Liberty Media Corp (LLYVA) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to the Liberty Media Corporation Q4 2014 earnings call. Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Courtnee Ulrich, Vice President of Investor Relations. Please go ahead.

Thank you.

Before we begin, we'd like to remind everyone that this call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, new service and product launches, the future financial performance of SiriusXM, stock repurchases, and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation, possible changes in market acceptance of new products or services, the ability of our businesses to attract and retain customers, competitive issues, regulatory issues, and market conditions conducive to buybacks. These forward-looking statements speak only as of the date of this call, and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media's expectations with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary notes, and schedules one through six can be found at the end of this presentation.

Now, I'd like to introduce Greg Maffei, Liberty's President and CEO.

Thank you, Courtnee. Good afternoon to all of you. Today, speaking on the call beside myself, we will have Liberty Media's CFO, Chris Shean.

So let me start off with Liberty Media itself, where we had a pretty busy quarter. As you may recall, we completed the spinoff of Liberty Broadband in November and a rights offering for Liberty Broadband, subsequent to the quarter's end, in January. From that spin, as a part of our spin process, we received a distribution from LBRD of $300 million in Q4.

We -- as a part of that, we also restarted our buybacks at Liberty Media. And from November 1 until January 31, we bought back about $17 million.

We are aware that the discount to NAV, net asset value, has increased at Liberty Media as compared to a year ago. It's somewhat counterintuitive and, perhaps, a little perverse because we would've thought that the spinoff of Liberty Broadband, which was a great success and we are pleased to see Charter hitting new highs every day, would help to reduce the discount to NAV at Liberty, especially given that Sirius now represents greater than 90% of Liberty Media's market cap -- our shares in Sirius. So we watch and wait.

Onto operational highlights. Looking at SiriusXM first, we reported strong fourth-quarter results and strong results for the full year. We increased subscribers to 27.3 million. Q4 revenue came in at $1.09 billion, and for the full-year, revenue crested at $4.18 billion.

Adjusted EBITDA grew 17% to $381 million for the quarter and 26% for the full-year to $1.47 billion. The Company also issued robust 2015 guidance.

During the year, Liberty Media repurchased -- excuse me -- SiriusXM repurchased $2.5 billion of shares. As a part of that process and after their exchangeable or their convertible -- converting, our ownership stake, with the puts and takes, now stands, as of February 3, at 56.7%.

Looking at Live Nation, they're going to report earnings tomorrow. But they continue to have good progress during the year and quarter, including building share and conscious promotions with large tours, particularly overseas; driving great growth in sponsorship and online advertising and growing ticketing, powered both by continued success in primary and new success in the secondary market, enabled by the technology investments project, Jetson, that we've been working on over the last few years.

With that, I'll turn it over to Chris to talk about our financial results.

Thanks, Greg.

Just a reminder that included in our consolidated financial statements is SiriusXM's results, but analysis work is probably better served by going directly to SiriusXM's filings. So where you can find that is at their website or on any of the sites where you can pull down SEC filings.

At quarter end, Liberty had cash and liquid investments of $880 million and principal amount of debt of $5.9 billion, which includes the debt balances of SiriusXM and a margin loan at Liberty. Included in the $880 million of cash and liquid investment balance at December 31, 2014, $148 million funds held at SiriusXM. The remaining $732 million is at Liberty corporate.

With that, I'll turn the call back over to Greg.

Thank you, Chris. To our listening audience, we appreciate your continued interest in Liberty Media. And operator, with that, I would like to open it up for questions.

(Operator Instructions)

Amy Yong, Macquarie.

Thanks. Two questions.

So now that your stake in SiriusXM is at 57%, I guess, what's the level of urgency to address that relationship, either through a buyback, selling into the buyback, or perhaps having Sirius buy back Liberty Media stock?

And my second question is on the Braves. Sports assets continue to go up. Have you thought -- can you update us on just how you're thinking about monetizing that particular asset? Thanks.

Thank you, Amy.

Well, first, I don't think there's a sense of urgency to do anything at SiriusXM caused by the getting to 57%. I mean, there may be a natural break point at 80% when you tax consolidate. Maybe some would worry about a point when you don't have a sufficient liquidity in the SiriusXM stock, but it seems like we're a long way from those -- either of those points.

We remain very excited about our investment in SiriusXM. We remain enthusiastic about its prospects, and I don't anticipate, and we are not certainly announcing today, any intention to be selling into that. I think we said that before, and I think our prospects or our views continue. So they continue to generate a lot of free cash flow in increasing amounts, and they're putting it to good work and buying their stock.

As far as the Braves, I have noticed -- we have noticed -- the increasing value in sports teams, and we think that the Braves management has done a particularly good job on that front, driven incrementally by two things. First, some re-negotiations we did on some of our TV deals. And secondly, by their more recently announced stadium in Cobb County, which we believe will have a very positive impact on asset values at the Braves.

So I don't think we have a need to monetize; I don't think we have a current plan to monetize. We remain very happy with those prospects.

If you look at what we paid, we've had a nice rate of IRR against that. And if you -- when you look at some of these current expected values, and if you took the tax savings that we received, which were north of $300 million in our 355 exchange with Time Warner, and were to apply it not to the shares, but instead to the -- mentally to the Time -- to the costs, rather, of the Braves itself, we really have a good IRR. We're pleased. We continue to move forward there. We're happy to see the value creation, and go Braves.

Thanks.

Jason Bazinet, Citi.

Just one simple question.

On Siri, do you think that Sirius needs additional assets to thrive in the connected car market? Or do you think it has everything it needs?

Well, I guess, Jason, you never have everything you need, but Sirius is very well-positioned. I think, both their own internal efforts and the Agero acquisition have made them very strong. I think the relationships that they have with the OEMs and they continue to extend with the OEMs are very positive, and I expect you'll see that momentum coming to pass over the next few years.

This is a exciting market. Nobody knows exactly where the connected car is going to go, but the embedded solutions, rather than tethered solutions that many others supply -- the embedded solutions that SiriusXM can supply, I think, are going to be very interesting, both to the car manufacturers and to customers, ultimately. And we're excited about it.

And you'd be surprised if they did some other acquisition in that space?

Well, I didn't say that. I said, Jason, I thought that they were very well-equipped on their own. But we're always looking to bolster.

They have a luxury of having an enormous amount free cash flow. We've been applying the bulk of that to share repurchase, but if we found something strategic that furthered their efforts, we'd look at it.

Okay.

But I don't think we need it. I think if it helped, we'd look at it.

Understood. Thank you very much.

Barton Crockett, FBR Capital Markets.

Okay, thanks for taking the question.

I was a little bit interested in your comment about the discount to NAV widening. You said you would watch and wait, which is kind of a passive stance. I was wondering if there's any tools you might call out as things that might be interesting to use as ways to narrow that discount to the NAV, or whether it's truly something where you'll just sit back and let nature take its course?

Well, I would point out to you, Barton, that at various times, we used share repurchase as a way to capitalize on that. There are other ideas that we have that might recognize this disparity or might help us bring that disparity in line or capture some of that value, but we're certainly not announcing any of those today.

Okay.

Then, switching gears a little bit, since you are the controlling shareholder and Chairman of Sirius. There's the government -- the Copyright Office has put out a paper, basically, calling for legislative reform of the music rights licensing laws in this country. And I was wondering if you guys have a view, if you think there should be change, if you think this is an important issue for Sirius, and something that affects your view of the investment?

I will give a two-second overview, and then I'm going to let our General Counsel, Mr. Rich Baer, comment. Look, I think the pre-1972 and a lot of these other issues are completely confusing, to be honest. There are -- there is a lack of clarity between state and federal. There are state courts in different jurisdictions have different views.

And when you're looking at what's happening on some of this, it's a practical rewrite of what has been going on since 1972. I think federal action could be interesting. Of course, too often, federal action means more taxes, but with that caveat in mind, Mr. Baer?

Yes. Look, we're defending these cases very aggressively. We don't agree with the rulings we've seen to-date, and we'll continue to fight these cases very aggressively.

But any resolution, here, needs to create an even playing field among all the companies impacted, not just singling out one or two of them. So that's very -- an important thing to keep an eye on as anyone tries to engineer an ultimate resolution.

Okay, great. Thank you.

Matthew Harrigan, Wunderlich Securities.

Thank you.

This is maybe a little afield, but there's a huge amount of attention, now, on sports streaming -- what some of these guys are doing globally in NBA, wrestling, baseball -- a big article in MLB Advanced Media in the Journal this morning. Can you talk a little bit about how you see the market for sports rights and video delivery working out over a very long period of time, as you look at the tail value of the Braves, which you've always said is considerable, relative to what guys like me carry it at in our valuation models?

Thank you.

We obviously see the rising cost of sports programming and the nature of much of that going globally. Things like Premier League or things like the NBA or Major League Baseball showing their ability to have a streamed product that's very interesting.

I suspect there will be more and more of that that is niched. I've seen the numbers -- not exactly parallel thought, but then, related thought -- the numbers around the pay per view on these -- the Fight of the Century, here, that's coming up between Mayweather and Pacquiao that you're happy to see people pay up for premier sporting events and real-time access. So I think you'll see more of that, and I think those rights are going to continue to increase.

This is probably too speculative to even ask, but are you disconcerted when you hear stories about Steve Jobs' deathbed wish was going into the automotive industry and to some of the new players in that area?

I think that the car industry and the connected car will be a vibrant market. I think there will be a lot of solutions, many of which are both tethered and embedded. I feel good about where SiriusXM's strengths are, particularly in the embedded space.

Thanks, Greg.

James Ratcliffe, Buckingham Research Group.

Thanks for taking the question. Two, if I could.

First of all, can you give us an update on the Vivendi litigation and where you are, in terms of interest accrual on that settlement?

And secondly, just on the Braves -- following up on that -- if you were to look to sell the asset or move it on, are there any tax look-back impacts on the original Time Warner swap where you acquired the asset? Thanks.

I'll let Mr. Baer, who's in popular demand today, comment on Vivendi. And then, I'll ask for clarification on the Braves. Go ahead.

Yes. So on Vivendi, the case is up on appeal in front of the Second Circuit. We're actually in process of briefing that right now. And we hope to have an oral argument in front of the Second Circuit later this year, probably in October.

I'm not sure where we are on the interest accrual. But that is actually one of the issues we are appealing, because we don't agree with the interest rate that was applied to our judgment from the federal courts. Hopefully, we'll have this resolved, probably, by early next year, at least in front of the Second Circuit.

Yes. From a financial statement perspective, no amounts have been accrued -- settlement or potential settlement or the interest -- since it's a gain contingency.

And on the Braves, maybe you could just restate the question, make sure I understood it?

Sure. I'm just wondering if there are any limitations on your ability to, should you want to, sell the Braves -- if doing so would, somehow, negatively impact the tax efficient transaction, which you acquired in the first place?

I don't believe, at this point, that's an issue. The larger issue would be that -- do we have sufficient ATBs around the Company? There are always things of value, active trades of business. And then, not that this was going to your thought, but given the fact it has a very low tax basis, a cash transaction and a taxable gain would be painful, in terms of the taxes paid for us.

Good. Thank you.

Tom Eagan, Telsey Advisors.

Great. Thank you very much.

If I could ask a previous question in a different way, has the surprising NAV discount increase, has it had any impact in any strategic initiatives that you might be taking with Sirius? And then I have a follow-up. Thanks.

Well, I don't know if it has any impacts per se. But we are cognizant of the fact you're probably not an issuer of shares, as it is such a diluted number. We're usually pretty good with that math thing. I guess, after you say that, I'll let you decide whether that answers the question or not.

Right.

Your second question.

And then, in terms -- a question with the separation of Broadband from Liberty Media, could you talk about the appeal now of buying in the balance of Siri? Is that still on the table? Thanks.

Yes. We still like Siri. It doesn't -- the Liberty Broadband's spin doesn't impact that.

We still like Siri; we think it's an attractive proposition. We're very happy to see our ownership increase every day, as the Company buys in stock.

Okay. Great. Thank you.

Thank you.

John Tinker, Maxim.

Thanks. Live Nation -- there were a lot of issues when Live and Ticketmaster merged, given how powerful the Company was. Do you think that in any way would affect them if they wanted to increase their involvement in the EDM space, particularly given that Bob Sherman brought his company into play today by offering to take it private?

Yes. I wouldn't claim to be the anti-trust expert, but I don't believe -- the EDM space is pretty fragmented. These are small, nascent markets. I don't believe that will be an issue. That isn't a view or a statement about whether Live Nation would be interested in SFX. It's just a statement about our flexibility to do something.

And secondly, continued interest in Siri. There's been a lot of discussion -- or increasing discussion about the value of that spectrum and what it could be worth. Do you have a point of view on that?

I think there's -- I think it's increasing. I agree with that point. I think there's a complicated, long-term tail and that we utilize a lot of it today, so you'd have to be far down the road before we could find a way to clear our customers off of it. And there are probably some regulatory hurdles around that, as well. So it is a complicated discussion. But clearly we've noticed spectrum values have been increasing.

Thanks.

Thank you.

Ryan Fiftal, Morgan Stanley.

Hey, that's probably meant for me, but this is Ben. Hey, Greg. A couple questions for you.

Sirius has been buying back stock consistently, but the leverage commentary has, I think, evolved a little bit to the point where they're not -- I think the quote was, in a rush to get to the target anytime soon. And I think they even used the phrase dry powder on their call. And I'm just wondering if you agree with that approach, or if you think they should be or will be more aggressive on getting to that leverage target faster?

And then I just had a quick follow-up.

Well, I think it's just a math problem, in the sense that they announced their share repurchase target. And that is a -- that doesn't -- given the high-quality problem of as much cash flow as they have and the growth in their EBITDA, that doesn't actually move the needle on their leverage target that much. So they're sort of approaching it.

Okay. Then I just was wondering that there's about $490 million of other debt at the end of the year, maybe for Chris. Any color on what that is? Is that something related to Liberty Broadband or --?

No, at year-end, that's our margin debt.

Siri line.

I think there's margin loan of $250 million, and then there's another debt of $491 million.

(multiple speakers) Margin loan of $250 million against Siri. And there is some debt on the Braves, related to their stadium.

Stadium.

Related to their stadium.

I got you. Okay. Thank you.

With that, I think we're done for the afternoon. Thank you very much, as I said, for all of your interest. And we look forward to speaking to you next quarter, if not sooner.

And that does conclude today's conference. Thank you for your participation.