Q2 2019 Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to the Liberty Media Corporation, 2019, Q2 earnings 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.
As a reminder, this conference is being recorded August eight.
I would now like to turn the conference over to Courtnee, Chen Chief portfolio Officer, and senior Vice President of Investor Relations. Please go ahead.
Before we begin we'd like to remind everyone that this call includes certain forward looking statements within the he's the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent form.
Yes.
These forward looking statements speak only as of the date of this call and Liberty media and Liberty Tripadvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statement contained herein to reflect any change in liberty media or.
Hi, first expectations with regard there to or any change in events conditions or circumstances on which any such statements are based on today's call. We will discuss certain non-GAAP financial measures, including adjusted to watch on adjusted EBITDA.
The required definitions and reconciliations for Liberty media in Sirius XM, one and you can be found at the end of the earnings press release issued today, which is available on our website now I'd like to introduce Liberty President and CEO Craig.
Thank you Courtney.
Good morning.
Today speaking on the call. We'll also have borne that one's chairman and CEO Chase Carey.
And introducing.
Liberty print celebrities new principal financial Officer, Brian went away.
Rejuvenate will also be available to answer questions related to Liberty trip advisor.
So beginning at Liberty Sirius XM, we continued our purchases of Liberty Sirius XM stock.
And we bought an additional $85 million or stock from the period of May 1st to July 31st.
We effectively bought this had a look through price of the Sirius XM shares at about 411 per share were prepared I think that's pretty attractive.
Well the discount to NAV remained stubbornly high it is lower than its all time high.
And we will continue to take advantage of it if you continue to give us the stock of Sirius XM at a discount I don't want to price.
Our ownership of Sirius XM today stands as of July 26, rather stood at 71.1%.
Looking at Iheart, just for a moment I will call you may recall that we when it emerged from bankruptcy research and my heart debt, which we sold at a slight premium to market.
So I heard cheers or should be pretty much in place I heard chairs and warrant, which we continually hold and 17 million CCOH shares during the quarter, we sold that CCOH stayed for $87 million.
It was on price a 510 per share there's pretty favorably to 27 at the CCM close that yesterday.
We use the proceeds from those share sales to repay a portion of this jury margin law.
Looking at Sirius XM itself and solid quarterly results, including record Sirius XM, ARPU and strong growth in Pandora ad monetization.
The company increased its guidance for revenue and EBITDA during the quarter and a return to capital of $1.9 billion year to date.
Having repurchased all the shares issued in the Pandora acquisition.
Yes, you price for Siri during the Pandora deal was 698 per share and serious sector. We bought back all those shares at an average price of 590 per share dramatically lowering the cost of the acquisition.
Oh, the focal one group looking at that had very strong financial results as well showing the benefits of our investments despite unfavorable variance in the calendar with Oscar included in current quarter barring cooler than last year's Q2.
There's some very exciting races heading into the summer break, including the first victory for Red Bull in their home GP, Austria.
Fantastic performance from Sebastian Vettel in Germany, moving up the back of the grid interconnection second.
And the battle at the end of the Hungarian GP with health and passing for stopping for the win with just three left to go.
For staff and having secured his first pole position.
Chad its continued to grow to the German GP.
We are building out the calendar for next year, including the return of the Dutch GPM renewals, we Silverstone and adult circus.
And lastly, we're very excited for season two of the net book series tried to survive, which will include all of the teams purchase.
Like nation, another very strong quarter with double digit revenue growth.
And during the quarter announced the acquisition of a controlling interest.
Mexico, Mexico's largest promoter.
Bryce.
Okay, 60, 844th and at least seven games had an <expletive> .
We added three we leveraged the roster just prior to the trade deadline, we know that Suntrust Park will host the 2021 MLB All star game.
And we are proceeding phase two of the battery, which is going well.
We started the vertical construction on block C, which has an expected completion in the summer of 2020.
The tests and crop development is also at the grading stage with expected.
Fall of 2021.
You may recall that the 20 of the 2018 season year included several positives that benefited the baseball side of the business, including a very favorable home game schedule.
A competitive team that went into the end of the season, including the postseason and non game day special events.
Well tenets looks good so far this season aided by strong operational performance. Many other the above factors will continue to play out during the rest of the season.
Over at Liberty Tripadvisor, we rolled our existing trip margin loan into a new margin along with additional capacity at a lower interest rate.
Trip announced their earnings this morning, and markets respondents responding well they expanded their hotel media platform adjusted EBITDA margin to its highest level.
2015 through marketing efficiencies.
We expect that the hotel platform segment revenue can get back to growth in the fourth quarter of this year.
And that's despite the group Google aggressively pushing their own metasearch travel products.
We are excited for areas of growth in hotel media and platform segment, which includes scaling media and advertising revenue driving consumer product enhancements that grow membership and cultivate loyalty.
Executing on impactful brand advertising and expanding our hotel b to b product offerings.
During the quarter experiences and dining revenue also grew 28%.
And the total number of reviews and opinions on the site grew $795 million 995 billion with that I'll turn it over to Brian for more on our.
Thanks, Greg and good morning, everyone.
At quarter end Liberty Sirius XM group had attributed cash and liquid investments and 21 million, excluding 215 million of cash held at Sirius XM.
