and our partners have managed through this year we.
Thats required three key priorities to execute once the virus hit us in March 1st to keep our fans engaged with a championship season and other initiatives that maintain the momentum we built coming into 2020 and to do sales safely.
Second while mitigating the financial impact from the virus this year.
Prioritize strong long term relationships with our commercial partners.
And third enhance the long term growth of the sport by completing agreements and regulatory changes to strengthen the competition and action on the track the governance of the sport and the business model for the teams in Formula one.
Well, we still have four races to go we believe we are well on our way to achieving our goals.
Executing the race schedule safely has been challenging and our success to date is a tribute to the partnership of everybody at Formula One the FAA and our teams.
Most do not realize the complexity involved in delivering the formula one 2020 competition, which require about 2500 personnel at the track in.
In 2020, we will ultimately race in 12 countries traveling from many locations requiring us to navigate constantly changing regulations on both ends.
But the 17 race schedule beginning in early July we met our goal of 15 to 18 raise calendar.
Building. This schedule is a bit of a jigsaw puzzle is 13 of our originally planned 22 race locations canceled.
This is an opportunity to create special interest for fans by adding races, where we had not raised in years if at all.
We feel very good about the fan reaction to our season to date.
While many for sports have struggled with viewership this.
This year, our viewership is up modestly over last year to achieve these results in a season with Mercedes dominance Ferrari struggles also many other sports theyve seen steep declines is a solid achievement.
Our digital growth has been even more dramatic formula one is the fastest growing sports league in terms of followers across Facebook, Twitter, Instagram and Youtube with a 17% growth rate between March and September.
Formula One also saw the highest year on year growth for social engagement with growth of 70%, which is more than three times higher than its closest competitor.
We've had some special moments cap by Lewis Hamilton, becoming the sports lifetime leader in wins.
92nd victory in Portugal, and subsequently winning is 90 threerd enabler, surpassing the previous record of 91 step by Michael Schumacher.
Congratulations to Mercedes setting new boundaries are becoming the only constructor to ever win seven consecutive constructors titles after.
After Lewis Hamilton's when enabler.
The Eiffel Grand Prix at the Nurburgring marks a return to the podium for Daniel Ricardo in Reno, and returning submitted with another podium in Ampla.
This race for the first time in our history, we partnered with you to the stream the entire weekend for fans across selected European markets.
We look forward to continue our unique partnership with you tube as another way to engage our fans.
In September we raised twice in Italy, which produced some outstanding racing.
There were multiple red flags in a multi car collision on a restart in Tuscany, only 12 cars finished and Alexander album got his first podium.
Bonds that produced one of those thrilling races in years and gave us a snapshot of the future with the youngest podium so far with PR ghastly securing is made and when he was joined in the podium by Carlo signs Atlanta Stroll, yes.
We have to see more of these unpredictable outcomes with a 2022 regulations.
The pattern has been a flurry of activity with driver changes for time champion Sebastian Vettel dating scene, indeed find a seat with racing point.
Let's see of other drivers security such as Sergio per as Nikol convert.
Nico doesn't even have a permanent seat this season, yet as score 10 points.
As heavy speculation about the new driver lineup from Haas, and Netflix has been capturing the drama as they filmed season three of drive to survive.
Continuing on the topic of engagement the 2021 season of our F. One E Sports series presented by Aramco got underway in October with Alfa Romeo, claiming the top spot.
We're in the middle of a second event right now with racist competing for an industry, leading 750000 dollar price pot.
We've continued to see tremendous growth with E. Sports is over 237000 participants attempted to qualify this year we.
We will have a live broadcast double last year, which will be streamed online via f. ones official channels on Facebook Youtube Twitch Leah.
As well as broadcast by International TV partners.
With regards to our Twentytwenty results. We recognized early on this was going to be an unprecedented and uniquely challenging year financially.
The most significant impact on our promotion revenues is only two of our 13 events to date have add fans and those were capped at less than half capacity and only in Portugal, where we able to offer a limited product club.
There were significant impacts and sponsor revenues this year, some cancel locations have material local sponsors.
A fewer number of races reduced title sponsors and general inventory and the lack of hospitality precluded some elements of sponsored benefits.
The virus also made the completion of new sponsor chip agreements more difficult.
Television revenue saw the lowest percentage impact among our three primary revenue captured categories. However, we still significant.
We've reached revised agreements with all but a couple of our material commercial partners for 2020.
