Earnings Call Transcript - BATRA Q3 2023

Operator, Operator

Welcome to the Liberty Media Corporation's 2023 Q3 Earnings Call. As a reminder, this conference will be recorded November 3. I would now like to turn the call over to Shane Kleinstein, Vice President, Investor Relations. Please go ahead.

Shane Kleinstein, Vice President, Investor Relations

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K and 10-Q filed by Liberty Media with the SEC and the most recent Form 10-Q and registration statement on Form S-1 filed by Atlanta Braves Holdings with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Media and Atlanta Braves Holdings expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media or Atlanta Braves Holdings 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, SiriusXM and Atlanta Braves Holdings, including adjusted OIBDA and adjusted EBITDA. The required definitions and reconciliations for Liberty Media, SiriusXM and Atlanta Braves Holdings Schedules one through three can be found at the end of the earnings press release issued today, which are available on Liberty Media and Atlanta Braves Holdings website. Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Gregory Maffei, President and CEO

Thank you, Shane, and good morning to all. 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. Also during Q&A, we will be available to answer questions related to the Atlanta Braves Holdings, and the Braves management will be available as well. So, beginning with Liberty SiriusXM, we did propose a combination of LSXM and SIRI. The goal is to rationalize the dual corporate structure, create a single share class, and benefit both groups of shareholders. We believe such a combination would lead to enhanced trading dynamics in new Sirius with increased liquidity, less technical pressure, for example, a small short interest, and a higher likelihood of future index inclusion. We will provide updates on this potential transaction only if and when an agreement is reached. So, let me turn to Sirius itself. Q3 results demonstrate what management had put forward during the year that there would be continuous improvement throughout the year, and we saw sequential improvements in self-pay net adds, and we expect a slightly positive back half of the year. EBITDA grew 4% versus the prior year and 6% sequentially, and there were $40 million of cost savings that were realized during the third quarter. The dividend was raised 10%. The Board approved that, showing continued confidence in Sirius' cash flow generation capabilities. Sirius also announced an expanded partnership with Ford to make SiriusXM a standard feature in all traditional F1s, beginning with the 2024 model year. That's important because the Ford F-150 has been the best-selling vehicle in the U.S. for over four years. Management does remain focused on its strategic objectives, supported by the significant EBITDA and free cash flow generation. You will see a new streaming experience and branded platform announced next Wednesday, the day before our Analyst Day by the Sirius management team at their own event, and we believe this new experience will be able to drive engagement and enhance subscriber acquisition and retention. Turning now to the Formula One Group, we announced in September our planned acquisition of Quint. Quint is a provider of hospitality inventory, and they sell unique experiences to F1, the NBA for the NBA All-Star game, the Kentucky Derby, and other sporting events. We believe this merger or this purchase will enable us to enhance our partnership with F1 and lead us to expand to other live sporting events. Quint is a high-growth asset with EBITDA and cash flow positive capabilities and currently already is both, but we'll expect it will grow more over time. Turning to other things at F1, during the quarter, in October, we repriced the $1.7 billion of our F1 term loan B, and we tightened the spread there from 300 basis points to 225 basis points. At F1 itself, we see a surge in popularity, and it continues. We've had continued sellouts in the grandstands in the Paddock Club. We've seen growth in engagement and awareness across social platforms, TV, digital platforms like F1T, social consumer media, and others. You continue to see new interest in Formula One. For example, we've seen new investors, high-profile investors joined at Alpine, Rory McIlroy, Anthony Joshua, and Patrick Mahomes, and that follows Ryan Reynolds' investment in June. This morning, at F1, we also announced a 5-year extension of our race in Brazil through 2030. We are excited for the inaugural Vegas race in just under two weeks. The Pit Building is ready. We received the certificate of occupancy to operate for the race. This will be the largest Pit Building on the F1 calendar. The rooftop deck and wraparound balcony will provide 360-degree views of the track. The temporary structure is in place. The bridges are complete. We are ready to go. This event will offer an unparalleled fan experience. It's going to kick off with an All-Star line-up for the opening ceremony Wednesday before the race, which will air on ESPN2. To name a few, they'll be Keith Urban, Andra Day, J Balvin, William, and others. We'll also have Netflix hosting its first-ever live sporting event, the Netflix Cup. This will be a golf tournament with F1 drivers and PGA Tour players, and it will stream on Netflix on November 14 at 6:00 p.m. Eastern Time. The Vegas race is generating record-breaking sponsorship levels with new marquee brands, and these examples include Moet Hennessy and Google Chrome. But more importantly, we think the biggest experience will create commercial opportunities beyond the race itself and accrue to the broader F1 ecosystem. The Amex partnership we recently announced is a great example, and there are more to come. We did incur significant expense in launching year one in Vegas, and that included extra provisions for safety, security, and traffic planning, which was required by local regulators. And we had several nonrecurring items, for example, our first-year only opening ceremony, as I mentioned, and the design and launch of our multipurpose app and creation of a fan database. We remain highly confident in increased efficiency to operate there on our growing profitability in years two and beyond, and we remain bullish on the broader value creation at LVGP that far outweighs the increased investment in start-up costs. Let me turn now to Liberty Live Group, where we issued new $1.15 billion of two and three-eighths live exchangeable in September, $918 million of those proceeds were used to repurchase 93% of our existing LYB exchangeable. Looking at Live Nation itself, another record quarter announced. Looking year-to-date, they've sold 140 million tickets versus 121 million for the full 2022. Revenue was up 36%, AOI was up 33%. They saw strength in all markets, venues, and price points with international leading the way. Year-to-date, concert fans are up 21%, with international fans up 34%. Per-fan profitability is up double digits globally at operated and owned theaters and clubs, and sponsorship has been a tremendous win with a new large deal with Mastercard driven again by growth in the international concerts platform. Live sees continuing tailwinds into 2024 and beyond. Consumer wallets are continuing to be spent on live experiences. We see untapped potential in the continuing globalization of live business, and large venues are showing a pipeline and sponsorship commitments, which are up double digits. Lastly, looking at the Braves, it was an incredible season on field and off the field, even if the playoff run was obviously more disappointing and ended earlier than we had hoped. We finished with the best record in Major League Baseball, 104 wins against 58 losses. 3.2 million tickets were sold, a new record for Truist Park. We won our sixth straight National League title. The Braves have won the most division titles of any team in baseball since the institution of Divisional Play in 1969. Braves had strong financial performance. Baseball revenue was up 11% year-to-date from increased ticket demand and attendance, and the Battery continued to benefit from increased traffic and rent growth, with adjusted OIBDA at the mixed-use up 15% in the nine months versus the prior year. And with that, let me turn it over to Brian for some more on our financial results.

