Liberty Live Holdings, Inc. Q1 FY2025 Earnings Call

Welcome to Liberty Media Corporation's 2025 Q1 Earnings Call. As a reminder, this conference will be recorded, May 7. I would now like to turn the call over to Shane Kleinstein, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. These forward-looking statements speak only as of the date of this call, and Liberty Media 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's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media, including adjusted OIBDA. The required definition and reconciliations for Liberty Media Schedule 1 can be found at the end of the earnings press release issued today, which is available on Liberty Media's website. Speaking on the call today, we have Liberty's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali, and other members of Liberty Management will be available for Q&A. I'd like to turn the call over to Derek.

Great. Thank you, Shane. Good morning, everyone. It has been a great start to the year at Liberty. Importantly, the priorities we have outlined for 2025 are progressing well. Namely, number one, we are working towards the close of the Dorna acquisition; two, continuing our path towards structural simplification. And three, we continue to drive momentum at Formula One. Starting first with the Dorna acquisition. We are progressing with the Phase II regulatory process and working constructively with the European Commission. We hope to receive approval by the long stop date of June 30, 2025. The MotoGP kicked off 2025 with its first-ever season launch event in Bangkok. The event generated massive buzz, bringing together all 11 teams to showcase MotoGP as a thrilling sport and premium entertainment brand. MotoGP will host a 22 race calendar in 2025 compared to 20 races last year, which was impacted by race cancellations necessitating 2 replacement races scheduled mid-season. The season is off to a great start with incredible on-track action and growth independence across the first 5 races completed to date. The Argentina Grand Prix set a new attendance record for the track with over 200,000 spectators. Attendance was up 15%, and COTA hosted its largest crowd since 2018, and Herrera saw its highest attendance since 2015 with 24% growth over 2023. The company announced several commercial agreements to start the season, including Pirelli as the new tire supplier starting in 2027 and the extensions of the Barcelona French and Valencia GPs through 2031. Our second priority is continuing to progress our structural simplification, including the planned split off of Liberty Live. Our third priority is continuing to drive momentum at Formula One. The confluence of excellent racing and commercial momentum is benefiting engagement and financial results in 2025. There are several areas currently in focus worth highlighting. We are seeing continued momentum in sponsorship and licensing to start the year. An excellent showcase with the LEGO partnership last weekend in Miami, where all 10 teams rode in fully drivable LEGO F1 cars for the drivers parade. The project took over a year to come to life and required 400,000 LEGO bricks per car. It was an amazing collaboration that captivated our fans and the Internet, and our drivers loved it. Looking ahead, pulling the sponsorship pipeline forward has allowed our team to focus on 2026 and beyond and emphasize securing blue-chip names aligned with the F1 brand. The appeal and breadth of the F1 brand are uniquely resonating with sponsors across B2B and consumer brands alike. Second, we are focusing on improving LVGP stand-alone economics and maximizing the overall benefit to the F1 ecosystem. Tickets went on sale in early April, and volumes are trending ahead of this time last year. Lower initial ticket prices are driving momentum, which we expect will drive greater sell-through. With the first 2 years having demonstrated clear benefits to the wider Vegas ecosystem, we are engaged in encouraging discussions with key local stakeholders to ensure their support and best position the event for future growth. Finally, our current U.S. media rights agreement concludes at the end of 2025, and we are in active and productive discussions for a new deal. F1 is a strong product for broadcasters with solid growth in the U.S., including this season, and an attractive demographic with 1/3 of viewers under age 35, females representing 42% of the fans. We remain focused on finding the right partner to continue to innovate on broadcast offerings and sustain our momentum in the U.S. While it's early in the year, performance to date is strong. The contractual nature of Formula One's cash flow provides high visibility into our business performance for the next several years and will be especially important in this macroeconomic climate. As of March 31, Formula One had $14.2 billion of future revenue secured under contract. Advanced ticket sales for our promoters and hospitality tickets for the remainder of the season remain strong. We continue to actively monitor changes in consumer sentiment, though historically, Formula One's business model has proven resilient in times of economic uncertainty. We are encouraged by the strength of the business and look forward to completing the rest of an exciting season. Now, I'll turn it over to Brian for more on Liberty's financial results.

