Q4 2022 Liberty Media Corp Earnings Call
Welcome to the Liberty Media 2022 year end conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press star one on your telephone keypad as a reminder, this conference call we will be record.
Today March 1st I would now like to turn the call over to Shane Feinstein, Vice President Investor Relations. Please go ahead.
Thank you and 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, and actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in Liberty Medias mistaken Form 10-K filed with the SEC.
These forward looking statements speak only as of the date of this call and Liberty media expressly disclaims any obligation or undertaking to December .
Any updates or revisions to any forward looking statements contained herein to reflect any change in liberty Media's expectations with regard thereto or any change in events conditions or circumstances on which any such statement is based on today's call. We will discuss certain non-GAAP financial measures for Liberty media and Siriusxm, including adjusted OIBDA and adjusted EBITDA the required definitions.
And reconciliations for Liberty media and Sirius XM schedules one through three can be found at the end of the earnings press release issued today, which is available along Liberty's website now I'd like to introduce Greg Maffei, Liberty's President and CEO .
Thank you Shane and good morning to all of you.
Today speaking on the call. We will also have formula one's president and CEO , Stefano Domenicali, and Liberty's, Chief accounting and principal financial Officer, Brian Wendling.
First let me start with an update on the split off the Braves and the creation of Liberty life tracker.
We filed the amended S four and we still expect completion.
In the second quarter.
Let me turn to Liberty Sirius XM.
Yes.
We expect we will have a simplified structure following the recapitalization of <unk> accretion will ever do like tracker.
And we are focused on rationalizing the structure in the near term.
Looking at Sirius XM, the underlying asset reported strong fourth quarter results with record high <unk> EBITDA.
And record low churn management.
Management did get more cautious forward looking commentary given.
Multiple headwinds we're experiencing here in the early part of 2023.
Top of the funnel in terms of new subscribers is still pressured as the Saar has dropped from about $17 million in 2019 to something like $13 5 million last year.
The AG market remains soft, especially in the first half of 2000 Twenty's rates and we are seeing moderating marketing spend ahead of the fourth quarter App revamp.
Plus we've had some cash impacts.
We expect peak satellite Capex in 2023, and we are now a taxpayer something which previously we had not yet.
We do expect these incremental satellite Capex will moderate in 2024 with nearly no incremental satellite capex by 2027.
By the end of the year.
We're also stepping up some tech investments for long term success.
We are building improvements around commerce and identity to reduce friction and the new App will have more personalization.
As it is within 360 L.
We do expect these negative trends in the AD market and the Saar will turn and we have a resilient business model with meaning free cash flow. So we still remain optimistic optimistic about our longer term prospects.
Turning to live nation.
Continue to see incredible demand.
2022 attendance was up 24% over 2019.
We are all time high for concert attendance. Despite many markets still being closed during part of the year.
We have seen especially strong international markets with 70% of net new tickets sold and 22 2022 were to international clients.
And we expect another record year of demand in 2023.
Ticket sales in 2023 are up 20% versus the same time last year.
And last year also benefited from $20 million of Texas tickets that were rescheduled from prior periods due to COVID-19.
Formula One group.
Great end of the 2022 year attendance.
Attendance records were set we were up 36% over 2019, our fan base is increasing diverse with new fans being younger and the share of females within the fan base, 40% larger than the share and the established fan base, that's been the new SaaS base.
The U S is especially strong.
One in three fans globally started following Apple F. One in the last four years in the U S. It's even higher at one and two.
This is a result of many efforts.
And most of them related to our efforts to drive.
The access to our drivers across all channels not only drive to survive.
But the driver presence on social pages coverage and larger use publications late night comedy appearances on people like Jimmy Kimmel.
And it's interesting to note for example look at our Instagram followers and comparing Cups Lewis Hamilton at $31 5 million person, Tom Brady at $13 6 million.
F. One is clearly getting into the mentality of America.
And looking at the younger talent.
Clark has almost $10 million and Luca Don Chick is that $8 million again, we're doing pretty well.
