Earnings Call Transcript - LLYVA Q2 2025

Operator, Operator

Welcome to the Liberty Media Corporation's 2025 Second Quarter Earnings Call. This conference will be recorded on August 7. I would now like to turn the call over to your host, Shane Kleinstein, Senior Vice President of Investor Relations. Please go ahead.

Shane Kleinstein, Senior Vice President, 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 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 statement 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 reconciliation for Liberty Media Schedule 1 can be found at the end of the earnings press release issued today, which is available on our website. Speaking on the call today, we have Liberty President and CEO, Derek Chang; Liberty Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One President and CEO, Stefano Domenicali; and MotoGP CEO, Carmelo Ezpeleta. Other members of management will be available to join for Q&A. And with that, I'll turn the call over to Derek.

Derek Chang, President and CEO

Thank you, Shane. Good morning, everyone. It was an active second quarter at Liberty, which saw us progressing the initiatives we laid out to start the year. Regarding our planned split-off of Liberty Live, we filed the initial S-4 at the end of July and are now going through the customary review process. Chad Hollingsworth will be the CEO of Liberty Live Holdings once the split-off occurs. Chad is a Senior Vice President at Liberty, has been our Director of Live Nation since 2020, and is an agile person to oversee our investment. We expect to complete the split-off in the fourth quarter. Our next priority is supporting the growth and momentum at F1. The financial results were outstanding this quarter alongside a flurry of new sponsors announced, promoter partners extended, and media rights agreements signed. Stefano will provide greater detail shortly. And finally, we completed our acquisition of MotoGP on July 3. We are now beginning fulsome work in helping management set their strategic direction to enhance the company's growth. Fortunately, the sport and ecosystem are both in a strong position, providing the foundation to build on for future success. While it's early, I'd like to outline what we see as near- and medium-term priorities for MotoGP. Starting with near-term objectives. First, we want to accelerate the build-out of certain commercial functions, which was already in progress prior to the close. This includes sponsorship and marketing teams in areas such as sales, account management, research, public relations, and social media strategy. Second, we will lean into brand positioning and build off the new MotoGP brand campaign that launched last November. Efforts will include developing a more robust fan insights platform, tracking brand awareness and engagement to better inform commercial propositions for new and existing partners. The team has already started new content initiatives with specific focus on the U.S. and U.K. markets. Third, we have begun collaborating with F1 to explore areas where we can accelerate business initiatives and share learnings. Some of these benefits will take time to materialize and be realized over the longer term. With respect to medium-term priorities, first, we intend to enhance the Grand Prix experience and turn each weekend into marquee events, very similar to the mandate in the early days of F1. This includes improving the hospitality offering and augmenting fan experiences on site as well as ample opportunities to deepen our partnership with Quint. Second, we will expand the sports global presence and broaden its appeal and reach. The MotoGP team has a clear focus on capturing new fans and growing outside the motorcycle racing world while maintaining its core traditional fans. They are already making progress in optimizing new race locations, including the recent announcement for a race in Buenos Aires in 2027, which strategically locates a track in an urban center as well as a return to Brazil next year after a 2-decade absence. We plan to target the U.S. as a key growth market given its limited presence today. Third, we need to scale sponsorship partners as we know this has massive potential given the current heavy reliance on endemic names. Furthermore, there is clear low-hanging fruit like unsold title sponsorships or vacant trackside advertising. However, we are also mindful that sponsorship sales cycles can be long, and the team will manage for the quality of partners with clear brand alignment. In aggregate, while it is early days and will take time, we are very optimistic about the growth potential for MotoGP. One perspective on the potential opportunity is in reference to F1 on several engagement and financial metrics. For example, F1's audience in both race attendance and cumulative TV viewership is roughly double that of MotoGP, yet F1 monetizes its primary revenue streams at roughly 5 to 10 times those with sponsorship and hospitality at the high end of that range. These monetization opportunities, again, will take time, but we believe there is significant potential to scale and grow the business. We'll look forward to updating you on our progress as these initiatives develop. Now I'd like to welcome Carmelo to make some remarks on MotoGP. I have gotten to know Carmelo and his team over the past few months and have tremendous respect for the sport that he has built. His passion is second to none, and I will now turn it over to Carmelo so you can hear it from him directly.

Carmelo Ezpeleta, CEO of MotoGP

Good morning, and thank you, Derek. We are very excited that the transaction has closed, and we can now begin our partnership with Liberty Media. Liberty's track record with Formula One is well known, and the acquisition has already led to increased interest in our ecosystem. We look forward to benefiting from Liberty's expertise as we continue to accelerate the sport's growth and expand its reach to a wider audience, growing value for our funds, teams, commercial partners and investors. The 2025 season has been very strong. We have held 12 races through the first half of the season and have seen driving competition and great engagement from our fans. We have had 5 riders and 4 teams win and 11 riders across 8 teams on the podium, including our spring races. The concession system in our sport is designed to drive more competition across the grid, giving lower ranking manufacturers more testing opportunities to improve their technology quicker. This new system, which was put in place last year, is clearly having a positive effect, which we expect to continue. Through the first half of the season, attendance is up 6% on a like-for-like race basis. Notably, Le Mans set the highest attendance ever from the MotoGP championship since records began in 1995 for the third year in a row. Looking at recent races, the Italian Grand Prix saw attendance up to 6% and set a new circuit attendance record and the Dutch and German Grand Prix achieved record attendance at their circuits for the second consecutive year. From a viewership perspective, we have 38.2 million average TV viewers through the first 12 races of the season, and engagement has been also very strong across digital channels, including our direct-to-consumer product, VideoPass. Social media followers reached almost 60 million, growing 6% year-over-year. Our new brand identity launched at the end of last year and our first-ever season launch event that we hosted in February are resonating with fans as we continue to showcase MotoGP as a leading global media and entertainment brand. Our management team is looking forward to getting to know our investors and analysts audience over the coming quarters and to sharing our incredible sport with all of you. Now I would like to turn the call back to Derek.