Brian Wendling, Chief Accounting and Principal Financial Officer

Thank you, Greg, and good morning. This morning, I will discuss our balance sheet figures, comparing the balances as of September 30 to those adjusted for the split-off completed on July 18 and the reclassification of our tracking stocks finalized on August 3, which you can see noted in the release. At the end of the quarter, Liberty SiriusXM Group had attributed cash, liquid investments, and monetizable public holdings totaling $339 million. Excluding $53 million of cash held at SiriusXM and including our Battery stake valued at $65 million as of September 30, we anticipate these shares will be exchanged with third-party lenders to reduce debt shortly. Additionally, we have $1.1 billion of undrawn margin loan capacity at the parent level related to our SiriusXM margin loan. As of November 2, the value of the SiriusXM stock was $14.9 billion, and we have $1.4 billion in principal amount of debt against these holdings. The total attributed principal amount of debt for Liberty SiriusXM Group stands at $11.5 billion, including $9.4 billion of debt at SiriusXM. After the quarter ended, Liberty SiriusXM retired the remaining $199 million in outstanding face value of the 1.375 basket convertible notes. Turning to the Formula One Group, at the end of the quarter, it had attributed cash and liquid investments of $1.5 billion, which includes $947 million of cash at Formula One. The total attributed principal amount of debt for the Formula One Group was $2.9 billion, including $2.4 billion of debt at F1, leaving $500 million at the corporate level. F1's $500 million revolver is undrawn, and its leverage at the end of the quarter was 2.2 times. As Greg mentioned, F1 repriced its term loan B in October, resulting in a margin compression of 75 basis points down to 225 basis points. The F1 business is best analyzed on an annual basis due to its variability in the year-over-year rate calendar. However, I will briefly comment on the quarterly results. During the quarter, F1 acknowledged a higher proportion of season-based income since eight out of 22 races took place during this quarter compared to seven out of 22 last year. The race mix also positively impacted our financial results in the third quarter, having two flyaway races in Singapore and Japan this year versus France in the prior year. Formula One's OIBDA grew in line with revenue during the quarter. We achieved leverage on fee payments while also making incremental investments in growth initiatives not incurred in the previous year, such as the Vegas race and F1 Academy. Year-to-date, our team payments for the first nine months represented 64.6% of pre-team OIBDA. I should also mention that Q2 and Q3 generally have higher payout ratios due to a greater mix of European races during these quarters. Other costs of F1 revenue and SG&A should be viewed as a percentage of total revenue. Other costs of F1 revenue for the quarter comprised 21% of total revenue. Revenues and other costs related to the LVGP will primarily be recognized in the fourth quarter when the race takes place. For SG&A, the third quarter included $8 million of costs related to the LVGP. As Greg mentioned, the Paddock building is now ready. Year-to-date, through the third quarter, we incurred around $280 million of capital expenditures related to the Pit building structure and track preparation. The majority of the capital expenditures have and will be incurred at the corporate level concerning the Pit building, as the land and buildings are owned by the Formula One Group, separate from the Formula One OPCO. Track-related capital expenditures have been and will be incurred at the F1-OPCO level. At the Liberty Live Group, attributed cash, liquid investments, and monetizable public holdings were $417 million, which includes the ETF assets. There is also $400 million of undrawn margin loan capacity related to our Live Nation margin loan. As of November 2, the value of our Live Nation stock was $5.7 billion, with $1.2 billion in principal amount of debt against these holdings. During the quarter, we raised $1.15 billion in new 2.375 Live Nation exchangeable bonds, part of which was used to repurchase approximately 93% of our outstanding 0.5% Live Nation exchangeable bonds for $918 million. There is $62 million still outstanding on the 0.5% bonds, which have a September '24 put call date that we plan to settle with the remaining proceeds from the recent issuance. Liberty and our consolidated subsidiaries complied with their debt covenants at the end of the quarter. Briefly, regarding the Atlanta Braves, revenue growth during the quarter mainly reflects increased attendance at regular season games and growth in related revenues such as ticket and concession revenue, which more than offset the impact of having one less home game in this period. Battery mixed-use revenue increased due to higher rental income from both existing and new tenants. However, baseball operating costs rose in the third quarter, primarily due to increased player payroll and higher minor league expenses. SG&A was also elevated in the third quarter, largely driven by costs related to the split-off. Now, I will turn it over to Stefano to discuss Formula One.

