Liberty Media Corp Q2 FY2023 Earnings Call

Good morning, and welcome to the Liberty Media Corporation's 2023 Q2 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. As a reminder, this conference is being recorded on August 4th. I would now like to turn the call over to Shane Kleinstein, Vice President of Investor Relations.

Thank you, and good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 and the registration statement on Form S-4 followed by Liberty Media and Atlanta Braves Holdings with the SEC on June 8, 2023. These forward-looking statements speak only as of the date of this call, and Liberty Media and Atlanta Braves Holdings expressly disclaims 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 regarding these statements 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 can be found at the end of the earnings press release issued today, which is 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.

Thank you. Good morning. 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 the Q&A, we will be able to answer questions related to Atlanta Braves Holdings, and the Braves management will be available too. Starting with some corporate updates. Atlanta Braves Holdings began trading as a C Corp on July 19th. We believe this Split-Off will better highlight value at the Braves and its real estate. For example, the BATRA A shares and the K shares are up 38% since the Split was announced last November. We also settled all of the remaining inter-group interests in connection with this Split-Off. Today marks the first day of trading for our new trackers, and we expect that more focused equities and increased future flexibility will trade better and be easier for investors to follow. Beginning with Liberty SiriusXM, this simplified tracker consists only of an 83% interest in SiriusXM, cash, and debt. We continue to reduce debt in the second quarter, retiring the remaining $275 million of our two and one-eighth exchangeables for SiriusXM, and we expect having the 1.8 million new BATRA shares at LSXM exchanged for debt retirement in the near term. We reiterate the focus on rationalizing the SiriusXM and LSXM structures in the near term. Looking at SiriusXM itself, it reported strong financial results with an improvement over the first quarter as was expected. We had a sequential improvement in self-pay net ads, and we expect a positive back half in the aggregate in self-pay net ads. SiriusXM has sustained a historically low churn of 1.5%, and the business is focused on improving efficiency and cost structure which will benefit EBITDA in the coming quarters. During their announcement, SiriusXM increased its full year free cash flow guidance by $50 million to up to $1.15 billion. During the quarter, we experienced continued progress on lowering the streaming cost for customer acquisition, which was down 20% over the prior year. Data shows that the second half is a great accelerant for in-car conversion as well, and we are making progress on our next-generation SXM mobile app which will launch this fall. SiriusXM is maintaining its focus on enhancing its in-car position, and I'd note, electric manufacturers, which are a growth area, are an area of new success for us as demonstrated by our agreement with Volvo. Turning to the Formula One Group, at the corporate level, I remind you that the assets consist of F1 ownership and the motorsport related assets we have including the Vegas property. During the quarter, we effectively repurchased $1.1 million of FWONA shares in settling the inter-group