We approach these agreements with the spirit of partnership and all.
Almost all cases, we could have taken a much firmer position, if we simply enforced our contracts as written however, we believe it best to approach these discussions with a sense of fairness to maintain our momentum.
On the cost side, we aggressively reduced costs where possible.
Some of our operating costs like freight and travel were naturally reduced with the revised calendar.
Their discretionary costs were largely eliminated.
On the operating cost level, we implemented furloughs freezes and cuts in expenses expected discretionary compensation.
Our price fund expense to the teams is contractual and will increase as a percent of revenues.
All in all the financial impact this year significant but manageable by both us and the teams and positions us well as we go forward.
Our third priority was to implement key initiatives for the long term growth and help the sport.
We achieved much more than most expected key elements include a cost cap on team expenditures to improve competition and the business model for both existing and potential new teams.
New technical and sporting regulations for Twentytwenty, two that will improve action on the track for fans.
A five year agreement with teams to better balance price on distribution and provide improved stability in an enhanced sense at partnership.
Streamlined operating structure to better grow and improve the sport.
Advanced initiatives on both diversity and sustainability.
Strengthened our balance sheet to provide both stability and the ability to be opportunistic during this period of continuing uncertainty.
We still have much to do in a current focus as our engine we need to address the cost and performance of the current engine and you continue to define the path forward for our next engine, which will be a centerpiece for our sustainability goals.
We expect to announce at 2021 calendar soon which will look much like our original 2020 calendar, where the March start early December finish in a record setting number races, including Saudi Arabia as Greg mentioned.
We're planning for events with fans.
Provided experienced close to normal and expect arguments to be honored.
The television area, we have one material market to finalize and otherwise well position for next years next year. Likewise in our sponsorship category are finalizing our last renewal and actively engaged in a number of new sponsor opportunities.
If the virus does not present plans, we expect 2021, we'll be pretty close to the 2021, we would have originally planned 12 months ago, meaning.
Meaning continued growth on 2019, and the previously expected growth in Twentytwenty.
That being said what is obviously not predictable as the virus.
What I do believe more strongly than ever is that the world will in due course conquer the virus and when it does that life unique global events like Formula one.
We'll be more popular than ever as people look to the shared experience of sports and our array of partners will have a greater than ever need to reengage with fans and consumers.
In closing I want to highlight what I believe is our most important achievement in 2020, the appointment of Stefano Domenicali as the new CEO of Formula One effective January one.
Stefano combines a richer experience and expertise in formula one with the commercial knowledge of leading one of the world's iconic brands Lamborghini during the past six years.
He is respected throughout the motor sport, the commercial world and will hit the ground running with that ill turn it back to Greg.
Great. Thanks, Jason Thanks, Brian.
We hope you all will join us for our virtual Liberty Investor meetings.
On November 19th November Twentyth.
We do appreciate your continued interest in Liberty media and hope you are all staying safe and healthy with that operator I'd like to open the line for questions.
Thank you, Sir ladies and gentlemen, as a reminder, please press star one to ask a question.
Yes.
And now we take our first question from Bryan Kraft from Deutsche Bank.
Hi, Good morning. Please go ahead.
Thank you good morning, I had two first for Chase wondering if you could put some context around Honda his decision to leave Formula one as an engine supplier should we be concerned at all that a shift toward electrification by key teams might impact future participation in F. One.
And then Greg on the live nation side I saw an experiment was recently conducted in Germany to test the safety of concert goers with various safety measures in place that experiment concluded that there was low transmission risk to concert attendees. When certain measures were taken so I don't know if you had seen in sort of live nation was involved but I was just.
Curious.
If you had seen it knew anything about it and if so if there were any implications for potentially being able to return to concerts earlier. Thanks.
Okay.
I guess two things within the Honda.
Honda decision and I think one it was better.
From my perspective, largely driven by.
Challenges X.
Economic challenges yet.
The overall Honda entity.
The auto industry in general is having some challenges and I think Honda clearly.
His sales.
His living is struggling with those challenges. So I think that goes yes. The the core issue. There is no question their economics around the engine that we're going to address.
But but I think kind of helped those pressures exist today and they had to make some decisions.
On the flip side, we actually are.
Getting.
Increasing support.
Not just from the players that are in the sport. The Oems that are in the sport, but a Oems that aren't they are actually incredibly enthusiastic about our sustainability future, where we're going to next generation engine.