Stefano Domenicali, President and CEO, Formula One

Thanks, Brian. Good morning. We are coming to the end of an action-pack triple header in the Americas, from Austin to Mexico City and this weekend to Brazil. Max Verstappen of Red Bull has had an incredible season winning their second consecutive Constructor Championship and third consecutive title. While the Championship has been secured for several races, the other teams are still competing; firstly, with tight battles all the way down the field at every event. We have had six different teams represented on the podium season-to-date. McLaren, Mercedes, and Ferrari have gained strength throughout the season evidenced in Norton with Lando's excellent start and excitement around the various strategy implemented. Santa Luisa is getting closer to Max in Austin and Mexico and four Ferrari poles in the last six races. We have more battles left to witness for the remainder of the season, even with the number of teams shifting focus to their 2024 cars. With gaps in performance appearing to be closing over recent events, we hope for a real challenge for Max and Red Bull next year. Our business is in a position of strength. Fan engagement is high, and commercial interest is strong. The teams have sustainably improved their financial health, generating their own incremental sponsorship, which benefits our entire F1 ecosystem. And we have a number of brand expansion initiatives in the works, including the much-anticipated collaboration with Brad Pitt. I will have more to share on our strategy to capitalize on this momentum at Liberty's Investor Day next week. Braves attendance in 2023 continues to sell out. The highlight of the third quarter was the record 480,000 weekend attendance at Silverstone for the British Grand Prix, the highest recorded in any event in recent decades. Other highlights include the Japanese Grand Prix's total weekend attendance of 202,000, the highest level since 2006. The Netherlands sold out with 305,000 fans. Singapore sold out with 260,000 last weekend in Mexico, so another record with 400,000 attending. These are massive crowds for the countries where we race. As we've discussed, our fans are increasingly engaging with F1 content across multiple media platforms, including linear, digital, and social. We are building richer and more varied content across media to satisfy the various types of fans. All in all, the global audiences averaged approximately 70 million. Growth markets have seen solid year-over-year growth in viewership, including Spain, Australia, Mexico, as well as the U.S., where we have also had particularly strong growth in F1 TV subscriptions. We've seen growth in digital video viewership with the F1 YouTube channel reaching almost 10 million subscribers, plus 14% year-over-year. Across our social media channels, F1 reached 67.6 million followers as of Q3, up 26% year-over-year. TikTok is now the fastest-growing platform on social media, growing existing and new fans alike. A massive audience gravitates towards both racing and lifestyle content across our social channels. We launched our F1 23 game in June, and the U.S. is now the biggest market for our game, surpassing the U.K. for the first time. According to OpenCritic, the game continues to be the highest-rated annualized sporting game franchise globally. F1 continues to advance our approach to audience measurement as consumer behaviors evolve. We aim to better capture our wider viewership and engagement for the future as we continue to grow these touchpoints. Turning to recent updates on our commercial agreement for race promotion, we look forward to the '24 race championship calendar next year. We recently renewed our agreement in Belgium for an additional year in 2025 after record year race attendance of 380,000 this season. The promoter has invested in its capacity increases and more variety entertainment for fans in recent years, which has benefited their attendance figures. On media rights, we entered into a strategic partnership with Viaplay in the Netherlands that will allow their customers to access F1 TV Pro as part of their Viaplay subscription, providing fans with incremental commentary, camera angles, radio communication, and more. Our agreement with RTBF in the Netherlands and Belgium were also renewed for multiple seasons. This past week, we announced an expansion of our agreement with DAZN to broadcast F1 in Spain in an attractive deal until the end of 2026. A market with strong growth in TV viewership this season. TV Pro and access subscribers continue to grow and provide a tailwind to our media rights revenue. On sponsorship, our recently announced new multiyear regional partnership with American Express welcomes them as the official payment partner for F1 in the Americas, and for Las Vegas, card members will have special benefits and access across F1 races in the Americas, including presale tickets and curated on-site benefits. We were also thrilled to renew our agreement with Pirelli and Liqui Moly. Pirelli will remain F1's global partner until 2027, securing their place as a long-standing supplier to Formula One. Liqui Moly will also continue as an official partner under a multiyear renewal. Overall, demand and interest from sponsors continue to be strong, given the growth in our brand and the opportunity to align with F1's sustainability initiatives. We continue to have meaningful success in securing new and renewed sponsors, and we are confident in our coming pipeline. All eyes are now on Las Vegas as we countdown to the Grand Prix weekend. While the race itself will be a spectacle, it has also generated exciting noise that benefits the entire F1 ecosystem through increased commercial interest, fan awareness, and broader brand value. The fan experience will be unparalleled. The team has continued to invest in creative offerings for its fans, including the announcement with the Wind Grid Club, a first-of-its-kind membership program that will debut at the Las Vegas Grand Prix. The program is designed for F1 enthusiasts and will provide members with an unparalleled hospitality experience, including exclusive access to locations within the Pit building and bespoke services. Incredible members will also enjoy year-round benefits to additional F1 races and services through our over Wind properties. As part of our partnership with the brand new Sphere, we will be taking over from Wednesday to Sunday, race weekend, to display a combination of unique partners, F1, and Las Vegas Grand Prix. The team in Las Vegas, led by Renee Wilm, has secured a number of new partnerships in addition to the previously mentioned Americas fresh deal. With the agreements announced this quarter, the Las Vegas Grand Prix has now secured over 20 partnerships to date for the marquee event. We are committed to raising Las Vegas in the long term. The total local economic benefit of the Grand Prix this year is expected to reach over $1.2 billion, which includes the direct spending from F1 to put on the race, the incremental spending by visitors, and the impact on local suppliers and businesses. In addition, the Las Vegas Grand Prix will generate an estimated $25 million that will be allocated to K-12 public school and is developed in a STEM program that will be implemented in the County school district in the coming years. Perhaps a future F1 engineer will be born from this. Finally, F1 continues to progress on our sustainability and diversity and inclusion efforts. F1 Academy completed its debut season in Austin; congratulations to victory. And as we promised, she has now secured a fully funded seat within the underlying our determination to ensure the best in the Academy series move upward to the system. The F1 Academy finale was broadcast live in over 100 territories, marking a significant extension of coverage. This demonstrates the support of our broadcast partners and their commitment to bringing F1 Academy to both existing and potential new generation F1 fans who can be inspired by this incredible racing talent. Additionally, our ambition efforts in the development of 100% advanced sustainable fuels are advancing well. Just last week, our partner, Aramco, announced that they will start operating two facilities to produce synthetic fuels by 2025. Our partnership with DHL to use bio-fuel trucks across Europe this season was highly successful. They reduced emissions by an average of 83% compared to diesel-driven trucks. The use of bio-fuel will continue into 2024 and beyond. And we are excited about the insight we are gaining this year as we're exploring further opportunities in the connection with the event. We have only three races left in the record-breaking season. I want to thank our F1 family, FIA, fans, teams, partners, and shareholders for all of their support and enthusiasm this season. Our own excitement isn't done yet. With the battle for standings outside of first place likely to come down to the last round of racing, we hope you tune into Brazil this weekend before we make our way to the Las Vegas Grand Prix and then wrap up the season. I look forward to providing additional updates at Liberty's Investor Day next week. Full speed ahead! And now I will turn the call back over to Greg. Thank you.