interest that was previously held at LSXM for $6,750 a share. At F1 itself, the number of fans engaging with F1 content across the platforms is bigger than ever. Stefano will give you more stats in a moment, but to name a few, we continue to have sellouts at almost all races. The Sprint weekends are driving year-over-year growth in viewership. For example, the SPA total audience across race, sprint, shootout, and qualifying was up compared to the Belgian GP last year. We've seen particularly solid growth in the U.S. Viewership on ESPN is up season-to-date versus the 2022 average viewership, with strong F1 TV performance as well. The 2023 season has already seen three of the four largest live audiences in F1 history on U.S. TV including Miami, Monaco, and the Canadian GPs. All but two of our races have averaged more than 1 million viewers, which are huge numbers for the U.S. market. On the financial side, OIBDA was up slightly quarter-over-quarter despite one less race due to improved operating leverage on team payments and freight. And now turning to LVGP, excitement for the race grows as demonstrated by momentum across social platforms. For example, LVGP had over 11 million social impressions and over 1 million engagements in July. The Las Vegas team is pulling together an event of unprecedented complexity and scale. It will be the largest and, I would argue, the most premium sporting event of 2023. We are pleased to say preparations are running on schedule, and despite inflationary cost pressures, we expect no change in revenue and profitability assumptions that we laid out previously. We are increasing CapEx estimates for the Paddock building and track work, and Brian will go into that in more detail in a moment. We remain confident in the return profile of this incredible project which will support the incremental capital investment that we are making. We've also been receiving inbound inquiries regarding the use of the Paddock building within the next year, and we look forward to sharing those commercial plans once they are finalized. We expect to learn a lot from our inaugural race and look forward to racing in Las Vegas for many years to come. Turning now to Liberty Live Group, Live Nation experienced its strongest second quarter ever, and they are confident in continued growth into the balance of the year and 2024. Revenue for the quarter was up 27%, and AOI was up 23% over the prior year. Growth was driven by international demand, which is a real opportunity for Live. International fans were up 46%, and more artists are touring globally. Finally, regarding the Braves, now a separate public company but business as usual is continuing in Braves country. We've seen continued momentum in fan demand, with 96% of our ticket capacity sold season to date, which is tied for MLB's best. We've recorded 40 sellouts already, the fastest we've ever hit this milestone in a season, and concession revenue is up season to date despite shorter game times. We announced a jersey patch sponsorship with Quikrete in a multi-year deal. Most importantly, on the field, the Braves lead the NL East and the entire MLB. A franchise record of eight players were in the All-Star Game, including our entire infield. All eight of these players are locked up through 2023 and most even longer, into 2025. The Battery is also seeing continued growth, with adjusted OIBDA for the mixed-use development up 18% in the first six months versus the prior year. And with that, I will turn it over to Brian for more on our financial results.