I don't know if you saw the there is a quite a couple of months ago from the CEO of Volkswagen.
Could have been couldn't have been more positive about where we're going and the importance of us as a platform. So I think as we continue to flush out and put more information out there about.
Our next generation engine to sustainability goals, we are actually getting increasing support and interest.
From both existing partners and potential new partners about the importance of that.
To their future.
Great. Thanks Chase.
Thank you live nation I am.
Just a little bit familiar with the German.
Efforts that you've mentioned Brian.
I'd note a couple of things and I think most of you are aware this 86% of the fans who had concerts pro postponed because of the cold with buyers have said don't send my money back how weak and I will.
Go to the concert when you are ready so demand is they are among our.
Customers.
Why is also there we have artists who want to tour.
You've seen efforts to begin towards like the German thing, but other things as well.
And really some combination of safety measures and I think there are other experiments like the one you mentioned to Germany, but elsewhere as well some combination of safety measures rapid testing and eventually a vaccine.
We'll bring live concerts back in a big way with a huge amount of pent up demand and a huge amount of pent up supply so.
We remain quite bullish there is a cost to waiting obviously live nation is.
Burning cash.
Cash flow at weights, but I remain very optimistic about the ultimate team.
Tam there that the market and the ultimate terminal value in fact, I think in many ways. It could be strengthened because sadly other players are not as strong as live nation, and we will probably be able to take advantage of it both in terms of our share in terms of recruit terms with Andy's artist in Hawaii.
Thanks, Thanks Chase Thanks, Greg appreciate it.
Thank you and I will take our next question from Jerry.
From Evercore.
Thanks, Greg.
Thank you.
Thank you Greg.
Obviously, you talked about gold have been doing it then.
Okay.
I understand if it's done right.
Noncash.
Hey that you could sort of quantify it.
HGV can you explain to us how.
That could be done on collecting that engage and.
Pretty close to 80% is that something that nothing imminent.
And potato, obviously, we haven't really seen the details of the new.
The team.
The Capex suggested that there is new waterflood agreement on the team.
We need to be as the business will that will deliver better operating leverage to formula One company.
Any detail on that.
That could be to profitability going forward would be appreciated. Thank you.
Oh, great. So thanks BJ for the question so.
It is it possible that it done in the correct way.
We might be able to achieve Eightd status Act.
Active trader business status for Sirius XM.
But that would involve some.
Some issuance of shares it would involve some hopes and its not guaranteed that we would still get to being an ATP.
The priority, they're getting to the 80, because it really allows.
Upon the conclusion of the tax sharing arrangement with Sirius XM It allows us to.
Move capital and the tax free manner up to LS XM.
Thats really the priority ATP would be kind of nice icing on the cake, but I would note that we are already approaching ATP status for.
For example, we already have it at the Braves and we're approaching it a formula one January.
2022, it will become an ATP so our flexibility there within Liberty media is pretty good on ATP, you can never have enough atps, but you're not going to commit unnatural acts to try and make this one become an ATP the priority is to get to 80.
Yes.
And I guess, if I understood. The question I think it's around the Concord agreement and the split between us and the teams.
And if thats the question.
We won't go into I'm not going to go into.
Real details on it but.
From a high level essentially what our premise was if we can grow the business.
We should.
Receive benefits from growing if we don't grow the business.
It goes the other way so I think it's an incentive enough that.
Billy to.
They get to a bit more of the of the upside if we can successfully grow it.
I think it's all done with making sure everybody has a healthier model when you combine the cost cuts that you guys have with the revenue distribution every team should be better off but I would guess, we believe in success ratio associate formula one.
Thank you Doug.
Thank you.
Our next question from Ben Swinburne from Morgan Stanley. Please go ahead.
Thank you Craig are we going to get a video monetize at the Liberty Investor Day.
Wipe that out too.
Okay.
Dan This is great.
Bit cobot has caused many changes and you may not exactly the same thing, but we try not to disappoint. So we will have something for you don't agree.
Okay, and then lastly.
At cared about but maybe if there is not a business.
Goodness.
Brian answer too.
Okay. Thank you very much.
I wanted to.
Ask you, Greg going back to the management changes at Sirius XM.
Yes, I think the market youve been very positive on Gen. James performance over the years I think thats a widely held view.
The market seems to be I dunno react with some surprise.
