Formula One Group - Earnings Call - Q2 2023

Transcript

Speaker 0

As a reminder, this conference will be recorded on August 4. I would now like to turn the call over to Shane Kleinstein, Vice President, Investor Relations.

Please go ahead.

Speaker 1

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 ks and 10 Q and registration statement on Form S-four filed by Liberty Media and Atlanta Brace Holdings with the SEC on 06/08/2023. These forward looking statements speak only as of the date of this call, and Liberty Media and Atlanta Braves Holdings expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statement contained herein to reflect any change in Liberty Media or Atlanta Braves Holdings' expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non GAAP financial measures for Liberty Media, SiriusXM and Atlanta Braves Holdings, including adjusted OIBDA and adjusted EBITDA.

The required definitions and reconciliations for Liberty Media, SiriusXM and Atlanta Braves Holdings, Schedules one through three, can be found at the end of the earnings press release issued today, which is available on Liberty Media and Atlanta Braves Holdings websites. Now, I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Speaker 2

Thank you. Good morning. Today, speaking the call, we will also have Formula One's President and CEO, Stefano Domenicali Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling. Also during Q and A, we will be able to answer questions related to Atlanta Braves Holding and the Braves management will be available too. Starting with some corporate updates.

Atlanta Braves Holdings began trading as a C Corp on July 19. We believe this split off will better highlight value at the Braves and its real estate. For example, the Batter A shares and the K shares are up 38 since the split announced last November. We also settled all of the remaining intergroup interest in connection with this split off. Today marks the first day of trading for our new trackers and we 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 Siri, cash and debt. And we continue to reduce debt in the second quarter, retiring the remaining $275,000,000 of our 2.8% exchangeable for Siri. And we're having the 1,800,000.0 new battered shares at LSXM exchange for debt retirement in the near term. We reiterate the focus on rationalizing the Siri 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 adds and we do expect a positive back half in the aggregate in self pay net adds. Has sustained a historically low churn of 1.5% and the business is focused on improved efficiency and cost structure and that will benefit EBITDA in the coming quarters. During their announcement, CRE increased its full year free cash flow guidance by $50,000,000 up to $1,150,000,000 During the quarter, we experienced continued progress on lowering the streaming cost per customer acquisition and it was down 20% over the prior year. Data shows that this app 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. Sirius is maintaining its focus on enhancing its in car position and I'd note EV manufacturers, which are a growth area, are area of new success for us as demonstrated by our agreement with Volvo.

Turning to Formula One Group. At the corporate level, I'd 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 1,100,000.0 FWANA shares in settling the intergroup interest that were previously held at LSXM for $67.5 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 versus the Belgian BGP last year. I'd note 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 1,000,000 viewers, 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 11,000,000 social impressions and over 1,000,000 engagements in July. The Las Vegas team is pulling together an event of unprecedented complexity and scale.

It will be the largest and our argument would be the most premium sporting event of 2023. And it's a view that's a testament to our Super Bowl aspirations for all our Grand Prix events. I am 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 at 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. I'd note we've also been already receiving inbounds with attractive economics for 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're confident in continued growth into the balance of the year in 2024. Revenue for the quarter was up 27% and AOI was up 23% over the prior year. Growth was driven by International Man, a real opportunity for live. International fans were up 46% and more artists are touring globally. And lastly, the international front, our OCESA acquisition in Mexico is outperforming expectations.

Overall attendance and per fan profitability were both up double digits for the quarter overall at Live Nation. Turning now to the Braves, now a separate public company, but business as usual is continuing in Braves country. We've seen continued momentum in fandom demand, having sold 56% of our ticket capacity season to date tied for MOB's Best. We've made it to 40 sellouts already, the fastest we've ever hit this milestone in a season of Truist, and concession revenue was up season to date despite shorter game times. We announced a Jersey Patch sponsorship with Quickrete in a multiyear deal.

And most importantly, on field, the Braves lead the NL East and the entire MLB, a franchise record 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 excuse me, 2025 with most even longer. The battery is also seeing continued growth. Adjusted OIBDA for the mixed use development was 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.