Thank you, Greg, and good morning, everyone. My remarks will focus mainly on the balance sheet figures adjusted for the split-off that was completed on July 18th, and the reclassification of our tracking stocks that was completed yesterday. At quarter end and adjusted for the split-off and reclassification, Liberty SiriusXM Group had attributed cash and liquid investments of approximately $331 million, which excludes $51 million of cash held at SiriusXM. There's also $1.1 billion of undrawn margin loan capacity at the parent level related to our SiriusXM margin loan. As of August 3rd, the value of our SiriusXM stock was $16 billion. We have $1.5 billion in principal amount of debt against these holdings. Total Liberty SiriusXM Group attributed principal amount of debt is $11.7 billion, which includes $9.5 billion of debt held directly at SiriusXM. In April, Liberty SiriusXM settled the remaining $275 million of its 2.125% Sirius exchangeables. Due to the net pay down at both SiriusXM and Liberty SiriusXM during the quarter, total attributed Liberty SiriusXM Group debt was down $360 million from $11.7 billion, exclusive of the debt reduction due to the reclassification. The 1.375 basket convertible notes mature in October, and $199 million principal remains on these notes. Liberty SiriusXM plans to exchange its 1.8 billion BATRA shares with one or more third-party lenders to pay down debt in the near term. Turning to the Formula One Group, at quarter end adjusted for the split-off and reclassification, Formula One Group had attributed cash, liquid investments, and monetizable public holdings of $1.4 billion, which includes $1.1 billion of cash at F1. In connection with the reclassification, approximately $100 million of cash, as well as certain private and public assets previously held at Formula One Group, were attributed to the Liberty Live tracking stock. Total Formula One Group attributed principal amount of debt was $3 billion, which includes $2.4 billion of debt at F1, leaving $536 million at the corporate level. F1's $500 million revolvers were undrawn, and their leverage at quarter ends was 2.2 times. As we mentioned last quarter, the margin on F1's term loan has been permanently stepped down to 3% from 3.25%, effective at the beginning of May. The F1 business is best analyzed on an annual basis given variability in the year-over-year race calendar, but I'll make a couple brief remarks on their quarterly results. During the quarter, F1 recognized a lower proportion of season-based income due to six out of 22 races occurring during the period compared to seven out of 22 that occurred in the prior year period. F1 also recognized proportionally less team payments given one less race, which was partially offset by expected increased team payments for the full year compared to 2022. Our team payments are best viewed on a year-to-date basis and represented 63% of pre-team EBITDA in the first half of the year. Formula One generated modest OIBDA growth in the quarter despite one less race, held and incremental investments in growth initiatives that were not in the prior year period like the Vegas race and F1 Academy, as well as costs associated with the canceled Imola race. Given that Imola was canceled on the Wednesday of race week, the majority of the race-related costs with regard to planning, logistics, and setup had already been incurred. On a full-year basis, we estimate the impact to adjusted OIBDA from the cancellation of Imola is modest at less than $20 million. Reminder that other costs of F1 revenue and SG&A are best viewed as a percentage of total revenue. Other costs of F1 revenue in the quarter was 24% of total revenue, consistent with our historical average. Note that the LVGP-related revenues and other costs of sales will largely be incurred in the fourth quarter when the race occurs, but for the quarter on SG&A, we had $7 million of costs associated with LVGP. Regarding Vegas, as Greg already noted, there's no change to our revenue and profit expectations for the race in year one. Our Paddock building is now 85% complete. We expect CapEx related to the Vegas race, including both the Paddock building structure and track-related CapEx, to be close to $400 million, of which approximately $155 million was incurred in the first half of the year. The majority of the CapEx spend will be incurred at the corporate level related to the Paddock building, as the land and building both sit within F1, or FWON, separate from Formula One. Track-related CapEx has and will be incurred at the F1-OPCO level. Our team has managed this project on a compressed timeline and in an inflationary environment. Much of our cost increase is attributed to track-related expenses incurred to be responsive to the concerns of the local community, such as minimizing disruption to businesses along the Strip. We have also invested in security enhancements and expenses incurred to ensure the quality of the fan experience, with infrastructure changes to improve sidelines. We are working closely with our local Vegas partners, and the speed and efficiency with which we have completed this project is a testament to these relationships. We are excited about our investment in Las Vegas and the associated opportunities for both the Grand Prix and year-round activities at the Paddock building. At the Liberty Live Group, adjusted for the reclassification, there is attributed cash, liquid investments, and monetizable public holdings of $204 million, which includes the ETF assets contributed from Formula One Group. In connection with the reclassification, the Formula One Group has also contributed private assets with a fair value of approximately $380 million, measured at the time of our definitive S4 filing. We do not anticipate providing ongoing updates to the value of these private assets. Additional disclosure on the composition of these assets can be found in the asset list posted to our website. There is $400 million of undrawn marginal loan capacity at Liberty Live Group related to our Live Nation marginal loan, and as of yesterday, the value of our Live Nation stock held at Liberty Live was $6 billion. We have $920 million in principal amount of debt against these holdings. Liberty and our consolidated subsidiaries are in compliance with their debt covenants at quarter end. Looking quickly at the Braves.