Jim's departure Davids departure, Denver, Dallas elevation, maybe it was tied to the Howard. Thanks I was just wondering if you could talk a little bit more about your the chairman of the board there and what what if anything will change at Sirius XM going forward under the new team if anything and maybe just spend a little more time, there and then for China.
Hey.
Hopefully this will probably be your last earnings call and ask I'm guessing, but would love to hear from you again, if you will if you want to come back any update on the Miami plans. If I think that that may be on the on the to do list for 22, and if you if it if thats likely do you think you go to 2024 races on how high on the road.
Count is sort of practical thank you.
Okay.
So.
Dan I think we were surprised by the market reaction.
And you maybe with hindsight, we should have been smarter, but the combination of changing out or.
Proceed to be changing out the CEO and the CFO at the same time.
Plus the overhang of potentially was how were going to sign.
Let's put it in context.
Jim is been with us and see over eight years.
I Love, Jim Jim has done an amazing job, but.
But I'll give you I'll tease him and say, there's always been a little bit of a hamlet like aspect because if you've noticed you've taken relatively short term extensions and he has rightly said I have other interests I love serious I've done a great job here I am proud of what's been accomplished but I have other interests, including.
Is racing at Indy and open wheel so.
I think this was a natural evolution for Jim and we are likely or sorry, we are blessed to have him stay on as vice chairman and keep the benefit of his expertise. He would also tell you change is good and that.
Having jennifer in a new CEO come in somebody who is both been around a long time, but also has new perspectives will be a positive tempered by some continuity with himself and myself.
So all of those I think Jennifer is an absolute natural evolution and 18 years experience and has been as close to Jim and around the.
The business as long as anybody in his life elevated roles as anybody.
As far as the tenure of David David did a lot of great things David is a very smart guy very able guy.
But it was somewhat of a time for national change there as well with the changing of the guard so I.
I think we haven't shown a very experienced CFO, who knows the entertainment business and will be a great addition, and add new perspectives.
And the other overhang as we talked about was the potential to Howard lots.
Lots of people speculating.
Without a lot of reason, but nonetheless, speculating that Howard would not renew with Siri.
You see most of the obviously, we don't have assigned deal, but you've seen most of the commentary suggest Howard is likely to re sign and I think thats correct.
Good.
I want to I want to see the ink on the paper and I'm sure we'll Howard.
Deserves the right to make his own announcement, but most people are forecasting that is likely to be side.
So I think some of that overhang is now been removed I think the market is get will get very comfortable with the both continuity in Jim and I would like to think myself and see Jennifer for the power that she is see Sean for the addition, they can be and see as resign Howard and a lot of positive things going forward the business is doing.
Very well.
Thank you.
Okay and on Miami.
We're still actively engaged and actually to that conversation with it.
Dolphin group leadership few weeks ago.
I think both of us to decide.
Decided that when the virus issues sort of came to the forefront in the uncertainty associated with it.
We were better off going a little slower in trying to get to a place where we had a bit more visibility.
Two.
How this is going to play out.
We're probably as excited as good as ever about the opportunity in Miami.
But I think we felt the prudent I think both felt the prudent path forward.
It was tough to.
To make sure we're confident and we feel pretty good about next year early events are all.
So the ones, we've probably had the most the deepest conversations all seem confident about having having fans and having events that if not normal feel pretty close to normal. So we are getting great enthusiasm, but there's still uncertainty. So I think Fred for a new razen, we want to launch in the right way that we both.
Thought the right thing was to try and.
Yes sort of go a little slower until we had a little bit better visibility going on whether it's in vaccines are treatments are tests or what have you.
And ultimately growing the sport.
In the US is as we said all along is not up it's on a 12 month proposition its a longer term proposition. So I think it's more important we do it right than fast and the virus obviously represents.
Challenges until you have a better sense of it so.
So certainly we're still engaged but I think we will.
We will continue to sort of monetize.
Monitor the broader environment and see what makes sense to them too.
[music].
The move to the next phase.
Thank you.
Thank you and then we take our next question from David Karnovsky from Jpmorgan. Please go ahead.
Hi, Thank you good sign up on.
Starting in contract to jump in on rebates on the broadcasting sponsors that.
Wouldn't impact our lives be allocated to the quarter based on the proportion of races are there maybe some factors that might have had in Q3, specifically and then should we expect any potential adjustment the contracts maybe be reflected in future years or is everything tied up.
In 2020.
Jason comment until late Jason I'll, let you comment to the great you'd like on.
