Q4 2020 Liberty Media Corp Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to the Liberty Media Corporation 2020 year end earnings call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session at.
At that time, if you have a question. Please press star one on your telephone keypad.
As a reminder, this conference is being recorded today for.
The 26th I would now like to turn the conference over to Courtney Chun Chief portfolio Officer. Please go ahead.
Thank you good morning, before we begin we'd like to remind everyone that this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due for a number of risks and uncertainties, including those mentioned in the range at the most recent form 10-K or in the media acquisition for them.
S. One registration statement filed with the SEC. These forward looking statements speak only as of the date of this call and Liberty Media and Liberty media acquisition of expressly disclaims any obligation or undertaking to decide.
Any updates of revision any for it.
Statements contained herein.
Like any change in Liberty Media Liberty Media acquisition Corporation of expectations with regard there to R&D.
The change of events conditions or circumstances on which any such statement is based on today's call. We will discuss certain non-GAAP financial measures for Liberty media and Siriusxm.
Oh, I got an adjusted EBIDTA and required definitions and reconciliations for Liberty media and Sirius XM sketch of wanted two can be found at the end of Greens press release issued today, which is available on.
Now I'd like to turn the call over to Greg Lefever, Who's the president and CEO. Thank you Courtney and good morning to all of you today speaking on the call will also have the ones you do president and CEO Stefano Domenicali.
Liberty, Chief Accounting Officer, and principal financial Officer, Brian.
I'd once again like to recognize and thank our management team and employees for the tremendous job. They have done mainly from COVID-19 in difficult circumstances.
Beginning with Liberty Sirius XM and I know, we continued our share repurchase since repurchasing.
Out of millions of dollars across all aspects of the Mary Kay shares in the November to January time frame.
As you know all of the discount persists and we repurchased at a look through price of CRE of about $3 70 per share.
We do expect to continue to take advantage of the discount opportunity in part driven by some recent balance sheet turbines, we have at L. S ex that.
In November we raised $929 million of a live exchangeable bond at the.
The debt to repay our.
Why of exchangeable maturing later this year and part of the call spread.
Between the Olympics that might one day originated when we did the reattribution.
In terms of we have been.
And then the light margin ball and unencumbered of a substantial portion of our lives of equity.
Also at the core and we have met our Siri margin loan increasing our borrowing capacity from $1 35 billion to $1 75.
Yeah.
Accordingly, we have generated substantial incremental borrowing capacity to go after that discount and we continue to take advantage of it.
On the ownership of series six of them.
As of January 2019 stood at $76 four per cent.
We do expect to get to 80% ownership in this year and we recently announced a tax sharing agreement between Sirius XM and Liberty Sirius XM.
The Siri board of directors evaluate the capital return strategy every quarter and we'll continue to do so if the liberty gets to the 80% ownership level of as we expect later this year.
So let me get serious itself, we welcomed the Jennifer Witz, who.
Sales for our new CEO role in January.
The new car penetration at Siri had 80 per cent in the fourth quarter and we have line of sight to get to 82% in 2021.
Sirius XM hardware who's now the one out of the every two cars on the road and the number continues to climb.
That's ex have self paid households listening in the digital environment out of the car growth 40% of 2020.
And the Stitcher has.
Has the largest share of U S podcast listening audience available for advertisers.
Please make sure you listened to the podcast of the year Office Lady.
Those of you have been to our Investor Day, you know how much we loved the office.
Turning to live nation, we continue to have great demand for concerts, perhaps notably the weekend sold over 1 million tickets worldwide for its 2022 tour just one week after announcing the tour clearly there is robust demand as we noted the live music.
Well I also acquired a majority stake of beats a ticketing livestream platform.
Current you to check out the series they have on Rufus Wainwright.
Chairman of the fourth turning to the Formula One group.
As I mentioned, we the new deal there are definite mccallion from whom you will hear in a minute.
We are planning for a record 23 races. This year.
Notably the Orange the army is ready to welcome the Dutch G P and local hero Max for the stoppage in September of dashboard.
2020 showed we have ample demand for hosting races EBIT on short notice for both new and historic tracks.
And not for many of you will have seen everything you want to see streamed at all why has your get ready the train and for season three of drive to survive, which drops on Netflix on March 19th.
In January we introduced Almac this back.
We raised $575 million, that's the largest corporates back to date.
According to the banks, who are involved for babies are biased the most of all.
Oversubscribed back of all time in the first trade at 13 20 with the highest initial trade for earnings back to date.
Stock has continued to trade well.
Volume we.
We are actively in discussion with a number of targets in the TMT space.
The 20% interest in L. Mack.
Is attributed to the Formula One group.
And I would remind you that the formula One group has committed.