Gregory Maffei, President and CEO

Thank you, Stefano. As some of you may have noticed, Albert is retiring after 20 years at Liberty. Many of you know Albert and the significant value he has brought to our shareholders. Most recently, he was Chief Corporate Development Officer and previously served as Head of Tax, a role he continued to influence. Thankfully, he will stay on as a senior adviser. We have a strong team in both corporate development and tax, and we will keep expanding in those areas. I'm glad that Albert will collaborate with them and me to pursue future investment opportunities and refine our tax strategies. We look forward to seeing many of you at our Annual Investor Day on Thursday, November 9, in New York. You can find more information on our website. John Malone and I will be leading our annual Q&A session. If you have questions you'd like to submit in advance, please email investorday@libertymedia.com. Just a note, none of the questions can be about comedy. We appreciate your ongoing interest in Liberty Media and Atlanta Braves Holdings. Operator, let's open the line for questions.

Operator, Operator

Thank you. Our first question comes from the line of David Karnovsky with JPMorgan. Please proceed with your question.

David Karnovsky, Analyst

Hey, thanks for the question. On Formula One payments, our team payments year-to-date, if we look at the implied figure for the full year, I think it's down a bit relative to where it was in August. Greg, you noted significant launch in nonrecurring costs related to Vegas. So I wanted to see if you've adjusted your expectation for the economics of the race in the first year?