What years at Dan, but if you want Brian when like might be able to help on the quarter allocations.
Well, Brian I'll, let John.
Yes from accounting you can go first and then I'll add.
Yes.
Yes, I would say, there's there's a portion thats the pro rata effect of the race is having 10 races.
The 17 for this quarter, but then obviously the promoter revenue stream has been impacted by not having fans and then since we went down to 17 races. There were also some adjustments on the broadcast side and then some sponsors specific adjustments.
Related to specific location. So what are those recognized broadcast revenue I think the question is is the broadcast revenue Shirley I.
I think those things.
Yes, I think it is largely recognized in the way we would have recognized it which is the events are event specific in the broadcast and sponsorships that aren't tied to a vigil races are still spread across all the races as they come.
'cause, it's obviously different calendar, but I think the principles underlying or the sales and.
And I'd say the impact the impact when you look beyond our AARP.
I can't say, there might tweaks or something I mean, obviously, we have some things like making hole on sponsorship it.
Largely the issues we've dealt with this year, if they're not issues that.
That Uh huh.
Predominantly fall into subsequent years, so it's not completely but but largely the issues are ones. We've taken this year one of our core objective was and I think we said it before.
Whether we we believe in 2021 were pretty well positioned but as we get past the virus in it you had the business as we know it was before the virus.
So our goal has been to absorb the change is short term and protect the business.
As it should be and it would be in the ordinary course long term. So I guess there is none but that was different tweaks here and there some things to.
The deal with but it's by and large issues we've dealt with this year.
Okay, and then Keith I'd be curious to understand the decision to livestream equal GP on me two.
Is this maybe a.
Our own staff to more digital distribution or is this more of a one off experiment with the platform.
No look I mean theres.
There is no question. These digital players are going to be a bigger and bigger part of our future and.
And so one of our.
Yes, as you get up increasingly mature broadcast world in a maturing pay world 10 trillion dollar digital companies that are getting deeper and deeper into content.
Is there an incredibly important part of our future. So we are looking to continue to try and expand.
Those relationships.
And we've got an array of things we're in active discussions with all the key players there about various initiatives to.
Expand and build on whether it's.
The the events themselves are things around the events the library.
Yes that is an area, we certainly expect such as long term or short term to be an increasing area of activity for us. So it is it.
It is trying to find places we can get if we could do two things.
And and build and expand those relationships.
Thank you.
Thank you and now to take.
Our next question from David Katz from better than typical Michael. Please go ahead.
Hey, Thanks, a lot Q on one first I was hoping you could fill us in on the evolution of sponsorship talks.
The last time, you updated and said that they are progressing nicely as the Concorde agreement signing really accelerated the talks in any way.
Can you maybe frame what we as investors should be thinking about in terms of growth.
Or specific opportunities next year and then second question just on of one operating cash flow for the year.
And im quite negative as indicated through the first nine months and is there potential in Q4 to see some of that come back such that the the operating cash flow outflow will be.
A little bit less severe than what we're seeing today. Thanks.
So on the.
Sponsor front.
Yes, I think as I said on the.
In the opening comments.
Finishing off where it should be a pretty good place on renewals.
And I think weve navigated the two issues.
I had to navigate through before getting new ones obviously.
Adjustments for this year and renewals.
We are finalizing the one renewal left so I think feel good about that I think we feel we've got probably one adjustment to navigate them. When they were still actively finishing up so I think we feel were in a good place.
And we've actually had great support.
From our sponsors they have been.
I think we.
Really no field couldn't feel better about the.
The way, we're heading into next year with them and the enthusiasm and support.
We.
Our on the new sponsor front.
Engaged with in a number of key categories that we think are opportunistic I mean, I think probably it's fair to say that.
The virus doesn't make those conversations easier obviously, you you'd like to go.
Sit down people face to face that it's tough to do.
You'd like to be able to up to.
To meet and walk through.
So we we are engaging.
People are figuring out how to move forward.
We feel good about the interest we'll find out will you will see in the next.
In the coming in coming months to what degree we can turn some of these into new relationships.
So I think we feel good about the activity.
The uncertainty around the virus, probably again is certainly not up.
For the short term is something we have to deal with and I think we have to be smart about how do we deal with.
You know peoples.
Peoples right entities concerns about what.
What what's.
What's going to be the impact of the virus and the short term pause.
Positively probably some of the areas. We're most excited about or probably areas that actually are not.
