Liberty Media Corp (LLYVA) 2019 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Liberty Media Corporation 2019 Third Quarter Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded November 11.

(technical difficulty) over to Courtnee Chun, Chief Portfolio Officer and Senior Vice President of Investor Relations.

Please go ahead.

Thank you.

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 our most recent Forms 10-K and 10-Q filed with the SEC.

These forward-looking statements speak only as of the date of this call and Liberty Media and Liberty TripAdvisor 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 Liberty TripAdvisor'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 and adjusted EBITDA.

The required definitions and reconciliations for Liberty Media and SiriusXM, Schedules 1 and 2, can be found at the end of the earnings press release issued today, which is available on our website.

Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Thank you, Courtnee.

Good morning.

Today speaking on the call, we'll also have Formula One's Chairman and CEO, Chase Carey and Liberty Media's Principal Financial Officer, Brian Wendling.

During Q&A, we will also be able and available to answer questions related to Liberty TripAdvisor.

So beginning with Liberty SiriusXM, we continued our repurchases of Liberty SiriusXM stock, buying an additional $60 million in the period August 1st to October 31.

If you look at that, we effectively bought the underlying SiriusXM shares at a look-through price of $4.47 per share.

We will continue to take advantage of the discount to NAV as long as you, the marketplace, continue to give it to us.

Our ownership today stands in SiriusXM at 71.5%.

Actually, it was as of October 29.

Looking at SiriusXM itself, fantastic results yet again.

Robust subscriber growth, solid expansion of adjusted EBITDA and free cash flow.

The Pandora acquisition has increased our scale to approximately 100 million users, continued focus on distribution and content.

We have a new deal with Google, making SiriusXM available on Google Assistant and Google NAS devices.

And we have a collaboration with Marvel to create scripted and unscripted podcasts.

Year-to-date through October, SiriusXM has returned over $2 billion of capital to shareholders.

Formula One Group made tremendous progress during the period regarding the regulations for 2021 and beyond.

Also experienced exciting racing on the track, Lewis Hamilton won his sixth World Championship in Austin and Mercedes clinched their sixth Constructors' Championship.

It's fun to watch Ferrari come back to win 3 in a row, the thrill of Red Bull and the return of McClaren, with close battles among the best of the rest.

Live Nation continued strong execution, the highest AOI quarter ever, expect to deliver double-digit growth for the year.

Demand for live events continued to grow, with 92 million tickets sold through mid-October.

Turning to the Braves.

Braves won their second straight NL East division title with a host of individual awards, including Donaldson being ML (sic) [MLB] National League Comeback Player of the Year.

Brian Snitker was the National League Manager of the Year finalist.

Soroka was the National Rookie of the Year finalist.

And this weekend, 3 players were named Silver Slugger Award winners, Freeman, Acuña and Albies, the most trophies of any club this season and the first time any club has had multiple winners under 23 years old in 1 season.

Turning to the more mundane but important, we have a number of exciting new tenants moving into the battery, including an indoor Topgolf-type experience and a dueling piano bar.

Blocks C and H continued to progress on time and on budget, and we look forward to our new Braves Academy at Northport, opening in early January.

Over at Liberty TripAdvisor, Trip had a difficult quarter, with trends worsening in the hotel click-based auction.

We still see opportunity and experiencing (technical difficulty) but that category is probably -- it is growing quickly, but slower perhaps than we'd originally forecast.

TripAdvisor does plan to return capital to shareholders, and they announced a dividend of $3.50 per share, which will translate into $108 million of proceeds to Liberty Trip.

They also announced that they would increase their share repurchase authorization by $100 million to $250 million.

In light of these, these are done really in light of the fact that despite the challenges to some of the click-based auction items, the business does generate and will continue to generate strong free cash flow.

They're also planning to evaluate their cost structure and prudently reduce and reallocate expenses among the groups.

With that, I'll turn it over to Brian for more on our financial results.

Thank you, Greg, and good morning, everyone.

At quarter end, Liberty SiriusXM Group had attributed cash, restricted cash and liquid investments of $54 million, excluding $90 million of cash and restricted cash held directly at SiriusXM.

The value of the SiriusXM common stock held by Liberty SiriusXM at November 8 was $22 billion, and we have $950 million in debt against these holdings.

Total Liberty SiriusXM Group attributed principal amount of debt was $9 billion, which includes $8 billion of debt that's directly at the SiriusXM level.