Gregory Maffei, President and CEO

I'm going to discuss Vegas briefly, and then I'll allow Brian to reiterate or clarify his comments about how team payouts can sometimes be misleading when viewed on a quarterly basis. First of all, I believe Vegas is proving to be a larger spectacle and more impactful than we initially expected, but there have also been some initial start-up costs. I mentioned a few, such as increased security and one-time expenses like the opening day ceremony, but there were also others like consultants who helped us with the setup and unusual permitting costs. Overall, there are several initial costs that are likely higher than our original estimates. I remain very optimistic about the overall impact of Formula One in Las Vegas and the potential for this race to be a profitable venture on its own.

Brian Wendling, Chief Accounting and Principal Financial Officer

Yes. And just year-to-date, we're running at 64.6%. As you rightly noted out, you can see an implied decline in the overall team payment for the year, but those are covered by what Greg noted. But Q2 and Q3 tend to have a higher percentage team payment than what we typically see for the full year just because of that higher mix of the European races that have lower economics versus flyaways.

Gregory Maffei, President and CEO

So to say another way, as we come into some of the races that have higher revenue, one might expect that the payout ratio will be higher payouts to the team but a lower percentage overall. So this quarter may not be indicative of the full year number. Does that help?

David Karnovsky, Analyst

Yes. And just sticking with Vegas for a second, it looks like there is a possibility of a labor strike next week at the hotels. Obviously, this could resolve before the race, but how are you thinking about the potential impact should a work stoppage go through?

Gregory Maffei, President and CEO

We have worked with the unions, and I believe our race will not be impacted directly. We're obviously watching what impact that may have on the overall Las Vegas market.

Operator, Operator

Our next question comes from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Benjamin Swinburne, Analyst

Thanks. Good morning. Congratulations to Albert, and I guess, the IRS.

Gregory Maffei, President and CEO

He's not quite finished yet. Fortunately, we're going to keep him around a little longer, so I don't have to say goodbye just yet. But go ahead, Ben, I apologize.

Benjamin Swinburne, Analyst

No problem. Greg, to clarify, are you still anticipating around $500 million in revenue for race weekend, which would place it within the top five EBITDA numbers? Or has that outlook changed today?

Gregory Maffei, President and CEO

I have a few thoughts. I believe those revenue figures are still a reasonable estimate for profitability. I mentioned that we've experienced some one-time and start-up costs that may have exceeded our expectations. However, it’s important to remember the impact this has on us, both directly and indirectly; this is a very profitable venture for us. Regarding being recognized as a top five, we don't disclose which events are in that category, but we acknowledge that this one will have a notable impact. I still believe that’s the case, especially when considering the overall profitability for F1. I expect to see that profitability, as I mentioned. Once we move beyond these initial start-up costs and optimize, we will see an increase. To clarify, this year, our focus is on being present, being punctual, and delivering an excellent race. That doesn’t mean these same goals won't apply next year, but I believe we will be able to optimize various other factors as well and enhance profitability.

Benjamin Swinburne, Analyst

Okay. Greg, you recently mentioned at a conference that in light of the Disney and charter situation, along with rising interest rates, inflation in sports rights is likely to be affected. You just announced a new deal, and there were reports about Apple that you may not be able to address. Could you share your thoughts on the current market conditions for sports rights from a seller's perspective? Also, does this deal suggest a future direction for forecasting your sports-related businesses?

Gregory Maffei, President and CEO

There are several factors to consider. If you are a fully distributed and more stable sports property, trends related to market fragmentation and overall pricing could raise concerns. However, we have observed significant increases in some properties. Our situation is somewhat different, particularly in the U.S., where we are still in the early stages, but our product is gaining traction and our audiences are expanding rapidly. Therefore, I feel much more confident about the F1 renewals than I do about the overall market. Various elements in the broader market, like fragmentation, create challenges in finding scale. Properties often struggle to balance payment and audience reach, and this challenge will become more pronounced with market fragmentation. Nonetheless, factors such as the SAG strike and the rising costs of scripted content make sports a still attractive area with potential for scale. While there are several opposing trends that make me cautiously optimistic about the overall market, I remain very positive about F1.

Benjamin Swinburne, Analyst

Is Europe tougher than the U.S.? How would you compare those?

Gregory Maffei, President and CEO

I think the reality is most of the trends that are negative are further along in the U.S. than in Europe. But a lot of cases, Ben, as you know, how would sports rights get bid? Largely a function of which distributor in the market needs the product or wants the product and it could be a market where there are multiple bidders you're going to do very well, and where there are fewer bidders, you will do less well. And that may almost be unrelated to what is going on in the market in that particular geography.

Operator, Operator

Our next question comes from the line of Bryan Kraft with Deutsche Bank. Please proceed with your question.

Bryan Kraft, Analyst

Good morning. I guess I wanted to ask a couple, if I could. Greg, what do you think the time-line will look like to reach an agreement with the Special Committee of Sirius, assuming you do reach one? And whether you just answered that question or not, I was wondering if you could maybe address the second one, which is if you do reach an agreement, once that agreement has been reached, what would be the key milestones and the probable timing to close the spin and merge? And then separately, I just want to ask you about Quint events. Once you close that acquisition, are there significant advantages to F1 from owning the asset? Or is it more of an opportunistic acquisition to pursue growth opportunities outside of F1?