Two board purchase children of $50 million of $10 per year.
In connection with the initial business combination when it occurs.
Turning to the Braves.
We sadly lost some icons of the brands in this off season.
We'd like to start by paying tribute to the notably fill knee growth and of course. Thank you.
Yeah.
We started the fund named out for Henk guarantee the $1 billion from the brightest plus $1 million for them.
Major League baseball and the Major League Baseball players Association to help grow diversity in baseball.
We are excited about our enhanced 2021 roster of coming off of winning the end at least for our third straight season.
We didn't resign Marcellus went up two of for your deal.
You May recall, we came within one year, one win rather from going to last year's World series. So our guys are ready to go for.
For any great freemen coming off of the 2020 and O N V. P of appealing the albeit at more of our hungry and ready.
Spring training good start recently on Tuesday, our first strength spring training game is the Sunday, we expect Japan to be the cabinets at 25 per cent capacity.
Turning back to the home, but the three ballpark of office tower.
We are near completion of 70% leased.
Kitchen Cook.
And top of Jos will fully occupy their space by the summer of 2021.
97% of the batteries tenants are operational which speaks to the relative openness of Georgia and.
And we believe bodes well for fans of true it this year.
We do expect the have Phantom advanced but are not yet sure of the seating capacity restrictions.
And we do have significant demand for both tickets.
True it and.
In spring training.
We look forward to a great 2021 season and income.
Hosting the MLB all star game on July 13th.
So with that let me turn it over to Brian for some of our financial results.
Thanks, Greg and good morning, everyone.
The Liberty Sirius XM group with bank of the number of steps the boost liquidity and strengthen the balance sheet.
The fourth quarter, we issued $920 million of live nation of exchangeable bonds and the men.
Our one day should margins.
Net income for a substantial I've mentioned the equity values.
Decreasing the share of the underlying below the $53 7 million for nine months.
Subsequent to quarter end, we amended our Siri margin loan income.
The borrowing capacity of 175 billion up from 1.35 billion at your at the borrowing an additional 125 million.
Inclusive of all of this additional margin one draw of Liberty Siriusxm group had attributed cash restricted cash and.
With investments of $1 1 billion, excluding $83 million of cash and restricted cash held directly at Siriusxm.
We also have $1 1 billion of Undrawn margin loan capacity at the parent level.
Note that approximately $850 million of our cash will be used for 2021 to settle the call spread between the Formula One group and the Liberty Sirius XM group and to repay our 2.25% live nation of exchangeable bonds.
Those values based on estimates of the fair value or for the fair value of liabilities at year end.
As of February of 25th the value of the Siriusxm stock held at Liberty Sirius XM group was $19 billion the value of our live nation stock was 6 billion excluding value of the live nation call spread held of Formula one.
The 370 471 million of year round.
We had $3 2 billion of principal amount of the I guess the polls total Liberty Siriusxm group attributed principal amount of debt was $12 8 billion, which includes $8 6 billion of debt.
At the Sirius XM directly.
Formula One group had attributed cash and liquid investments of 4 billion, which excludes 265 nine of the cash held at Formula one.
And so the Formula one group attributed principal amount of debt was $3 6 billion, which includes $2 9 billion.
Maybe the 727 million of the corporate level.
At year end Formula of Formula One 500 million revolver remains undrawn.
At quarter end Braves group had attributed cash and liquid investments and restricted cash of 185 million and attributed principal amount of debt of 674 million.
We are currently in compliance and all of that covenants across the portfolio.
With that I'll turn it over for stepping up to discuss formula one.
Thank you Brian.
The first of all the and all of it for the equivalent of what.
Thank you to Liberty the SLA aid the teams in all of our partners for the warm welcome.
Before I start the one to say chase for his tireless work over the past for years and building a little bit of relation that gives us the very strong foundation for the growth in the the case that the.
Last year was a challenge for everyone around the globe and everybody uses of the sport.
All of the influx of the from that.
One of my warm delivered what many thought was impossible instead of the Oasis kolenda delivered safely and with huge enthusiasm from our clients.
72% since that's one of those improve over the past two years.
The 8% be the best one is in good hands on the Liberty media.
71% rate their satisfaction with being in that one fan of eight or higher.
The more funds believe former one handle each safely the anywhere.
The well during the global from Denny's with 90% of believing them to seek the measure put in place to allow races to go ahead and I'll be the handle well, 81%, believing that's one that's communicate well with the pads during the shut down from 73 per cent, believing that as one of his handle the absence of fans of the race as well and 88%.
The positive of Bobby can then do in 2000.
We all continue to see that the gave the challenge of COVID-19 of this year, however that would not preclude us.