The value of the Sirius XM common stock held at Liberty Sirius XM as of August 7th was 19 billion.
And we have 875 million in debt against these holdings.
Total Liberty Sirius XM group attributed principal amount of debt was 8.8 billion, which includes $7.9 billion.
That's Sirius XM.
Formula One group had attributed cash and liquid investments of 58 million, which excludes 276 million of cash that one.
Formula One group has attributed public market securities with a market value of approximately 5.5 billion us yesterday's close including the inner group interest in the Braves group and our stake in live nation.
Total Formula One group attributed principal amount of debt was 5 billion, which includes 2.9 billion of debt at F. One, leaving 2.1 billion in debt at the corporate level.
That one's total net debt to covenant OIBDA ratio as defined and that one's credit facilities for covenant calculations was approximately 5.6.
As of the ended the quarter.
That's compared to a maximum allowable leverage ratio of 8.25.
We would note that the rates down variances between 2018 and 2019 resulted in income from 22 races falling in the trailing 12 months ended June 30.
We have set a target total net leverage ratio for Formula One group or for Formula One of 5.6 times Bank Covenant waiver, though please note that these leverage ratios are for the Formula one business not the Formula One group.
Lastly, with the Braves.
We had attributed cash and liquid investments of 127 million and attributed principal amount of debt.
470 million.
With that I'll turn it over to Chase Carey to discuss Formula one.
Thank you Brian .
We are now 12 races into the season Im pleased to see Formula one living up to its promise with some phenomenal racing Ethan with Lewis Hamilton at Mercedes and the lead.
Every gram free offers plenty of action both on Saturdays in qualifying and on Sundays in the races.
The races in Austria, Great Britain and Germany.
I've been called the unforgettable trilogy.
The heat in Austria produced a thrilling battle with Max for staff and overtaking Charleston clerk with two laps to go.
This battle and the strong performance of other young drivers bodes well for the exciting future Formula One racing.
[noise] over 140000 fans can to Silverstone on race day to see Lewis Hamilton, when a record six British ground for a victory.
Again, the rivalry emerge between for stepping in look clerk.
But in the end this was overshadowed by Spansion battle driving into the back of the Red Bull, causing the boat to tumble off the track.
The German GP has been referred to as the race for the ages. If you missed it be sure to watch it on F. One TB.
The varying track conditions resulted in seven cars, not finishing the race and 78 pit stops.
Max for staff and won the day, while Sebastian Vettel who started in Twentyth finished second.
Daniel caveat secure third Toro Rosso.
This is only the second podium for Toro Rosso and a great milestone for Honda as the last time to different kind of power teams were on the podium occurred and 1992.
Red Bull set a record for fat fastest pit stop of 1.8 seconds, beating the record they adjust said in Austria two weeks earlier.
Also the Hungarian GP confirmed the attractiveness of the sport.
Featuring an intense battle for the victory between Hamilton in for staff, and which kept the 92000 spectators spectators at the Honey girls ring Restless until the last few laps when the five time World champion took the lead of the race. Thanks to a masterstroke strategy implemented by Mercedes.
Through July 31st attendance is up for the season and on the digital media front, our video views on social media year to date increased 67%.
Minutes watched increased 87% while page views on digital products more than doubled.
The formula to when Formula Three championships have provided great displays on track at every event.
Well there are a number of young talent shining like China China's ones out.
In formula to and Rushers, Russia's Robert Schwartzman Formula three.
Mick Schumacher won its first formula to race in Hungary, and generated huge media Buzz 15 years. After his father, Michael last one at the girl.
These two feet or series are a great addition to the grom free experience as are other fan oriented initiatives like the bond in motion exhibition.
Attracted more than 80000 visitors over the last four grown priests.
F. One TV is steadily improved throughout the first half of the season, and we're getting closer to our targets both in terms of content and reliability.
We were thrilled to announce the season.
That season, two of the Netflix series drive just survive will air in 2020.
For the first time, all 10 teams will feature in the nine per Doc you series.
Given all the drama we've seen on the track we can't wait to see the storylines developing behind the scenes.
One of which is the speculation already building around which drivers will secure seats for the 2020 season.
And we look forward to seeing obesity cancer Steiner of season two.
The 2020 raze calendar continues to evolve and we were excited to announce our return doesn't work for the Formula One Heineken Dutch Grom free.
Which will run for at least three years.
Demand for tickets already far exceeds the capacity of 315000.
And we expect to see season of Orange out to support hometown favorite Max for Stepan.
This is our second new location for 2020. In addition to the previously announced race in Vietnam.
Additionally, we were delighted to extend the British crown free at Silverstone until 2024.
We're focused on preserving formula one's historic venues, Silverstone, which posted the very first Grand Prix certainly fits the bill.
On the other side of the Globe Formula One race in Melbourne until at least 2025.
And again that season launch the season on March 12 through 15 2020.
With Formula one celebrating our seventyth anniversary and our 25th visit to Albert Park next year.
The Formula one Rolex Australian Grand Prix promises to be a spectacle unlike any other.
Clearly we remain in the fortunate position of demand outweighing supply of races. We're thoughtful about how we will manage the calendar for 2020 and beyond.
We value our partnership with their existing promoters.
