Formula One Group (FWONK) Q3 2025 Earnings Call Transcript

Liberty Media Corporation Series C Liberty Formula One

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Overview

The earnings call highlights strong growth in social engagement and strategic partnerships, notably with Apple, which is expected to enhance media audience growth. Ticket sales and costs for key events are well managed, and new sponsorships with major brands are expanding. Although management was vague about specific revenue impacts, the overall sentiment is positive due to strategic expansions and market opportunities, particularly in media rights and hospitality segments.

Key Financial Performance

Formula One Group attributed cash and liquid investments $1.3 billion, which includes $571 million of cash at Formula One, $176 million of cash at MotoGP, and $78 million of cash at Quint.

Total Formula One Group attributed principal amount of debt $5.1 billion at quarter end, which includes $3.4 billion of debt at F1, $1.2 billion of debt at MotoGP, and $523 million at the corporate level.

Revenue growth for Formula One (year-to-date) Up 9% year-over-year despite one fewer race, driven by growth across all revenue streams including sponsorship, media rights, and hospitality.

Adjusted OIBDA for Formula One (year-to-date) Up 15% year-over-year, with revenue growth outpacing increased expenses.

MotoGP revenue growth (year-to-date) Increased due to additional events held and contractual fee increases, despite higher costs from race mix and strategic headcount increases.

MotoGP adjusted OIBDA (year-to-date) Declined as revenue increases were offset by higher costs of motorsport revenue and increased SG&A due to strategic headcount increases.

Attendance at Formula One events 5.8 million attendees year-to-date, up 4% relative to last year, with record attendance at Monza, Austin, and Mexico.

Social media followers for Formula One Up nearly 20% year-over-year to 111 million, with notable growth on TikTok.

MotoGP attendance growth Up 4% through Malaysia, with record crowds at 8 different events.

MotoGP social engagement Up nearly 120% year-over-year through the third quarter, with social reach growing nearly 30% year-over-year.

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Operating Highlights

Formula One (F1): Renewed global partnership with Heineken in a multiyear deal. Signed a landmark distribution partnership with Apple in the U.S. for a 5-year deal starting in 2026. Partnered with brands like Hello Kitty and Pottery Barn to expand licensing and sponsorship opportunities. Expanded U.S. market presence through a partnership with Apple. Renewed media rights agreements in Mexico and other territories. Increased fan engagement with record attendance and viewership growth.

MotoGP: Closed acquisition on July 3, 2025. Focused on enhancing the Grand Prix experience, expanding global footprint, and scaling sponsorship roster. Renewed promoter relationships in Japan, Catalonia, Valencia, France, Germany, and San Marino through 2031. Expanded into South America with plans to race in Brazil in 2026 and Buenos Aires in 2027. Renewed broadcast agreements with SuperSport and expanded digital reach through TikTok and other platforms.

Debt Refinancing: Refinanced MotoGP's debt in August, reducing interest expenses and extending maturities. F1 obtained additional loans to fund MotoGP acquisition, with plans to deleverage both businesses.

Fan Engagement: F1 and MotoGP reported increased fan engagement through social media, digital platforms, and direct-to-consumer services. F1's Paddock Club saw an 8% increase in race day guests.

Liberty Live Split-Off: Planned split-off of Liberty Live to highlight value in Live Nation and improve trading dynamics. Expected to complete by December 15, 2025.

Collaboration Between F1 and MotoGP: Exploring partnerships between F1 and MotoGP to share best practices and drive commercial upside.

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Risk or Challenges

Debt Levels and Leverage: The company has significant debt levels, including $5.1 billion at Formula One Group and $1.2 billion at MotoGP. MotoGP's net leverage is particularly high at 5.6x, and while deleveraging is expected, it remains a near-term financial risk.

Investment Costs at MotoGP: MotoGP's adjusted OIBDA performance reflects elevated costs due to ongoing investments in commercial functions, sponsorship capabilities, and other growth initiatives. These costs are expected to continue, posing a challenge to profitability in the near term.

Race Count Variability: Formula One and MotoGP face variability in race counts and mix, which impacts revenue and profitability comparisons year-over-year. This inconsistency could affect financial predictability.

Foreign Currency Exposure: MotoGP's revenue and costs are largely euro-denominated, exposing the company to risks from foreign currency movements, which could impact financial results.

Sponsorship Growth Challenges: While sponsorship is identified as a growth opportunity for MotoGP, building a robust pipeline is expected to take time, delaying potential revenue growth.

Regulatory and Contractual Risks: The company relies on long-term promoter and broadcast agreements, which, if not renewed or renegotiated favorably, could impact revenue streams.

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Guidance & Outlook

Liberty Live Split-Off: The split-off of Liberty Live is expected to be completed on December 15, with trading as a stand-alone asset-backed equity starting the following day. This move aims to enhance trading dynamics and highlight the value of Liberty's position in Live Nation.

Formula One (F1) Growth: F1 continues to build commercial momentum with strong financial results despite having one fewer race. The company has extended media rights agreements, renewed promoter partnerships, and signed a landmark distribution partnership with Apple in the U.S. starting in 2026. This partnership aims to elevate the sport's presentation and expand its U.S. market presence.

MotoGP Strategic Plans: MotoGP is focusing on enhancing the Grand Prix experience, expanding its global footprint, and scaling sponsorships. Investments are being made to build commercial functions and enhance sponsorship capabilities, with associated revenue growth expected in the future. MotoGP plans to race in Brazil in 2026 and return to Buenos Aires in 2027.