Ladies and opportunities we see in front of US, which are number one who can the drivers of the sense of the last one I. They represent the soul and I'll be a possibility of sport the level of talent. We have to day of the debate is one of the highest that for one of the history and we should celebrate that number.
Number two.
Delivering an incredible product the strength in its competition and action on the track, including plenty of three races. This year.
For the three enhancing the long term prospect of sport and shooting at the attractive business most of them for all participants and attracting the new protests, but the number for remaining committed to our action dwell of weird I used to swamp laflin focus on sustainability diversity and inclusion and community.
So we reflect on 2020, we were the swing the crowd to complete the successful 17 of race season.
The last few races brought some new places the bogie of including the psyche of G. P was so Sergio pad as many of its supposed to be when all of them side. That's the bulk of corner of law school at the same time and at the same rate we were relieved to see realm of growth John Walker wait for one of the theory crash of taste.
The link to remain the <unk>.
Support teams of the track and improve safety measure in the sports.
Lots of a stop and secured the window of over the last one of them, bringing up the Derby, which kept the very successful season for Red Bull, who placed second in the construct of that.
Well the financials plants clearly we were impacted by COVID-19, but working in collaboration with our partners to mitigate these impacts.
Due to the reduced number of races duration of the season that almost no kind of tenders I'm suprisingly, Brian the revenue declining architects of however, we work with that work for them over because of the extent complex web of mutually agreed the work with certain the sponsor for the fed selected Reits into future years, we of course of these agreements with the.
Spirit of partnership and lodging isolated the old construct the impact 2020, the spirit of collaboration together with the ongoing tenders all of accounts leave us well positioned with all of them of material commercial partners are we entering 2021.
For the full season, we are pleased with the reaction from our fans across multiple platforms. We made significant gains the drilling of social platforms, making us the second fastest growing major sports league until the Bolivar across the four major social play for but I had the major sports such as N. S. L. M E. P. G. A tour of <unk>.
Definitely.
We have seen the fastest growth in the digital engagement compared to all other major support within the 99 per cent decrease from 2020.
The T V. Our acreage, though just for the prompt the was 87 point for media very marginally down on 2019, but still higher than the average of 2018 I compared the February two other major sports with an international footprint that the discrete has been declining doesn't 'twenty due to the pandemic.
We plan to engage more sales in 2021, and the upset Florida of exciting plenty of T racist Colin.
This includes the addition of Saudi Arabia and much of the debate that race in net then that becomes.
We will not forget the challenge of the from Ben but I'm pleased with how we have already been working with other partners. We were able to the stable Australia later in the year and announced the we'd sort of the more than 40 miles of us get all.
The old compensation with promoters have been positive since the start of the year and every one of them has made it clear that the events should be going that had the scale.
We'd love to welcome pass back from the track I will be working with the local organizing the governments all of that approach.
I'm also grateful for the of course made by the government to allow formula one to continue to travel to other events during the time of global current time.
All of a highly robust safety procedures have proven we can travel safely.
Safely for the mall, we have evaluated the race weekend with the proposal to try a new type of the screen tweets Paul some of the races in 2021 the reserve.
Both of which would remind the grades for the main event for themselves.
Supported by the teams in principle of the meeting a few weeks ago, and we will work with them and the FAA to finalize the day before the start of the season.
The sporting side, we are expecting other exciting season, we'd lose some of the limits say despite the for the unique and he saw the eighth World Championship, we hope to see Ferrari, we that old that he's putting the sport being they have played back and I'm excited for the all the new places in the lives up on the great.
Well most of the season, we will wonder why the central patents would find the job of seat and we can.
Wait to see him pad up with Max of the stop.
The cloud and web spectacular 2012, the season finished the third the infrastructure spending we'll see Valerie Cabral of London noted the end up together.
We welcome Aston Martin and iconic brand with the seeds of champions of Sebastien Bell at the end of wheel. We also welcomed the return of the number of alone. So two of renamed Alpine team He's doing well by the way you pull the way these races of the accident and looking forward to see him of the stop of the season in Bahrain and of.
Of course, the world will be watching the made the seasonal mix Schumacher of Pos.
Last year was momentous fulfillment of one sided the new Concorde agreement and reached an agreement on the introduction of the coast GAAP thinking of stagnation in 2021.
The next major radio to Covid related to the to the power of the only for that.
The demonstration of our collaborations the play.
<unk> put them in the one and the teams devoted to free it's probably use the development from the start of 2022.
High level of working group has been established we think who's probably with the manufacturer and supplier.
We look for the next generation of the public units for 2025, the key objective of our carbon neutrality truly sustainable to us hybrid power unit significant cost reduction and of course, the rest to the new power unit manufacturers, we believe that the sustainable two of the hybrid engine will.
