Formula One Group (NASDAQ:FWONK) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong EPS performance and positive cash position, despite some revenue declines due to race scheduling. The Q&A reveals optimism in sponsorship growth and F1 TV expansion, with potential upside from the Las Vegas Grand Prix. Management's conservative approach and focus on long-term sponsorship agreements offer stability. While some management responses were unclear, overall sentiment is positive, with strong fan engagement and growth in social media and TV subscribers. The absence of a shareholder return plan slightly tempers the outlook, but the overall sentiment remains positive.
Key Financial Performance
EPS $0.05, compared to expectations of $-0.18.
Cash and liquid investments $2.8 billion, which includes $1.5 billion of cash at F1 and $69 million of cash at Quint.
Total debt $2.9 billion, which includes $2.4 billion of debt at F1.
Leverage ratio 1.2x as of March 31.
Race promotion revenue Decreased due to the mix of races with Australia and China occurring in the current period compared to Bahrain, Saudi Arabia and Australia in the prior year.
Media rights and sponsorship revenue Declined due to the timing of race-specific local titles sponsorships and recognition of that revenue shifted with the timing of races.
Adjusted OIBDA Declined alongside revenue due to calendar variance.
Other revenue Declined due to one less Paddock Club event and the mix of races held.
Team payments Decreased due to lower pro rata recognition with one less race held.
Total CapEx Approximately $33 million year-to-date, including slightly less than $20 million related to Grand Prix Plaza.
Corporate revenue $53 million, which includes Quint results and approximately $6 million of rental income related to the Las Vegas Grand Prix Plaza.
Corporate adjusted OIBDA loss $12 million, includes Grand Prix Plaza rental income, Quint results and corporate expenses.
Live Nation stock value $9.3 billion, with $1.15 billion in principal amount of debt against these holdings.
F1 TV subscriber growth Total subscribers up 4% year-over-year, led by the U.S. market up 20%.
Social media followers Reached 100 million, growing 30% year-over-year.
Ticket sales for Las Vegas Grand Prix Tickets went on sale April 9, with sales velocity outpacing last year.
Attendance at Australian Grand Prix New record crowd of 465,000 weekend attendees.
Advance ticket sales for hospitality products Sold over 12,000 tickets at Tower Paddle Club.
F1 exhibition ticket sales Sold more than 530,000 tickets in the last 12 months.
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Operating Highlights
New Product Launch: LEGO partnership showcased at the Miami Grand Prix with fully drivable LEGO F1 cars.
New Licensing Partner: New license partner LEGO has seen high demand for its F1 products, selling on average 1 piece every second in March.
New Activation Experiences: Grand Prix Plaza in Las Vegas opened with immersive F1 experiences and year-round activities.
Market Expansion: Renewed contracts for Mexico GP through 2028 and Miami GP through 2041, indicating strong U.S. market presence.
Attendance Growth: Record attendance at Australian Grand Prix with 465,000 weekend attendees; strong demand for remaining races.
Media Rights Growth: Active discussions for new U.S. media rights agreement with multiple partners.
Operational Efficiency: Lower initial ticket prices for LVGP driving momentum and greater sell-through.
Financial Performance: Formula One had $14.2 billion of future revenue secured under contract as of March 31.
Cost Management: Increased costs due to higher freight and partner servicing, but expected to stabilize as a percentage of revenue.
Strategic Shift: Progressing with Dorna acquisition and structural simplification, including planned split-off of Liberty Live.
Sustainability Commitment: F1 cars to be powered by 100% sustainable fuel from 2026, with significant investments in sustainable aviation fuel.
Long-term Agreements: New Concorde Commercial Agreement with teams for 2026-2030, enhancing collaboration and financial attractiveness.
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Risk or Challenges
Regulatory Risks: The company is progressing with the Phase II regulatory process for the Dorna acquisition and is working constructively with the European Commission, hoping for approval by June 30, 2025.
Economic Factors: The company is actively monitoring changes in consumer sentiment, although historically, Formula One’s business model has proven resilient in times of economic uncertainty.
Supply Chain Challenges: Increased freight costs due to longer routes and higher commissions and partner servicing costs have impacted overall revenue growth.
Competitive Pressures: The current U.S. media rights agreement is set to conclude at the end of 2025, and the company is in active discussions for a new deal, indicating competitive pressures in securing broadcasting partnerships.
Event Attendance Risks: The company faced race cancellations in the previous year, which necessitated replacement races, highlighting potential risks in event scheduling and attendance.
Debt Management: Formula One Group had a total attributed principal amount of debt of $2.9 billion, which includes $2.4 billion at F1, indicating a significant debt load that needs to be managed.