We will have three U S races in 2023, the second year of Miami capitalizing on the first year success with several improvements around hospitality and security.
We expect the sporting world to be Super excited as we are for the inaugural Las Vegas GP.
F. One Las Vegas, social media garnered over 170 million impressions and over 5 million engagements since September of 2022.
And we launched L. B G P tick tick tock last weekend.
Post had over 500 <unk> hundred 35000 views in the first 24 hours.
Let me turn to the Braves.
We reiterate that we believe the split off will better highlight the value of the Braves.
We grew baseball revenue in 2022, even though we had experienced less post season gains capitalizing on the tailwind from our 2021 World series win.
We had year over year growth across ticket sales sponsorships concessions and retail.
We sold $3 1 million tickets and led major league baseball with 94% of our inventory.
Being sold.
Demand for the season and single ticket games tickets remains high for the 2021 2023 season.
Bleacher report called the Braves front off the front office the number one in major League baseball for the 2023 season, we tend to have great. We were happy to extend manager Brian Snitker through 2025.
And GM Alexander topless invested smartly in the off season.
Adding to the already core talent, we have by locking them up in multiyear deals.
This team has built on young talent and is positioned for long term success and we very much look forward to the opening on March 30th.
With that let me turn it over to Brian to talk a little bit more about our financial results.
Thank you, Greg and good morning, everybody.
At quarter end Liberty Siriusxm group had attributed cash and liquid investments of approximately $305 million, which excludes $57 million of cash held at Siriusxm.
Also $1 3 billion of Undrawn margin loan capacity at the parent level related to our Siriusxm and live nation are margin loans.
As of February 28, the value of our Sirius XM stock held at Liberty Siriusxm Group was $14 1 billion in the value of the live nation interest was $5 billion.
We have $2 8 billion in principal amount of debt against these holdings totaled.
Total Liberty Sirius.
Liberty Siriusxm group attributed principal amount of debt is $13 1 billion, which includes $9 5 billion of debt that's down at the Sirius XM level.
Formula One group had attributed cash liquid investments and monetize public holdings of $1 8 billion at quarter end.
Which includes $752 million of cash at Formula one.
Total Formula One group attributed principal amount of debt was 3 billion. This includes $2 4 billion of debt down at the Formula one level, leaving $565 million at the corporate level.
During the quarter F. One refinanced its term loan and revolver at attractive rates and an extended maturity F. One repaid $477 million of its term loan b in connection with this refinancing using cash on hand.
And at year end formula $1 million to $500 million revolver is undrawn formula one's leverage at the end of the year was two seven times.
On the F. One operating business given quarterly variability in the year over year. If race calendar reminder, that this business is best analyzed on an annual basis total revenue grew 20% in 2022 with growth across all primary revenue streams. Other half one revenue grew 63% or $180 million with approximately 110 million.
The revenue growth coming from hospitality and experiences and approximately $55 million coming from increased rate.
Team payments as a percent of the pre team OIBDA as reported was 66% in 2022 down from 68% in the prior year benefiting from the team the terms of the 2021 Concorde agreement agreement.
As a reminder, other costs of Formula one revenue are largely variable in nature and related to both primary and other F. One revenue opportunities.
Other costs increased from 20% of total revenue in 2021% to 23% of total revenue in 2022.
Primarily driven by compression in freight margins with significant air charter cost inflation inflation during the year as well as increased cost of servicing our additional hospitality offerings.
SG&A as a percent of total revenue was basically in line with historical averages in 2022.
Mentioned in Q3, we did have some modest increases in personnel cost due to the change in the company's L tip from a stock to a cash based long term bonus program and increased head count to support growth.
Also included in SG&A in 2022 was $19 million of costs from the Las Vegas Grand Prix, mostly related to personnel and marketing initiatives.
Looking at 2023, and we look forward to a record 23 race calendar. The calendar will consist of 14 flour flyway races, compared to 12 flyway races in 2022.
As we've discussed before flyway races, typically pay higher fees than the European races.
And on Las Vegas, as previously communicated we expect total revenue approaching $500 million looking at total raised specific economics Vegas is projected to be in the top five of all races in year. One in terms of total profit to the company.