Thanks, Derek, and good morning, everyone. At quarter end, Formula One Group had attributed cash and liquid investments of $2.8 billion, which includes $1.5 billion of cash at F1 and $69 million of cash at Quint. Total Formula One Group attributed principal amount of debt was $2.9 billion at quarter end, which includes $2.4 billion of debt at F1, leaving $526 million at the corporate level. F1's $500 million revolver is undrawn, and their leverage at 3/31 was 1.2x. As a reminder, all MotoGP transaction-related financing is in place and deal contingent. Turning to the Formula One business, I'll make brief comments on the quarterly results. Though as we all know, the business is best analyzed on an annual basis given variability in the year-over-year race calendar and timing of events. Note that every quarter in 2025 will have incomparable race count and mix, which will impact year-over-year comparisons of quarterly results throughout the year. Most of the variability in year-over-year results is due to the 2 races held in Q1 2025 compared to 3 races in Q1 2024. Race promotion revenue decreased due to the mix of races with Australia and China occurring in the current period compared to Bahrain, Saudi Arabia, and Australia in the prior year. Media rights and sponsorship declined as only projected season-based revenue was recognized compared to last year. Sponsorship is also impacted by the calendar shift as the Saudi Arabia and Bahrain races both have race-specific local title sponsorships and recognition of that race-specific revenue shifted with the timing of those races. However, the decline in sponsorship revenue was largely offset by strong underlying growth from new and renewed deals impacting 2025. Media Rights revenue is benefiting from contractual increases in rights fees and continued growth in F1 TV, benefiting from the launch of the new premium subscription tier. Other revenue declined during the first quarter as a result of one less Paddock Club event and the mix of races held. Adjusted OIBDA declined alongside revenue during the quarter driven by the calendar variance. Other costs of F1 revenue increased due to higher freight costs with longer routes flown and increased commissions and partner servicing costs, servicing the overall primary F1 revenue growth, as well as higher cost for Grand Prix Plaza due to more activity compared to Q1 2024. On a full year basis, we expect other costs of F1 revenue to be consistent with prior years as a percentage of total revenue. SG&A increased in the first quarter due to marketing costs associated with the season launch event at the O2 and should be viewed as a percentage of total revenue for the full year. Team payments decreased in the first quarter due to the lower pro rata recognition with 1 less race held partially offset by the expectation of higher full year team payments. As a reminder, team payments as a percent of pre-team adjusted OIBDA was 61.5% in 2024, and we expect that percentage to continue to come down as we complete the term of the current Concorde agreement at the end of 2025. In connection with all 10 teams signing the 2026 Concorde Commercial agreement, Formula One paid a total of $50 million to the teams in the first quarter. This cost is excluded from adjusted OIBDA and presented separately from team payments. Although revenue and adjusted OIBDA were lower year-over-year due to the calendar variance, we are seeing a strong financial start to the year and are tracking well against our internal plan. Grand Prix Plaza in Las Vegas officially opened its new year-round activations on May 2. Revenue from these activations will be recognized at the F1 OpCo level, and we expect results will have a modest impact in 2025 as we scale that business. The vast majority of the CapEx required to build out Grand Prix Plaza activations was incurred in the first quarter. Total F1 CapEx was approximately $33 million year-to-date, including slightly less than $20 million incurred related to GPP. Looking briefly at Corporate and Other results in the first quarter, revenue was $53 million which includes Quint results and approximately $6 million of rental income related to the Las Vegas Grand Prix Plaza. Corporate and other adjusted OIBDA loss was $12 million and includes Grand Prix Plaza rental income, Quint results, and corporate expenses. As a reminder, Quint's business is seasonal with the largest and most profitable events taking place in Q2 and Q4. Q1 has modest event activity while still incurring ordinary course operating expenses. Quickly turning to the Liberty Live Group. There is attributed cash of $314 million and $400 million of undrawn margin loan capacity relating to our Live Nation margin loan. As of May 6, the value of our Live Nation stock held at Liberty Live Group was $9.3 billion. We have $1.15 billion in principal amount of debt against these holdings. Liberty and F1 are in compliance with their debt covenants at quarter end. With that, I'll turn the call over to Stefano to discuss Formula One.

Thanks, Brian. Formula One has had a strong start to 2025 with six races completed and thrilling on-track action continuing. Wins have been shared across teams, making the racing closer than anticipated. Although it's early in the season, we anticipate this excitement will persist. The impressive performance on track has resulted in increased fan engagement, with attendance up from last year and sellout crowds at nearly every race so far. The Australian Grand Prix set a new record, attracting 465,000 attendees over the weekend. Demand remains strong for the rest of the year, with Mexico selling out in a matter of hours for the tenth consecutive year. Montreal also saw high demand, with many fans returning from 2024. Hospitality sales are thriving too, with over 12,000 tickets sold at Tower Paddock Club so far and significant advanced sales for the rest of the season. We're focused on exploring ways to boost capacity and developing innovative hospitality options where demand exceeds supply. Viewing statistics in our top 50 markets reflect growth, with live TV viewership increasing during the first five races. We registered over 60 million total linear TV viewers during the opening Grand Prix weekend in Australia. In the U.S., ESPN viewership rose 45% during this period, with the Australian Grand Prix being the most watched edition of the race for U.S. viewers. Other markets like Brazil, France, and Australia also reported notable growth in linear viewership. Highlights viewership on the F1 YouTube channel increased by 31% year-over-year, underscoring the growth of our digital platforms as fans seek more ways to engage with our content. Our social media following has reached 100 million, marking a 30% increase from last year, with growth particularly driven by Instagram, TikTok, and YouTube. Nielsen's recent fan data from March indicates continued growth in F1 fandom, with our total fan base surpassing 826 million, adding nearly 90 million new fans in 2024. These engagement metrics illustrate the expanding global appeal and real connection fans have with our sport, affirming our strategies to enhance F1 for them. The robust engagement contributes to our ongoing commercial success, and I’m pleased to share that we have solid momentum. Regarding race promotions, we're finalizing our 2026 calendar. We're thrilled to announce the renewal of our Mexico Race through 2028 and Miami through 2041, representing our success in the U.S. market. Most of our races now have medium and long-term contracts in place. Interest from potential new race hosts is strong, and we’re assessing various future opportunities. The Netherlands will hold its final race in 2026, and Spa will alternate years starting in 2027, creating a slot in the calendar for 2028. Tickets for Las Vegas went on sale on April 9, introducing new pricing and offerings. General admission tickets now start at $50 for a single day and $400 for a three-day pass in the Flamingo zone, with a commitment to maintain these prices, fostering urgency in sales. We are pleased to see strong sales momentum in Las Vegas compared to last year. Our media rights business continues to show strong competition for premier sports rights. F1 TV subscriber growth remains robust, with total subscribers up 4% year-over-year, driven by a 20% increase in the U.S. The introduction of our F1 TV Premium tier has exceeded expectations, particularly in key markets like the U.S. We are currently in active discussions regarding U.S. media rights with multiple partners and will provide updates once these discussions conclude. In addition to race content, series like Formula 2, Formula 3, the Sprint, and F1 Academy are giving broadcasters increased content value. Viewership for the Sprint races is consistently growing, with the Sprint at the Chinese Grand Prix attracting over 1 million live viewers on CCTV, and viewership doubling in Italy when Lewis Hamilton achieved his first win for Ferrari. Outside race weekends, Drive to Survive Season 7 entered Netflix's Global Top 10, appearing on the top 10 lists in 39 countries. The F1 Academy docuseries will debut on Netflix on May 28, and an Apple movie announcement is set for June 16, with the film's soundtrack and merchandise released just last weekend in Miami. On the sponsorship front, we began the year with strong visibility for 2025 and potential for additional growth. Recent announcements include Barilla pasta as an official partner and PWC as our official consulting partner. PWC will assist with strategic consulting to improve our global performance and operational efficiency. Our team remains focused on both the 2025 and 2026 pipeline, making progress on high-value renewals and new partnerships. Licensing continues to be a priority for growth. Our new partner, LEGO, has seen high demand for its F1 products, selling an average of one piece of LEGO every second in March. An exciting activation occurred in Miami where all drivers participated in a parade in fully drivable LEGO cars. In the experiential licensing space, F1 Arcade is expanding to new locations, having hosted sold-out watch parties for the Australian Grand Prix in Boston and Washington DC. A new arcade will open in Philadelphia on May 29, followed by openings in Denver, Las Vegas, and Chicago in the fourth quarter. The F1 exhibition has sold over 530,000 tickets in the past year, with Buenos Aires surpassing 40,000 tickets within its first month. Amsterdam opened in April to 45,000 advance tickets sold on its first day. In March, we launched new activation experiences at the Grand Prix Plaza in Las Vegas, which has opened to the public. This venue offers fans a year-round immersive F1 experience and provides an engaging daytime activity center for the Las Vegas community. Grand Prix Plaza features a cartoon experience inspired by F1, an immersive exhibit, the latest racing simulator, a casual dining option, a retail shop, and three private event spaces. These activations will run through the first three quarters of the year and generate revenue outside of Grand Prix events. Regarding Formula One's sustainability efforts, I’m proud to announce the recent issuance of our progress report for the 2024 season, with a comprehensive impact report anticipated later this year. Significant investments have been made in sustainable aviation fuel, and 90% of our promoters have enhanced fan access and travel options. All promoters are collaborating with local organizations to create programs focused on engaging the next generation. Starting in 2026, F1 cars will run on 100% sustainable fuel, a vital step for the automotive industry in reducing greenhouse gas emissions in road transportation. Our recent power unit manufacturing meeting in Bahrain reaffirmed our commitment to the planned 2026 engine regulations, with all stakeholders working together to ensure the best racing experience. We expect all F1 teams to begin concentrating on the 2026 engine as the season goes on. As we look ahead, while we are still early in the 2025 calendar, we are already planning for 2026. We have agreed on the fundamentals of Cadillac's entry into the championship in 2026 and have established a new Concorde commercial agreement with the teams that spans from 2026 to 2030. We are also making good progress on governance terms, which are financially beneficial for the entire F1 ecosystem. This collaboration with the FIA and teams aims to promote the growth of F1 for everyone's advantage. In conclusion, we are very pleased with the start of the 2025 season. Our strong performance on track, expanding fan base, and solid financial results position us well for an exceptional 2025 and future. Avanti Tutta—Full Speed Ahead. Now, I will turn the call back to Derek. Thank you.