Formula One Group had attributed cash and liquid investments of $65 million, which excludes $354 million of cash at F1.

Formula One Group has attributed public market securities with a market value of approximately $5 billion as of last Friday.

That includes the intergroup interest in the Braves Group and our stake in Live Nation.

Total Formula One Group attributed principal amount of debt was $5 billion, which includes $2.9 billion of debt at F1, leaving $2.1 billion of debt at the corporate level.

F1's total net-debt-to-covenant OIBDA ratio as defined in F1's credit facilities for covenant calculations was 5.3x at quarter end, as compared to a maximum allowable leverage of 8.25x.

We have set a target total net leverage ratio for Formula One of 5 to 6x bank covenant OIBDA.

Please note these leverage ratios are for the Formula One business, not the Formula One Group.

Braves Group had attributed cash, liquid investments and restricted cash of $210 million at quarter end and attributed principal amount of debt of $540 million.

With that, I'll turn it over to Chase to talk about Formula One.

Thank you, Brian.

We've made tremendous progress on defining the future direction of Formula One, and we're pleased to announce the unanimous ratification by the FIA World Motor Sport Council of new regulations beginning in the 2021 season.

These rules are the result of a detailed 2-year process that included input from the teams and other stakeholders that we firmly believe achieve the goals we set out to deliver.

From 2021 on, Formula One will have cars that are better able to have battle on the track, a more balanced competition on the track, a fully enforceable cost cap of $175 million per season and a better and more sustainable business model for participants.

There's a wealth of information online if you'd like to see all the details, but let me talk a bit more in depth about closer racing.

Current Formula One cars can lose up to half their downforce when following in the wake of another car.

As part of the new regulations, we project the 2021 cars will lose just 15% of their downforce when they're 1 car length behind a rival and just 5% at 3 car lengths.

This is a huge difference that will enable the battles our fans want to see.

These regulations are an important major step.

However, this is an ongoing process.

The regulations were married to a new governance and prize fund structure, which will enable this sport to grow and improve, while further strengthening the business model.

These agreements are in advanced stages with the teams.

In addition, we plan to address our initiatives around the environmental impact of our sport.

We already have the most efficient engine in the world, and we'll be launching plans to reduce and eventually eliminate the environmental impact of our sport and business.

We believe we can play a leadership role in this critical issue in the automobile industry.

Now back to the season.

Lewis Hamilton clinched his sixth Formula One World Championship, an achievement that puts him just one title behind the all-time record holder, Michael Schumacher.

It was also a tremendous season for Mercedes, which secured their sixth F1 Constructors' Championship.

Lewis's teammate, Valtteri Bottas scored his fourth first place finish of the season in Austin, and we look forward to seeing these teammate rivalry continue in 2020.

Ferrari posted an impressive showing after the summer break and secured 3 wins in a row, including the Charles Leclerc win at home in Monza.

Not to be outdone, Sebastian Vettel posted a win in Singapore and several podium finishes but suffered a dramatic suspension failure in Austin.

Rounding out the top 3 teams, we've seen some fantastic racing from Red Bull's Max Verstappen and Alex Albon, who hasn't finished below 6 since being elevated to the team from Toro Rosso.

The excitement on the track has been drawing crowds and viewers through 19 races, including Austin.

The average weekend attendance is 204,000 per event, up 2% year-on-year.

We set a new record in Italy, and Mexico drew a crowd of over 345,000.

We had 3 races that attracted attendance over 300,000, Mexico, Silverstone and Melbourne.

For TV viewership, we're up 7% through 15 races in Singapore.

And we look forward to our last 2 races in Brazil and Abu Dhabi.

During the quarter, we announced important race renewals.

Formula One will continue to race in Mexico City and we'll change the race name to the Mexico City Grand Prix to emphasize the support given by the government of the city.

This event recently won the award for Best Live Sporting event at the 2019 Leader Sports Awards, selected from among 450 events in 5 categories worldwide.

We also announced the extension of the Italian Grand Prix in Monza.

This race has been on the calendar since 1950, the year the World Championship was established, and it is an important part of our history.

And we announced that the Spanish Grand Prix will return in 2020 for its 30th consecutive season.

These renewals, along with previous announcements of Silverstone and Melbourne and the new race in Vietnam and the return to the Netherlands set us up for a record 22-race season in 2020.