The paddock building is progressing on schedule and the concrete structure will be completed by the end of March capex related to the <unk> building will be incurred in the formula and corporate level and track related Capex is expected to be incurred at the F. One opco level.
The majority of our Capex spend will be incurred at the corporate level, primarily because year round activations static building will be separate from formula one.
We will not be providing a forward looking allocation between F. One opco and formula one corporate capex.
But youll be able to see it in our historical numbers as they get reported.
<unk> will pay rent and other fees out of Formula one opco to the Formula one corporate.
For use of the building during the race period, which will show up in our financial statements as revenue at the corporate level, but will eliminate in consolidation.
We also expect the receipt of advanced payments, primarily related to ticket sales to impact year over year comparability in working capital flows in.
In the first year the Vegas race.
Nearly all <unk> revenue will be recognized in the fourth quarter. When the res takes place, we would expect grandstand and Gi tickets as well as sponsorship revenue to be recognized in primary F. One revenue as race promotion in sponsorship revenue respectively.
We expect hospitality tickets will be recognized within other formula one revenue.
On cost recognition, we expect the vast majority of the race related costs will also be recognized when the race takes place as cost of F. One revenue.
So there will be some SG&A incurred throughout the first few quarters of 2023.
Finally at the branch group at quarter end, they had attributed cash and liquid investments of $151 million, which excludes $22 million of restricted cash raise group had attributed principal amount of debt of $546 million at the end of the year.
Liberty and our consolidated subsidiaries are in compliance with our debt covenants at quarter end and with that I'll turn it over to Stefano to discuss formula one.
Thanks, Brian 2022 was a fantastic season on track commercially with our partners and financially in our results Max Viz Tap ins had seen wins broke records with the most wins in a single season.
The rebel team won their first construct a championship that since 2013, and then APAC competition battles down to the last race without being in the cloud and both tightened for fourth place the feedback from the drive has made it clear the new regulation meant that costs could raise more closely and we saw some great results on the truck.
These actions during the season fueled our growing fan engagements. So it doesn't fit it'll show requisite tenders a grab for events, we welcome more than $5 7 million fast race weekend.
36% compared 2019 demand is continuing in 2023, which sellout crowds expected at the number of races diseases.
<unk> was once again the fastest growing major sports league on the planet in 2022, instead of social media followers, we had $60 6 million total followers.
93% from 2021 and saw significant growth in markets like the U S, where social followers went up 42%. This 2021 to $4 5 million at.
Additionally, can also have one dot com and the F. One app unique users were up 11% best doesn't 'twenty, one $225 million.
Viewership cumulative TVE audiences for the 2052 season was 1.54 billion and average viewership of race was 70 million U S. Viewership was up 36% compared to 2021 with an average of 1.2 million viewers tuning in all raised.
<unk>.
Looking at some other markets each of the viewership grew in 2020.
22%, Australia was up to 20% and Germany viewership grew 9%.
With our newer younger demographic the digital Shadow F. One video minutes consumed grew from 16% in 2021% to 24% in 2022.
And in those months of F. One growing global popularity technological relevant says sustainability of Ford's Ford announced their return to F. One from 2026 in our new partnership with Red Bull.
Ford is a celebrated name in motor sport with a story of the F. One history dating back into their <unk> and they are the third most successful engine manufacturers in <unk> history.
We expect pours involvement as a technical engine provider will bring value not only to reboot, but to support the growing fan engagements has benefited both new and renewed commercial agreements F. One grew revenue across all primary sources promotion media rights and advertising.
In sponsorship.
In addition, our pathos lab hospitality products performed especially well in 2022, its first full season of operations since the onset of the pandemic.
We welcome 50000 guests over the season with sell out at 12 out of 19 events. In 2023, we are focused on optimizing the value of our paddock led by expanded the premium services. We also continue to enhance the guest experience and adjusting pricing.
Turning to recent updates on our commercial agreements Ah race promotion, we extended our racing Zandl trance doesn't 24, and 2025 and the 23, that's Grand Prix is already sold out the promoter has focus on sustainability is uncertain with 99% of general admission.