Thank you, Stefano and Brian. A very quick note and exciting news. Please save the date for this year's Liberty Media Investor Day. Changing things up this year, Investor Day will be held alongside the Las Vegas Grand Prix on Thursday, November 20 in Las Vegas. We will have more details to share in due course and look forward to seeing many of you there. We appreciate your continued interest in Liberty Media. And now I'd like to open the call for questions.

Our first question today is from Stefan Laszczyk of Goldman Sachs.

Maybe to start just on team payments and the budget for the year. Bryan, curious if you could talk a little bit more about how the team payment budget is structured for the year. And if there were opportunities for upside in that budget in terms of what you pay the teams, what some of the larger opportunities out there could be over the course of 2025 as you execute against them and reach the potential of what you think this business could produce this year.

Yes. Thank you for the question. At the beginning of the year, and as we've talked about in the past, there's always prudent financial forecasting at the beginning of the year. We do think that there are opportunities for upside, but we want to be conservative in thinking about the variables that we have out there, which are the Las Vegas Grand Prix towards the end of the year, and then sponsorship. Everything else is contracted. And as you've seen in the past and we've talked about in recent quarters, the company is moving away from large go-getters in sponsorship in the current year and focusing on future years. Are there still opportunities? Yes, there are probably some opportunities there. But the biggest unknown will ultimately be ticket sales, which you've heard are trending well currently.