We continue to pay homage to the rich history of Formula One, while adding exciting new destinations.

On the broadcast front, we extended our partnership with ESPN until 2022.

Since returning to ESPN in 2018, Formula One has seen viewership in the U.S. increase 19%.

The demographic of viewers age 18 to 34 has grown 81% over that same period.

This new deal will see all Formula One races continue to air live and commercial-free on either ESPN, ESPN2 or ABC.

As an additional element, ESPN Deportes will serve as the exclusive Spanish language home for all Formula One races.

This renewal rounds out carriage for the 2020 season.

Regarding sponsorship, we reached a new -- a deal with Dubai Expo 2020, which will debut in Abu Dhabi this year, to be featured at 8 races across 2019 and 2020.

If you watched the U.S. Grand Prix, you might have seen signage from Caterpillar.

We're in the final stages of signing our master services agreement with them for a long-term sponsorship arrangement and are excited to partner with them.

We were also pleased to announce VinFast as the title sponsor of the Vietnam Grand Prix.

Vietnam's largest car manufacturer has signed a multiyear deal for the Grand Prix, which will debut in 2020 on the streets of Hanoi.

We held our third fan festival in Hollywood Boulevard in Los Angeles prior to the U.S. Grand Prix.

This event included our first ever donut contest between Daniel Ricciardo, Valtteri Bottas, Max Verstappen and Alex Albon.

The event was featured on Jimmy Kimmel Live!

and Guillermo even stopped by to eat a donut.

We hosted our final fan festival this past weekend in Brazil with Heineken and the Senna family to celebrate Ayrton Senna and his 25-year legacy.

The event featured modern F1 cars from Mercedes and Renault and legends Emerson Fittipaldi and Felipe Massa driving Senna’s historic cars.

We'd like to bring your attention to our new corporate website, can be found at corp.formula1.com We felt we needed a site that was more user-friendly to cater to sponsors, investors, media and prospective employees.

Please take a look at the site when looking for corporate information and sign up for news alerts.

In summary, we're pleased with our results year-to-date and are on track to hit our 2019 targets and look forward to continued strong growth results in 2020.

After years of effort, we achieved a milestone in the approval of the regulations for 2021 and beyond, and we look forward to working on the commercial agreements with the teams.

Now I'll turn the call back over to Greg.

Thanks, Chase and Brian.

All in all, a great quarter at Liberty Media.

As a reminder, we will be holding our Annual Investor Meeting on November 21 in New York.

The link to register is on the homepage of our website.

We look forward to seeing many of you there.

And with that, operator, we'll open it up for questions.

We will take our first question from Vijay Jayant from Evercore.

This is John Belton for Vijay.

Two on F1.

So first, on these commercial agreements you're discussing with the teams, anything you can share on timing?

When you're hoping to get these finalized?

Any regulatory deadlines that may or may not exist with these agreements?

And then the second question on broadcasting.

So I appreciated some of the details on the ESPN deal, but anything you can share about some of the competitive dynamics around that deal?

And then kind of, how you're thinking about some of your core Western European renewals in light of the positive viewership trends so far this year?

So I guess on the first part, timing, we'd like to obviously get it done as soon as possible in fairness to the teams.

While the -- I think the core business principles they've had for a while, the actual underlying agreements, which are substantive, they've only gotten in the last few weeks.

We've had meetings with both the sort of financial and legal teams to take them through it.

So they now have had a chance to digest it.

And certainly, we plan to engage with them in coming weeks.

Again, I'm not going to put a deadline to it.

I think we're having good discussions, and we'd like to get things done and finalized as soon as possible.

I guess, on the broadcast, when you say competitive, do you mean competitive interest?

Or I guess, I'm not sure what you mean in terms of...

Yes, just were there other bidders besides the ESPN or...

I guess -- yes.

And actually, we have more interest than we did, and this was -- it wasn't that long.

The last deal like was only a couple of years.

So it was really just 2 years ago.

We have better interest than we did 2 years ago, it's a step forward for us.

We still have a lot of upside in the U.S., there's no question.

The U.S., I think we said before, is a long-term proposition.

We like the momentum there.

We saw increased interest, we saw from parties an increased interest expressed in offers.

But -- so yes, we feel good about it.

But clearly, we think the U.S. is a market that still has a lot of upside for us.

Great.

And then anything on the Western European renewals?

What do you think...