The balance that that against growth opportunities of our sport.
In business to add exciting new locations.
We expect to announce the 2020 race calendar in the coming weeks.
In sponsorship, we announced morelli as the official telemetry services supplier for Formula one.
This will labor our ability to transfer more live data from the Formula one cars to the broadcast centre and improve the quality and quantity of rates information that can be shared whether audiences worldwide.
Off the track the 2019 Formula one new balance E. Sports series continues to attract the next generation of motor sports fans.
Over 109000 participants took part in qualifying from across a 156 territories.
Of the participants 79% were under the age of 34.
With half below the age of 24.
For the first time ever all 10 teams involved in the pro series selected their drivers at the Pro draft on July 17th.
These drivers will now join their official teams to prepare for the pro series comprised of 12 races contested over for live events and we look forward to a thrilling championship.
We also launched the F. One E Sports series, China Championship. The first regional competition of the series.
The champion runner up for the China Championship will join the 20 20-F, one E Sports Pro draft.
We're glad to nurture the passion for racing in China through F. One E sports and identify the next wave of Chinese talents.
In racing F. One EA sports and potentially formula one in the future.
Well, let me discussions in June between the Fiat Formula one team principals and technical technical directors from the 10 teams for elegant a number of drivers.
It was unanimously decided to defer the final presentation of the technical sporting and financial regulations for 2021 and beyond that till the end of October .
We've made substantial progress to date.
We believe the core objectives have been defined decided to take additional time to further refine the Reg regulations.
I've stressed before that there are many details to be addressed and we want to ensure we think through the impacts of changes we make with the goal of improving the competition actions.
Unpredictability of our sport on the track in a sustainable and attractive situation for the teams participants in formula.
We look forward to providing these regulations later this year.
In summary, we're pleased with our second quarter results and the momentum in our business and our onset and are set to meet our targets for 2019, I will turn it back to Greg.
Thanks, Jason Brian all in all it was great quarter for Liberty media.
As a reminder, we will be holding our annual Investor meeting on November 21st in New York.
The link to register is on our home page of our website.
We appreciate you appreciate your continued interest in Liberty media and with that operator, I'd like to open it up for questions.
Thank you.
Ask a question please signal by pressing star one on your telephone keypad.
Using a speakerphone. Please make sure your mute function is turned off.
Clinton again press star one to ask a question.
For just a moment.
When an opportunity.
Question.
We will now take our first question from Bryan Kraft with Deutsche Bank. Please go ahead.
Thanks, Good morning.
I had a few if you don't mind.
Chase wondering if you could give some color on the a 175 million budget cap per team that's been reported.
Just wanted to understand is at an all in budget for every aspect of it teams up one activities or are there some carve outs.
And is the cap different for teams at design to make their engines versus those that don't.
Also I want to see if you had any update on the res calendar in terms of the number of races. You expect at this point I know you talked a bit about.
Some of the some of the changes and renewals but.
I don't know if you if you have a sense on account of it. So you still expected to be 21.
And then separately Greg just wanted to ask you you know youve strategically avoided any new any new traditional television focus media investments for several years now just curious if there are any pockets of traditional television focus media that you think might be of interest at this point.
Whether it's from a valuation perspective, or you know if you're thinking about the opportunities differently. Thank you.
Okay.
I guess on the two things that.
Budget cap in the calendar.
I'll address.
Hi, Greg.
I want to say too much about it.
The budget cap.
Essentially because we're not through so I think probably will provide more insights to it.
Once we.
Finalize it cited.
It's implemented.
I didn't get it.
I guess a couple of general comments, there are carve outs, probably most obvious one would be something like marketing I mean, what we're really looking to do is.
Is to make the racing on the track more about how well you invest your money not well you spend your money that how much you spend.
To the degree their marketing initiatives or other efforts like that.
Yes.
I think they affect the competition is tracking the focus on the cost competition focused on the cost cap is really to make the competition the action and so on the track and the unpredictability and drama the sport.
Better and make it a healthier business for teams.
So it is focused on.
Those elements there are few other carve outs.
There are number of rather carve outs that we think again.
To make the cost cap implementable.
It makes sense.
But.
I think probably thats, probably leave it at that.
It is a consistent cost cap across.
Across the board for the teams is not it's not a different.
Cost gap that the engine manufacturing there for entities to provide engines that is this is really a cost cap against the car.
So the cost of cost of acquiring engines.
There's a cost to acquire the edge, but that was that the fourteens to manufacture engines.
That we're addressing in a different way.
In terms of the calendar.
We do expect that it will probably get ahead of ourselves we expect to announce the 2020 calendar.
In the next few weeks.
And so.
Yes.
Wait till we have that out there we are fund.
Close to five years.
I think it's largely finalized now.
Yes in general what I'd say about the calendar is.
I think we expect the number races over the next few years.
To increase a bit.
As a limit to how much but I think we expect do you expect it to go up marginally.
And.
As we announced the calendar will provide more insights to do to win when and where.
That occurs.
Thanks, Jason.
Brian I think you know we address some of our general fears about.
Traditional linear.
Cable networks, particularly those that are in scripted which feels like a war zone.
With rising costs.
And rising competition, including new entrants, who have different business models, which are more efficient and allow them in many cases to price.