The oldest in 2022, arriving by public transportation bike or unfold.
We signed a number of large brokers the agreement throughout 2022, including the new in our partnership with Sky in major European markets and with the ESPN in the U S.
More recently, we entered into a multiyear media rights agreement, we'd been sport to exclusively broadcast F. One intense territories across Asia.
Our Fox sports agreements in Mexico was extended through 2025, we also renewed our partnership with place forward in Belgium for 2023, and 2024 and our agreement with the zoning Japan through 2025.
F. One TV continues to grow in popularity among new and edit edges fence. The product is now available in 120 countries on <unk>.
Sponsorship just last week, we announced the addition of Qatada ways as a global airline partner under multi year agreements that will also be the title sponsors three races.
Looking forward there are number of areas, we continue to explore for additional sponsorship opportunity, including travel financial services food and beverage telecommunications and more.
Our team is continually building fan engagement opportunities to capitalize on our momentum the fifth season of drive to survive as of February 24th.
The 2023 F. One the esport qualify round is being has through may 25th and we hope to build on the strong engagement from last year when 1.3 medium players attempt to qualify.
The new license program F. One of our key launches first location in London in December hosting over 600 Epsilon guests and celebrities as the official launch party with finished the excitement on F. One with 60 full motion racing simulator.
The second venue will open in Birmingham in the UK in the fourth quarter 2023 with additional locations planned to follow a new F. One exhibition with also launching Madrid later this month and remained there before moving to Milan anytime for detailing Gregory. This is a 90 minutes immersive experience guiding visitors through the <unk>.
At present, and the future of the sport and its planned to visit 25 cities around the world over the next decade.
We are counting down to the start of 2023 seasons.
<unk> finished the last week and with another year of improvements of the track we are expecting even pieces competition on the track Ferrari and Mercedes is simply eager for that come back there will be new phases on degree with Nick the Breeze, Oscar yesterday, and a promising young American driver Logan's surgeon as well as the return of an equal hoods.
Good.
The 23 raised commensurate he said they could fulfill more one.
We made the decision not to replace China on the calendar and the most of the economic benefits of our replaces race was the worst the logistical and sustainability considerations with F. One and other things.
There will be six sprints event housing Azerbaijan or sweat spot, Qatar, Austin and Brazil the.
The spin series have been successful in driving attendance and engagement across the entire weekend for our promoters and broadcast partners.
The 2023 calendar will feature three race in the U S, including taking to the streets of Las Vegas for a night race in November we announced Heineken silver as the title sponsor and T mobile as the exclusive wireless provider.
The plan to deploy and thus <unk>, probably net loan race weekend that will power our customer in the App and then hasn't efficiency all the fan experience.
Our second wave of public ticket sales, we launched soup and in spring the love the gains, albeit still facing the track roads with digital plans in place to minimize disruption to the Las Vegas flow of traffic in the process.
We have made a long term investment in Las Vegas, which we expect to set us up to the race for Vegas took up and finally, we made several announcements pausing our opposing sustainability diversity and inclusion F. One recently announced that global charity partnership with UNICEF to help bring quality education to the world's most book.
Children building on the F. One long history of promoting stem education worldwide.
We also look forward to the brutal F. One academy in 2023. This he does intend to maximize the potential of young female drivers to reach the highest level in motorsport provided those currently go karting other juniper taboos with access to the fundamental as clean as needed before ration at three and working up to form.
Well the <unk> Lucas he's a five teams run by current at 203 teams each entity free cash to make up our 15th cause grades.
The first season will comprise 21 total races, and then as a support events at the Austin Grumping October I'm delighted that today, we have announced Susan worldwide. The managing director of the affluent Academy. She has a wealth of experience as a driver and team principal and will provide huge value to the project.
Rapid 2022 and look in 2023.
One is that the strongest position it has ever been this year, we launched a new brand campaign demonstrating at one place in the Sporting and Entertainment War, given new fancy reason to actively engage with SaaS twenty-three season, and keep coming back for more.