We're probably just turning to -- look, again, I think our -- I think we will -- we feel good about the momentum of the sport.

We feel good about the interest in the sport, whether, again, it's attendance, it's viewership or just general fan research in terms of perception, which is very positive about the direction of the sport.

We're in the early stages of our agreements that -- the significant European agreements you're talking about are in place for 2020, so -- they're really renewals for 2021.

We're probably in the earlier -- early stages of moving forward with those given they're still more than a year away.

But I think we feel positive about the momentum, what we have going and really the reaction engagement from parties about the sport.

And we will now take our next question from Bryan Kraft from Deutsche Bank.

I had 2, 1 for Chase, 1 for Greg.

Greg, kind of an open-ended question for you.

Podcasts have become a bigger focus for virtually everyone in the audio entertainment space.

Just wondering how you think this segment of the industry evolves from an industry structure perspective?

And do you think there are any real economic winners in podcasting over the long term?

And then Chase, wondering if you can give us any color on the growth outlook in sponsorship and advertising for next year relative to this year, just directionally?

And can you give us any sense for the growth this year in broadcasting relative to the advertising and sponsorship revenue within that primary revenue bucket.

Are those growing at relatively similar rates?

Or is the pace materially different between the 2?

Chase, do you want to go first and handle the more direct question and I'll ramble on the open-ended one?

Okay.

Look, I think the sponsorship area, we said before, probably from a couple of years ago, I'd say it was probably a little slower to develop than we initially anticipated.

I think the advertising market in general is probably a little tougher than it was a few years ago.

But actually, I think we feel good about the momentum and the interest.

And it's probably taken -- I think we recognized we had to do more work telling the story about what we're doing with the sport, where we're going with the sport.

We had to create capabilities for sponsors to create the type of offerings they want, whether it's virtual or regional or other events like Esports in digital and other vehicles we can use to create those offerings.

We just -- I just referred to the 2 deals with Caterpillar and Dubai Expo.

The interest right now, we feel very good about.

We've obviously got to turn it into dollars.

We are quite busy.

I'd say the sponsorship group is realistically flat out, and I expect them to be flat out the next few months before we get to the 2020 season and significant deals.

Again, I don't want to get ahead of ourselves.

We've got to turn them into dollars.

But certainly, the interest and engagement in the sponsorship area has been increasing significantly as we've sort of gone through the last year and certainly in the recent quarters, and they're probably never been busier, to be frank about it.

I think on the broadcast side, if you look at -- I mean, the renewals this year, were some -- were probably not larger contracts.

So directionally, we feel good about where we're going, but the bigger markets are probably in 2021.

So it's a positive, but they're not -- they weren't the larger markets that were being renewed in -- for 2020.

Great.

So Bryan, thank you.

That is a great question, and one that you'll hear a lot more about from us and from me at our Investor Day, because I think podcasts are a great example of how audio content continues to expand.

We believe there's a lot of room left to expand your audio day, unlike your video day, which is pretty much being capped out because everyone's got their device and the time in which you can use that device for video is limited, has become maxed.

The audio day, between AirPods and Alexas and other kinds of distribution devices is only expanding and is well undertapped, both in monetization and in time.

When you think about how to differentiate that audio day, you move from a world of music, which is somewhat of a commodity, it's table stakes, everybody's got to have it -- to a world where things like podcasts are an example of exclusives, something that Sirius has done so well at with things like Howard Stern or versions like CNBC and ESPN having exclusives at least for a window on audio.

Podcasts are a place where you can really go to exclusives.

And you think about the economics of that, whatever a podcast maker charges, and they might be pretty good being podcast company right now and trying to sell yourselves because it's obviously hot, it's still far less cost per hour than what you get in video.

So the reality is all these new forms of content -- audio content like podcasts, in our judgment, are really attractive economically and really attractive for consumers and therefore, distributors.

So you'll hear probably more than you care to at our Investor Day because it really is one of our key focuses.

We will now take our next question from David Karnovsky from JP Morgan.

Just one for Chase.

During the last Concorde negotiation in 2012, 13.

I think Formula One made some upfront payments to teams in connection with their future participation.

So as you look to finalize the commercial agreements with the teams now, do you see payments like this as part of the process?

Or was that really unique to the prior period?

I don't think we're going to, at this point, comment on the specific components of the deal while we're still engaged with the teams.