Derek Chang, President and CEO

Thanks, Carmelo. We are thrilled to have you and your team on board and are looking forward to further showcasing the MotoGP asset in due course. Now I'll turn it over to Brian for more on Liberty's financial results.

Brian Wendling, Chief Accounting and Principal Financial Officer

Thank you, Derek, and good morning, everyone. At quarter end, Formula One Group had attributed cash and liquid investments of $3.1 billion, which includes $1.8 billion of cash at Formula One and $70 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 the OpCo level, leaving $525 million at the corporate level. F1's $500 million revolver is undrawn. The MotoGP acquisition closed on July 3. Liberty acquired 84% of MotoGP, with management retaining a 16% ownership stake. Pro forma for the transaction, F1 OpCo had approximately $380 million of cash and $3.4 billion of debt, bringing pro forma leverage to 3.3 times compared to 0.7 times reported as of June 30. Formula One Group Corporate had pro forma cash of approximately $480 million and no change to the debt balance. Shortly following transaction close, we launched a refinancing at MotoGP that is expected to close later in August. We priced approximately $230 million of new Term Loan A denominated in U.S. dollars, a new EUR 800 million Term Loan B, and a new EUR 100 million multicurrency revolver with future reductions in margin expected as the business delevers. This new capital structure will result in significantly reduced annual interest expense, extended maturities, and a currency mix that better reflects the euro and U.S. dollar exposure of the business. Using June 30 balances, exchange rates as of that date and pro forma for the refinancing transactions as 5.2 times. In the near term, we expect to delever both at Formula One and MotoGP. Our goal is to delever to the 3 to 4 times range of the MotoGP business by the end of 2026. Turning to the F1 business. I'll make some brief comments on the second quarter but will focus primarily on year-to-date comparisons, which better reflect the state of the business given variability in quarterly race numbers and mix. A reminder that every quarter in 2025 will have a different race count and mix, which will impact quarterly comparisons. Most of the variability in Q2 year-over-year results is due to one additional race held in the mix of events in the second quarter compared to the prior year period. Q2 '25 held 9 races compared to 8 races in '24, with Bahrain and Saudi Arabia occurring in the current period compared to China in the prior year period. Year-to-date, though, through the second quarter, F1 had the same race count and mix year-over-year. The business is performing incredibly well with revenue up 14% and adjusted OIBDA up 21%. Revenue grew across all revenue streams with sponsorship, race promotion, and media rights continuing to benefit from new partners and underlying growth in the existing contracts. Media rights also continued to see strong F1 TV growth and recognized one-time revenue associated with the Apple F1 movie in the second quarter. Other revenue increased primarily driven by higher freight, hospitality, and licensing revenue, including the success of the new LEGO partnership. Adjusted OIBDA increased on a year-to-date basis with revenue growth outpacing increased expenses. Other costs of F1 revenue increased primarily due to higher freight costs from the mix of routes flown as well as higher hospitality costs, primarily driven by increased Paddock Club attendance and higher commissions and partner servicing costs, including increased costs to service new sponsorship agreements. SG&A expense increased year-to-date, primarily due to higher marketing and personnel expenses. Marketing expense was impacted by the O2 launch event that occurred during the first quarter and team payments increased due to the pro-rata recognition of expected higher team payments for the full year. Team payments as a percentage of pre-team share adjusted OIBDA were 58.4% year-to-date compared to 61.9% in the prior year period. A quick reminder that team payments should be analyzed on a full year basis due to quarterly fluctuations in team payments as a percent of adjusted OIBDA. Reminder that team payments as a percent of pre-team share adjusted OIBDA were 61.5% for full year '24, and we continue to expect to see leverage against the full year '24 percentage for the full year of 2025. Turning briefly to MotoGP's results. A reminder that since the transaction closed on July 3, MotoGP results will not be consolidated until the third quarter. All financial information for the business to date has been in Spanish GAAP, and we expect various U.S. GAAP adjustments, including the removal of straight-line revenue and cost recognition for multi-year contracts. Under U.S. GAAP, we expect growth rates for primary revenue streams with multi-year contracts to more closely approximate the annual escalators included in the contracts, obviously, absent the impact of any significant renewals, which will differ from the relatively flat Spanish GAAP representation included in our financial disclosure to date. We expect to provide results for the full year 2024 in U.S. GAAP at year-end as part of our normal reporting. More information can be found in the information pack on MotoGP that was posted to our website at the time the acquisition closed and a table summarizing June 30 year-to-date results in Spanish GAAP can be found in a trending schedule that will be posted to our website after the 10-Q is filed. MotoGP held 10 races in the 6-month period ended June 30, 2025, compared to 8 races in the prior year period. Spanish GAAP revenue and EBITDA were EUR 220 million and EUR 75 million, respectively, for the 6 months ended June 30, 2025. Year-over-year comparisons are impacted by the mix of races as flyaway races generally carry a higher cost per race. For the full year 2025, we expect a normalized race calendar unlike 2024, which was impacted by several race cancellations. Note that the second half of the year contains a higher mix of races with greater profitability. The majority of MotoGP's revenue and costs are euro-denominated. Going forward, we intend to provide both U.S. dollar and euro-denominated growth rates to better portray underlying trends in the business. Lastly, looking briefly at the Corporate and Other results year-to-date. Revenue was $198 million, which includes Quint results and approximately $12 million of rental income related to the Las Vegas Grand Prix Plaza. Corporate and other adjusted OIBDA loss was $4 million, which 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. Turning to the Liberty Live Group. There's attributed cash of $308 million and $400 million of undrawn margin loan capacity related to our Live Nation margin loan. As of August 6, the value of the Live Nation stock held at Liberty Live Group was $10.4 billion. We have $1.15 billion in principal amount of debt against these holdings. Liberty and F1 are in compliance with our debt covenants at quarter end. And with that, I'll turn it over to Stefano to discuss Formula One in more detail.