F. One is an unmissable, an extraordinary perspective, and a three legged stool and intoxicating what affection innovation and entertainment.
On and off the track where.
While the extraordinary potential of technology into work comes together to make the difference between winning and being for Gov.
This is not only support this is permanent one avanti to tab.
So full speed ahead, and now I would turn the call back over to Greg. Thank you Joe.
Thank you Stefano and thank you Brian .
And to our listening audience. We appreciate your continued support of and interest in Liberty media and with that operator, I'd like to open the line for questions.
Absolutely. Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from the JV or not with Evercore. Please proceed with your question.
Hi, good morning.
Greg.
The Braves hot spin about to get done and the recapitalization of the Reattribution Liberty live and you you sort of talked about the rationalizing the structure of Liberty Sirius I think can you sort of talk about the prospect of doing a hard spin of Liberty Sirius boast the reattribution is any.
Limitations on that you know when you did liberty.
Entertainment many years ago, you know even before you talked about a combination with Directv you did a hot spin and then over time is that something that's something potentially possible structurally and from a tax efficiency perspective.
And then for Stefano.
You know you have I think 10 global sponsors is that you talked about a lot more opportunities in different verticals is there more opportunity to have more global sponsors or are we sort of topped out at that and if I could one final on it you know it looks like the logistic costs that is paid by the teams, but it seems sort of elevated.
And I'm trying to understand is some of the inflation impact of that being passed on to the teams is that something are.
We should expect to continue or was that sort of a one off factor. Thank you.
Yeah.
Okay I'll start Vijay that was so long ago that was one of those questions I almost forgot what lost but.
Thank you.
So look we have lots of things, we could do including a spin of theory, but I think there are probably.
Discussion to be had with <unk>.
The Sirius XM independent board members about the best structure moving forward. If we were to do something but all elements are on the table all options around the table and as we said we look we're looking at those with renewed vigor and we believe we are much better execute on any of those post the Liberty live reattribution of the brave spin.
Step it up.
Yeah I.
Thanks, you Dave for the question I used up for the second of these logistic goes to.
So last year was a combined factor that we.
We had to pay for that and included the team, but I would say the first signal that we see already the she is going into the right direction.
<unk> of our.
These logistics supposed to be reduced and in that respect that he is also the other element that we're trying to be even more efficient in order to make sure that the you know the things that I've done in the proper way and and and this is very very very important to shape up and and then on the other side with regard to the partner So of course, we want.
To keep the exclusivity.
Value and and and we want to put on the other side. The final number of that is in portable it's important that we get the right value to the global part of it but also to the other verticals that that would come into the equation. Because you know we never had such a strong pipeline. So he's up to us really to make sure that everyone has the right visibility and Val.
For what is basically related with us.
Alright, thanks, guys.
Yeah.
Our next question is from Ben Swinburne with Morgan Stanley . Please proceed with your question.
Thanks, Good morning.
Two.
For me one question I guess first for Greg or Stephane whoever wants to take it report, but certainly both.
It's pretty clear and I think definitely at this point last year that the value of the teams has significantly increased especially from where you bought the business years ago, but I don't know if I have a clear idea of how that benefits F. One the company and ultimately shareholders.
It does but.
I'd love to get your perspective and in particular.
The award is asking the first Concord agreement question for 2020 six but does this allow or enable our support your ability to sort of continue on this path of operating leverage into the new agreement.
Because of the amount of value creation at the team level. So that's that's I guess any more interesting question and then I'm going to try and O'brien you guys don't like to give guidance, but I just wanted to take another take a stab at the G&A commentary because we're getting a lot of questions on that this morning 80 million Opco in Q4 is there a way for us to <unk>.
About how sort of recurring that level of G&A is as you move into 'twenty three and then you mentioned marketing and I guess when you guys talk about a top five economic race for Vegas are you, including these incremental G&A costs that are happening outside of the quarter.
Oh, that's it thank you.
So Stefano I'm happy to take a cut and then or or let you leave the other way.
One of the things we are.