Debt Refinancing and Leverage: MotoGP's debt was refinanced in August, reducing interest expenses and extending maturities. Future reductions in margin are expected as the business deleverages. F1's covenant leverage is below the threshold to trigger a permanent reduction in the Term Loan B margin, with interest accruing at a lower rate.

F1 Attendance and Engagement: F1 is experiencing record attendance and engagement, with plans to increase capacity in some markets in 2026 to meet demand. The Paddock Club remains sold out, and early partner requests for 2026 signal robust demand.

F1 Sponsorship and Licensing: F1 is finalizing a strong year in sponsorships with visibility into the 2026 pipeline. Licensing partnerships, including collaborations with Disney and Hello Kitty, are expected to provide long-term benefits.

MotoGP Sponsorship and Broadcast Agreements: MotoGP has renewed several promoter relationships and broadcast agreements, including a multiyear partnership with SuperSport. Sponsorship remains a growth opportunity, with efforts underway to build the pipeline.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:How is the U.S. rights agreement with Apple expected to impact engagement and media audience growth?

A:The U.S. market is crucial for growth, and the partnership with Apple is seen as a significant opportunity due to Apple's ability to engage young, dynamic, and multitasking fans. The deal is long-term, and Apple’s ecosystem is expected to enhance content delivery and social relevance. Management believes the risks are minor compared to the opportunities, and the partnership will strengthen over time.

Q:Was the global factor considered in the decision to partner with Apple for U.S. rights?

A:Yes, the global factor was considered. The deal with Apple has already prompted interest from other global partners. However, management does not plan to cover the entire world with a single Apple deal, as the current structure of regional deals is seen as stronger.

Q:How are ticket sales and costs for the Vegas event tracking?

A:Ticket sales are on target, and costs are being managed effectively. Initial investments are being optimized, and community engagement has helped reduce costs. The event is expected to have a positive impact on the P&L, and the race time has been adjusted to 8:00 p.m. on Saturday to enhance community involvement.

Q:Will there be a meaningful step-up in U.S. media rights revenue next year due to the Apple agreement?

A:Management did not provide specific guidance but indicated that the F1 TV subscription on Apple’s platform is expected to increase value globally. They do not anticipate a negative effect from the transition.

Q:What is the strategy for new sponsorship and licensing opportunities?

A:The strategy focuses on long-term agreements and expanding the fan base through partnerships with brands like LEGO, Disney, and Hello Kitty. These deals aim to enhance connectivity with fans and maintain the value of existing partnerships. Licensing, though currently small, is being expanded as part of a long-term growth strategy.

Q:Where does F1 see the most opportunity for increasing global media rights monetization?

A:F1 sees opportunities in both linear and digital platforms, depending on market trends. Recent deals with Televisa in Mexico and Globo in Brazil highlight the focus on key markets. Management is also exploring new deals and expects competition among platforms to drive value.

Q:What are the drivers of growth in F1’s hospitality segment?

A:Growth is driven by strong pricing, increased capacity, and investments in infrastructure by promoters. Examples include renovations in Hungary and new facilities in Austin. The focus is on maintaining quality while expanding availability.

Q:What is the outlook for MotoGP race renewals and new events?

A:MotoGP has seen significant interest in renewals and new events, with Brazil and Argentina being added. There is no immediate need for rotating races, and the focus is on improving event quality and expanding into new markets without impacting media rights.

Q:What is the strategy for MotoGP’s hospitality offerings?

A:The strategy includes improving service and experience, targeting new fan bases, and offering tiered pricing. Collaborations with Quint aim to enhance the hospitality experience and attract a broader audience.

Q:How is F1 addressing competitive balance among teams?

A:F1 has seen improved competition among teams due to the budget cap and strong business fundamentals. Upcoming regulation changes, including sustainable fuel and new powertrains, may initially create gaps, but mechanisms are in place to reduce disparities over time.

Q:What are the expected changes in operating leverage under the new Concorde agreement?

A:The new Concorde agreement is expected to provide modest operating leverage into 2026, with stability in governance and financial strength for teams being key priorities.

Q:What are the growth strategies and investments for MotoGP?

A:Investments focus on marketing, storytelling, track improvements, and digital properties like video pass. The aim is to enhance fan engagement and drive long-term revenue growth.

Q:What is the impact of the upcoming split-off on capital allocation and operations?

A:There are no expected changes to capital allocation plans or operations at Formula One Group due to the split-off.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance on the expected step-up in U.S. media rights revenue due to the Apple agreement, citing the inability to give financial guidance. Additionally, they used vague language when discussing the potential global expansion of the Apple partnership, stating that it would depend on market dynamics and early-stage discussions.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

FWONK Transcript

Formula One Group (FWONK) Q3 2025 Earnings Call Transcript

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The earnings call highlights a 6% revenue growth and a 10% increase in sponsorship revenue, indicating strong financial performance. The Q&A section reveals positive sentiment towards F1's growth trajectory and new opportunities with Cadillac. Despite some vague responses, the overall outlook is optimistic, especially with record attendance and increased F1 TV subscribers. The lack of a specific shareholder return plan is a minor drawback, but the focus on growth and strategic partnerships suggests a positive short-term stock price movement.

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