I think we've put something on the -- we've got a proposal to them a structure, they've had this structure for -- I mean, again, the business is -- the business element to this, they've largely had for a while.

We think it's a proposal that's fair to us and fair to the teams.

But we think it enables us to continue to achieve the growth we expect in the business, but I don't think we're going to get into commenting on what's in it and what's not in it.

And once we've finalized it, we will provide appropriate color to -- what the agreement is.

Okay.

And then you mentioned the agreement with Caterpillar before.

Is there anything incremental you can say on this?

Is this a potential global or regional deal?

And then just given the trackside advertising at Austin, should we assume this starts in the [fourth] quarter?

Yes.

I mean, obviously, since they showed up in Austin, it will start where they show up.

It's more than -- it's not a global deal in terms of all 21 races, but it's a significant deal, and I think an important partnership and one that certainly -- is one that we look to build on with them.

So it's a deal we're excited about.

They've been quite enthusiastic about it.

And we think they'll be a good partner.

So certainly, it's more than just a regional deal.

It is a significant multi-race deal.

We will now take our next question from John Tinker from Gabelli & Company.

Just a quick question on sports gambling, it looks like New Jersey has already got a better book than Vegas.

How do you see that playing out in terms of how it might help the Braves?

And we just passed it here in Colorado as well.

So you can see -- I think, state by state, you're going to continue to see this chip away.

It will take time and there are clearly some states which are unlikely ever or at least for a long time to pass it.

But major states will do it, it's a revenue source.

I think here, it's going to be used for water, but you'll see it state by state, and I do think that's an opportunity.

The leagues have been trying to do things around verified data, it's not quite as clear what -- how you do that in baseball as you do in something, frankly, like Formula One, where there's much more proprietary data.

And as you may recall, we have a deal to monetize some of that in Formula One.

But I do think it's both somewhat of a revenue opportunity, but perhaps even more of a fan-engagement opportunity, which will just strengthen baseball.

And to the degree that more and more of it becomes an opportunity to bet in game, bet on parts of a game, you'll just see continued fan engagement, much the way that Fantasy built that in -- particularly in football.

If I could just ask one more.

You got out of trade channel outdoor very well.

I noticed you still have a couple of other small investments.

I think you may have a little Viacom left and some AT&T and in Formula One.

How do you think about them?

So I think we would look at them mostly as a source of capital at the right time.

It turns out the right time for Viacom was probably earlier than we've executed on it, but so be it.

We were probably more bullish that the merger would be positive than it has been.

On the AT&T in particular, it's worth noting, we actually don't really have AT&T there in any real sense, it's a -- it's hedged by -- we own it to hedge the exchangeables that we've issued.

We have a couple of odds and ends that are in there that are capital sources, a partnership or 2 that is likely liquidating.

Brian, do you want to add on any of those, of note or substance?

No.

I mean, none of them are specifically material and they're not liquid.

So there's not a callout in particular.

But in general, they are -- you asked about our philosophy on them, John, we're -- they are a source of capital at the right time, when we think it's the right moment and something we can probably get out of either tax efficiently or we have a use for the capital that says we want to pay the taxes and go do it now.

And we will now take our next question from Jason Bazinet from Citi.

I heard you guys sort of reiterate the 5 to 6x leverage target, and you guys have made nice progress bringing that down.

Why is that the right leverage for this business?

I know it's not cyclical, but it still strikes me as a pretty high amount of leverage to have on the business.

Or is that just sort of the interim target, when you get to 5 you may lower it beyond that?

I'll comment and Chase, if you want to add anything, surely you can.

Our view is, is that this is an unbelievably secure sustainable financing business.

90-plus percent on contract, even in the case of a downturn because of the nature of how we share risk with the teams, limited downside.

In our judgment, few businesses support leverage as well as this business and in a period of extremely low interest rates and our continued ability to refinance this on more and more attractive terms, we like 5 to 6x.

Yes, on that If I could -- sorry, one more thing, Chase, I'd note also, 2 more things that are below the EBITDA line make that only more compelling.

The low CapEx needs and the very attractive tax structure that we have make both of it, probably be the case that 5 to 6x, while on the surface may sound large, is actually not particularly large, if you look at the free cash flow yield.

Sorry, Chase go ahead.

Yes.

And I was going to add on those.

And I guess, the only other thing then I'd add is, I think, also from a cost perspective, realistically, at this point, we probably put the -- we don't really face any increased costs as we've got the -- we've built the organization to support and grow the business the last couple of years.