Strong credit Chase and credit Stefano So it's easier for me to go first elect give them the credit one of the things that we at Formula One with Liberty's helped I've been trying to do is build a mentality.
All credit the NFL for which is one league that we benefit when everybody benefits and yes. The teams compete very hard on Sunday and Monday, we need to think about growing the entire ecosystem.
And it was critical that.
We have healthy teams so that we could have a healthy league and it was critical that they had a prospect of making money even the teams towards the back of the grid.
So that we could have a prospect of also making money.
And they've seen radical increases in their value, we've seen pretty good increases in our value, but we're here to play the long game and doesn't mean, we won't have disagreements with the teams about how much of the pie as ours on how much the pie as theirs, but trying to build the mentality that as you gain we gain and vice versa and that that we're playing the long.
I'm here is really part of our goal.
And so I think we will have.
Our strength in hand in the cut next Cochrane agreement not.
The whip hand, but a hand, saying hey look we're here to grow the value and youre going to be benefit from it and we want to see your team value grow dramatically.
Stefano Please correct me.
No I totally agree Greg if I may add just two consideration its own thing.
Financially it.
It means also the strength of the entire system to invest with the also their strategy to gauge more with fans and partners that will have a direct effect to the growth and the strength of the business itself and we don't have to forget that there's not that many years ago and.
But these were suffering and we as that's one we're there to support them financially.
And this is something that we don't have to forget that's why we really believed that the more value we get to the teams the morbidity we'd go back to the system.
And to the entire business.
And then on the on the SG&A piece I'll talk about it from the full year basis.
But you.
<unk> seen an increase obviously related to the Las Vegas Grand Prix, that's $19 million that was elevated in the fourth quarter, because we had our launch event and marketing activities around initial ticket sales.
We also talked about the L tip moving from stock compensation expense to a more like a personnel expense. That's in there now you won't see that you won't see that increase so it's in the base.
And then there's other one time items in there there is higher legal and professional fees associated with a couple of different matters.
ERP implementation and a few other onetime items that are affecting SG&A.
So on your question about whether SG&A is included in our statement on top five race at most definitely is.
Great. Thanks, everybody.
Thank you.
Our next question is from Barton Crockett with Rosenblatt Securities. Please proceed with your question.
Just switch gears to sports teams and just wanted your your kind of use Greg on.
You know what's behind the kind of vibrant activity, we're seeing right now in acquisitions of sports teams in many sports at premium prices.
You know I'm thinking out to talk around Manchester, United Milwaukee Bucks in axons.
Maybe Washington, Commander, certainly Denver Broncos, there seems to be a lot of prices coming in that are way above what we're kind of set the values that these teams were carried added things like Forbes or sport of coal and I'm. Just wondering if you have any thoughts about why.
And you know if this could be applicable that baseball in your view and.
And then is there any potential for this to be disrupted by all of the noise around local TV rights and the risk of that carries to an important revenue stream.
Yeah.
A couple of thoughts I mean, I don't have any.
I believe unique thoughts on the value of sports teams you've seen.
A lot of commentary about these are trophy assets, there's a limited number.
They've been good stores of value that increase in global popularity only means that they have more interest globally and more fan and more potential investor interest globally. I think those are all true isolating which of those factors hard to for me to say.
I think thats certainly going to be true of the Atlanta Braves is true with them as they are on their.
Trading value the longest contingency operating franchise in United States.
Storied history of winning a storied history of economic success.
Hard to think of a a more perfect franchise in many ways.
Okay.
Obviously, there are changes coming in the ecosystem.
I feel pretty good about those changes for a bunch of reasons.
I do think you will see net revenue declines across all of baseball with the decline of the RF sensors. So I think that's in the short term at least that's almost inevitable with some of these contracts are done there maybe operations, which prevent that but it seems more likely than not.
But about our relative position I feel very good having the largest <unk>.
Cable household or a broadband household territory, having a very large dedicated fan base, having a relatively modest rss feed given the scale of those that territory.
All anecdotal evidence we know suggests that we have the most profitable RSM for the artists and owner and distributor so.