The a very attracted all per for the Oems and their portfolios and provides another solution to deal with the most of the dead globalization drive across the world I feel very positive about this probably because of these EDA and they've already had very productive conversations with existing and potential Oems about the direction for one of these moving.
Continuing on this topic, we confirm the we erased as one lots of would be kind of level of a piece of the ESG platform with the three core pillars of the sustainability diversity and inclusion of community. We are proud of the impact. These plots of him as last year and will continue without what action to push forward.
As for <unk>.
In the coming weeks I will meet with all the drivers to discuss with them. Our weird. He says one plants for the share the deal income.
The the rollout of our apprenticeship ease the machine and scholarship at other sport for underrepresented groups and very importantly, got heroes role models and champions of progress in other sport that in spite of fans around the world.
We are looking forward to seize them free of right to survive hit the message on March 19.
Once again captured all of the drama and storylines of 2020 and Theres No question Betsy This computer for the new parts of the sports.
I can't Express my excitement for all of the opportunities for one has in front of us and I look forward to update you on our brokers, but please be sure to watch the season opening ramping by range on March 28.
Once again, thank the so much I would certainly open to you Greg. Thank you.
Thanks, Brian Thank Stefano.
Of our lessening of our audience. We appreciate your continued interest of Liberty media and hope, you're all staying safe and healthy.
And operator with that I'd like to open the floor for questions.
Yeah.
Thank you as a reminder, ladies and gentlemen, please press star one to ask the question.
Our first question today comes from Vijay Jayant Evercore.
Thanks, I have two of us.
Greg obviously, the tax sharing agreement with serious that's sort of.
Kicks in the 80% of.
You know obviously you mentioned that the board will decide how capital allocation works both of that moment, but you know given.
Given the flow through would be pretty small.
I think the dividends will be tax free both that is that of an expectation that we should assume that we'll ship more towards dividends over buybacks. All of these well definitely on a path to sort of taking the company private.
And other any obstacles sort of on that that is that like the squeeze out of requirement of 90% of anything you can share on sort of what happens for the capital equity capital structure sort of post <unk>.
The 80% level and second of all except one all welcome.
I just wanted to sort of get your perspective are you you've been mentioned in the press, suggesting that you are looking for more quality over quantity in terms of races, and you know all of them. So you're talking about it's been great for you.
What do you think you'd need to change the format of the race weekend. The uniquely you know.
Our pay practices and making it the biggest tactical can you just talk about what what do you really think of the opportunity.
The make the weekend event growth.
Thank you.
So I'll go first and chat a little bit about dividends capital allocation and the like.
First of all of that really is the decision.
Of the full board.
You would know correctly that on the margin.
We would probably have a slight tilt towards dividends, we at Liberty media Liberty Siri compared to where we once were but it's really not that big of tilt, while we're looking at the the.
The.
No the discount to.
Running about just under 28% substantially tightened from the 45% when the GM eat the world.
And we were running more like in the middle of 30. So we are trying to.
But that's still quite large compared to even the 7% rate we would normally pay with the D. R D exclude.
Exclusion. So you know I don't think the huge thumb on the scale for Liberty, we are marginally more.
Oriented towards dividends, but not massively but that decision really will be driven by management and the board.
As far as triggers.
Of that might involve.
I'd say the independent board will have to make the arbitration, but one thing that I think would likely be in the back of their minds of do we get to 90 per cent.
We could do a short form squeeze out merger of the remaining 10 per cent. So some directors Mike you know think about the pace of which we would get to that kind of a number.
But again those decisions really will be made by the full board and.
At some point.
End of directors will have voice about ensuring that the minorities in Frankfurt appropriately protected.
Okay. That's my go to the answer to the question with regard to the format on the on the what we are thinking to improve into them up show first of all of you say that that would of objective is try to all for so the people that have come into the event to the people. The other watching for the visions of the people that are really the signs approval of some.
Some of that he's excited so the idea that we have share then I think that the we have received the great feedback from everyone. In the sport is that the we will try to figure out something that would give us the qualified on Friday. So I think those pinch ways that will determine the the greed order for the Sunday race. So though it gives the of thrill of the great we can't that would be.
The beneficial to all of the pontoon boats and this is something that we have the same thing with the with the with the themes in the other play in the next few weeks in order to present the final for months before the start of the season of limbo right, but that's the aim of well we had well what we've tried to do this year in that respect.
Okay. Thanks, so much the.
Our next question comes from David Karnofsky of J P. Morgan.
Alright, thanks for taking the question a welcomed plateau.
Can you discuss the free zone engine, the dolphin and how you think this might impact on track competition and then just maybe expand a bit on your view of Def one long term income goals in light of some of the Oems like GM and Jaguar moving toward the all electric vehicles.
Well. Thank you David for the question I think that the what is important to say that the these idea of prison. One of you in advance is connected to the new business sustainable approach that for one of his take you know we will have taken of the shoe with the cost of gas that is related to a certain part of the cost of mentioned the theme. The other part of the was not the.
Talking about very both of US how we can capture the control the investment of course as you know the normal business on the public units the for by Associates of the fact that we would anticipate that the end of the spending you might need for the new engine. We were thinking of how we can capture the attention of potentially manufacturer, but also.
Making sure that the ones that the book today I think the that's in the future. So we do believe by being the I bridge in the future is the I D.
The exact position does allow you know all of the mandates that you have to have an access to our beat for the portfolio not only of the deprecation for to do the normal business. So the Florida I think that most of you are putting the plays in that respect hadn't carbon neutrality fully sustainable fuels of the center and beat the high but gave us a really great position in.
The bulk package and sell mcbean always at the pinnacle of the technology of advanced researching pool of one and making sure that the everyone could benefit from this the activity all sorts of wherever I sort of wrote relevancy extra the activities that can be beneficial to all of the automotive manufacturer and by doing that we're going to have a win win situation a lot of attached.
The low power the only thing of different way of all of the bean electric the having the cost control under under the control and of course being the alive with our credit will be sustainable for the future. So besides of the basic thinking that the we're taking when we decided to go and follow this path.
Okay, and then I.
There's a number of ways promotion contracts expiring at the end of this year I think Singapore and was just wondering how you're thinking about F. One clip into those regions versus.
Adding new races, and other flyway buckets I think you've mentioned in South Africa recently, and then with regards to the Vietnam. GP is there any update you can provide on whether we might see that rates at some point in the future.
Well, yeah, I mean for sure we are in the great moments because of.
Despite the pandemic, we had received at an incredible number of requests bye bye bye that shows that the F. One of the sense of the interest no totally from the organized over there of all around the world, but also from the Motorsports community. The four of our strategic plan is that to the side first of all what is the right dimension of it.
The races in the the the concept you are mentioning the odd expiring, but the debt out of a discussion of ongoing because of the ones that the weather considering that I really important and there is a lot of interest to progress in in and keep them. You know also in the future we confirm as you said.
As you know that the U S. A is very important and strategic market for us and the.
We are of the Ainsworth another race in the U S. A we have already great partner and the most of them, but we are the looking for other solutions that are will be very important for us.
And what I can see with Vietnam for whatever reason the happen D. C. We didn't have the race, but for sure that is a matter for east in general that is very important for the strategic growth of our business in the future and for sure. That's in there that well be going to exploit the other opportunities for the future.
If I could just add the stefanos comments, which I agree with you know we do not have an unusual number of promoter contracts expiring this year of pretty much in any year. You know we have a portfolio for a certain number of get renewed every year just like we have a certain number of broadcast contracts that get renewed every year and in general because.
We think demand will rise for our sport.
We don't fear that we actually appreciate that because we think theres more opportunity of had been behind.
Thank you.
Our next question comes from Ben Swinburne of Morgan Stanley.
Yeah.
Thanks, Good morning, guys I wanted to ask all of it's definitely on the Greg just a question around the sports rights are and sort of the the state of the market right now maybe Europe and U S.
You guys had a very successful at least based on the press reports renewal in Germany with Sky last year, but we've seen you know some of the some of the other deals.
That has happened or are happening has gone backwards, you know E. P. L. A the Bundesliga and the at least the press suggests Syria.
Roll back.
And even in the U S. There's been you know so probably more tension unusual and Greg obviously with Sinclair of what's going on there from Fox Sports is clearly tricky with cord cutting. So maybe can you guys just give us sort of of centers you as you move through 'twenty, one and 'twenty two how you're feeling about your position both with F. One and the Braves.
The market has gotten even more complicated the more challenging than it was a couple of years ago.
I'm proud of you aren't taking kind of a happy too.
Okay I mean in my opinion of the wish you are living today is for short of interest for one side, but very very good about the other I mean once they can see the as you know all of our business most of the the broadcaster partners out of the hugely important for us, but we can see all the very good opportunity to do two ex.
And the and explore the beat to the moguls too as I said to be complementary platforms and provide the data collections of the fan base built in the OTT world the piece of steel.
And the other does we will for sure the give and I are very both the night for the future, but the to be honest I do believe that the eats we're able to attract as we are doing the.
The sport you know the commercial accounts because they used the rest is there and we need to make sure that the the sport we had the shape it out for the future given the complex to make sure that is the livable to defense and that's why we have a lot of activity connected to make sure. The first of all of of course, the they'll lose the traditional and very religious fence, but we need to speak.