Or in places that are not as impacted by the virus as others sort of NIM, obviously things like travel and hospitality her much more impacted than tech driven.
We think we are.
I think there are categories that fit our sport that actually have gone.
Been pretty strong through the through the period of the virus. So we.
We're hoping to hit our goal is to.
To really continue to build sponsorship as well as the others to to to.
To build on the curve that would have existed.
From pre virus I mean, obviously this year is down because of stuff.
The impact of the virus, but we're looking to get back in the curve that would have been.
We would have anticipated.
Okay literally almost as the virus hit but.
But he's on then on the ground based on changes in the team there so that so.
So we've got.
Okay.
Hey, sort of fresh and organization and and you know at this point that really picking up speed in terms of some of these commitments. So I think we.
We have to continue to battle through the uncertainty around the virus, but.
But I think we feel.
Feel good about the reception, we're getting I think it's helped by the momentum in the business I think people we.
From all the partners.
The momentum and strength of the business I think the momentum this season.
So we've been able to maintain in the sport have given.
People confidence.
And.
[music].
And excitement about the future.
I mean operating cash flow I mean, clearly the second half of the year.
Yes.
During the first half we had just cost so we didn't have revenue.
And with most of our players.
We deferred payments, so, yes, and we have a much more.
The cash flow that will will come through.
Yes, and our expenses are more spread across the year on on our end.
The expenses will get will come through and to some degree we probably supported the teams and cash flow.
Yes.
On timing of some of the payments and the like so so the cash flow will improve for us as Weve, obviously deal with more operations in our earning earning money that would have been paid earlier in the year that were deferred until we started racing.
Okay.
Very helpful. Thanks.
Thank you well now be taking the next question from Brian So from credit Suisse.
Go ahead.
Hi, Thanks for taking the question. So this is in reference to how should your sex happens capital return May change once every reaches the 80% ownership.
Over the summer the former CFO serious suggested he didnt see management recommending to the board that the dividend be significantly increased.
Obviously today, the management and the board look different but Greg.
Once you do own 80% would you recommend that they change the capital return strategy and if so how would you make a case that this would be in the best interest of serious shareholders. Thanks.
Well thanks for the question.
Yes, I think that the board has seen.
Changing capital strategies over time, we didnt have a dividend before we had buybacks at various levels and those will be evaluated.
In conjunction with management.
As we go quarter to quarter, obviously from Liberty's perspective.
The dividends are nice because it allows us to go after the discount.
But we've also had dividend increases for everybody else benefit of everybody else. So I don't think we have a set plan or intent now and it will be evaluated with management the board at the time.
Understood all right. Thanks.
Thank you.
Thank you and have a.
Take our next question from Brandon Ross from licensed partners. Please.
Please go ahead good morning.
Hi, guys. Thanks for taking the questions.
Maybe this is for Greg or Chase wanted to get your perspective on this year a significant decline in sports ratings are you said form the old one was an exception to that trend maybe.
Maybe why do you think you guys were able to Buck the trend and then what do you think is causing the broader issues and is that our longer term concern for you as as a sports rights supplier with the Braves and Formula one.
Hi, Chase you want to take a shot and then I'll I'll add or are you sure. If you wanted to Africa.
I guess, let me try to give a perspective I guess on the.
Two issues, I mean broader sports industry and us.
I think on the broader sports industry.
Yes.
I think probably a couple of things going on.
Impacted it.
Some of it was that the mic.
The overlapping of everything coming sort of being at the same time.
So as opposed to being spread out you ended up at the end of the NHL the MBA on top of.
And baseball and football all on top of each other so.
So I say, except.
The competition of these events with.
With each other for eyeballs.
I think clearly.
Yes, clearly had a significant impact on the top.
On the events.
And I guess I'd say, that's the biggest I mean, if you look at what the public as a site in the public's cited.
To some degree.
Having fans not fans I think it should I think it varied by sports to what degree. It does I guess, if you look at US I think one of the benefits. We have is fans aren't a big part of our television experience that other than the pre race the post race.
Watching a race on TV without fans.
Theres no crowd Theres no noise. There is no cheering, it's not if you don't those things don't aren't part of yes formula one race.
So I think the lack of fans.
To varying degrees.
With sports I think to what degree does it take this I missed some of the energy the excitement the passion. So I think thats, probably more not as big a factor as the the competition.
I think the political aspects of the political issues that have sort of bled into sports I think we have not been a positive.