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Guidance & Outlook
Dorna Acquisition: Progressing with the Phase II regulatory process, aiming for approval by June 30, 2025.
Structural Simplification: Continuing efforts towards the planned split-off of Liberty Live.
Sponsorship and Licensing: Focus on securing blue-chip sponsors aligned with the F1 brand, with strong momentum in sponsorship and licensing.
LVGP Economics: Improving stand-alone economics for the Las Vegas Grand Prix, with ticket sales trending ahead of last year.
U.S. Media Rights: Active discussions for a new media rights agreement as the current one concludes at the end of 2025.
Grand Prix Plaza: Opened new year-round activations, expected to generate modest revenue impact in 2025.
Sustainability Initiatives: Investment in sustainable aviation fuel and commitment to 100% sustainable fuel for F1 cars from 2026.
Future Revenue: $14.2 billion of future revenue secured under contract as of March 31, 2025.
CapEx: Total F1 CapEx approximately $33 million year-to-date, including $20 million related to Grand Prix Plaza.
Team Payments: Expect higher full-year team payments despite a decrease in Q1 due to fewer races.
Adjusted OIBDA: Expected to be consistent with prior years as a percentage of total revenue.
Viewership Growth: U.S. viewership up 45% across the first five races, with strong engagement metrics.
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Shareholder Return Plan
Shareholder Return Plan: Formula One Group has not announced any share buyback program or dividend program during the Q1 2025 earnings call.
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Key Q&A
Q:Could you talk about how the team payment budget is structured for the year and opportunities for upside?
A:At the beginning of the year, we do prudent financial forecasting. There are opportunities for upside, particularly with the Las Vegas Grand Prix and sponsorships, but we want to be conservative. The biggest unknown is ticket sales, which are currently trending well.
Q:Can you comment on the sponsorship business and the potential for growth in 2025 and 2026?
A:Our strategy for sponsorship is solid, focusing on maximizing revenues and ensuring strong partnerships. We have a strong pipeline and are optimistic about growth in the coming years.
Q:How do you view F1 TV as an asset in the U.S. media rights deal?
A:F1 TV is growing positively, especially in the U.S. We are open to discussions on bundling it with media rights, depending on what makes sense for F1.
Q:What can you tell us about team payment leverage in the 2026-2030 timeframe?
A:We expect leverage in 2026 compared to 2025, with a more simplified structure benefiting all parties.
Q:Can you provide an update on the MotoGP deal and its broader opportunities?
A:The deal is not finalized yet, but we see upside in MotoGP and are optimistic about making it a mainstream entertainment asset.
Q:Can you comment on sponsorship growth despite fewer races this year?
A:We can't provide a specific number, but we encourage patience as Q2 will give a clearer picture of sponsorship trends.
Q:What are the expectations for other costs of revenue this year?
A:There will be increases in partner servicing and commission costs, as well as GPP costs for activations, but these will be offset by generated revenue.
Q:How are renewal discussions for non-U.S. media rights progressing?
A:There is healthy competition for media rights, especially from streaming platforms, and we expect positive impacts in various regions.
Q:What are your thoughts on the defensiveness of sponsorship revenue during an economic slowdown?
A:We have long-term agreements with sponsors, which reduces financial risk. Our strong relationships and understanding of partner needs help us remain positive.
Q:How do you plan to engage younger audiences with shorter attention spans?
A:We aim to create diverse content and engage fans year-round, recognizing that not every interaction needs to be monetized immediately.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific number for sponsorship growth despite fewer races, indicating complexity in revenue recognition. Additionally, there was a lack of clarity on the exact nature of the media rights discussions and how they might evolve.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Australian Grand
Demand
LEGO car
Las Vegas
Media
Mexico
Moto GP
OIBDA calendar
Prix weekend
Quint
Saudi Arabia
Season
Sprint
Tickets
advance
agreement end
calendar variance
consulting
day admission
driver parade
ecosystem
event activation
launch event
majority
mix race
partner PwC
percentage
priority
remainder season
route
season track
ticket month
weekend Miami
FWONK Transcript
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Positive5-8
The earnings call highlights strong EPS performance and positive cash position, despite some revenue declines due to race scheduling. The Q&A reveals optimism in sponsorship growth and F1 TV expansion, with potential upside from the Las Vegas Grand Prix. Management's conservative approach and focus on long-term sponsorship agreements offer stability. While some management responses were unclear, overall sentiment is positive, with strong fan engagement and growth in social media and TV subscribers. The absence of a shareholder return plan slightly tempers the outlook, but the overall sentiment remains positive.
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