Stefano Domenicali, President and CEO of Formula One

Thanks, Brian. It continues to be an incredible season as we head into a well-deserved summer break for our F1 community. We've witnessed a thrilling competition and on-track action that shows everything Formula One represents. Several drivers across the grid have stood on the podium this season, demonstrating the depth of talent across the grid. What is equally impressive is our competitive mid-field battles. Every single team down to 10th place has scored meaningful points this season. I'd like to take a moment to congratulate Nico Hülkenberg on achieving his first podium at Silverstone, a moment that perfectly captured the unpredictability and human stories that make F1 so captivating. Our fans are showing up in larger numbers than ever with impressive engagement across metrics. Attendance has been solid with nearly all events operating at capacity. Twelve of the past 14 races sold out and six races set new attendance records, including Silverstone, welcoming close to 500,000 fans over the 4-day weekend. At the Paddock Club, we've sold 28,000 tickets season to date through Hungary. Early forecasts based on advanced partner requests are already indicating strong demand for 2026. Looking at TV viewership for the '25 season, nearly every race is showing healthy growth in year-over-year live viewership across F1's top 15 markets. Key large European markets have seen robust growth, including Germany, the U.K., and France as well as our non-European markets like the U.S., Australia, Canada, and Brazil. In the U.S., in particular, live viewership is up 7% season to date compared to last year, and ESPN has seen seven races set viewership records for their events. Our additional race content is benefiting total viewership with live audiences for the Sprint race in Miami up to 25% year-over-year, attracting the largest U.S. audience for Sprint race since the format was introduced in 2021. Perhaps even more impressive is our traction on digital and social platforms. Viewership of F1 highlights on our YouTube channel grew 30% compared to last year, and over half of this audience is under 35. Our social media followers reached 106 million, growing over 20% year-over-year, primarily driven by TikTok, Instagram, and YouTube. F1 remained the fastest-growing major sports property on social platforms. Driven by both an exciting season on track and cultural buzz around the F1 movie, F1 drew its largest reach ever on social media in the second quarter with over 20 billion total social impressions, growing over 100% compared to the second quarter of last year. In June, the F1 movie was released to the world. The movie was the largest global opening weekend ever for a Brad Pitt film and was shown on more than 44,000 screens across 80 markets. In its first five weeks, the F1 movie saw global box office sales over $500 million, becoming the highest grossing Apple film to date. The film will be released on Apple TV later this year and will continue to strengthen fan engagement with our sport. It's worth emphasizing the scale of our total global fan base. As Nielsen reported earlier this year, the F1 fan base reached a record number of 826 million in 2024, with 43% of these fans under 35 and 42% of our fans being female, the highest share in F1 history for both segments. Additionally, we recently publicized results from a global fan survey conducted by Motorsport Network. 27% of the survey respondents were under 24 years old, and half of these were female. 75% of the fans who became interested in the sport in the last year were female. Importantly, for our commercial business, 1 in 3 fans are more likely to consider a purchase if it is from an F1 partner. We will continue to cultivate this fan base in creative ways to interact with Formula One race on non-race weekends alike. Growth in our fan engagement is translated to strong interest from commercial partners, generating continued financial strength. In our race promotion business, we renewed the Austrian Grand Prix through 2041 and the Canadian Grand Prix through 2035, reflecting the confidence our partners have in F1's value and growth trajectory. We also announced our '26 calendar. We are excited to welcome Madrid to the F1 family as a new race beginning next year; 2026 marks the final lap for Zandvoort, and we are tremendously grateful for all our promoter has done to delight fans since their return to the calendar in 2021. We look forward to welcoming one of the numerous interested nations and cities to this slot in 2027 and beyond. The '26 calendar also advanced our continued improvement in the geographic flows of races with the Canadian Grand Prix now following Miami, driving expected freight efficiency and consolidating our European races into one unbroken run over the summer months. For Las Vegas Grand Prix, we are very happy with the progress made so far this year. Our ticket sales are trending ahead of last year, driven by higher sell-through rates. We have agreed to contract extensions with all our founding partners and are working to secure long-term procurement contracts to reduce future build-out costs. We and our partners see the incredible value of this race as we continue to build it for long-term success. Turning into media rights. We are finalizing contracts in several regions, including Japan, Australia, Pan-Asia, Mexico, and Latin America. We continue to make progress on our U.S. media rights agreement and are confident in our attractive position in the U.S. market. Nielsen reported that the American fan base grew over 10% to 52 million fans in 2024, and the U.S. remains our largest market on social. We continue to focus on securing the ideal partner to support our broader commercial strategy for continued growth in the U.S. market. In Brazil, we have secured a return to Globo TV for 2026, which previously held our rights for 40 years. This platform has the largest share of total viewers in Brazil and commands over 50% of the free-to-air broadcasting market. Additionally, alongside our race promotion renewal in Canada, we also contracted a long-term extension to Bell Media's media rights deal. F1 TV continues to outperform our expectations, with especially robust growth in the U.S., UAE, Canada, Brazil, and Sweden, and with the new premium tier offering seeing strong uptake. Our sponsorship is entering 2025 with high visibility into our pipeline, and I'm very pleased with the significant new partnership activity we have announced. MSC Cruises extended as our global partner through 2030, and we welcome Pepsi as an official partner, bringing their powerful portfolio, including Doritos, Gatorade, and Sting Energy into the F1 ecosystem. With this incredible success benefiting our 2025 results, our team is now focusing attention on our pipeline for 2026 and beyond. I'm confident in our progress on several high-value renewals and new partnerships that will drive continued growth. On our other revenue stream, looking first at the Paddock Club, we continue innovating our premium hospitality product, including leveraging key learnings from Las Vegas to diversify and enhance this experience. We were excited to announce House 44, a partnership with Lewis Hamilton, Soho House, and F1 that we launched at Sixth Circuit this year, beginning in Silverstone. We believe there are additional innovative products to come. Licenses remain a continued area of focus and growth. F1's new partnership with Disney is the latest example of our effort towards F1's always-on strategy, bringing F1 into the lives and homes of our fans throughout 24 races a year. We will deliver a 360-degree licensing program with Mickey and friends across consumer product categories, retail, trackside activation, and experience and are thrilled to launch this partnership in 2026. Our LEGO partnership also continued to show strong growth and generate buzz on social. LEGO marketing activation hit over 21 billion in reach this year. Across our consumer product business, our partners sold 12 million units of product in Q1. In 2026, we will see a number of new licensed products launching across soft and hard lines. In experiential licensing, F1 Arcade globally welcomed over 200,000 guests through its door in the second quarter alone. The third year venue in Philadelphia opened at the end of May, and Denver, Las Vegas, and Chicago will open in the fourth quarter. We are also pleased to report that the F1 exhibition has now surpassed 1 million tickets sold. Turning to Grand Prix Plaza. The new activation launched to the public in May capitalized on the F1 brand to promote the site as a primary destination in Las Vegas. The venue has welcomed visitors from 72 different countries since opening. We believe our karting operation is now the second highest-grossing track in the country, exceeding 1,000 riders a day on the weekends with strong and growing revenue per person. It is, however, still early days and the overall revenue contribution is modest. And finally, we hope many of you saw our F1 75th motion activation, marking 75 years of F1 through a vintage-inspired premium pop-up at Luxury Retail Selfridges in London. Originally planned as a 2-week activation, it was extended due to exceptional demand. Finally, on sustainability, in July, we published our 2025 update, highlighting our continued commitment to sustainable growth and progress to date. We achieved a 26% reduction in emissions in 2024 versus our 2018 baseline, ahead of internal expectations. This achievement is particularly noteworthy against the backdrop of more races and bigger events, demonstrating that we can grow sustainably while expanding our global footprint. As we look ahead, Formula One's momentum across every dimension of our business positions us for continued growth. The foundation we are building today will drive long-term value creation for all our partners and stakeholders. Avanti Tutta, full speed ahead. And now I will turn the call back over to Derek. Ciao. Thank you.