Gregory Maffei, President and CEO

Okay, Bryan. Let's start with my previous comment about not discussing the negotiations or timing any further. If an agreement is finalized, it will likely require a shareholder vote due to the ownership structure on both the LSXM and SXM sides. Given our significant equity ownership and the way they operate, it should proceed more quickly. However, we still need to account for the usual regulatory approvals from the SEC and FCC, which I anticipate will cause several months of delays even after a deal is finalized. Regarding Quint, we’re genuinely enthusiastic about it for various reasons, and I’ll let either Stefano or Renee add their insights. We’re excited about its potential contributions, especially as we focus on a trend in Formula One that emphasizes a deeper understanding of our customers and fostering direct connections. Initiatives like the app, our Las Vegas presence, and Quint enhance our ability to grasp customer preferences and needs. This trend will further empower the F1 ecosystem and enable us to achieve more. Quint is pivotal because of its engagement with some of our key customers and the opportunity to leverage their expertise to enhance our understanding of our current customer base and broaden it as well. Additionally, Quint's presence in areas outside of F1, such as the NBA and Churchill Downs, presents appealing opportunities. We believe there are numerous sporting and live events that could benefit from Quint-style experiences, and we see potential for Liberty to assist in connecting with those leagues and opportunities. We're excited about the advantages it can bring to F1 and the collaborative possibilities in the broader sports arena. Stefano, would you like to add anything?

Stefano Domenicali, President and CEO, Formula One

No, I believe, Greg, that you highlighted the crucial point for Formula One. We need to better understand our customers. The growing demand we see globally is tied to the experience, and this acquisition will enable us to communicate more effectively with them and provide improved products and opportunities that will bring them closer to our F1 world.

Bryan Kraft, Analyst

Greg, if I could ask one follow-up just on the first one. I think you mentioned FCC is in Federal Communications Commission matters. I guess my understanding is there would be no HSR approval needed because you already have hard control. Is there an approval needed? How should we think about what the FCC's role would be?

Gregory Maffei, President and CEO

My understanding is that Renee, you want to go?

Renee Wilm, Chief Legal Officer

Yes. No, I'm happy to. It would be very much a pro forma application process, likely done within 45 to 60 days is what we're expecting. I think the longer will be the SEC review, which to Greg's point, should take a few months, I think maybe four to six months to get the entire thing done after we have an announcement.

Operator, Operator

Our next question comes from the line of Vijay Jayant with Evercore. Please proceed with your question.

Vijay Jayant, Analyst

Thanks. A question on the Las Vegas race. I'm assuming that the OPCO is paying the holding company as a promoter, given Liberty Media spent money on the track and the land as a sort of promotion fee. So when Greg talks about the profitability of the Vegas race, are you assuming that includes that payment from the OPCO to the holding company? Or is it at the operating company, the profits you're expecting from the race?

Gregory Maffei, President and CEO

Well, Vijay, you're correct that there is that relationship. I think we are talking about the totality, but also, I think, over time, how the OPCO will be a very profitable race as well. So I think you can look at it both ways.

Vijay Jayant, Analyst

And then Stefano talked about the attendance in all these races. Can you confirm that the Vegas race is sold out for ticketing?

Renee Wilm, Chief Legal Officer

I'm happy to take that one. We have a handful of tickets left, and the last-minute demand is strong, which is typical for Las Vegas. We didn't reserve tickets for that reason, so we are very excited and expect to be sold out by the time of the event.

Gregory Maffei, President and CEO

Los Angeles for Las Vegas relatively late, which is part of the war strategy.

Operator, Operator

Our next question comes from the line of Stephen Laszczyk with Goldman Sachs.

Stephen Laszczyk, Analyst

Maybe just a follow-up on the media rights strategy for F1 to the extent you'd be willing to add to Ben's question. I would just be curious to better understand how you would think through the pros and cons of entering a longer-term exclusive global media rights deal with a single distributor? Just curious to the extent you think the Formula One IP could be well-suited for that type of structure over the long term? And I have a follow-up.

Gregory Maffei, President and CEO

Thanks for the question. I think we've tried to be consistent in answering this. There's always a trade-off between reach and profitability. There are relatively few, if any, distributors today who have the global reach that individual players do in their respective markets. So you would be thinking hard about that trade-off. And you can see that in some markets where we've actually tried to play both sides of that, where we made some of it's on broadcast and some of it's on pay because we don't want to see all of our product behind the paywall or which is not widely distributed. So I don't have a comment other than you're always going to weigh that trade-off, and it depends on how we feel about the maturity of the business and in each respective market. And the length of the deal we're willing to cut in many cases is dependent on how far we are on that curve. I note we've noted before, in the U.S., we're fairly nascent, and we try to keep a shorter-term deal partly because we think we will do better as time goes on. In other markets, where it's more material, we're willing to talk about more stability. And there is benefit in many cases for the distributor to have more stability because they will be able to make a greater investment in the product promotion, et cetera, if they know they have the long term. So you weigh all those factors.