Let me interrupt you for a moment, Brian. As we discuss the Braves, I realize I made an error earlier and mentioned it was at 56% capacity. The Braves Stadium is actually at 96% capacity. Please continue.

Thank you, Greg, for clarifying that. So looking at the Braves, revenue growth reflects that 96% capacity in the quarter with more regular season home games in the period as well as increased game attendance and growth in related revenues, including ticket and concession revenue. Battery mixed-use revenue also grew due to increased rental income from existing and new tenants. Baseball operating costs grew in the second quarter primarily due to increased player payroll, as well as increased payments under MLB's revenue-sharing plan and higher variable stadium operating costs due to increased attendance. At quarter end and adjusted for the split-off, they had attributed cash and liquid investments of $131 million, which excludes $52 million of restricted cash. Atlanta Braves Holdings had attributed a principal amount of debt of $543 million. And with that, I'll turn it over to Stefano to discuss Formula One.

Thanks, Brian, and good morning to everyone. We are already over halfway through the 2023 Formula One season. I would first like to congratulate Red Bull and Max Verstappen on their incredible performance this season, breaking an all-time record on consecutive wins. The title field behind them has produced incredible action for all our fans, and I believe the gap will continue to close over time for all the teams. In Silverstone, the top six finishers crossed the line within 13 seconds of one another. Hungary had one of the most thrilling qualifying rounds to date, with the top six all within three-tenths of a second. McLaren's performance improvement following recent upgrades has delighted fans with London’s second-place podiums at Silverstone and Hungary, alongside strong drives from Piastri. Our fans are accessing F1 content across multiple media platforms. The global audience averaged 68 million through the first eight races. In growth markets like the U.S., viewership over the same period is up 5% on ESPN, and events like Monaco have grown by 29% compared to last year's U.S. viewership. The sprint series has continued to not only generate excitement on the track but also drive viewership growth. At Azerbaijan, our first sprint of the season, total weekend viewership across the race and sprint events was up 10% versus 2022. We recognize that sports fans today engage with content across a variety of platforms, including linear, digital, and social. Across our social media channels, F1 reached 64.6 million followers as of Q2, up 29% year-over-year. F1 continues to adapt and expand our content to engage different platforms and serve all segments of fans. For example, at the Hungarian Grand Prix, we piloted our first-ever F1 broadcast for kids in partnership with Sky UK in Germany. In just one day, social media coverage for the announcement of KitKat and the presentation of the driver’s avatar reached more than 45 million users. With 93 million impressions and hugely positive sentiment, F1's celebrity presence continues to draw fans. For instance, F1's social post featuring Shakira at the Spanish Grand Prix generated over 50 million impressions and over 2 million engagements. As filming for the Apple TV movie began, the post of Silverstone with Brad Pitt and Damson Idris lining up at the back of the grid generated 2.8 million engagements and over 7,000 comments. The social impact of Yuki Tsunoda and his AlphaTauri teammates helping the community after the flood in Florence generated almost 15 million social impressions. F1 is considering how to advance our approach to audience measurement to add consumer behavior, evolving to better capture a wider viewership and engagement for the future. Our discussions with commercial partners successfully focused on these broader engagement metrics. The promoters continue to improve the quality of Grand Prix events and invest in enhancing the overall fan experience. We have seen the results of these efforts with continuous sell-out races, many at increased capacity. The Canadian and Silverstone Grand Prix both set new attendance records with crowds of 345,000 and 480,000 respectively. Silverstone attendance was up 20% compared to last year, partly due to cultivating the fan experience across the entire race weekend, including Calvin Harris's performances on Thursdays, the evening before on-track activities started. We will continue working with our promoters on these efforts. The success of their events is beneficial to the entire F1 ecosystem. There are growing ways to engage with F1 outside of race weekends. Our F1 Arcade licensees announced further expansion plans, with new sites opening in Birmingham in the UK this December and Boston in May 2024. Footfall at flagship London location grew 16% in Q2 compared to the prior quarter, with an average of over 7,000 visitors per week. In June, we launched the F1-23 video game. In its first week, the game ranked number two and number three in UK Games and Global Steam sales charts, respectively. Finally, F1-related podcasts are increasingly providing other content to engage our fans. A new Formula Y podcast launched in May reached number one in the U.S. and UK sports podcast channels, performing particularly well among newer fan cohorts, with 35% of its audience in the U.S. and 30% of its audience female. I'll now provide an update on our commercial agreements. Regarding