The content at very low or no cost because they're being mop.
Monetizing somewhere else.
A prime service or something like that so a very scary space.
Linear in total and scripted in particular.
And you've seen us both with our feet on some of the things like.
R&D assets that we either didnt bid on or that we disposed of.
There are niches that could be attractive.
Reported that we.
A bit on some of those.
Those be very much valuation dependent or something where we think we have an angle which is different.
Thats got to be really different though because we don't bring any synergies to the table.
We don't have any existing content assets like that to share.
We obviously have different kinds of content that we're very enthused about including music and things like Formula one, but we don't have scripted or those kind of traditional linear content plays. So I think it's very much going to be situation specific I would point out in some cases, we have found opportunities with things that we knew would eventually decline, but there was a period, where we could capitalize on that and if we found something along those lines. We would do it but it's got to be where we have a very defined story.
It's something we can add to the picture and why it's going to be.
Right or exceed it in spite of a lot of headwinds.
Okay. Thanks, Greg Thanks Chase.
We will now take our next question from Ben Swinburne from Morgan Stanley . Please go ahead.
Hey, good morning, everyone.
Chase I know you talked about announcing the calendar coming out in a few weeks, but theres, obviously been a lot of activity on the race promotion front, there's been some press written about.
Some price reductions fee reductions I'm just wondering if you can help us think about the trajectory of Ray's promotion revenue growth over time.
If you take the changes in terms and mix plus the calendar quantity. If you expect this to be a growth driver for formula One sorry, I guess pun intended on the revenue front that would be helpful and and then for Greg.
Maybe a similar question to Brian but on the music side, we've seen more investment more capital going after just sort of like catalog rights publishing rights.
So the big machine deal I'm, just wondering if you think that's an interesting area to look around given sort of the rise in consumption across platforms for liberty.
Sure So I guess on the calendar.
I guess first week.
Yes, we do think we do view this as a very revenue growth for us. So I guess just to put it simply.
It's probably it's not steady it's not consistent with every.
Yes.
Every event some events are different.
I think in some places the events are more mature.
But.
But I think we do have and do you expect do look for.
This to actually probably.
Increasingly be in every area of opportunity for us I guess I'd say driving it.
Obviously, adding a number of adding a couple of races is a factor.
I think we actually are very excited about the.
The demand interest.
The number of places that want to host a race and obviously supply and demand.
And I touched on it in the opening comments.
He is important and therefore.
We value our historic relationships, but.
It is important to carve out opportunities to add a new race.
The demand is there.
And the appetite there.
For stepping up for that.
And I think there's some places where that I've touched on before we inherited situations, where we were not.
No we're not receiving what we should be receiving.
When when we came in so I think I guess, it's fair to say between.
The supply and demand being in our favor.
The.
Increases raise calendar.
And addressing a couple of the places we're not receiving.
What we think we can and should be.
We do expect this to be an area of growth for us.
Got it.
Hey.
Publishing you know I would say, that's obviously been a very.
An area where.
That's a great businesses and valuations have responded accordingly.
If we had gotten into the publishing's five seven years ago.
And we had a vehicle which.
Would allow us to buy incremental assets.
And you know something looks like the revenue line rather than the cost line are recognizing the lack of cost because you've got the synergies we might be in a position to do that but these things have been pushed up unbelievably.
Yes, it's hard hard from where we stand where we don't bring synergies to the table.
You know we've been lucky to be in some of the best parts of the music business, including obviously.
Performance.
Performed live performances, who live nation, and probably the best part of the distribution business through serious.
Shame on US maybe we should have got the publishing a while ago, but I think it's well you know that's a place where we don't have quite as much to offer today and those values have been pushed up a lot.
Yeah.
Got it thank you.
[noise].
Well now take our next question from BJ giant from Evercore. Please go ahead.
Thanks, Jay you know you talked about the reliability and the user interface on the F. One TV products sort of approaching.
Just sort of broadly do you think the product has enough tonnage to at that price point you have it to really.
Alternatives youre sort of considering on how to repackage that.
To really drive that as you know to be a big free cash flow generator for formula one.
Yeah, I guess in a nutshell I mean, I'd say to you.
You don't see a formula one CBD over top product.
Certainly still at work.
In progress and certainly I think probably improving expanding.
And enhancing the content component of it.
It's certainly a part of that and I think as we think about it you know they're sorta.
Three steps you have to get through.
To really build this.
And they have to sort of happened in sequence.
First which is really been.
We've been working on I think we've made headway as I touched on first is got a technical platform that is reliable.
Yes.
I do think you can't frustrated customers and clearly we had some issues last year earlier. This year I think we've made good strides. So I think platform has to be reliable than we need to find the content experience, that's I somebody's going to buy it.
And then you need to sell and marketed.
Yes, I think you do have to sort of get those things done an order or.
You can't be selling them trying to sell the market something.
Aggressively.
You know the product, it's going to get not.
Not meet the thresholds that needs to be for for consumers.
So I think we are making strides I think on the content side.
Clearly their hands whats to come we still are scratching the surface in terms of things like archival product I touched on sort of enhanced data and information I think that is an important area for us.
And working on a number of.
Ways to cover the spin of the sport more broadly what goes around that goes on around it.