Derek Chang, President and CEO

Thank you, Stefano, and thank you, Brian. Before going to Q&A, I want to remind you to save the date for this year's Liberty Media Investor Day. We will be hosting our Investor Day alongside the inaugural F1 Business Summit on Thursday, November 20, in Las Vegas in advance of this year's Grand Prix. We will have limited in-person attendance, but the Investor Day will be webcast. Stay tuned for more details. We appreciate your continued interest in Liberty Media. And now we would like to take questions.

Operator, Operator

Our first question comes from David Karnovsky with JPMorgan.

David Karnovsky, Analyst

For Derek or Stefano, obviously, there's been a lot in the press on the U.S. media rights. Maybe you can update us on where things stand with the process. How are you thinking about priorities in terms of reach versus payment? And what role might F1 TV play?

Stefano Domenicali, President and CEO of Formula One

Derek, if I may, I can start, if it's okay for you.

Derek Chang, President and CEO

Yes, absolutely.

Stefano Domenicali, President and CEO of Formula One

Thanks, David, for the question. I think that, as you said, I will start from the last of your remarks. F1 TV is and has to be, and will be part of the package of what we are negotiating now into the future. This is absolutely relevant because as you have seen, David, the numbers are growing. There is an incredible opportunity for us to stay connected with our, let's say, fan base that is maturing and is growing in terms of attention in terms of knowledge. And of course, the discussion we are having are in a good place because we believe that we are, as I said, very, very good opportunity to keep the momentum that is very strong in U.S. And just I think yesterday, there was the indication that this year, we were over 1 million followers on the races in the U.S. that is really great. So we are progressing our negotiations. Of course, there are weeks in front of us. We have not a great rush to finalize everything because we want to make sure that, as you said, we find the right solutions. One thing that I definitely can add is we are looking for, I would say, mid-term, not long-term, mid-term agreement because we believe that we are still in a position that our growth will have the chance even further to be negotiated better in the future. But everything is looking good. And the balance is definitely important, as you said, between reach and awareness. But we believe that everything is progressing according to our plan.