race promotion, we announced a further extension of the Austrian Grand Prix through 2030. Hungary has also extended through 2032, with commitments made by the promoters to invest significantly in their physical infrastructure, including a new pit building and main grandstand by 2026. We announced a record-breaking 24 race championship calendar for 2024, with the return of the race in China for the first time since 2019. F1 is further progressing on a journey towards greater regionalization of the calendar where possible, including back-to-back races in Japan and China, as well as Abu Dhabi and Qatar. This improves the efficiency of our operations and reduces unnecessary delays in our travel, particularly from a freight perspective. On media rights, we entered into a multi-year agreement with Tencent to stream F1 events across its digital platform, complementing our existing coverage in China on CCTV. Additionally, we continue to grow F1 TV Pro and access to subscribers, particularly in the U.S. market. On sponsorship, Heineken extended their global partnership in a new multi-year deal. As previously announced, they will also be the official title partner of the Formula One Heineken Silver Las Vegas Grand Prix. The relevance of F1 brands continues to generate interest in sponsorship opportunities, including leveraging our sustainability strategy and new inventory like Las Vegas. We are focused on delivering incremental value to our existing sponsors and further developing our strong pipeline of new commercial partners. We are just over three months away from the inaugural Las Vegas Grand Prix. The Las Vegas Grand Prix will provide an unparalleled guest experience, combining the thrill of F1 racing with premium live entertainment, musical acts, world-class culinary offerings, and more. We continue to grow our fan offerings with new partnerships, ensuring all partner venues meet the quality standards our fans expect and deserve. Most recently, we were excited to announce additional hospitality experiences, including the Heineken House, Club SI, and Club Paris, as well as a partnership with Hilton Grand Vacation to host a premier on-track hospitality suite. Musical acts including Jay Bellingham, Major Lazer, and Mark Ronson will headline the T-Mobile Zone at the Sphere Stage, with many high-profile music and DJ acts still to be announced. The beverage brand Liquid Death was named as the official event partner and will provide fans with a more sustainable alternative to single-use plastic through their beverage offerings. Formula One and Liberty have made a long-term commitment to race in Las Vegas and have invested meaningful capital to make it happen. The team, led by Renee Wilm, has built incredible partnerships with the local community, all of whom stand to benefit from the tremendous economic value we believe Formula One will bring. The Las Vegas team worked with third parties in gathering market-based data and estimate that the economic impact to Las Vegas in year one of the race will be over $1.2 billion. This is in addition to meaningful community efforts focused on food insecurity, water conservation, and access to education in Southern Nevada. We are proud of the work our team is doing and are confident that the Las Vegas Grand Prix will shake the global sporting community this November. Finally, F1 continues to progress our sustainability and diversity and inclusion efforts. The F1 Academy began its inaugural season in Austria in April and is now through six of seven races. The season finale will take place in Austin alongside the F1 Race Weekend, with Marta Garcia leading the championship. Last week, we announced that all ten Formula One teams will have F1 Academy drivers and liveries for the 2024 season. This demonstrates the depth of support across the F1 community for the importance of F1 Academy grassroots initiatives. Building the next generation of young women in racing tends to provide tremendous benefit for the entire F1 ecosystem. F1 has also progressed initiatives this season in environmental sustainability. In Austria, we piloted an energy-efficient power system that delivered a 90% reduction in carbon emissions from operating the Paddock pit lane and F1 broadcast area. Additionally, a new fleet of biofuel trucks operated by DHL are delivering our broadcast production, technical and other equipment for the European events of the 2023 season, which we expect will reduce our road freight emissions by a minimum of 60% compared to traditional fuel vehicles. The Formula Two and Formula Three cars are successfully running on 55% advanced sustainable fuels this season, and we remain on track to introduce 100% advanced sustainable fuels to Formula One in 2026. We are also encouraged by the increased awareness and openness of governments to include advanced sustainable fuels in their policy roadmaps to net zero, something that F1 will continue to be at the forefront of pushing. We look forward to an exciting rest of the season, and of course, a well-deserved summer break for our teams. The season will resume in the Netherlands later this month before going to Monza. The gaps are getting increasingly closer within the pack on the grid. We have a three-month sprint series to come in Austin, Qatar, and Brazil. Our business is in a position of incredible strength both financially and commercially, and I look forward to updating you on our progress. Avanti tutta! 'Full speed ahead'. And now I will turn the call back over to Greg. Thank you.