The language of the new support that the new fans of the young generation. So we have a lot of programs to make sure that this has happened already this year, so I'm positive of that to be honest.
I agree with Stephane I was comments, but I had a couple of more if I could then for.
You know we've done a lot over the last few years. Thank you Chase and now thank Stefano to try and build fan interest in fan excitement and that's better on track competition, that's more balanced field that we as we go into 'twenty two that's a lot of ancillary things like the fan festivals like programming like drive the server.
All of those building fan interest.
Obviously, the E sports component as well.
As an important component when you obviously the Gulf of renewal how much fan interest how much excitement there is.
Probably the most important component is how much competition. There is a lot of potential bidders distributors of your product and Kathleen all of the best deal, we have probably as our UK deal and it was largely because there were several bidders highly interested in getting a product I do feel as Stefano notes, we have of relative value you have seen.
And some of the other higher cost European alternatives, but if you look on any kind of basis about what the cost per eyeball cost per hour of et cetera.
If one looks like of relative value.
And I think a sign of bank, which I'm sure you can appreciate with the rising cost of alternatives like scripted content as that gets more expensive in some ways. It provides the floor on what the value of some of the live sports can be historically of live sports like sort of expenses, maybe not quite as much when scripted continues to rise.
So I'm excited about <unk> prospects, but above all we would benefit from increased competition, which is potentially some of the new digital players entering in the SNF and we'll see if we can get them excited I do believe ultimately they will be competitors and that would be the word benefit is.
As far as looking back of U S rights and the Braves.
Obviously, we've had a world where the bundle has caused a lot of overbuy, whether it be for a sport of all kinds of sports programming, including the U R. S.
And is that bundle breaks there is risk around.
What the total amount paid two teams will be including the Braves I feel relatively good about the Braves.
Contracts from 27 first and secondly, we have a good contract, but far and away not the highest.
Well below somebody like the Dodgers, but in contrast, we have the largest broadband households.
Audience. So the Braves type of the largest territory with 12 million broadband households, sort of the Gray you look at digital alternatives from the like we're probably in the best shape.
Compared to many of them.
As new alternatives.
Alternatives horizon, the bundled potentially a weakened.
So tell me what that good luck in the out of at least this are the seeds of thank you. Thanks. Thanks.
[laughter].
Our next question comes from Bryan Kraft of Deutsche Bank.
Hi, good morning.
A couple of questions first can you Greg can you talk about your current expectations for what I'll call. The past the normalcy for your live event businesses looking out over 'twenty, one and 'twenty two there's obviously a lot of you know.
The focus in the market by investors on how quickly.
The businesses like these are going to be able to bounce back and you know weather.
Half of 'twenty, one looks normal or twenty-two looks normal so would just love to get your thoughts on on what Formula One live nation, the Braves, what that what that path looks like for them.
And then just quickly on the leverage target for Formula. One can you just remind us what your target leverage ratio is and is there any thought to the running that balance sheet more conservatively in the future just given the experience with the pandemic or are you still comfortable with that thank you.
So I'll start on the.
You know the opening it's certainly not binary.
Binary of a lot of ways because net.
That's one and the Braves, we have multiple sources of revenue.
As the ones got three big pillars, right broadcast, which was impeded, but probably won't be paid less.
In 'twenty, one regardless of the pandemic sponsorship and advertising, which was impeded less in 2020 then the.
Certainly the the fan component part of the promotion component, but again, probably less of 'twenty and 'twenty, one and then fans and we're gonna have a variety of alternatives where fans will be to some degree there and I don't think again, we'll be binary we're not necessarily going to see zero to 100, Ob somewhere potentially in between the oil.
The more optimistic as we go to the end of the year, we're going to get to a 100 per cent of capacity.
And the same thing with the Braves multiple revenue streams, both television and.
On the site, but we don't really have is we do have sponsorship it's not as large of component of the visit formula one.
I think again not binary the X.
Expectation is we'll probably start out of 25 per cent.
I mentioned already the GA is relatively open we will be in far better shape from the the fan attendance than if you were in New York or California, or some other locales.
And it will be decided not by baseball, but by the local rules of authorities.
So the expectation is we will have increasing numbers of there you know.
Again, not binary I don't think we're going to go from 25 to 100 in the space of a flip of a switch and obviously live nation.
Doesn't have has obviously advertising and sponsorship doesn't have the broadcast elements of what's the most responsive are vulnerable or affected by shutdowns.
[noise] offset to that is global business really with the potential for very different responses, depending on where you are in the world.
So I think formula one in particular is preparing for a a.
Our balance sheet that is.
Invincible the whenever it comes and we're fully supportive of that the.