More broadly Buddy.
The content experience and we have talked about it I think we viewed.
The building of the content experience.
That's something that really was going to occur over a couple of years. So we had a foundation, but it's clearly a foundation.
To be enhanced and I think what we.
I expect we'll have there.
I think is something that you know.
It does can and will appeal.
To that passionate fans, we have for the sport, which are significant around the world.
And.
Yeah, and I think we believe it's an important opportunity for us to continue to build on but.
It is a work in progress.
Okay.
We will now take our general from Jeff Lewis Dar Sac from pivotal. Please go ahead.
Hey, good morning, guys Nice guess on the name.
[laughter] at one for Greg in a couple for chase.
Great can you comment specifically on Liberty's potential interest in Univision and then for Chase a couple of follow ups on the budget cap. How comfortable are you that you can those cost caps can be properly enforced and then if you can get the cost caps in place how significant of an opportunity is there to expand the automakers producing engines and all are fielding F. One teams.
Thanks.
No Jeff.
You know I think my comments a minute ago to Brian about what kind of things, we'd be interested and address some of that and I'm not I prefer not to.
Comment on what we might just specifically, but I would say that we need to reiterate we need to have an angle.
The thesis on why we provide some value or why we have a different way to go at it and other buyers might.
Now, having said for a lot of assets out there today in that space there appear to be a lot more sellers and buyers. So it will take those factors into account and see what we can come up with.
Yes in terms of the cost cap.
Yes, and actually one of the real positives is I think the the evolving attitude towards it we feel quite positive about.
Where we are with the cost cap.
In many ways teams that I think.
Some of whom had concerns or issues going is.
Our increasingly supportive I mean, I think by and large right now the support is really quite broad and I think everybody believes it's the it's an important part.
An important element to the future of the sport. So I do think the.
Can you support is built and the teams really are behind it as being.
Important cornerstone to building.
Sport going forward.
And so we wouldn't have done it if we didnt think it was enforceable.
No reason to head down the path from it.
And clearly you've kind of forever for anything what you really need to make sure is you have access to the right information to do the accounting and that just about us being disciplined from about what we need.
Weve addressed that we are going to use 2020 .
All the teams will participate.
Actually it certainly gets a call effectively get dry run because the cost cap will be.
Yeah actually enforced with consequences until 2021.
But in 2020.
Yes, what we actually are really going to go through it was shaking out the bugs and stuff.
Oh, yes.
Accounting.
Of accounting for the costs.
And.
The and clearly one of the goals in terms of the cost cap is great healthier me to talk about the competitive yes.
Goals.
But it is equally important we create the cost cap support a business model that is healthy and.
And growing and positive for our existing teams and potential new teams coming into it and that has been enforced as we've had discussions with potential new teams all have looked at.
Sort of steps in terms of cost discipline and.
And probably a more balanced revenue distribution is being cornerstones to creating what they think.
So it's an exciting opportunity so certainly thats a part.
It's good news thanks.
We will now take our next question from David Karnovsky with Jpmorgan. Please go ahead.
Hi, just one per case would be interested to get your updated thoughts on affluence media rights.
I think your TV contracted the NCCN expires after the season and in some markets you've moved to distribute erases through.
Sports streaming services like the zone. So wondering if that's something you would entertain in the U.S. and then maybe as a follow on to a prior question how are you thinking about.
The upfront TV product as part of this process is it a priority to keep libraries is.
On that service in the us or would you be willing to give that exclusively to live video partner. Thanks.
I mean, it definitely to every market is different.
Yes, I mean, clearly there are players coming into this space that have more yes.
[noise] multi country aspirations as opposed to historically most of our historical players look at.
But in a more single country wide rollout of digital players.
They are expressing interest to come in looking at it.
On a broader basis.
But that being said I think at its core.
The situations do differ.
In each country go into.
In many ways.
That's one TV.
It is now a part of the portfolio.
That we have to figure out how do you optimize.
The opportunity in the market and that is looking at all the players of his free pay.
Yes.
Digital.
Digital platforms that are been a multi multi content platforms or our dedicated content platform like F. One TV.
And what's the best way to maximize the opportunity for us working with whatever that partner is in the country.
We will do it in some places it will depend on.
The partner, we have seen clearly in certainly in the short term.
We are going to have the traditional television world.
He is going to continue to be the biggest part of our.
Of our television.
Universe.
With growing importance from digital.
In some places we've got agreements, where the traditional I'll call it that.
The traditional television partner is partnering us with just distributing and growing up one TV in Hawaii.
So the places we are partnering with traditional television there places to grow F. One TV there places we're doing it more on our own.
And I think that yes.
Certainly certainly will continue to be the business model.
Having this portfolio, which I think is the reality of the world a content today.
In figuring out how do you optimize your short and long term opportunities.
In in each market.
More broadly.
Thank you.
We will now take our next question from Zack Silver with B. Riley. Please go ahead.
Okay, great. Thanks for the question first for Chase I don't think Weve touched on sponsorship you guys too did two big deals.
In the back half of this year with Mws and I S. G. I just curious on how the current pipeline is looking and maybe how much the sponsors.
Partners care about deaf firming up the new Concorde agreement before entering into new partnerships.
Sure.
Yeah, I think the.
Sponsorship arena actually sort of again right now.
We actually feel great about the level of interest.
I think clearly it's been an area where I'd say.
The time required to grow this area of our business.
Has probably been will help a bit longer than we would have anticipated a couple of years ago and.
And that is.
Yes, probably understanding.
It's a more complicated sale in a deeper sale in a more unique cell so we needed to build more capabilities to.
To deal with potential sparked potential sponsors.
And also probably understanding the degree to which.
So why did not really been yes.
Marketed or.
ER, so too yes.
The the the universe of sponsors so it's been both.
Educating potential sponsors on the opportunity, where we're going what we're doing.
Yet as well as creating products that enable us to do that.
Intuit sponsorship world that it clearly has.
For everybody in it.
Sponsorship and advertising.
It is.
It's clearly an area that.
A broader that has challenges but.
But I think we actually feel good about.
It's not even.
Not even more than good about the level of interest the levels like enthusiasm for the product and we've got to sign the deal.
We've got more activity today than we have at any point in time across more categories than we've had at any point in time.
It does take longer to takes longer to sell a client and longer term.
Potential sponsor and longer to close the potential sponsor, but we've got a lot of activity.
Going on and.
Certainly its our goal to turn that.
In the coming months to turn some of the activity in depth into dollars and we feel we're getting there even if its taking a bit longer than we would have hoped.
A couple of years ago, and I think that's going on I think this sponsor Jimmy and I wouldn't say that concrete road as a non factor, but I think theres a general.
Yes, I think the Concorde agreement I think there's a general understanding that.
We're at a pretty good place with the teams that doesn't mean, there are things to resolve but.
We're dealing more with them.
Not that they're not important but detail issues not broad consultant conceptual directional issues.
I'm sure they'll always be noise, just because thats the nature of the Beast, but I think there's a.
A growing.
A growing confidence.
That.
Yes that will will get to a place that is yes.
That everybody agrees everybody can agree to it as much better for the sport Jim can therefore for partners like sponsors.
Got it. Thank you very much and then maybe one for Greg I'd been no rocky few months for terrestrial radio and with that.
Great to hear your updated perspective on Iheart, then, yes longer term plans for that sake.
Well I think the a lot of that rocking as is a function of.
Looking at the stock price and the fact that emerged from bankruptcy.
Due to market conditions and perceptions about the leverage levels. They were unable to complete the primary offering they were going to do that.
Reduce debt and you have a bunch of.
Probably somewhat of a natural holders long term.
Unnatural holders of the stock so a lot of that's credit pressure on the stock I think the business is probably doing okay.
I've got headwinds.
Okay against kind of new entrants, but they also have a lot of strengths on some of the things are trying to do and and the scale that they have so.
We'll we'll watch the business with interest and we'll watch.
How its operating performance is and I would not necessarily think all the things that are happening.
And the stock or necessarily reflect.
Sort of operating results and on the longer term.
Got it thank you very much.
We will now take our next question from Ken on that thing catastrophe. Please go ahead.
Thank you.
Great. If I may 1st on IR, just to follow up on that question.
Given the amount of cash coming out of city is obviously, it's been a source of interest on where that cash is deployed and buybacks at a big source, but.
At some point given the ownership of spend or does it make sense to.
Good they did on the advertising side.
With Iheart being a part of that.
And.
Secondly, when you think about the distribution side of the business.
You know in the past I think you guys have spoken about.
That's really augmenting with Comcast.
And getting into wireless in a bigger way.
Not just on the back office stuff, but also more actively in owning the network.
Could you just update on starts just given the backdrop of the sprint and T mobile transaction on the way its going.
How you're thinking about the space right now thank you.
Well.
On serious cash you does generate quite a lot of cash you used quite a lot of it this quarter too.
Repurchase stock and they obviously have a continuing dividend, which they increase.
Several times over the last few years.
As far as scale in AD distribution, I think thats, a very something that they are clearly trying to do and that would.
Obviously factor in any revaluation of IR.
I would point out that they have been increasing their scale dramatically by things like the growth of the Pandora.
Cpms and Rps, but also the.
Our new ships they have through AD wins with people think Soundcloud, where we're doing a lot of monetization from all those are helping increase scale.
And we'll take all that in mind as we look at incremental opportunities.
You switched a little bit gears, there on the distribution distribution side to charter and I'd say charter and Comcast My observation would be turned Comcast or looking to partner every day in every way that they can because they are naturally a lot of potential synergies around areas like wireless.
Whether that would ultimately lead to something larger putting potentially.
An acquisition, we'll see how time will tell both are growing their MBS, though.
Thanks ships dramatically rising relationship in there and you know theres subs in the wireless side, so as they get that scale they'll continue to look at opportunities, whether it be purchasing spectrum and doing more on their own or.
Perhaps more down the road caught some kind of an acquisition, but that's really not today's.
I think todays agenda.
I think the more focused right now on growing the revenue you know.
Subs and seeing how how the business performs.
And really how it drives.
Some of the other products and how it fits with some of the other products that they sell on there.
Is that they have.
Thank you.
[noise].
Well now take our next question from John Tinker with Gabelli. Please go ahead.
Okay. Thank you.