Thanks, Stefano and Brian. Our annual investor day will be Thursday, November 9th, in New York. Please save the date. Additional details will be provided soon. We hope to see many of you there. We do appreciate your continued interest in Liberty Media and Atlanta Braves Holdings. And with that, operator, I'd like to open the line for questions.

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from Stephen Glagola with Cowen & Company.

Hi. Thanks for the question. Greg, can you help us better understand monetization of the Las Vegas Paddock outside of the Grand Prix in 2024 and beyond? What type of events do you plan on holding? Any early indicators on sponsorship interest outside of the Grand Prix? And do you expect this OIBDA contribution to match or exceed the Vegas Grand Prix over time? Thank you.

I will manage expectations first and say I do not expect it will exceed the amount we make in the Grand Prix over time. But with that, we have Renee Wilm here who's running our Las Vegas effort. I'll let her comment on some of the things we're thinking about outside the race.

Thanks, Greg. Happy to. So we are just beginning to really scratch the surface on what is available for us on a go-forward basis with the building. We have had a number of inbound requests. Think about Super Bowl parties, or things related to racing, maybe karting, high-end supercars. Of course, Las Vegas is the convention center of the world. There’s a lot of interest in our state-of-the-art LEED-certified building. Many of our partners in the F1 ecosystem are very interested in working with us throughout the year. So all I could say is there will be a lot more to come over the next few months.

Thank you. And if I could squeeze in one more. How should we interpret what appears to be some recent conflicting comments from the FIA with regards to an early renewal of the Concorde Agreement, and the appetite for new team entrants? Also, Greg, do you see any conflicts of interest with your vision of the sport long-term versus what the FIA views? Thank you.

I'll make a comment or two and then I'll let Stefano add. I think there's little daylight between Stefano and my view, which is we have ten great teams. We're very excited about what they're doing. There is a process to add more teams, but the bar is very high and it's unclear what an eleventh team would add in terms of value. There is a lot of uncertainty among the other teams about an eleventh team. The FIA and we have had productive discussions about all this. Do we agree on everything every moment? No. We discuss it and hopefully work things out. Stefano, what would you add?

I think, Greg, you said it perfectly. The FIA has started the process as it is in their possibility. We're waiting for the final conclusion. But as always in this discussion, we will find an agreement together because, as you said, the value of the team and the value of the business today is very, very strong. That decision and that information will come very, very soon, I'd say within the month of September.

All right. Thank you both.

Thank you. Our next question comes from Ben Swinburne with Morgan Stanley.

Thank you. Good morning. On F1, what's your sense of optimism about potentially signing a concrete agreement with the teams this year? Stefano, when you look at the product this year, obviously being dominated by one team, how do you look at that relative to all of the changes you guys have made around driving more parity into the sport? Do you see this as a step backwards or just sort of the natural way the sport evolves unpredictably over time? Additionally, I have one Braves question for you guys. There have been some teams that have left Diamond and gone on to new business models in different sports. What does that tell you, if anything, about how you think about the Braves opportunity over the next couple of years as this Diamond process plays out? Thanks a lot.

I'll let Stefano take the first two and I'll take a shot at the Diamond question. And obviously, if Derek has anything to add, he can do so as well. But Stefano, why don't you speak first?

Yes, thanks, Greg. I'd first like to celebrate the incredible job this company is doing with that car. If you see the other car and where the odds are in terms of the gap, it's just incredible how much they are doing a great job. But that has been always part of Formula One. I would say this is part of the game. I’m pretty sure that in the next couple of years, the technical doubts will be reduced, but if someone is great, we need to see the greatness of what they are doing. It’s also about confirming the legacy of someone who is performing exceptionally. So nothing negative in that perspective. Looking back, I would say this has always been a part of F1 research. Regarding the Concorde agreement, I would say today's conversations are really going ahead because the state of the sport is really great. Of course, we are not in a rush, but I would say all things are heading towards a positive conclusion for both discussions with the team and the FIA.

Thank you.

On the Braves, I'll give my view, and Derek, please feel free to add. We're fortunate to have an incredibly strong territory, with 14 million broadband households and a fan base appreciative of a very successful team. With a reasonable deal from Diamond or Valley, we think we are probably more profitable than they are. Some of the other teams had less attractive territories or fan bases, or relatively less attractive revenue versus costs compared to what we see with Valley, and that is why they were terminated as executory contracts by Valley in their bankruptcy process. I don't expect that will happen for us, and if it does, I believe alternatives will be available due to the strength of our product and the demand in our territory, which will likely generate positive returns. Derek, do you want to add anything?

Greg, thanks. You summarized that very well. I would just say that we and Valley are both adhering to the terms of our agreement as we currently stand. We are being paid in full and we are delivering our rights in full, so we don't foresee any change in that anytime soon. Generally, I would just highlight that large sports content continues to be very desirable and that we are looking at this long-term as a good position regardless of what happens.

You guys want to comment on the next season today?

No, thank you. Next question.

Thank you. Our next question comes from Vijay Jayant with Evercore.

Hi, good morning. A couple for me. On Liberty Live, Greg, are any of those private assets that were moved from Formula One included? And then just broadly, do you have some liquidity at Liberty Live? Is there any business strategy of buying venues or doing anything with Live Nation directly and growing a real estate portfolio? Or is it purely to tackle any discounts that may remain? Regarding Formula One, I don't want to nitpick particularly, but the team payments seem a little lower than our expectations, implying around 1.3 billion. I know you said in the past that you are conservative. Given there's one less race, is there anything in the numbers impacting the Q2 estimate?

Thank you, Vijay. There is a lot to discuss. Regarding Liberty Live, we currently do not have any ATBs in that business. We are seeking opportunities that could enhance and align with Live Nation's strategy. Our goal is to pursue initiatives that would benefit us and them in the future, which gives us considerable flexibility. Real estate is definitely on our list of potential interests, especially properties associated with Live Nation events. Our liquidity for this endeavor is somewhat limited, so we will need to think creatively, but we do have some strategies in mind. Moving on to Formula One, we feel positive about our position for the remainder of the year. However, we have identified some nuances concerning payment distribution between the third and fourth quarters. Overall, analysts appear to have a slightly optimistic view for the third quarter and a somewhat pessimistic perspective for the fourth. The payout structure is indeed conservative, as you pointed out, and the schedule of the races affects those payments. Brian, do you have anything to add?

I would just say that there is noise in the second quarter because of the rephasing and the impact of Imola. So I would just have you look at the first two quarters together and consider that percentage as we stated in our remarks. We were at 63%.

Great. Thank you both.

Thank you, Vijay.

Thank you. Our next question comes from Bryan Kraft with Deutsche Bank.

Greg, I had a couple for you on Liberty Sirius. I guess first a question that many investors often ask is, why Liberty hasn't made its Sirius shares available for borrowing, so that the market can be more efficient around that spread? I would love to hear if you could share the rationale behind your decision not to do that? And then the second question is I understand that the leverage is a sensitivity and a potential merger of Liberty Sirius with SiriusXM. Would it make sense for Liberty Sirius to sell some of its Sirius shares down to get closer to the 80% level? This would allow you to stay above the 80% before bringing some cash in and using that to reduce Liberty Sirius's debt. Are there any restrictions or considerations preventing you from doing that, or discouraging you from doing that? Thank you.

Yes. I'll let Ben Oren answer the first question, and then I'll address the second one. I believe the strategy we are discussing is not about being concerned with the leverage. Sirius could manage the leverage of the combined businesses, depending on the execution of who acquires whom. Generally, Sirius can handle that leverage. I am not in favor of selling some shares, as we have a very low tax basis in those shares, which makes it tax inefficient. As I mentioned, we can support the combination. We are actively seeking ways to manage our leverage. We receive dividends from SiriusXM, and occasionally, they have paid special dividends. Over the past year, we have been using those to reduce leverage. However, the tax inefficiency remains a concern due to our low basis in those shares. Ben, would you like to address the borrowing issue?

Yes, sir. While we are very sympathetic to the borrow issue, as it does create a lot of volatility, we have done a lot of work internally to explore the ability to lend out our shares. I think at this time, I would probably summarize by saying there are legal and different tax considerations regarding how any borrow facility would have to be structured, making it relatively inefficient for a potential user. So for now, coupled with the optics of what borrowers might be doing with those shares, is probably why we will remain reluctant and not lend our shares for the time being. But we will continue to evaluate it, and never say never.

Thanks to you both.

Thank you. Our next question comes from David Karnovsky with J.P. Morgan.

Hi, thank you. On the increased CapEx for Vegas, can you just remind us of what the original projection was for Paddock and maybe expand a bit on the drivers of the increased spending? Then, just on the race promotion, I'm curious; revenue was up versus last year in Q2, which had the same mix of races minus Imola. I just wanted to see if you could comment on the drivers there, with any one-offs or kind of material steps that we could be aware of? Thanks.

Brian, you want to take the CapEx?

Yes. I would say on the CapEx, we never officially gave a number; we said it would be approximate or slightly higher than the land purchase value.

So we still have not given a firm number. We've just told you that we now think it will be larger than the amount that we're spending on the land. Yes, approximating 400 is what we said. Can you repeat the second question just to make sure I followed it?

Sure. It was just on the CapEx, if you could expand on the drivers of the increase, that would be great. But on the second question, it was on race promotion.

Renee, do you want to comment on the drivers?

Yes, I'm happy to. We hit a couple of challenges as we uncovered asphalt, and cables needed to be addressed. There have been wires overhead that needed to be moved. A lot of this was driven by the requests and, quite honestly, requirements of the local stakeholders as we began this process of preparing the track for actual usage. We've also encountered some additional requests from the local stakeholders, such as the casino properties, regarding enhanced security and the opening and closing of the track. So this has led to additional equipment that was needed, as well as changes in actual road work. Of course, with regard to the paddock building, it is being built at lightning speed in an inflationary environment. As you can imagine, there have also been some additional costs along the way in that regard.

Great. Thanks, Renee. To your second question about timing and revenue recognition, can you repeat it, please?

Sure. It was just on race promotion. The press release noted it was up year-over-year, and I think you had the same mix of races minus Imola. So I just wanted to see if you could comment on the drivers there, if there were any one-offs or material steps to be aware of?

No, I mean, it's just regular contractual increases there, offset by the impact of the Imola race going away.

Thank you.

Thank you. Our next question comes from Stephen Laszczyk with Goldman Sachs.

Hi. Great. Thank you. Maybe for Greg and Renee on Las Vegas. I appreciate the focus for year one is just the fan experience. However, thinking into years two and beyond, are there any opportunities around the Grand Prix that have come more into focus over the last six months that you're particularly excited about? I'm trying to think through the long-term vision and the profitability opportunity around Las Vegas compared to what we might see in year one? Thank you.

Yes, I think we touched on some of this. I think both on the revenue side and the cost side, there will be opportunities both around the Grand Prix and outside the Grand Prix as we go into year two. We moved with lightning speed—the F1 team and Renee's team—to put this in place, which probably led to increased costs. It also meant that there are opportunities that we had to not capitalize on, whether it be fan festivals, sporting events, or music events, all of those things that could potentially grow around the second and beyond GP. So those are all GP-related opportunities. I think we already touched on the fact, as Renee noted, that there are also outside GP opportunities that people are interested in. But I don't think we have more to talk about today in terms of numbers.

Got it. Thank you.

Thank you. This is our last question, operator.

Thank you. Our last question comes from Marlane Pereiro with Bank of America.

Hi. Thank you for taking my question. Just quickly, on Liberty SiriusXM, is there a specific target or an amount of debt you're looking to reduce over the next year?

I think I touched on that earlier. We have looked at many perturbations and potential combinations with SiriusXM. All of them would involve, in one form or another, adding the debt that's in LSXM to the SXM debt, and in some cases taking on incremental debt. So there is no particular target because we don't know exactly what path it will follow. SiriusXM is a massive cash flow generator. One of the reasons why we're not another reason why we're not particularly interested in selling our stock. We're bullish on the prospects of the business and its continued ability to generate that cash. Any combination, though it might have for a short period, a relatively high leverage amount or leverage four to five times, we know that that cash flow generating capabilities would allow the combined entity to pay that debt down back to the three and a half targets relatively quickly.

Got it. Are there any factors? I mean, I think for the most part, most think a combination would occur and perhaps make sense. But are there any factors to consider as to why maybe a combination wouldn't happen?

Well, I think you've got an independent committee at SiriusXM, which will negotiate on behalf of their shareholders and their considerations, and you'll have Liberty representing LSXM. Hopefully, there will be a meeting of the minds. But there's always the potential that there is not an agreement between the two parties.

Got it. I'll leave it there. Thank you.

Thank you very much to all our questioners. Thank you to everyone on the line for your interest in Liberty Media. We look forward to speaking with you again next quarter, if not sooner. I think we're done, operator. Thank you.

The conference has now concluded. Thank you for attending today's conference call. You may disconnect your lines at this time.