There's plenty of confidence that there are reasons why they would want to stay engaged and there are a lot of other broadcast outlets, which would want to be involved with the Braves given the strength of all the things that I started with so you.
The disruption is certainly there the potential but I feel very good about our relative position and frankly, the financial health of the Braves gives me more confidence in that too.
Okay. That's.
That's great. Thank you.
Okay.
Our next question comes from Steven elastic with Goldman Sachs. Please proceed with your question.
Great. Good morning, maybe for Greg on F. One I think you said that.
Roughly a third of a fan started following us one over the last few years I mean that certainly makes sense with looking at the attendance.
He says well maybe looking ahead could you talk a little bit more about your confidence in what you've learned in the half.
And as I've come into the sport, maybe because of drive to survive or social media over the last few years in terms of lifelong fans smart and maybe more broadly what do you see as the next most important levers to drive growth from.
I'm here.
Well I'll comment, but I also want to Stefano to add.
Look we are.
Very focused on sustaining the growth and interest in F. One in many many ways that's with new innovations on the track ensuring a more competitive racing with new innovations on around the weekend like the sprint races lots of ways to grow fan <unk>.
First on the track lots of ways to grow fan interest in some of the things we do off the tracking to exposing the drivers drive to survive was obviously a key part but not the only one I think you know.
We're helping and the teams are helping create what will be a very exciting movie next year with Brad Pitt and the directors of top gun Maverick and produces a top gun Maverick all of which we think will be another thing to sustained growth. The Las Vegas race is going to be a massive noise.
Noisemaker for our sport and annoyed and will open up our support to many people who previously were not aware.
While there are 16, and 17 year olds, who are crazed and get up every Sunday morning to watch there are many people who really do not follow a formula one it will be hard to Miss Formula One after Las Vegas, It will be lot loud.
And we will get a lot of attention. So we're not only thinking about things, which are current but we're thinking about things for the long term to try and sustain that interest convert that interest into long term fans.
And I think we have a lot on the plate and many more in front of us that we're working on to do that it's definitely what would you add please.
Yeah.
Would say that the drag yet.
The main sport can pillar.
Sure culprit, we took about basing on the sporting side on the technical side on the financial side. These are elements of which we really are focused because we have shown in the short term that we find the idea is to improve the spectacle of the racing itself, but it's got to add another.
Another dimension is related to the fact that we have an entertainment platform that is growing we are working on new form of finally engagements with the different social calling to when you weigh all but connecting with media, but also we do not forget one thing that I would say, it's getting more and more relevant the way that we are doing.
Now with sports in the context, where we are talking about a very important values. When we were talking about the diversity and our approach is when we talk about that with social responsibility when we're talking about our ideas to develop on the system.
Besides of it I think that all of these are new elements of discussion are elements that are tracking new people new fans of Formula One and also we have the opportunity to talk about these.
These things with a different voice and the total voice of course is different depending on who we want to engage with but that we add up last one I'll kind of activity, so, but I have no connectivity needs that the all the elements that are able to attract interest has to be discussed and operated in the way that hopefully we have shown.
To be very see this up.
Great. Thanks for that and then just one more quick one Brian mentioned of team payments came down as a percentage of freaking chair of adjusted EBITDA.
EBITDA in 2023, we know those are variable I was wondering if you'd be willing to speak to at what point are you starting to see some of that operating leverage come through in 2022, and maybe what investors can expect to see on this front in 'twenty three.
Yes.
As you rightly point out team payments, where it were a source of.
Margin expansion in 2022.
That was offset by the freight compression that we've talked about higher hospitality.
Although we still have very attractive margins in the paddock club.
But as we've talked about before with the 'twenty one Concorde agreement as our profitability grows we have increased leverage on those team payment calix.
And as we pointed out before there's some one time items in SG&A. So we would expect some numbers.
Great. Thank you.
Our next question is from Peter So piano with Wolfe Research. Please proceed with your question.
Hi, good morning pleasure to be on our Liberty call.
Question on F. One operating expenses in particular I wondered if you would discuss puts and takes for Opex as we move beyond 2023.