Speaker 3

Thank you, Greg, and good morning, everyone. My remarks will focus mainly on the $6.30 balance sheet figures adjusted for the split off that was completed July 18 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 three thirty excludes $51,000,000 of cash held at SiriusXM. There's also 1,100,000,000 of undrawn margin loan capacity at the parent level related to our SiriusXM margin loan. As of August 3, the value of our SiriusXM stock was $16,000,000,000 We have $1,500,000,000 in principal amount of debt against these holdings.

Total Liberty SiriusXM Group attributed principal amount of debt is $11,700,000,000 which includes $9,500,000,000 of debt held directly at SiriusXM. In April, Liberty SiriusXM settled the remaining $275,000,000 of its 2.125% SiriusXM exchangeable due to the net pay down at both SiriusXM and Liberty SiriusXM during the quarter. Total attributed Liberty SiriusXM Group debt was down $360,000,000 from $331,000,000 This was exclusive of the debt reduction due to the reclassification. The 1.375 basket convertible notes mature in October and $199,000,000 principal remains on these notes. Liberty SiriusXM plans to exchange its $1,800,000,000 Batter 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 $1,400,000,000 which includes $1,100,000,000 of cash at F1. In connection with the reclassification approximately $100,000,000 of cash as well as certain private and public assets previously held at Formula One Group were attributed to the Liberty Live tracking stock. This includes $33,000,000 of ETF and public assets that were liquidated prior to the reclassification and made up a portion of the $100,000,000 of cash that was contributed over. Total Formula One Group attributed principal amount of debt was $3,000,000,000 which includes $2,400,000,000 of debt at F1 leaving $536,000,000 at the corporate level. F1's $500,000,000 revolvers undrawn and their leverage at quarter end was 2.2 times.

And as we mentioned last quarter, the margin on F1's Term Loan B permanently stepped down to 3% from 3.25 effective at the 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 of 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 proportionately 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 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 $20,000,000 Reminder that other costs of F1 revenue and SG and A are best viewed as a percent 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 cost of sales will largely be incurred in the fourth quarter when the rates occurs. But for the quarter on SG and A, we had $7,000,000 of costs associated with LVGP. On 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 $400,000,000 of which approximately $155,000,000 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 F1 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 sight lines.

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 $2.00 $4,000,000 which includes the ETF assets contributed from Formula One Group. In connection with the reclassification, the Formula One Group also has contributed private assets with a fair value of approximately $380,000,000 measured at the time of our definitive S-four 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's $400,000,000 of undrawn margin loan capacity at Liberty Live Group related to our Live Nation margin loan. And as of yesterday, the value of our Live Nation stock held at Liberty Live was $6,000,000,000 We have $920,000,000 of principal amount of debt against these holdings. Liberty and our consolidated subsidiaries are in compliance with their debt covenants at quarter end.

Speaker 2

Looking quickly at the Braves Let me interrupt you for one sec, Brian. As we turn to the Braves, I think I misspoke too early in the morning here and said it was at 56 capacity 56% capacity. The Braves stadium is actually at 96% capacity. Sorry, go ahead. Thank you, Greg for clarifying that.

Speaker 3

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 and related revenues, including ticket and concession revenue. Battery mix 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 the increased attendance. At quarter end and adjusted for the split off, they had attributed cash and liquid investments of $131,000,000 which excludes $52,000,000 of restricted cash. And Atlanta Braves Holdings had attributed principal amount of debt of $543,000,000 And with that, I'll turn it over to Stefano to discuss Formula One.

Speaker 4

Thanks, Brian, and good morning to everyone. We are already over halfway through the twenty twenty three four zero 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 guests will continue to close overtime for all the teams. In Silverstone, the top six finishers crosses the line within thirteen seconds on 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 improvements following recent upgrades as delighted fans will land the second place podiums at Silver Stone and Hungary and strong drive from PIAstri. Our fans are accessing F1 content across multiple media platforms. Global audience averaged 68,000,000 through the first eight races. In growth market like The U.

S, viewership over the same period is up 5% on ESPN and events like Monoc have grown up 29% compared to last year U. S. Viewership. The Sprint Series have continued to both generate excitement on the track and drive viewership growth. At Azerbaijan, our first print of the season, total weekend viewership across the recent Sprint events was up 10% versus twenty twenty two.

We recognize that sport fans today engage with content across a variety of platforms, including linear, digital and social. Across our social media channels, F1 reached 64,600,000 followers as of Q2, up 29% year over year. F1 continues to adapt and expand our content to gather to different platforms and serve all segment of fans. For example, at the Hungarian Grand Prix, we piloted our first ever F1 broadcast for kids in partnership with Sky UK and Germany. In just one day, social media coverage for the announcement of the Kid Kat and the presentation of the drivers' avatars reached more than 45,000,000 users, with 93,000,000 impression and hugely positive sentiment.

F1 celebrity presence continues to be a large role for fans. For example, F1 social post featured in Shakira at the Spanish Grand Prix generated over 50,000,000 impression and over 2,000,000 engagement. 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 2,800,000 engagement and over 7,000 comments. The social content when Yuki Tsunoda and his AlphaTauri teammates helped the community after the flooding planes generated almost 15,000,000 social impressions. F1 is considering how to advance our approach to audience measurement of consumer behavior able to better capture our wider viewership and engagement for the future.

Our discussion 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 result of these efforts with continued sellout races, many at increased capacity. The Canadian and Silverstone Grand Prix both set new attendance records with crowds of 345,408, respectively. Silverstone attendance was up 20% compared to last year, in part due to cultivating fund experience across the entire race weekend, including a Calvin Harris conference on Thursdays even before on track activity started.

We will continue to work 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 site opening in Birmingham in The U. K.

This December and Boston in May 2024. Football 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, EI launched the F1 twenty three video game. In its first week, the game ranked number two and number three in UK Games and Global Steam sales chart, respectively. And finally, F1 related postcards are increasingly providing other content to engage our fans.

A new formal Why podcast launched in May, it reached number one in The U. S. And UK sports podcast channel, performing particularly well among newer fan cohort with 35% of its audience in The U. S. And 30% of its audience female.

Tune in to raise an update on our commercial agreements. On race promotion, we recently announced a further extension of our Ocean Grand Prix throughout 2030. Hungary also extended through 2032 with commitments made by the promoters to invest significantly in their physical infrastructure, including a new pit building and May grandstand by 2026. We announced a record breaking 24 races championship calendar for 2024 with the return of the race in China for the first time since 2019. F1 is further progressing on journey towards greater regional regionalization

Speaker 0

of the calendar where possible, including back to back races in Japan and China as well as in Bodhadi and Qatar. This improves the efficiency of our operations and reduce unnecessary legs in our travel, particularly from a freight perspective. On

Speaker 4

MediaRite, F1 we enter into a multiyear agreement with Tencent to stream F1 event across its digital platform. This complements our existing coverage in China on CCTV. Additionally, we continue to grow F1 TV Pro and Access subscribers with particular strength in The U. S. Market.

On sponsorship, Heineken extended their global partnership in a new multiyear deal. As previously announced, they will also be the official title partners of the Formula One Heineken Silver Las Vegas Grand Prix. The relevance of F1 brands continue to generate interest in sponsorship opportunity, including leveraging our sustainability strategy in and new inventory like Las Vegas. We are focused on delivering incremental values 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, combine the thrill of Formula racing with premium live entertainment, musical acts, world class culinary offering and more. We continue to grow our fan offering with new partnership, ensuring all partner venues meet the quality standards our fan expect and deserve. Most recently, we were excited to announce additional hospitality experience, 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 J Belding, Major Lazer, Mark Robson with the headline with 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 official event partner and will provide fans with a more sustainable through their beverage offerings.

Formula One and Liberty have made a long term commitment to RISE in Las Vegas and have invested meaningful capital to make it happen. The team, led by Renee Will, has built incredible partnership with the local community, all of whom stand to benefit from the tremendous economic value we believe 04/2001 will bring. The Las Vegas team worked with third parties in gathering market based data and estimated economic impacts to Las Vegas in the year one of the race will be over $1,200,000,000 This is an additional two 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 Las Vegas Grand Prix will weigh the global sporting community this November. Finally, F1 continues to progress our sustainability and diversity and inclusion efforts.

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 10 Formula One teams will have F1 Academy drivers and liberties 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 races tends to provide tremendous benefit for the entire F1 ecosystem.

F1 has also progressed initiative this season in environmental sustainability. In Austria, we piloted an energy efficient power system that delivered a 90% reduction in carbon emission from operating the Pado 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 emission by a minimum of 60% compared to traditional fueled vehicles. The Formula two and Formula three cars are successfully running on 55% advanced sustainable fuel this season, and we remain on track to introduce 100% advanced sustainable fuel 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 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 Netherlands later this month before going to Monza. The gaps are getting increasingly closer within the pack of the grid. We have three months spring 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 Tuta, full speed ahead. And now I will turn the call back over to Greg. Thank you. Bye bye.

Speaker 2

Thanks, Stefano and Brian. Our Annual Investor Day will be Thursday, November 9 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.

Speaker 0

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

Speaker 5

Greg, can you help

Speaker 6

us better understand monetization of the Las Vegas paddock outside of the Grand Prix in 2024 and beyond? So what type of events do you plan on holding? Any early indicators sponsorship interest outside of the Grand Prix? And do you expect this OIBDA contribution match to match or exceed the Vegas Grand Prix over time? Thank you.

Speaker 2

I will manage expectations first and say I do not expect it will exceed the amount we'll make on 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.

Speaker 7

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, think about something relating to racing, maybe karting, high end supercars. Of course, Las Vegas is the convention center of the world, lots of interest in our state of the art LED certified I'm sorry, 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 a lot more to come over the next few months.

Speaker 6

Thanks. 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 and then the concrete agreement and then the appetite of new team insurance. And maybe just like more high level, Greg, do you see any conflicts of interest with your vision of the sport long term versus what the FIA views? Thank you.

Speaker 2

Well, I'll make a comment or two and then I'll let Stefano add. I think there's little daylight between Stefano in my view, which is, we have 10 great teams. We're very excited about what they're doing. We are there is a process to add more teams, but the bar is very high and it's unclear what an 11 team value they would add. And 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 we hopefully work things out. Stefano, what would you add?

Speaker 8

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

Speaker 6

All right. Thank you both.

Speaker 0

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

Speaker 9

Thank you. Good morning. On f one, any, what's your sense of optimism about potentially signing a concrete agreement with the teams this year, which would be a couple years early? And, Stefano,

Speaker 5

when you look

Speaker 9

at the the 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? And then I just had one brave question for you guys. There's 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.

Speaker 2

I'll let Stefano take the first two, and I'll take a shot at the Diamond question. And obviously, Derek, if you have things to add. But Stefano, why don't you speak first?

Speaker 8

Yes. Thanks, Greg. I mean, I would say, first of all, I think it's the right moment to celebrate the incredible job that this company is doing with that car because if you see the other car and where the odds are in terms of gap is just incredible, how Max is doing an incredible job. But that has been, always part of Formula One, you know, and I would say that this is part of the game. I'm pretty sure that, in the next couple of years, the the the term of technical gaps will be reduced.

But if someone is great, we need to celebrate what he's doing. And sometimes, I have to say, there is also the need to confirm the legacy of this of someone that is doing some spectacular stuff. And in in certain market, mainly the new one, you can say, you you can say that he's also putting an incredible legacy because, you know, that means something. You know? If you're able to win so many races, I mean, you are really a great dealer.

So nothing negative in that respect. And and if you look back, I would say this has something this has been always part of F1 history. With regard to corporate agreement, I would say today, conversation are are really going ahead because the momentum of the sport is really great. Of course, we are not in a rush, but I would say that all things are heading to a positive conclusion for this discussion, both with the teams and the FAA.

Speaker 9

Thank you.

Speaker 2

On the Braves, I'll give my view and Derek, please feel free to add. We're blessed to have an incredibly strong territory, 14,000,000 broadband households, a fan base, which is very appreciative of a very successful team. And with a reasonable deal on what we are paid by Diamond or Valley, we think we are probably the most profitable RSM they have. Some of the other ones were less attractive either territories or less attractive fan bases or relatively less attractive revenue versus cost to Valley. And this is why in the bankruptcy proceedings, they were terminated as executory contracts by Valley.

I don't anticipate that will be that will happen for us because we have for all the reasons I cited above. But I do think if it does happen, there will be other alternatives because of the strength of our product and the demand in our territory for, that will generate us positive returns. Derek, do you want to add anything?

Speaker 10

Greg, thanks. You said it very well. I would just comment that, first of all, we and Valleys are both adhering to the terms of our agreement as we currently stand. We are being paid in full and we are delivering our rice in full. We don't don't see that changing anytime soon.

And then just generally, let me just tell you live sports content continues to be very desirable. So we think long term, yeah, this is a good position regardless of what happens.

Speaker 9

You guys want to comment on

Speaker 8

the Mets season to date? Just kidding. Have a good day.

Speaker 2

No. Thank you. Next question.

Speaker 0

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

Speaker 11

Hi, good morning. A couple for me. On Liberty Live, Greg, some of those private that were moved from Formula One, are there any ATBs there? And then just broadly, is it you have some liquidity at Liberty Live. Is there any business strategy of buying venues or doing some stuff with Live Nation directly and growing sort of a real estate portfolio or anything?

Or is it purely to tackle any discount if that sort of remains? And on Formula One, I don't need to want to nitpick particularly, but the team payments, again, seem to be a little lower than I would have thought and sort of implies like a $1,300,000,000 And I know you said in the past that you are conservative. I know there's a one less raise. Is there any stuff in the numbers that sort of impact the 2Q estimate?

Speaker 2

Okay, Vijay. A lot to unpack there, but thank you. On Liberty Live, look, I think we are looking for there is no ATB currently in that business to start. We are looking for businesses in there, which we think will be accretive and fit well potentially with the Live Nation strategy. And we'd like to do things which were additive to us and potentially to them in the future.

That gives us a wide latitude, but real estate certainly is on the list of things we think could be attractive, particularly real estate, which is anchored by Live Nation events. Our liquidity there is relatively light, so we'll have to be creative about the ways we do that, but we have some ideas. Turning to Formula One, I'd note a couple of things. I think in general, how we look at the rest of the year, we feel good about where things stand, very good. But some of the analysis about how payments were done and where it would flow between the third and fourth quarters, I think in general, we looked at our analysts as being slightly optimistic on three and slightly pessimistic on four.

The nature of the payouts, as you rightly noted, is it's conservative. And the timing of how the races fall impacts the payouts. Brian, would you add?

Speaker 3

Yes. I would just say the other thing that there's 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 look at that percentage. As we said in our remarks, we were at 63%.

Speaker 11

Great. Thank you both.

Speaker 2

Thank you, Vijay.

Speaker 0

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

Speaker 5

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 borrow so that the market can be more efficient around that spread. So would love to hear if you wouldn't mind sharing the rationale behind your decision not to do that. And then the second question is, I understand that leverage is the sensitivity in the 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 so you kind of stay above the 80%, but bring some cash in and then use that to reduce debt at Liberty Sirius?

And are there any restrictions or considerations preventing you from doing that or discouraging you from doing that? Thank you.

Speaker 2

Yes. I will let Ben Orrin, if you're on Ben, I think you are, answer the first one after I'll answer the second first. I think that strategy, we are concerned or not concerned about the leverage. I think Siri could support the leverage of the combined businesses to be clear. It might depend on how that was executed in terms of who bought whom.

But I think in general, Siri can support that leverage. I don't like the idea and I think we at Liberty don't like the idea of trying to sell some shares because we have very low tax basis in those and would be very tax inefficient. And as I said, I think we can support the combination. We are continuing to look at ways to manage our leverage. We do get dividends out of SiriusXM and from time to time they have paid special dividends.

And in general over the last year plus, we've been applying that to reducing leverage. But I don't like the tax inefficient. We have very low basis in those shares. Ben, do you want to address the borrow issue?

Speaker 12

Yes, sure. While we're very sympathetic to the borrow issue because it does create a lot of volatility, we've done a lot of work internally and with lawyers on the ability to actually lend out our shares. I think at this time, I'll probably just summarize to say there legal, there are different tax considerations to how any borrow facility or borrow of our shares would have to be structured that would make it relatively inefficient for any potential user. So for now, that coupled with the optics that to the extent that we were going to lend out our shares, what would the borrower be doing with those shares is probably why we will reluctantly not lend our shares for the time being, but we'll continue to look at it. And if any of the legal or tax considerations alleviate, never say never.

Speaker 5

Got it. Thanks to you both. Appreciate it.

Speaker 0

Thank you. Our next question comes from David Karnovsky with JPMorgan.

Speaker 13

Hi, thank you. On the increased CapEx for Vegas, can you just remind us what the original projection was for Paddock and maybe expand a bit on the drivers of the increased spend? And then just on race promo, I'm curious, revenue is up versus last year in Q2. That's with the same mix of races minus Ebola. Just wanted to see if you could comment on the drivers there.

Were there any one offs or kind of material step ups that we could be aware of? Thanks.

Speaker 2

Brian, do you want to take the CapEx?

Speaker 3

Yes, would say on the CapEx, we never officially gave a number. We said it approximated or was slightly higher than the land purchase value.

Speaker 2

So we still have not given a firm number. We just told you that we now think it will be larger than the amount that we're spending on the land.

Speaker 3

Yes, approximating 400,000,000 is what we said.

Speaker 2

Can you repeat the second question just to make sure I followed it?

Speaker 13

Yes, sure. And just with the CapEx, if you could expand on just the drivers of the increase, that'd be great. But on the second question,

Speaker 8

it looks on rate promo.

Speaker 2

May, do you want to comment on the drivers?

Speaker 7

Yes, I'm happy to. So we've entered into a couple of challenges as we've uncovered asphalt cables under the ground that needed to be addressed. There have been wires overhead that have needed to be moved. A lot of this was driven by the request 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 around enhanced security, around open and closing the track.

So this has led to additional equipment that was needed as well as just additional actual road work. Of course, with regard to the paddock building, it is being built at lightning speed in an inflationary environment. So as you can imagine, there have also been some additional costs along the way in that regard.

Speaker 2

Great. Thanks, Renee. And to your second question about timing and revenue recognition, maybe you can repeat it, please.

Speaker 13

Sure. It was just on race promo. The press release had noted it was off year over year. And I think you had the same number sorry, same mix of races minus Molla. So just wanted to see if you could comment on the drivers there, if there were any one offs or kind of material step ups to be aware of?

Speaker 3

No. Mean it's regular contractual increases there offset by the impact of the Molla race going away.

Speaker 13

Thank you.

Speaker 0

Thank you. Our next question comes from Steven Losechki with Goldman Sachs.

Speaker 14

Hi, great. Thank you. Maybe for Greg and Renee on Las Vegas. I appreciate the focus for year one as the stand experience. But maybe thinking into years two and beyond, are there any opportunities around the GP that have come more into focus over the last six months that you're particularly excited about, but might not be able to fit in time for this November?

Just trying to think through the long term vision and the profitability opportunity around Las Vegas compared to what we might see in year one.

Speaker 2

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 GP and outside the GP as we go into year two. We moved with lightning speed, the F1 team, Renee's team, to put this in place, and that's probably led to increased costs. And it's also meant that there are opportunities we had to not capitalize on, whether it be fan festivals, whether it be sporting events, whether it be music events, all of those things that are potentially can grow around the second and beyond GP.

So those are all GP related items. And I think we already touched on the fact Renee touched on some of the things outside the GP that people are interested in. But I don't think we have more to talk about today in terms of numbers.

Speaker 8

Got it. Thank you.

Speaker 2

Thank you. This is our last question, operator.

Speaker 0

Thank you. Our last question comes from Marlain Carriero with Bank of America.

Speaker 10

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

Speaker 2

Well, I think I touched on this a little earlier. We are you know, 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 at 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 for the business and its continued ability to generate that cash. So any combination though it might have for a short period of time 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 3.5 target relatively quickly.

Speaker 10

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

Speaker 2

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

Speaker 10

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

Speaker 2

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

Speaker 0

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