The I do think they will have fans at events. This year of certainly you've already seen some of that and it will grow the announced earnings slightly ahead of expectations I think just the yesterday.
But meaningful efforts there will still be I'm definitely work to be done throughout 'twenty one.
Uh huh.
So that's kind of of you know that's probably somewhat of a non answer Brian because we certainly aren't in the crystal ball business exactly but we are in the business of trying to prepare to make sure we benefit when it does open and they we're prepared if that doesn't happen at the rates of pay or change of pace that we would like and I think all three of those businesses are well prepared.
And that sort of charts of the balance sheet question.
I think.
One of the things about being part of the Liberty Group is you can we have the ability to.
Hopefully looking ahead and be thoughtful for the benefit of our operating companies.
The.
Formula one balance sheet is very very strong I think the operating levels that we have all of our agreements are fine and I, obviously, they're a strong growth of the F. One of operating level and then when you look at the cash the flawed level.
It's quite strong so I'm not really worried about the balance sheet.
Great. Thanks for the just the answer your question real real quick on the leverage target of our stated leverage target on Formula One is five to five five times.
And as you recall, we have a our eight five Max leverage has been waived through March 31 of 2022, and when we bought the business. It had that approaching that of eight times leverage of wheat substantially deleveraged at not only true cash operations generated but we did have a primary equity issuance as well so both of those are.
The reduced the leverage even prior to the pandemic.
Yeah.
Got it okay. Thank you for thanks to the I appreciate it.
Thanks.
Our next question comes from David Beckel of Bahrenburg capital.
It makes a lot of for the question sort of piggybacking on the commentary about reopening I was wondering if you could help us think about a revenue recognition for the promotion side really all of the revenue streams under a variety of different scenarios. It seems as if the vaccine.
Rollout for.
For the most part is going better than expected in many parts of the world should we be thinking about wage promotion revenue.
In materially affected and each one or is that somewhat protected given the concessions you made last year and the.
Then sort of the follow up to that so I'd love to hear your thoughts to the extent you're willing to share on how the team payment structure.
Might affect earnings or EBITDA of one this year, specifically, maybe if you could frame it in reference of 2019 level of it.
EBIT level of preaching the dogs in 2019 should we expect marginal upside.
In the current year.
So oh I think promotion will be.
Reduced in 'twenty.
'twenty one.
Certainly versus what we would have in the non pandemic here, we will have restricted of audiences and restricted fans at some of our events. So I do expect and we're not here to make a forecast in part because some of this is still off of the air.
Floating around but also because that's what it could mean.
And unless you do.
So I you know like how much will be it'll definitely be it.
The amounts of which we'll see.
And.
Going forward we.
We have with the the new Cochrane agreement, we have a structure, which as we know.
The increased profitability, we have the opportunity to take back some of what historically F. One earn comparatively over the years the rates get a little more attractive for us whether we'll hit that in 'twenty, one given the risks around pandemic I'm not as confident but in the years going forward as we continue to have a fully healthy business I do believe our.
Our share of the margin will slightly increase Stefano would you add anything.
I couldn't agree more and I think that the what is important that the with the new governance with the new comfortably move with the new the you know cost control measure you know eats given the sustainability of Bruce that the allow us the things bigger and this is something that I do believe that these are really the right the fundamentals.
The the drives it the right way both from the commercial point of view and also from the people perspective to be part of this the incredible championship.
Great. Thanks, Bob.
Thank you.
The next question today comes from David Joyce of biopsies.
Thank you very much a couple of questions. One on the broadcast side of the Formula one business for for this year would there be any lingering COVID-19 related impacts or should we think about it as being.
Can you sort of comparable the 20th 19, then grossing up for step ups escalators of number of events.
And then secondly on the briefs with the.
The Sinclair are of a cent agreements.
And the this was already touched on the little bit earlier in the call.
Where do you stand with the the with them moving towards having a hybrid over the top model, how does that sort of play into your.
The economics of it look of the due for further the fan engagement.
Even those that could tie into your sports betting once that becomes.
Something on the horizon in Georgia. Thank you.
Thank you.
So we expect of.
Fairly normal broadcast revenue stream.
And in light of our 23 races now.
Yes.
Crystal ball about exactly how COVID-19 plays out, but our goal was to try and.
Take the pain in 'twenty to the.
Free that we rightly had to make concessions to where some of our broadcasters of encore was as much as possible was to make that of 'twenty event and bring 21 back to north of that is our hope and our expectation.
But.
Covid could change the items.
Good morning.
And on the.
You know thinking about the R. S ends.
As I said, we have our contract once the end of 2007.
I know Sinclair is trying to do some different things, it's not clear to me exactly what rights Sinclair has to do some of the things that they think they can do or want to do.