Stefano Domenicali, President and CEO, Formula One

And if I may add, Greg, on that correctly saying about this ratio between reach and profitability, the spirit of this change is different from country to country, from region to region. And this is really the reason why the media market today is quite complex. But we do believe that with the mix that we have, we will take advantage of the strategy put in place today. That's why we are very confident about it.

Stephen Laszczyk, Analyst

Got it. And then maybe one on the sponsorship side. Could you talk a little bit more about the regional deal with American Express that you recently signed, maybe the value you saw on each other to bring this deal to the table? And if you think that could be a good template or framework for other payment providers or financial institutions on a more global basis?

Gregory Maffei, President and CEO

I'll let Renee elaborate, but I want to highlight that Amex stands out for several reasons. Not only is it a strong company with a great brand and a compatible audience for us, but it also has a significant presence in the Las Vegas market, which has driven our connection there. This illustrates how Las Vegas is a leader for us, expanding our reach. Additionally, our digital capabilities will enable regional players to present sponsorship options and opportunities in their respective markets. Renee?

Renee Wilm, Chief Legal Officer

So I would just add to that something Greg mentioned earlier around the importance of data management and understanding who we are and being able to work with American Express on their platform has really proven to not only help us move the hospitality early but also to get more visibility into who our fans are. So we think this is going to be a great win across the board.

Operator, Operator

Our next question comes from the line of Stephen Glagola with TD Cowen.

Stephen Glagola, Analyst

Were these initial start-up costs for Vegas fully captured in the increased CapEx guidance last quarter? And what are your expectations for recurring annual maintenance CapEx for the Grand Prix Vegas?

Gregory Maffei, President and CEO

I believe we are not making any changes regarding CapEx from what we communicated last quarter. My comments were mainly focused on OpEx. The costs I discussed, such as security and the opening ceremony, are relevant here. I don't think we are making any announcements about CapEx today. I want to clarify that there will likely not be significant ongoing CapEx for maintenance. However, there could be CapEx for year-round activation as we explore new ways to utilize the facility. We have not yet determined or forecasted these costs because we are still working on what that might entail. Therefore, we don't have a specific number or details to share at this time as we are evaluating various activation opportunities. Our primary focus is on November 18.

Stephen Glagola, Analyst

I appreciate that. And if I can just ask one more with you or Stefano. With the FIA approving last month, can you just give us any updates on your views with respect to adding to the grid? How are you evaluating this? And what are the potential gating items for you to get incrementally more inclined to admission or reject?

Gregory Maffei, President and CEO

I'll let Stefano answer that.

Stefano Domenicali, President and CEO, Formula One

Yes. okay. Thanks, Stephen. I mean, as you know, there is a process that is in place. So as always, we don't have to give any anticipation of right role of doing its first assessment. Now we're in the process of doing our assessment on the commercial and marketing side. And as soon as this process will be finished, of course, we will inform everyone accordingly. First of all, of course, sharing this info in the first instance with the FIA.

Operator, Operator

Our next question comes from the line of David Joyce with Seaport Research Partners.

David Joyce, Analyst

I wanted to turn to the Liberty Live tracker. Just wondering what your opportunities and constraints are there? Conceptually, what might be some logical next steps for that? Might you buy a music venue that could allow you to spin that off in five years? Or might you do something like you propose to do with Sirius? And given that you've got such a discount at that equity, would that be something of interest you think with Live Nation to combine, given that they've got a significant cash balance now?

Gregory Maffei, President and CEO

Thank you, David. Our strategies for Liberty Live are evolving. We view it as an opportunity to expand and grow, creating an ATB that could allow for a potential spin-off in the future. Liberty wants to maintain flexibility around this. However, our primary goal is to develop a strategy, possibly in partnership with Live Nation, focused on incremental and additive opportunities that we could own, which we believe could also be beneficial to Live Nation. Currently, there are no specific plans or intentions regarding this, but we are generating ideas and exploring them.

David Joyce, Analyst

And second, if I could, on the Atlanta Braves on the RSN side of the equation, that's significant revenues annually that's coming from the RSNs. Is there any update or any thoughts on how that could be replaced if needed, either by the league or your own capabilities?

Gregory Maffei, President and CEO

Derek, do you want to handle that?

Derek Schiller, President, Atlanta Braves

Yes, sure. So obviously, there's ongoing legal with this situation. So we don't want to go too far with what we can say on it. I think probably the best way to answer this is we are continuing to deliver what we are expected to do under the terms of our agreement. And up to this point in time, they are you expect that to continue.

Gregory Maffei, President and CEO

Yes. Derek's way being more cautious than I would. I think our understanding is this is among, if not the most profitable of Diamond's RSNs reflecting the large territory we have, the high demand that Derek and his team have built around the Braves and the relatively not the highest payment among RSN payments. It is very profitable in our sense. So I do not believe they will be rejected. But given the strength of the territory and the strength of the Braves, people's interest in Braves embrace, I do believe we could replace that revenue stream or a good portion of it at least with other alternatives.

Operator, Operator

Our next question comes from the line of Jason Bazinet with Citi.

Jason Bazinet, Analyst

I just had a question on Formula One. You guys have accomplished so much with this asset since you bought it. The concrete agreement growing sponsorship, tweaking the calendar, increasing the popularity of the sport. I would just be curious, over the next three to five years, other than getting to know your fan base better, which you mentioned, what do you think the top two or three opportunities that remain are?

Gregory Maffei, President and CEO

I believe we have three or four major revenue streams, all of which have potential for growth, starting with broadcast. The rising interest in the sport worldwide, especially in the U.S., has opened up opportunities with a wider variety of distributors and the increasing presence of digital players in the market. As more people become aware of these sports, their willingness to collaborate increases. For instance, companies like DAZN and Netflix are beginning to engage with us regarding golf and Formula One, albeit on a smaller scale, but it's a promising start. This creates various opportunities for us. Regarding the races, we are not planning to increase the number of races at a significant pace, if at all. However, the limited supply combined with the growing demand for races and the interest from various cities or venues allows us to leverage this situation to elevate requirements and prices. As evidenced by the turnout at events like Austin, there has been a surge in demand that has benefitted promoters, enhancing their profitability and scale. We are thus able to negotiate better financial terms, not in a harmful way, but because it's advantageous for them, with other interested parties ready to step in if needed. In terms of sponsorship, we've seen significant growth in recent years and I believe there is even more potential. For instance, American Express has transitioned from a traditional approach to offering a more integrated digital experience and activation. This reflects our improved understanding of our customers and presents further opportunities. Additionally, in hospitality, we've enhanced offerings like the Paddock Club, driven by demand, allowing us to raise prices. Overall, I see all four revenue streams as robust with significant growth potential. Stefano, did I overlook anything?

Stefano Domenicali, President and CEO, Formula One

I think that the list is already quite interesting and full. But for sure, the concept that we have seen about Amex, the regionalization is another key factor of attracting new partners, and this was going to be our strategy. But we do not forget that two other areas, for sure, will be very important, is licensing and merchandising, where we just at the beginning of restructuring where we can really see potential of what we can do. I mean we don't have to also underestimate the potential of being bigger on social and bigger on the of the sport and being able to connect more and more with these new initiatives with our fans, we will be able to provide services that, of course, we have to pay back for us. So an incredible time in front of us. And that's the beauty of the sport that we are investing now really believe in it.

Gregory Maffei, President and CEO

I believe our last question.

Operator, Operator

Our final question comes from the line of Barton Crockett with Rosenblatt Securities.

Barton Crockett, Analyst

I was curious, Greg, about your thoughts about the opportunities for baseball overall to create a better streaming experience than the kind of fragmented circumstance that's developing right now with teams doing their own kind of local streaming, their own local broadcast. Do you think over time there should be some type of aggregation of the local team rights into new streaming or an existing streaming platform to optimize kind of the experience from a market opportunity and from a consumer experience perspective? Do you think that should happen? Do you think it can happen if you guys play a role in that, that creates value for your shareholders?

Gregory Maffei, President and CEO

I'll comment, and then I'll let Derek add. Baseball was an innovator with MLB.com, everything back to Bob Bowman that they did with BAMTech. And much of that has been accrued to the benefit. And I think with the increased interest in the sport this year, all to the good, you're right that the local rights regime is complicated. And how that has been divided has made probably some innovation more difficult over time. We, at various times, have looked at that and potentially partnering with MLB to help on that. I think there are many plans out there being looked at, none has yet come to pass, but there's surely a demand in the sport. Derek, what would you add?

Derek Schiller, President, Atlanta Braves

Yes. Thanks, Greg. So what I would say, just on the macro level, not trying to get too far ahead of baseball or the commissioner's office in this. But you think about baseball and maybe even ahead of that, live sports content is still very much in demand regardless of all the changes and fragmentation happening in the marketplace. So I think being in the live sports content business is certainly a very good thing. And then looking at it from just the Braves lens, a little bit to Greg's earlier comments, we have a very large marketplace. We are significantly advantaged in that marketplace, especially against a lot of our peer sets. And so there's a lot of opportunity, and that disruption might happen. But at the same time, I think the opportunity for us and for the broader sport is certainly there.

Gregory Maffei, President and CEO

Thank you all for your interest in Liberty Media. I think that was our last question. We look forward to seeing you in the Atlanta Braves. I don't mean to our Braves friends. I so used to being part of the family. I don't have to call them out separately. Thank you for your interest. As I said, we look forward to seeing many of you next week in New York and if not, on our next earnings call. Thank you.

Operator, Operator

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.