I notice, it's a portion to say it is now a signed up with Formula E. They obviously, having to move to to counter some of the negative press they've had on emissions can you just remind us what what your relationship is with them or is it purely liberty global that has an ownership position.
I mean, it's just liberty global in and actually discovery, So I guess two entities that in the past.
Or connection to the Liberty whole that are.
That are shareholders in formulation, we do not.
We in Liberty or not yeah engaged with formulation.
Liberty media.
Do you think it would be a good hedge to own a position.
[laughter].
Yeah look I think our real upside is growing formula one you know one of <unk> like one of our priorities and we are going to be more in the fall is really an untold story in formula. One is the strides we've made to date in terms of sustainability.
Hey, the hybrid engine you know that was launched a few years ago.
With an incredible step forward in terms of fuel efficiency, while retaining power.
And we are working aggressively on things like synthetic fuels actually working with them to the oil industry as a whole on synthetic fuels biofuels hydrogen fuels.
And I think you'll see as between now and year end.
The sustainability issue, becoming a much more front and center.
Part of our story and something I should we think we've talked.
In private with number of our partners are quite excited about.
And I think an honest recognition that.
The environmental issue is important to everybody.
And a big part of making strides forward and that is how do you reduce carbon emissions from the combustion engine.
And I think that can be as important as anything out there.
Yeah, we'll also have other initiatives in terms of environmental steps around our live events.
Freighting things two events, so it's a multi dimensional.
Story around.
But I think the part we're putting particular energy into is the degree to which weve well, we're reducing the targets, we'll have for reducing carbon emissions.
With the combustion engine and I think that has more upside for us than anything.
Thank you.
We will now take our next question from Bryan Goldberg with Bank of America Merrill Lynch. Please go ahead.
Hi, Thanks, I had a couple on F. One.
I was curious.
With respect to the U.S. market opportunity for F. One I mean engagement seems to be up in the market you've done a few fan festivals now.
What updates can you provide on potentially getting a U.S. race on the calendar in a market like Miami.
Or elsewhere, and then I have a follow up.
It's important to us.
We've been quite public about our goal to yeah.
For us the opportunity in the U.S. actually our television audiences grow while here this year.
When you look at digital.
Actually I think its been a positive surprise, because we didnt computers go where we weren't doing anything in digital so we stopped to measure the engagement we had in the U.S. digitally.
There are a lot more fans here than I think people.
I believe there are so.
Yes, I think we are excited about those opportunities we've talked about.
The adding races in call destination cities like Las Vegas, or Miami, we've been engaged in the last year there.
I think we've made good headway.
We are continuing to be gets IDE meeting next week.
With parties there.
At meetings month ago Yeah.
There.
So.
I think we.
Fee, we feel is important we feel we're making steps.
Down the road, we are talking to people like that new team entrance.
We.
As we solidify as we.
From up the business model the team ownership, we'd love to have a we have Haas is the U.S. team, we'd love to add to that with the high price high profile U.S. team.
Down the road you'd love to have a U.S. driver that probably takes it takes longer.
But we recognize their multiple elements to continuing to grow and build the sport.
Engage the fan base here.
And it continues to be a priority.
And I think we're.
We're making good headway on it and I think we looked up.
Certainly potentially add add that.
Probably the first step would be adding that race in.
City like mine near Las Vegas.
Thanks, and then I guess.
One on capital allocation I guess, we know what the leverage ratio now I think it's 5.6 times.
And I think an implied value of F. One operating at the at the tracker level, maybe at any point $5 billion range I'm just curious.
How are you thinking about capital allocation priorities.
More de leveraging versus reinvestment.
Acquisition or or returns to shareholders any any updates there would be appreciated.
Yes, there were some.
Okay. Thanks.
You want to check I know I was actually is going to say I mean at least from my perspective again I, probably our focus has been getting the business to where it is I think that will become a bigger topic for us in the short term, but I was I was probably going to.
Let Greg.
It is yeah.
Comments to it.
Yes, but I think the capital allocation, we were more focused on sort of yes, probably to date getting the leverage ratio to where we want it. We're obviously getting there. So I think yes it becomes.
Something that probably has a higher a higher priority and higher focus as we go forward from here.
Yes, and I think there's some anomalies that caused that to be a little a more favorable looking this quarter than the longer we.
I think over the time, we will expect that.
Keep in the five to six range as we've targeted at the Opco level, and we'll see what opportunities arise I'd point out we also have.
In that form tracker.
You know.
Matt Thats, which ultimately may prove to be non core.
Which provide incremental liability incremental.
Excuse me.
Cash so we'll see how that all goes.
Well, we haven't made decisions on.
What our plans are.
Beyond getting into that five to six range and saying.
Thank you.
We will now take our next question from Andrew.
Goldman Sachs. Please go ahead.
Great. Thank you I wanted to ask about Formula one.
TV viewership season to date I was wondering if you could share some.
Statistics on how thats been tracking.
Obviously I understand the shift in the UK market, but any sort of statistics or just your general thoughts about how TV viewership. This season has been going thank you.
Sure.
Hey, good I guess I'd call it Okay, we're actually down.
Yeah on sort of like when we look at it first and foremost Saturday Sunday qualifying.
Right.
Yes down a couple of percent few percentage points, but those are the biggest factor in that.
There's been some anomalies in Brazil.
Where last year with the World Cup going through Brazil, a couple of our qualifying races got sort of stuck got put.
ER positive results either right before or after the meaningful World Cup event that had an impact. So if you take Brazil out look at ARPU. So we have core 24 countries look at if you look at the 23 ex Brazil.
We're actually.
Up a couple of percent.
A few percent year to date and.
You know I think where the season that probably has it been competitive for the last three races have been great.
All else equal back before that.
We had some races that I would not call great.
Which is why we got to continue to improve it.
And clearly the competition at the top Lewis to as credits is got a pretty good lead. So yes, so I don't think.
In terms of.
Generating.
We I think we would hope as we go forward that we have.
More competition, we are going to improve the races for working on improving the tracks and again initiatives too.
So we've had some good races recently, but I think the.
Overall for the 12.
Races to date.
I'd say, it's been okay. So I think with those races in place at looking at some of the other factors like you talked about like the shift in the UK.
And those things have an impact end up saying.
Ex the impact of the World Cup in Brazil.
We're up I think we feel.
Pretty good about.
Thank you that's very helpful. And then one follow up on the same topic.
Chase how do you.
Think about balancing sort of broad distribution over broadcast versus maybe the opportunity to.
Earn higher fees on pay platforms.
Yes, the old management sort of tended toward.
Grabbing the pay platform higher fees, but how do you think about balancing long term short term objectives of the sport.
There's not I mean sort of reach versus dollar Smith, you know Theres no question that that's a ongoing dynamic.
Yes. They both are important we don't have a formula.
To look at it there are too many factors to try to.
Yes to try to sort of put a formula in place that lays over each market is different.
Penetrated as a paid platform, what's the quality of the pay platform in the UK Sky does a great job.
They are yes.
Yes sort of market leading sports broadcaster.
So if there are too many factors to put that form those trade offs are important I think what I'd say is generally.
Which has been true in sort of all sports content, probably content in general the trend continues to certainly be towards pay platforms and to.
I don't think thats going to change that.
Free over the air of the reach is great, but its closing mature business that I think.
Continues to I guess, I'd say more mature himself they're valued partners.
You know in many places the optimum is to sort of step up you have a mix that's not all at once but that isn't always possible.
So.
Yes, I think we.
We look at each on the on the merits, but I'd say, it's I'd say.
Generally.
We you know we do try to.
I think the world I think we will continue to move towards pay platforms, because that's where the world's going.
I think also as you look forward.
People have to realize.
And to get educated that reach.
Theres got to taking on a very different meeting right historically at minutes over the year realistically. If you want to reach up 20 year old today. It's an advice you hold in your hand, it's not 60 inch screen you put on the wall.
So so we are doing a lot to end up.
And to making sure that reach and that connection is as much coming through.
Yes.
These digital platforms as well.
Not just the historic platforms during the question and Uh Huh.
Yes raise showing up.
But over the air broadcast or.
Yes, it's still up.
Great experience, but youre connecting.
With both.
New and old fans in ways you never did.
For and whether that's.
Richard context, or social media.
Okay that flicks no series.
So I think that.
That view of that definitely does your definition of reach as you balance reached dollars.
He is continuing to evolve.
That's very helpful. Thank you.
Yes.
Well now take our last question from Jason Bazinet from Citi. Please go ahead.
I don't know if this is for mr. or Mrs. here, Mr carry but I would think when you are selling right.
It would be a TV rights it would be a pretty rational market.
And when I looked at what WWD step up was I didn't know if you interpreted that as.
Sort of an aberration because their old deal was too low or they split the rights between raw and Smackdown between two buyers or if there was a bigger implication.
It has to do with some of the challenges Mr. Randy was talking about with.
Scripted being saturated and a lot of the programmers trying to lean towards live programming in a linear world.
That would have very positive implications for the long term trajectory for me the ones TV rights. So.
Any sort of comment on that front would be helpful. Thank you.
I'll give you my two cents thing Greg yes.
Give you is too.
Nick I guess I think is yes.
It all comes it comes down to competition.
And.
These your.
Whether its WWL your formula one there UTI content. Unlike scripted there isn't it there's not really a comparable alternative.
But the value gets driven by the competition for the rights Ww, we ended up in a place where you had.
Well, the one player who really wanted those rights and sometimes competition only requires two.
Yes, I think you know.
Got it.
And yes it is.
It is the driving force I think that one of the big way, obviously, one of the core questions for US is how big what does the competition the future for Reits like this probably at the center of that how much does that.
The digital world, which seems to be moving increasingly into the content arena.
Become bigger and bigger players in different shapes and forms for this content.
But I think it's.
Really just.
At its core its competition for unique rights.
I think.
I agree with having changed said I'd only I'd only say I think if you also look at the buyers are not completely irrational, even when there is competition and the underlying value of how much.
Viewership there is and what the perception that fan base and fan affinity and fan activities are all very positive and I think trend well performing one when we look under monetized with a very strong fan base. So.
We hope did you have to see lots of competition, but we think underlying product is something that will merit our attention.
Thank you very much.
Thank you to all I appreciate your interest in Liberty media and look forward to speaking with you next quarter if not beforehand.
Thanks, a lot.