That's great. And then maybe just a follow-up on the sponsorship business. It sounds like there's still some focus on bringing in sponsors or renewing in '25. Would be curious if you could just comment on what those are and to what extent this could still move the needle. And then I guess as we look out into '26, it sounds like your attention focus there as well, longer sales cycles on the sponsorship side. Something you've been focused on. Just curious if you could give us an early read or early look into the '26 sponsorship funnel and to the extent you think that could grow off of '25, what the banded outcome could potentially look like on that?

I'll turn it over to Stefano.

Thanks, Stephen, for the question. Thank you. I mean, I think that we have proven in the last couple of years that our strategy with regard to the sponsorship is quite solid. The main focus is for sure to maximize our revenues, but we need to make sure that the partners that we have are stronger and invested with us with our experiential world. We have a strong pipeline and what we have said already and have confirmed to be here is the quality over quantity and a very, very genuine active activation with our partners because this is crucial in this moment where we want to make sure that our platform is what really our sponsors want. And the evolution between the structure of our partnership between global, official, regional and technical is getting stronger and stronger. So the focus is definitely to see if we have seen some opportunities in '25, but the big one is to keep going on in the next couple of years, and just remind to all of us where we were just 4 or 5 years ago and now where we are today. There is still a long way to go, and we are very optimistic on the fact that we will continue to grow that as a revenue stream. And also as a potential awareness increase through them to our partners of our products.

Thanks, Stefano, this is Derek. I wanted to mention that I've spent some time with Stefano at the track during the last few races. In my conversations with both existing and potential sponsors, I've never experienced this level of energy and excitement about engaging with the sport and F1. In my past experiences with major sports leagues, there was usually a balance of new sponsors coming in and others leaving. Here, it seems like the overall energy is high, and that's fantastic to see. This enthusiasm extends beyond F1 to the entire sport, as teams are also broadening their sponsor bases, which is encouraging. I talked with Zach Brown last week, who is one of the most innovative marketers in the paddock, and he shared his plans to market the underside of shoes. We'll see how that unfolds.

The next question is from Ben Swinburne of Morgan Stanley.

I am not sure if Stefano or Derek would like to address this, but regarding the media rights process in the U.S., F1 TV has been experiencing significant growth over the past few years. In the U.S., I am curious about your thoughts on leveraging that as an asset in your media rights deal. Do you consider bundling it with a broader agreement with a streaming partner, or is the business substantial enough that you prefer to maintain it as a separate product? Additionally, I was wondering if the Concorde agreement is sufficiently finalized to provide insight on whether team payment leverage is expected in the 2026 to 2030 timeframe. Any updates on this, considering past comments from previous earnings calls, would be appreciated.

Stefano, why don't you go ahead and start?

Yes. I mean, thanks Ben for the question. You're right. First of all, it's always interesting to see the speculation going around with regard to moments where they were optimistic, negative comments and so on. But apart from that, I would say we came back from this weekend in Miami really with the fact that we are engaging with multiple partners, and there is a lot of potential interest from many of them, of which we need to hammer down because we have the time to do it with the proper proposal. As you were correctly saying, F1 TV product is growing and is very, very positive and the feedback mainly in the U.S. is very, very strong. And therefore, we need to make sure that this asset is right and very valuable. Therefore, we are open to any kind of possible discussion depending on what will be the end and what we believe is the right way to make sure that we keep the penetration in the market as high as possible and making sure that we can monetize out of it. But the dynamics are very positive. So we keep working on it with them. And I think that the next month will be crucial to see really where we're going to be. But we come back from Miami, as I said at the beginning, with a very good and positive vibe because I think the U.S. audience figures in Miami that were very, very strong show the potential that we have. And I'm sure that the media partners understand that for a possible asset also for them to develop another small business together.

Yes, this is Derek. Following up on what Stefano just said, we are having productive discussions with potential partners regarding the U.S. media rights deal. It's interesting to note that the sport continues to grow. As Stefano mentioned earlier, viewership over the weekend is up 45% year-over-year. F1 TV's growth in the U.S. is up 20%. The overall health of the business is strong, and I believe this has significant long-term implications. We are still in the early phases of growth for F1 in the U.S., and the current uptake of F1 TV reflects a strong passion for the sport, positioning us well for the future. When considering the balance between F1 TV and a broader media rights deal, we'll see how things develop and what partners are looking for. It's important to find the right balance between reach and our own products, which will help us understand our customers better. This effort goes beyond content delivery and focuses on engaging our most dedicated fans. Overall, I see numerous potential outcomes, but the underlying demand for F1 and fan engagement in the U.S. is exceptionally strong, which is encouraging to see.

And then Ben, regarding your second question about the 2026 commercial agreement, yes, we do expect to gain leverage in 2026 compared to where we will finish in 2025. Going forward, we anticipate a more streamlined structure that will benefit everyone involved in the ecosystem.

The next question is from Kutgun Maral of Evercore ISI.

I just want to ask about MotoGP. I think it's encouraging that we're getting closer to regulatory approval here. Now that maybe there's a bit more clarity on getting that deal done you could talk a little bit about if anything's changed since the deal was initially announced in terms of the broader opportunity that you see ahead with Moto.

This is Derek. I'll take this one. The deal is not finalized until it's finalized, and we are actively working with the European Commission to reach that point, remaining optimistic about the outcome. From our perspective, we continue to see potential growth in MotoGP and feel even more confident now that we've spent additional time with them. With any premium sports properties, the challenge lies in how to transform them into mainstream entertainment assets. We've successfully done this with Formula One and other sports. There is a similar opportunity with MotoGP. Once the deal is completed, we will collaborate closely with MotoGP management to begin implementing our strategy.

The next question comes from Peter Supino of Wolfe Research.

A question on sponsorship and one back to the media rights. On sponsorship, 50% fewer races so far year-over-year. And so, of course, sponsorship revenue has that headwind? And yet, it looks largely offset by growth from new sponsors. And so we're wondering maybe this is too simplistic, but does that imply that sponsorship growth must have been close to 50% on an underlying basis adjusted for races as we think about modeling the year? Is that a useful number? And then on the media rights, we're on the opinion that the media rights are sort of uniquely misunderstood because the race times mean that the casual fan struggles to engage with the live broadcast. And so maybe the nonlinear format of streaming could really expand access for casual fans. And then of course, the media rights don't have any advertising. And so I wonder if you could comment on both of those opportunities for the media rights.

Stefano, you want to start on the media rights?

Yes, thanks, Derek. I can definitely begin with the media rights. It's important to acknowledge that we have experienced growth across all our social platforms and have noticed significant interest from younger generations in accessing our content through YouTube and other engagement methods. This is crucial, and we need to ensure that it becomes an integral part of our global media rights strategy, not just in the U.S. but worldwide. It's essential that our clients, who are increasingly engaging with us, have the opportunity to connect with the right products, as this is key to our strategy and decisions. We must offer different options to accommodate the various types of fans we have. This is the main strategic focus we want to implement. Additionally, this also relates to selecting and collaborating with the right partners moving forward. We are observing different dynamics in different markets. For instance, in Europe, we have a long-term agreement with our broadcaster, which will help us understand market evolution. We recognize that we need to keep a close watch on the diverse situations globally. Overall, I believe our strategy will align with the right partners who will help us enhance the understanding of our sport.

Yes, thank you for the question. Following up on what Stefano mentioned, he is absolutely correct. We are in the process of building an ecosystem and a funnel to engage as many people as possible with the sport. Historically, some platforms have been more easily monetized than others. However, our focus is not solely on maximizing revenue on each specific platform or content interaction with fans. We are creating a broader universe. For instance, a fan interacting with us on social media may not yield immediate revenue but could lead to them purchasing an F1 shirt, attending a race, or planning a visit to Grand Prix Plaza in Las Vegas one day. They might even encourage their parents to start watching races. There are numerous ways we can ultimately monetize these interactions, so not every single point of contact needs to be directly monetized.

Thank you. This concludes the Liberty Media Corporation 2025 Q1 Earnings Call. Thank you for your participation.