I don't know how much I'd say it's up.
It's a it's a negative but I think for some fans certainly.
Their fans it wants sports just to be fun and they want to go to it to escape daily life not be reminded of.
The challenges of yes.
And the problems of the world they want to.
And you go have a good time of their friends and share for their team.
And so I think again play not as big an impact, but probably not up not a positive.
And.
Yes, I think for us.
I think the fact that we.
We were we were fairly different I guess baseball with the one sport like us I mean, the other sports got interrupted in the Middle and then came back with a condensed sort of conclude.
Conclusion to the season are the virus affected us.
Yes, literally three days before our season started on Australia, we were on the ground in Australia.
So we didnt start.
We.
We came back with them, we put together a season that we thought could engage and excite fans.
I think we did a good job of keeping fans engaged on social media and other vehicles.
Going going into it so we can build some momentum.
I think we benefited from bringing.
Some bringing momentum into the season.
But I think in a nutshell I I think.
If.
If it is a broader question is do I worry about pop.
Popularity of live a little unique live events.
I actually I really feel quite strongly the world misses him the worlds.
The world really wants to Reengage with them.
And I think that.
The passion for.
Whether its events like ours or other sports events.
I think if anything I think people as pent up and there's demand that people want to get I think it's.
People have talked about what are the what are the long term changes coming coming out of the virus era and one of them I don't know I couldn't believe more strongly as.
They will not be it will not impact the popularity of live events I think if anything there.
There's an absence of it that is.
That people are longing for and and I think we see that are our partners to add on that are increasingly looking for ways to reengage with fans and with the type of events that we put on.
With that I'll I'll add I think I agree with a lot of change to the observations, which I've seen the light and observations you went from.
No no sports too much sports out of season politics, distracting, both potentially on court and off court with the national election.
You know a lot of factors.
How much of that secular and how much of that cyclical how much of these ratings declines of secular or cyclical hard to know.
I would note.
I won't you guys quoted our chairman about sports being the bundle. The glue that holds the bundle I think thats largely right and I think sports is probably going to have somewhat of a rebound, but how much is secular versus cyclical hard to know I would note both of our.
Our particular sports products it pretty well.
Formula one had particularly growth early when it probably was less competitive just in terms of how much sports was out there and the Braves had good numbers pretty much all season, partly because we had a good team.
And its a.
We've had a over the last several years I think 44% growth in TV audience over the last three years part of that.
Given by a good team and a new stadium and the like.
The longer term question of how much direct to consumer changes. The mix is is to be seen we have the benefit at formula one to think of being under monetized on arps product compared to many sports and we have the benefit of the brace of being a very large territory relative to most so you certainly want to think about the impact.
To those changes, but in both cases I feel pretty good about our situation.
Okay, and just because you guys have access to the data and follow international markets, probably a little more closely.
Are you seeing similar trends internationally to what we're seeing in the U.S.
Sports viewership.
Yes.
Brett Chase I'll, let you go first and then I'll get my sense.
So I guess for us.
They're probably other factors that are bigger I mean actually yes.
And then the trend so it's a little tough to sort.
Sort of differentiate what impact that there's no question Ferrari struggling and this year has a significant impact.
In markets, I mean, I guess, Italy, first and foremost, but realistically. They are you know.
There are uniquely uniquely important team, who as I said in the comments you made.
I think.
Probably one of the things I feel best about us achieving the results with that.
Where the.
Competition it lacked the drama at the top you would have liked and lacked an iconic team being as competitive.
As they have been and.
And I think to some degree it's that's why you need to continue to freshen and find different energy, whether it's new tracks or other things to excite.
So.
I think for us it's tough to have it.
I think we we went through all that pretty well.
In some degree because we don't really compete in the same way.
Inside the markets.
I don't.
I'm not close enough to sort of track what does the balloon distillate Doin', Germany, and what is serious doin', Italy what has.
And while that you could do in Spain.
So the the international market, so big broad and diverse.
I, probably the U.S. little easier to track just the sports EPS.
More data, it's just sundry where it's.
It's not as directly relevant for us given we're a global global platform.
Yes, I agree with cases comments I'd note in much the same way you noted that the lack of.
Ferrari being as competitive as they we might like probably hurt US and then leads from other places. It's also the case when Alonzo was hot Spain was good win backs or stop and is hot and when he's there you get ratings in the Netherlands, and the like accelerating so a lot of this is not only teens specific that driver now.