So at this point, we feel good about the cost side of it.

And to the degree there are incremental cost events, some variable revenues like freight, where we have both freight revenue and freight costs.

They're directly tied to revenues.

So I think from a, from a margin cost perspective, we equally feel very good about the business.

We will take our next question from Bryan Goldberg from Bank of America Merrill Lynch.

I've got a couple on Formula One.

First, on your efforts in Miami, looks like local politics took another twist down there last week with a mayoral veto against the local opposition.

And I was wondering if there was any kind of time line you could help us think about, within which you'd expect to get clarity on whether or not this iteration of the Miami Grand Prix can go forward from a regulatory standpoint?

And I guess, if negotiations become meaningfully protracted, at what point would a Miami appearance on the 2021 calendar become a bit problematic?

And then I've got a follow-up.

Okay.

I guess trying to handicap politics is probably really something ill-advised.

I think your comment on the veto last week is

accurate.

There's some steps to go.

They're very short term.

The reality is, for 2021, we really do need to resolve this in the short term, say, well, next few months for it to be a 2021 race, that we have time.

The reality is, most of the work -- most of the agreements are done, certainly the business agreements are done.

So it really is the political issues around it, and they're active.

But I'm probably not -- trying to handicap local politics is probably beyond my pay grade.

And we'll see.

We think it would be a great race.

We think it would be great for Miami, we think it would be great for us and great for all our partners.

We have other options in the U.S. that we think would be exciting, but we're hopeful about Miami, but we'll see where it takes us in the next -- in the coming weeks.

Great.

My follow-up question is on the sponsorship side of the business, really, I guess, from the global sponsorship side.

I was wondering if you could update us, what are the key unsold verticals right now as you see them?

Or said another way, which category is your sponsorship sales force team spending the most time on as you look to shore everything up for the 2020 season?

Well, I mean realistically, as I said, we've got -- I mean I got an update yesterday.

It's a 3-page update of engagement with potential partners.

So as I said we really, at this point, are flat out in terms of engagement, a number of them being large engagement.

And then there are certainly an array of categories, I guess, in areas like finance, technology, telecommunications, oil industry, sort of there are an array of places that are probably obvious, and some that -- I wouldn't have had Dubai Expo on them -- on the list a few months ago or probably Caterpillar, as a place that would have been as obvious.

So there are some that are probably more obvious than historically tied to us and some that are less so.

But I think we do -- we really do.

We feel it has taken time, but I think we're getting to where we think we -- we're getting to the place, we thought the -- we could in terms of sponsorship.

It's probably been a little slower going, but I think we feel good about the engagement, the momentum and the interest behind the sport and the story we have to tell.

And we will now take our next question from Drew Borst from Goldman Sachs.

I wanted to ask a question about Formula One.

Chase, when you look at the race calendar for next year, you -- I think you renewed 5 races and added 2 new ones.

Investors have come to expect that the race promotion revenue is fixed, right, multiyear contracts with fixed escalators.

I guess I'm wondering if anything has changed after all these renewals in terms of the trajectory of that.

Is it less fixed?

Is it more variable?

Or is -- there's nothing really changed there?

I think we probably, today, feel more positive about the upside in that category, certainly elements of it, and individual races are probably more mature, but we do think there's upside there.

And I think that probably, in many ways, it's just the fact that I think the demand has continued to be a real positive.

I mean, really across the world, the number of places that are interested.

Again, our -- we have a pretty full calendar and they're long-term contracts, so there are limits to how much you can do.

But I think we do think there are opportunities.

We have -- '22 is a full -- is a pretty full calendar, but we do think there's room still to add a couple.

I think we want long-term partnerships, but just as we changed this year, we will add races, and we will selectively probably end up dropping races.

There are a couple of places on -- couple of issues we've touched on in the past about races we inherited that -- agreements we inherited, that clearly were not reflecting what we think the value should be.

So I think there is upside to that, that probably more than we would -- if we were sort of 2 years ago, more than we would have sort of expected there.

And we think it's a place we can continue to grow.

And I think there are also, sort of -- and I guess, what I call related areas, that equally have growth, I guess, particularly something like hospitality, which is an important element.

The high-end customer is increasingly important at these events.

And [with the] Paddock Club, the hospitality, is an area -- there are a few races where we really maximize that.