Given that 2023 Opex includes some one time costs for the <unk> event in Vegas.
And then the second question is on your global popularity. It's obviously on the rise and we all agree that the U S is going to see a wonderful benefit from Vegas.
It happens I wonder as you look at other professional sports leagues in the ways they leverage their brands, what what best practices outside of the core events are you looking at that you think you might be able to replicate enough one thanks.
So I'll take the Opex, one first but.
As we pointed out freight margins had been one of the biggest pressures on our other cost of Rev.
Revenue and we basically absorb that in 2022. So you wouldn't expect to see that continue in as we go forward.
Hopefully you can see some leverage their hospitality costs.
As we just said there's good margin so vague.
<unk> will play in we Havent given the Opex number we've just given the revenue number and overall profitability, but you'll see opex increase associated with Vegas as you would expect.
But yes, we would expect leverage as we move forward.
Yeah.
Ethanol that can handle the second.
Yep.
Yeah can you hear me Peter.
Yeah, Thanks, Stefano Hello.
Okay got it.
No I think that the global popularity as you said these growing and and and and this is a fact and I would say what we we had to bring you know me is the fact that the all the other sports League business are really interested in understanding how our group was so fast and dramatic and but of course, we have quite humbled in depth approach because we want to learn.
Third from everyone around the world, but what we can capture in order to increase it.
Let's see.
Our our way of growing I think that is one key that is very important is the way that we engage with our drivers.
With defense and they are really the voice the authentic voice all of the pieces that we have it we feel that the sharing with them. There is possibility of all of that upon the engagement is giving us an incredible looked at action because then that's attractive.
Approach will turn into business you should think about gaming you should think about the site that the drive that defense wants to attend to.
As if you will if you see that the Paas wants to follow the council and other social media. So I think this is the really one of the key elements of that is quite unique and that I think on that we will work even harder to make sure that these these voice gets even stronger.
Thanks, so much.
Next question.
Our last question is from Jason Bazinet with Citi. Please proceed with your question.
Just had a quick question on Formula one.
Can you just if vegas is as successful as you expect it will be can you just talk about gating factors of constraints.
That are ahead of you in terms of expanding that into other cities.
I'll take a cut and I'll, let Stefano.
Vegas is unique for many reasons.
One the economic opportunity is large.
We're not.
We're operating in a country, which liberty is reasonably familiar it's pretty close to us the ability to go negotiate and make something happen on a street circuit rather than in one circuit made it easier in many ways there wasn't a promoter natural promoter.
It was a role that was good for us to fill in and it was good for us to test.
Some of the theories we had about promotion. So it was a unique opportunity and great. It's a great test lab.
Could there be other cities I think there are many countries, where it's obvious we would be less effective as a promoter than the U S. There may be some where we can operate reasonably effectively or maybe have some form of co promotion and that could be interesting, but I do not I think vegas is relatively unique in terms of being a kind of a place where we would go all out and do what we have done.
And what we are doing here in 2023 in Vegas.
Definitely what might you add.
Yeah, I couldn't agree more I think that that is it absolutely totally right. Then we don't have to forget that.
In such a short time, we moved it in the news I mentioned, but he's been at the promoter in a way you know that nobody was thinking toward possible. So first step for us is to make sure that we need to make.
Make sure that they get these rights first the first attempt. So total focus on that and then of course I'm sure that these will have an incredible push kudos to promote to see what is really what can be done better. So I think that already but that will be an incredible push whatever you want to to to push for a better qualitative reserve.
Helpful for everyone. We have a huge demand around the world to host the Grand Prix and not put them in the U S. But those antibodies. So these could be you know expedia that can be used to better organize rumbling in the future, but so far let's make sure that we are totally focused on making they just.
Super special with that.
Got it thank you very much.
So operator, I think we are done so to our listening audience. Thank.
Thank you for your interest in and support for Liberty Media.
We hope to speak with you next quarter, if not sooner and I think operator, we can end the line there.
Thank you. This concludes today's conference we thank you for your time.
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