Now specific as well.
Got it thank you guys.
Yes.
Thank you well now be taken my question from vaccines that from B. Riley.
Great. Thanks for taking the question.
Hi, Thanks.
The first is just on I think one of the India Indycar teams Meyer Shank announcing you guys made investment and our team.
Just wondering if you can talk about the rationale for that investment and whether you see an opportunity or more broadly, but the other racing rates.
Yes.
We did make a relatively small investment Meyer shrink.
[music].
We did that because.
We are interested in motor sport we.
We are lucky enough to own the pinnacle of motor sports, but we think theres a lot of opportunity, particularly in the us to grow both formula one and other sports and get a better view a better understanding of how some of that operates to become a player at one level in.
Indycar was attractive to us and we got an opportunity to invest with a group, we respect and again not a huge amount of money, but we'll learn something and it will get better insights.
Got it and then one more if I could.
So then the broadcast sales that you did this year you either retain their clawed back some of the streaming rights and for others Theres right still sit with the broadcast partners.
Can you update us on how you think about the importance of owning those digital rights and why you own them in some markets versus others.
Yeah, I wouldn't say that broadcast media.
Broadcasters own them probably in more places.
We own them, it's a matter of to what degree.
The way we.
Exploit them is.
It requires agreements with the broadcasters so they get more so I think it's always an issue to the broadcasters looking for protection from what they consider competing.
Competing products. So so I think in.
In some places it's more a partnership that we have to work with the broadcaster to to develop it.
And it really it's deal by deal I mean, it's.
The over the top platform, we said before for US is really a way to monetize the most passionate fans who want the deepest richest experience, we think thats actually good for us and good for the broadcasters, but theyre deferring glasscock. So it takes time to work work through those sorts of things.
Some progress there is some more relaxed.
It I think our core relationships.
Certainly priority one so I.
I think if we can find a way to do it in and expand and build on yes.
Yes, and build that they know that the digital platform.
Do it if it becomes a.
A real impediment, we'll look for other ways some of it ends up being.
How big is the deal what are they very incentive there moving parts to it so.
So I think it really becomes a part of the larger relationship Directionally I think we continue to want to believe it's up it's up.
It's an important long term dimension to our business to again for sport that has such passionate fans like ours to be able to tap into them.
I think we have continued to make headway. So we don't want to go to war with broadcasters over it I'd say in general with the renewals. We've done we find we get increasing flexibility and so I think thats more is how do we continue to get more flexibility to exploit this in a way that we can do.
In a way that works with our broader broadcasters are comfortable with as they grow into up a recognition of the digital world is going to be a bigger part of it and to a degree we can monetize it there at benefits all of us in terms of optimizing cede to them the value of a consumer out there. So so I think directionally I think we feel very.
Good almost.
Number of the deals we've done this year.
I think we get increasing flexibility to exploit on and better terms.
Yes that whether its us doing it alone or advanced discussions with broadcasters are we do it in partnership with them. So it's not one where we are trying to change the world and 12 months, but I think overtime.
Continue to give us more flexibility.
To exploit all these avenues.
Traditional and digital platforms to for our product.
Got it thanks, James Thanks, Greg.
So I think as our last question operator, thank you.
Yes, and we are taking the last question from John thinking from Neil.
Hi, Thank you.
Congratulations on good financials for Batra could you just talk a little about how the disease.
The CBVA wage agreement discussion might go and how that might affect you going forward.
Well I'm not sure they were great financials, because we'd like.
Many others baseball world suffer.
Suffered a lot from the lack of.
Yeah in person fans at events, but I think credit to our management team for making is the great adjustments that they did to sustain the business and keep fan interest.
I think the reality is baseball lost a lot of Midas year and unless bands are in the seats next year it will be.
A challenging business as well.
Not really going to comment on CB eight negotiations, but.
The long term reality must be that if there is not.
You know as much gravity coming year.
Likely to put pressure on what teens can pay for players.
Seems like an economic back.
And beyond that and I'm sure that will cause.
Tension because players want to get paid as much as they can understandably.
The teams are only going to have X amount of resources. So I think there will be challenges around that and we'll see what happens.
Good luck thanks.
Thank you John.
Thanks, all for joining and we look forward to your continued.
Liberty media.
Thanks, guys.
Thank you Jason.
This concludes today's call. Thank you for your participation you may now disconnect.