From discussions with baseball about the alternatives, but I do not expect of major change assuming we can run a full 162 games schedule on a normal pace I would expect we would have normal revenue streams from Sinclair in certainly.
Certainly in 'twenty, one and through the rest of the contract.
And I you know I.
Whether they're new engagement models that help us from Sinclair that could be out of it we'll see again I'm not exactly sure what some of the Sinclair thinks their rights are to do some of those things, but all of that.
The Mr Mitch rapidly job.
Then just.
Finally on the Covid impact for them.
For me a little one in broad strokes, how should we think about those promotion and sponsorship contracts and the cause of the mix between fixed and variable components is there is there.
General algorithm, that's baked into the contracts or how should we think about that.
But actually the thank you look most of the probably do not have triggers.
Any triggers that they do have we will likely be able to be on the other hand.
You don't take.
Our partner, who is the large international airline doing Uh huh.
Basically gets shut down for all foreign travel you can decide whether you're going to be a good partner with them or not for the long term and and that's been our goal. So we will work with them in the way that we appreciate that day it worked with us during the difficult time.
Yeah.
Alright, thank you.
Thank you.
Our next question comes from Jason Bassinets.
Okay.
Oh, thanks, so much I guess, how the extra liquidity is always a good thing, but I was wondering if there's any color that you might add in terms of these amendments that you did the unencumber some of the passive equity Stakes.
Was there something specific that you were that you were looking to do for.
Or sort of need that you have tourists from more just general optionality.
Well you know we're in the Optionality, Jason, but I'll, let ann or in a relatively new treasurer answer.
Sure.
With respect of the Siri margin loan we did do an upsize, but we kept them because of the same billions of shares of collateralized in that loan as we had previously under the 135. So we're just maximizing our ability to access dollars.
With respect to the y.
It's really a function of what happened in the previous margin loan.
We repaid it and we had a substantial number of share of the Rod your line that scary.
Lateral pool, and so when we rightsize the loans of 200 million Mi.
Appropriate took the amount of shares underlying that the cause.
Something that's closer to a of a realistic LTV for our modular.
Okay I understand thank you.
Yeah.
The next question comes from John Tinker of Gabelli.
Thank you.
Terrific numbers in the battery and the price.
Unfortunately, the things get a little losses, given most people focus on it and do you have any.
Would you ever consider in any way highlighting the that that valuation of the let's see.
The property in a different way.
John when we have great analytes like you're writing up the value for us we don't need to do with our come on that's the no.
You know I think you're right there is value in the battery it is impressive.
And it's a function both of Georgia being a relatively open places we've noted and I think really the great job that the bridge management team has done to create a secure environment.
The one where people are willing to come in and it's opening up kind of penciling.
Well.
We I'm you know I'm not sure of it we're going to create a tracker or do something different around that but we'll try and make sure. We highlight appropriately that there is value in the battery and our real estate developments. Thank you.
Thanks.
Of the final question today comes from Matthew Harrigan of benchmark.
Oh, Thank you, even though our formula one probably generates more data than any of the sport.
In concert with Egypt, where else of Intel and Qualcomm. It was really under the bulk of them under the answer on the Z with Bernie you've had a lot of discusses the universal Grand Prix email I think you've got a lot of labs, who maybe have anymore.
Ingalls and all of that and cameras and the races. The eventually but could you talked about the potential bidder and how you see that developing it feels like you've made some strides, but there's still a lot of the headroom in terms of what you could do on the T V saw it in the video game side. Thank you.
Yeah, No I think that's a great point, Matt if you think about.
The and the.
Evolving world.
Where we have increased starting on the sort of the broadcast side, where we have potential for increased digital players.
Players the <unk>.
Number of cameras, we have the angles, we have your ability to dial up the angle you want that really plays perfectly to the strength of those kind of game for players and different kind of straight linear.
So I think we are of sport will benefit from that increased attention on the digital side in terms of viewing.
Different experience and one of the fans of Taylor I think you can see that opportunity and it would be great.
The other point is that all of that data proprietary data.
We have begun we began to take advantage of through our contract with the ISG that did not turn out as well as we'd like for as we go forward.
For the opportunities around that I do believe there is quite a lot of round gambling around spanning formation that is valuable and that we are in a very strong place relative to the most sports because of the amount of data and the amount of which of it is proprietary so I think on both sides, that's a huge asset.
Thanks, Greg.
Thank you.
So with that operator, I think we're done thank you to our listening audience for your continued interest from Liberty media and we look forward to speaking with you again next quarter if not sooner.
Ladies and gentlemen that concludes today's conference call. The thank you for your participation you may now disconnect.
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