Derek Chang, President and CEO

Thanks, Stefano. And I would just add that as we continue to look at the U.S. market, we are very pleased with the progress we've made over the last few years with the addition of the races that we have here and sort of the engagement that we're seeing and look forward and the fact that the business has been built in the U.S. and what that's doing to help promote and foster the sort of robust discussions that we're having and look forward to having this next deal take us into the future.

David Karnovsky, Analyst

Okay. And then maybe just one on the Vegas Grand Prix, it would be great to hear a bit more about the on-sale process for the year, how the strategy of starting at a lower price point is paying out. And does that plus what you could do on expense management inform any view on the ultimate kind of contribution of the race to the financials for the year?

Stefano Domenicali, President and CEO of Formula One

Well, I can definitely say that Vegas is progressing very, very good according to our plan. If I go specific to your question, it's definitely what we have done differently from the first year to that experience, we definitely started with a price that is pretty clear with no drop down. And this has been very, very clear and the package that we have sold is following this direction. And we definitely believe that, of course, from this year onwards, the contribution of the Vegas Grand Prix will be definitely much more important than what has been so far in the first 2 years.

Derek Chang, President and CEO

Yes. And I would just add a huge shout out to Stefano and the whole F1 team, the LVGP team because the amount of progress they've made this year has been pretty impressive as we've at the beginning of the year talked about what needed to get done there, both on the expense side as well as the revenue side. And as Stefano talked about in his comments earlier, I think we've got the agreements in place with our partners in Las Vegas. I was just out there a couple of weeks ago. And I think the enthusiasm for where the race stands and where we're going with this thing is pretty palpable, and I think puts us in really good shape going forward.

Operator, Operator

Our next question is from Bryan Kraft with Deutsche Bank.

Bryan D. Kraft, Analyst

Brian, I was wondering if you could help us to quantify the contribution from the F1 movie to primary revenue so that we don't all end up overestimating the revenue that's going to be recurring? And then secondly, how will the MotoGP management team's 16% ownership be accounted for, both in terms of the income statement and the share count?

Brian Wendling, Chief Accounting and Principal Financial Officer

Yes. So on the F1 movie, think of it as a mid-teens number for the quarter that's one-time in nature on revenue. And then I'll answer your MotoGP question, but then I would kick it over to Stefano after that to really talk a bit more about the benefit of the F1 movie to the overall ecosystem. But quickly on MotoGP, the 16% will be accounted for as a non-controlling interest. So you'll see a big amount on our balance sheet above equity. And then we'll pick up 84% of the earnings of the business through the P&L. The other 16% will be allocated to non-controlling interest. Stefano, do you want to comment on F1, the movie?

Stefano Domenicali, President and CEO of Formula One

Yes, absolutely. I mean thanks, Brian. And Brian, I would say the effect of the movie is not only, of course, about the dollars and the economical impact, but the sport will have an incredible opportunity to grow its awareness and to generate, I would say, the circular economy around that because it's a new product that has been incredibly strong. And actually, why we were, in a way, quite positive about the impact in the U.S. was fascinating to see the impact on the more mature markets. So these things will generate definitely interest, will definitely bring money to the ecosystem, to the teams, to the F1 stakeholders. So that's really what we can see happening. If you think that after just a couple of weeks, the movie itself brought more than $500 million at the box office is something that keeps you the amount of interest that is generated. We don't have to forget that this movie will be out on the Apple platform later on at the end of the year. So that momentum will have a longer effect that will definitely create interest that can be monetized later on into the whole system that is around Formula One.

Operator, Operator

Our next question comes from Stephen Laszczyk with Goldman Sachs.

Stephen Neild Laszczyk, Analyst

One on MotoGP and one on F1 from me. Maybe first on Moto, I think it's clear that you see a lot of opportunity to improve the reach and monetization of the sport. I think it's also pretty clear that you expect a period of investment and repositioning to play out over the next couple of years. So I would just be curious if there's maybe any early frameworks or thinking around how investors should expect the pace of investment to be matched against the pace of execution against the revenue opportunity and really what that means for the trajectory of profitability for the business over the next few years? Any thoughts or frameworks there, I think, would be helpful. And then a quick one just on hospitality at F1. You called out in the press release and I think in the prepared remarks, the strength you're seeing there. Is there any way to maybe elaborate more on the drivers and magnitude of that growth? And if we were to look at comparable GPs year-over-year in the quarter, what types of growth we're seeing from Paddock and hospitality?

Derek Chang, President and CEO

Okay. This is Derek. Let me start by saying that regarding MotoGP, you're absolutely right. We see a lot of opportunity here. I'll let the team share their thoughts, but I believe that not many people are familiar with the drivers or the sport itself. However, we have a great sport and it presents a solid starting point for us. We see potential for investment in MotoGP, similar to F1, and we plan to invest. While it may not be a significant amount, we aim to accelerate growth and explore the opportunities to do so. I'll let Carlos Ezpeleta from MotoGP provide more details on this before we return to the hospitality question.

Carlos Ezpeleta, CEO of MotoGP

Thank you, Derek. We see growth primarily in two areas. The first is improving how we monetize our existing fan base and business. The second, where Liberty can be particularly beneficial, focuses on expanding our fan base globally. This can be achieved through content, storytelling, and strategically entering different markets, all aimed at increasing our audience. I should mention that we began investing in this area even before Liberty Media came on board. We have hired key personnel in commercial and marketing roles and invested in fan insights and research, which are already leading to potential business growth. Our biggest growth driver will be expanding our global fan base. As Derek mentioned, we have significant opportunities to showcase the sport and the riders, which we believe will be instrumental in driving growth.

Derek Chang, President and CEO

Great. Thanks, Carlos. I think as we come back to the question on hospitality, Stefano, if you want to give your thoughts on that, that would be helpful.

Stefano Domenicali, President and CEO of Formula One

Absolutely. Thank you, Derek and Stephen. I can confirm that demand is very strong. We are ensuring that we have various products that meet the needs of our partners and fans. The presence of incredible partners who can activate their investment through hospitality packages allows us to emphasize the importance of maintaining quality while also seizing opportunities worldwide to extend our hospitality in response to demand. This is crucial. We are actively negotiating and discussing with promoters. When we determine that there is sufficient demand to increase quantity while preserving our desired quality standards, we are moving forward with that. It is essential to note that we have been working diligently for the past couple of years to ensure our hospitality programs provide pure entertainment with unique value for the fans attending our events. This has been recognized as distinct from other sports and entertainment fields, and that is where we are concentrating our efforts. While increasing quantity is a goal, maintaining high quality in our offerings to fans is equally important.

Derek Chang, President and CEO

Yes. I mean a great example of that is this past weekend's race in Budapest, where they just unveiled a whole new Paddock Club facility, which is larger and certainly much more upgraded than previously, which speaks to both quantity and quality that Stefano just referenced.

Operator, Operator

Our next question comes from Ben Swinburne with Morgan Stanley.

Benjamin Daniel Swinburne, Analyst

One on MotoGP, and then I want to ask Stefano about sponsorship. I think the last disclosure we had from the deal deck, Brian or Derek was back in, I think, 2023. I think it was about EUR 480 million. I'm just curious if you could talk about how the business has performed just from a top-line perspective as you get through '24 and expectations for '25. I think you have more races this year than Moto was running in those couple of years, just to help us think about growth rates. And then, Stefano, in your prepared remarks, you talked about the sponsorship team focusing on '26. You sounded excited about the opportunities. I'm just wondering if you feel like you can keep the growth going in '26 at a healthy clip given what your team is seeing right now.

Derek Chang, President and CEO

I will start and have Brian take the first question, then we'll pass it back to Stefano.

Brian Wendling, Chief Accounting and Principal Financial Officer

Yes, Ben, I would point you to the info deck that was put on our website on the day the deal closed. But you can see in there and a reminder, these are not our numbers. They're in Spanish GAAP. They're not U.S. GAAP, they're in euros. There's a whole bunch of disclaimers I put on them, and those are all in the deck as well. So read those carefully. But with that said, in 2022, you had EUR 475 million. In 2023, you had EUR 486 million. In 2024, you had EUR 462 million. Same race count across each of those, but there were cancellations that impacted 2024 where your expectations were higher, but you had cancellations that two of which got replaced with lower fee races. You'll be able to see the OIBDA numbers in there as well. There were some bad debt amounts that were kind of one-time in nature in 2024. You'll see an information pack or a trending schedule filed on our site later today where you can see the year-to-date numbers. And what I would say on that is when we think about where we sit for the 6 months ended June 30, 2025 versus June 30, 2024. Keep in mind there's always a different mix of races. There were 10 races in '25, 2 additional flyaways, I believe, versus 8 races in the prior year. Those flyaways tend to have a higher cost. The economics obviously depend on each race, but we would expect to see a higher mix of profitability for the races that remain in the back half of the year.

Derek Chang, President and CEO

And then I'll turn it back over to Stefano for the question on sponsors.

Stefano Domenicali, President and CEO of Formula One

Thank you, Derek. Ben, I completely agree with you. It's important to note that the momentum we are experiencing is likely to remain strong. We were just discussing the movie, which will showcase a new dimension of our brand that will attract interest in what we have to offer. At this moment, the pipeline appears very promising, but we need to ensure we maintain balance. We will continue the efforts we've just begun to uphold quality and advance our partnerships, allowing us to provide less visibility to a larger number of sponsors while differentiating among categories. We have partnerships with Barilla, Allwyn, LEGO, Pepsi, and LVMH, creating an ecosystem that is generating increased interest across different categories that we are now evaluating properly. Moreover, one notable category is betting, which represents a significant opportunity that we must approach carefully. We are having extensive discussions about this, as in certain markets it presents a big chance now that there are legislative constraints we need to consider. Another area worth developing is the consumer segment, which hasn't historically been significant in F1. This is another potential growth area we're focusing on to secure valuable deals not only in 2026 but also in the following years.

Operator, Operator

Our next question comes from Kutgun Maral with Evercore ISI.

Kutgun Maral, Analyst

I wanted to ask about the outlook for F1 race promotion and maybe just excluding Vegas. I know this year is relatively light, but it seems like you have a number of deals or extensions in 2026 that could really help accelerate growth over there, particularly thinking about Melbourne. So I wanted to see if you could expand on the opportunity you see over there.

Derek Chang, President and CEO

Yes, Stefano, I can...

Stefano Domenicali, President and CEO of Formula One

Sorry, sorry?

Derek Chang, President and CEO

Go ahead. Go ahead.

Stefano Domenicali, President and CEO of Formula One

Okay. Thank you, Derek. I would say, well, definitely, the positive trend that we see is definitely there because in all the possible opportunities that we have, we have more demand and/or we have the chance to, let's say, work together better with our partners in order to make sure that, as Derek was mentioning before, Hungary has proved to not only Europe, but all the markets that if a country believes in our sport, there is room for investment, room for the right investment for fans, and also the right fees that needs to be recognized by the fact that F1 is the business cup for a country and for a culture. Therefore, there are opportunities in front of us. But the other good thing is that for the deals that we have extended with a quite significant term, it's benefiting the fact that there is robust growth in the year to come in order to keep the financial opening to the race as minimum as possible. But definitely, for the windows that we have in front of us, there are huge opportunities because, as you know, we don't want to move forward in terms of number of races even if the request is higher than what we can offer.

Derek Chang, President and CEO

The conversations that Stefano and his team have with prospective promoters out there, it's a pretty healthy group of folks that are always coming in to have discussions. We clearly have certain limitations related to the calendar. But I think as we continue to scope it out in the future, there will be options as we move forward.

Operator, Operator

Our next question comes from Peter Supino with Wolfe Research.

Peter Lawler Supino, Analyst

I'm thinking about the profit recovery potential in Las Vegas. If memory serves, you have about $600 million of capital invested in Las Vegas PP&E. And understanding and appreciating that the LVGP has benefited the entire sport, is that original capital investment something on which Liberty realistically expects to earn a stand-alone return on capital that's better than your WACC?

Brian Wendling, Chief Accounting and Principal Financial Officer

Yes, our aim is to achieve a return on that investment. As you mentioned, we have increasingly moved away from solely considering the stand-alone economics of Las Vegas. As the city continues to grow and we collaborate with partners in the market, we see benefits that enhance the overall ecosystem, some of which are intangible while many are quite tangible. Overall, we definitely aspire to earn a return on that investment.

Operator, Operator

Our next question comes from Joe Stauff with Susquehanna.

Joseph Robert Stauff, Analyst

I wanted to ask if there's anything you could share with us on MotoGP and just, say, the expiration schedule for the existing race promoter contracts that you have? And then the second question is on the new race promoter contracts within F1 you announced in Canada and Austria. Is there any sense you can give us on kind of like the average growth that you'll realize over the period? Or any delta you can share with us, please?

Derek Chang, President and CEO

Yes, this is Derek. Regarding the first question about race promotion at MotoGP, I'll let Carlos provide more details shortly. However, I want to mention that we have a routine schedule of renewals coming up for the new races we announced earlier today, including the Buenos Aires race and the returning race in Brazil. Now, I will turn it over to Carlos to elaborate further.

Carlos Ezpeleta, CEO of MotoGP

Thank you, Derek. We're pleased to report that promoters represent one of the most significant areas of growth for the sport at this time. There is substantial interest from new countries wanting to join the calendar, and we have the capacity to accommodate them, despite having a maximum of 22 races agreed upon with the teams. Currently, we have four races in Spain, two in Italy, and other events that could potentially be replaced to introduce new markets. This year, we have confirmed that Buenos Aires will join the MotoGP calendar starting in 2027, and Brazil will return after a 20-year absence. Both of these additions will replace events that had considerable value. We have also renewed agreements with events in Spain and France, which have seen significant fee increases. Therefore, we observe a strong demand from new countries wishing to participate. As we consider our partnership with Liberty, we must strategically manage the calendar to ensure room for new markets or to enhance our presence in existing ones. We see that the pace of these contracts is accelerating, with countries and promoters seeking to expand their agreements, which typically last five years, but some are now extending to ten years or more.

Derek Chang, President and CEO

Great. Thanks, Carlos. I think on the F1 question with respect to the two recent renewals, we're not getting into the details of what those renewals are. But that being said, both of these are important markets for the F1 calendar and also bring other components to it, including the media rights renewal in Canada, but I'll let Stefano articulate that in a bit more detail.

Stefano Domenicali, President and CEO of Formula One

Thanks, Derek. I want to reassure you, Joe, that the changes are definitely positive, not just in terms of financial contribution, but also beneficial for the ecosystem. Each Grand Prix has different aspects to consider. For instance, promoters must acknowledge the significant impact of Red Bull's investment in the F1 ecosystem, which is quite evident. Canada has always been a vital market for Formula One, but it has also required investment to foster the right environment for growth. This is why our initiatives, such as new facilities and an expanded Paddock Club, along with additional grandstands for fans, will enhance profitability for both the promoters and us as the commercial rights holder. I believe that every situation is carefully considered, with an understanding that each one is unique and must be treated accordingly. Overall, there is strong support for our approach as everyone recognizes the benefits for themselves. Wherever we go, we create business opportunities and generate interest, allowing everyone to showcase what lies behind the race. The focus is not just on the event itself but on nurturing an ecosystem that fosters technological inspiration and fulfills what each country aims to achieve by hosting a Grand Prix. In summary, the changes are positively impacting every location we engage with.

Operator, Operator

Our next question comes from Ryan Gravett with UBS.

Ryan Andrew Gravett, Analyst

With the MotoGP deal closed and the split coming, I was just wondering if you could provide an update on capital allocation plans and priorities from here. I know you talked about getting to 3 to 4 times at MotoGP, but how should we think about the right target leverage at the F1 OpCo level and just your general thoughts on share repurchases.

Derek Chang, President and CEO

Thank you for the question. As you mentioned, we are currently reducing our debt. As we reach a level of leverage that we are comfortable with, we will continue to explore opportunities in the marketplace, which has always been a central focus for us. From a mergers and acquisitions standpoint, we maintain high standards and a disciplined approach to our potential investments. This will evolve as we progress, and it's definitely a topic we will keep discussing.

Operator, Operator

Our next question comes from Steven Cahall with Wells Fargo.

Steven Lee Cahall, Analyst

First one just on F1 TV. I'm wondering if you've done any assessment of those subscribers. It seems like maybe some are super fans, some are cordless; definitely some could be both. But as you contemplate maybe moving to a streaming partner for some of your rights, do you worry that there are any cannibalization risks of the folks that are cordless and just may be able to find that content for the subscription that they already have? And then a second one, just on competitive balance. I was wondering if you could talk if there's anything new in the Concorde agreement around this. We have another F1 season where 6 of the 10 teams aren't really racing for championships or podiums. I was wondering if there's anything in the new Concorde that might balance that better over time. I know you have some financial controls in there, but it hasn't yet kind of moved out of the steering effect that you've got in the field.

Derek Chang, President and CEO

Yes, I'll start. Stefano, I'll hand it over to you because I know you enjoy discussing competitive balance. Regarding the question about streaming platforms and F1 TV, the reality is that in today's world, it's not just about choosing one option over the other. It's essential to make content available to consumers and fans wherever they choose to engage with it. Our overarching goal is to provide access to our content in as many locations as possible for easy consumer and fan access. With that, I’ll pass it over to Stefano.

Stefano Domenicali, President and CEO of Formula One

Thanks, Derek. I mean, just to go to the competitive balance, Steven, I think that we need to be considering F1 not in one season. But if you remember two years ago, McLaren, who is today leading the championship was last in the last row of the first Grand Prix in the Boeing Grand Prix. So I think that what has been done with regard to the budget cap and the possibility for the teams that are able to win to have reduced time of wind tunnel and some other effect on their development is having an effect. The gaps in terms of the difference between team to team has never been so small. And therefore, I mean, on that respect, I do believe that we are not worried at all about these assets. I would say the model we have put in the Concorde is absolutely fair because there are so many variables that we will try to consider everything in order not to have something that can be perceived as unsustainable. Therefore, I do believe that the more that you are creating in terms of attention to the fact that if you are more successful, you can get more money from one side. But on the other side, on the sporting side, we are trying to create the right content from the sporting and technological regulation in order to try to keep the pack as competitive as possible. And this is the duty of the work together that we have to do together with the FAA and us on both sides of the cab.

Operator, Operator

Our last question is from David Joyce with Seaport Research Partners.

David Carl Joyce, Analyst

I wanted to ask about MotoGP. You already talked about the race promotion cadence, but could you help us understand the typical duration of the media rights contracts and what might be expiring in the next 12 to 18 months? And similarly, with on the sponsorship side, I know that's a ripe area for growth there. What are some typical contracts there? And how would those be renewing?

Derek Chang, President and CEO

Thanks for the question. As we are thinking about sort of both of those categories, clearly important pillars of our revenue and our growth. And as I think Carlos, we spoke about earlier in terms of sponsorship and sort of that area, we do see a huge amount of opportunity there. We do think it's a long build just because we've got to sort of tell the story, get the potential sponsors and people bought into what we are, what we can do for them. And just like we saw with F1, that will be something that happens over time. On the media rights, we do have a variety of deals coming up, as you might imagine, over the course here in the next several years. I will let Dan speak about that in a little bit more detail. But again, I think the goal there is probably to broaden the reach and continue to sort of build the brand of MotoGP in the conscious of the general market. So that's sort of where we're pushing. But Dan, why don't you take that?

Dan Rossomondo, Chief Commercial Officer of MotoGP

Thanks, Derek, and David, thanks for the question. I think I'll start with the media part first. I think the great part about our sport is that we are truly global in nature. So we have to be relevant and have the right media deals in a variety of countries. And everywhere we go, we want to have the best and most thorough distributions. Our deals do have different cycles, as Derek said. And I think the other really key part that Derek said is that we need to sort of change with how today's consumer is changing, where they're watching things, and how they're consuming content. So we're always looking for what might be the next really key distribution methods, and we hopefully keep flexibility within our agreements to sort of touch on that and to change that as we can. On the sponsorship side, it's been said a few times. We think that's a huge area of growth. One of the real reasons why we spent so much time and invested so much money over the last year on the brand identity and on building up both the business analytics and the marketing team was so that we can go out and tell better stories and attract new brands into the ecosystem. We have a variety of partners that are endemic inside of the industry. We have some really great ones that are not endemic, but we clearly have to build out that pillar of our business. And we're going to do that by becoming more attractive to brands that they want to tell stories with us. We want to get them to know our riders better, and we want to enter into long-term deals with sponsors that are like-minded and are really, really good marketers so that they can help us build our business and attract even more fans. So that's where we are.

Derek Chang, President and CEO

Thank you, Dan. And I think that's our last question. I want to thank and welcome Carmelo and Carlos and Dan. Thank you, guys, for your participation. Thanks, Stefano, and thank you to everyone who joined the call today. We appreciate it and look forward to speaking again soon.

Operator, Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.