I think there are a lot of events where we've got upside to the hospitality side of it as well as just the basic promoter agreements and an ability to add dimensions like title sponsors, we're still not filling a -- fall more in a sponsor area.

But as you add races, we still have opportunities to take advantage of things like title sponsorships, as we talked about the Vietnam opportunity.

So there -- I think the whole arena related to the promoter relationships and the related elements of the promoter relationships is an area that I think has more opportunity and more upside in it than, again, we probably would have thought -- would have said a couple of years ago.

And if I might, while appreciating the upside scenario, is there any type of downside risk?

Like, I don't know, again I know you don't want to get into specifics about contracts, but just generally like, for example, are there -- are they hinged to serve the attendance at the race, or any of those things?

And if attendance didn't come through -- or is that not really how the deals work?

Yes.

I mean, our agreements today don't generally have that type of variable.

Obviously, the Paddock Club component of it is attendance-based.

So there is certainly revenue that is attendance-based, but the base part of it is, generally is not attendance-based.

So look, on any renewal -- and I guess, you see where our renewal comes in and what alternatives exist.

So I'm certainly not going to say there aren't risks.

Today, we feel pretty well positioned given the breadth of interest from the array of places that we have.

But we've still got to get renewals executed.

We obviously went through a number of renewals in the last 12 months.

And so I think we feel good about the ability to navigate that space and look forward to taking advantage of, whether it's adding a race to the calendar or making some substitutions that are upside or fixing some of the issues we've got.

But the -- other than Paddock Club, which is again [event] that I wouldn't say attendance at a race in general, is that, that's not generally a part of our agreements.

And we will now take our last question for today's call from Zack Silver from B. Riley FBR.

Okay.

Great.

I think when you guys first announced the deal to acquire F1, there was some talk around issuing shares to the teams, that obviously

never happened, but could this still be a possibility down the road?

And also curious to hear your thoughts around financial mechanisms you have to promote higher economic alignment with the teams beyond the prize pool?

Chase, you want to go on that one?

Yes.

We're not discussing equity with the teams at this point.

Obviously, we are discussing the long-term relationship.

I guess more generally, look, one of our real efforts has been to try to create more of a shared vision about where we can go with this sport and the growth opportunities in it.

I think the teams are actually quite positive about the changes and energy we've brought to the sport, yes they see the bigger crowds.

They see the growth in events.

The breadth of it -- of things at events, whether it's a fan fest or a fan zone, I think the energy there is palpable.

They see the, we share with them the research about where we're going.

So -- and we certainly share with them probably more than would have been shared in the past.

They want to be our partners.

The prize fund that they share in is obviously -- that they receive makes them a partner in the business.

So they share in the upside and the growth of it.

And we're engaging with them on a much more regular basis.

I mean I meet with them every race, we have sort of a casual meeting on a Saturday morning, just to make sure we're sort of sharing what we're doing, sharing the things we're trying to do and addressing any issues that exist.

So a lot of how do you make -- how do you create a better alignment is just -- is dealing with them day to day and dealing with them in a more transparent and a more collaborative way.

There are obviously going to be -- always going to be tough issues we've got to work through, and that's true in any business.

But I think we are trying to bring a fresh mindset and a fresh perspective, and they all want the business to grow.

And I think they largely, I mean we're not perfect, but I think they believe we're doing a lot of the things we should be doing that are really adding breadth and depth and growth to the sport.

So it's -- there's no magic bullet to how do you create alignment other than treat them like partners and engage with them in an honest and transparent way.

Got it.

That's helpful.

And one more, if I could.

You have time for one more?

Sure.

With leverage at the F1, the op co, is sort of at the low end in the target.

Can you talk about your view on buybacks at the F1 tracker?

And whether this is something that you think could happen in the near term or not?

Well, I think you're right.

The restricted payments test that we have and the target leverage that we've discussed is going to start allowing us to generate free cash flow from the F1 operating business up to the holdco.

And we are looking at alternatives for that, what we might do with that capital, including share repurchase.

And I think I'm going to punt a little bit on that and talk more about that next week when we get to the Investor Day, because we -- I think we have a little more time we will spend there on that.

Thank you.

Thanks to all of you.

And again, we look forward to seeing many of you on next week.

It is Veteran's Day.

Thanks for the many veterans who are on the line and have served our country.

And with that, operator, we'll say good afternoon or good morning.

Thanks a lot, guys.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect.