Liberty Media Corporation Reports Second Quarter 2018 Financial Results
ENGLEWOOD, Colo.--(BUSINESS WIRE)--Aug 8, 2018--Liberty Media Corporation (“Liberty Media” or “Liberty”) (NASDAQ: LSXMA, LSXMB, LSXMK, FWONA, FWONK, BATRA, BATRK) today reported second quarter 2018 results. Highlights include (1):Attributed to Liberty SiriusXM Group SiriusXM reported strong second quarter 2018 results Added 483,000 net new self-pay subscribers in the quarterSecond quarter revenue climbed 6% to $1.4 billionNet income grew 45% to $292 million in the quarter; diluted EPS climbed 49% to $0.06Adjusted EBITDA (2) grew 4% to $543 millionOperating cash flow climbed 20% to $579 million; free cash flow (2) climbed 17% to $486 millionSiriusXM increased 2018 guidance for self-pay subscribers, revenue and adjusted EBITDA (2) on July 25 thLiberty Media’s ownership of SiriusXM stood at 70.5% as of July 23 rdFrom May 1 st through July 31 st, repurchased 3.6 million LSXMK shares at an average price per share of $45.45 and total cash consideration of $161 million Attributed to Formula One Group Entered into multi-year agreement with Amazon Web Services Inc. (“AWS”) under which AWS has become an Official Technology Provider and global sponsor for F1Extended the Belgian Grand PrixRepaid $125 million of F1 debt during the quarter Attributed to Braves Group thyssenkrupp Elevator announced planned development of North American headquarters, high-rise test tower and innovation complex in Battery AtlantaProgressing on sale of residential portion of Battery AtlantaBraves record 61-49 as of August 7 th, second in NL East division
“It’s been an exciting season for F1 with four different winners over twelve Grands Prix. We look forward to the season starting back up in Belgium at the end of August,” said Greg Maffei, Liberty Media President and CEO. “Live Nation achieved spectacular results as all the business units continue their solid growth. SiriusXM also posted an outstanding quarter, notably with churn down to 1.6%. At the Braves, The Battery announced the planned development of thyssenkrupp’s North American Headquarters and continues with the sale of the residential assets.”
Unless otherwise noted, the following discussion compares financial information for the three months ended June 30, 2018 to the same period in 2017.
LIBERTY SIRIUSXM GROUP – The following table provides the financial results attributed to Liberty SiriusXM Group for the second quarter of 2018. In the second quarter, approximately $12 million of corporate level selling, general and administrative expense (including stock-based compensation expense) was allocated to the Liberty SiriusXM Group.
The increase in Liberty SiriusXM Group revenue was primarily driven by an increase in SiriusXM’s daily weighted average number of subscribers. Revenue growth at Liberty SiriusXM Group was partially offset by the impact of the adoption of a new revenue recognition accounting standard, as described in detail in Liberty Media’s Form 10-Q for the quarter ended June 30, 2018. Operating income declined, primarily driven by a $69 million charge related to a legal settlement at SiriusXM for sound recordings for the period from January 1, 2007 through December 31, 2017. Adjusted OIBDA (2) increased primarily attributable to revenue growth at SiriusXM.
SiriusXM is a separate publicly traded company and additional information about SiriusXM can be obtained through its website and filings with the Securities and Exchange Commission. SiriusXM reported its stand-alone second quarter results on July 25, 2018. For additional detail on SiriusXM’s financial results for the second quarter, please see SiriusXM’s earnings release posted to their Investor Relations website. For presentation purposes on page one of this release, we include the results of SiriusXM, as reported by SiriusXM, without regard to the purchase accounting adjustments applied by us for purposes of our financial statements. Liberty Media believes the presentation of financial results as reported by SiriusXM is useful to investors as the comparability of those results is best understood in the context of SiriusXM’s historical financial presentation.
The businesses and assets attributed to Liberty SiriusXM Group consist primarily of Liberty Media’s interest in SiriusXM.
FORMULA ONE GROUP – The following table provides the financial results attributed to the Formula One Group for the second quarter of 2018. In the second quarter, the Formula One Group incurred approximately $6 million of corporate level selling, general and administrative expense (including stock-based compensation expense).
“The 2018 season continues to excite with unpredictable outcomes and a varied group of podium finishers,” said Chase Carey, Formula 1 Chairman and CEO. “We successfully returned to France, at the Paul Ricard Circuit, for the first time since 1990 and hosted our second fan festival for 2018. We made progress across many fronts as we entered into an exciting global sponsorship agreement with AWS, renewed global sponsorship deals, renewed the Belgian Grand Prix and continued to expand on our digital content offerings.”
The following table provides the operating results of Formula 1 (“F1”).
Pro Forma F1 Operating Results
Primary F1 revenue is comprised of (i) race promotion fees, (ii) broadcasting fees and (iii) advertising and sponsorship fees.
Broadcast revenue decreased due to the impact of slightly lower proportionate recognition of season-based income during the quarter (7/21 races in the second quarter of 2018 compared to 7/20 races in the second quarter of 2017). Race promotion and advertising and sponsorship revenue decreased in the second quarter primarily due to differing events on the calendar, with one additional European race taking place in the second quarter of 2018 (France) compared to one additional flyaway event taking place in the second quarter of 2017 (Russia), partially offset by fee inflation in underlying contracts. Typically, flyaway races such as the Russian Grand Prix carry a higher promotion fee than European races.
Advertising and sponsorship revenue was impacted by the adoption of the new revenue recognition accounting standard (ASC 606), which accelerated the recognition of certain elements of fees related to F1’s Global Partner and Official Supplier contracts. These fee elements were previously recognized pro-rata with the race calendar, but the majority are now being recognized evenly over the calendar year and others over a smaller number of specific events. This change provided a modest tailwind to advertising and sponsorship revenue in the second quarter of 2018 but will be neutral on a full calendar year basis.
Other F1 revenue increased during the second quarter primarily due to the sale of F2 component parts to competing F2 teams as 2018 marks the start of the next three year vehicle cycle for the championship.
Operating income and adjusted OIBDA (2) decreased in the second quarter. Cost of F1 revenue decreased modestly, driven by reduced team payments due to the pro rata recognition of such payments during the season, partially offset by increased costs associated with providing component parts to F2 teams and costs associated with increased fan engagement activities, freight, technical activities and digital media. Selling, general and administrative expense increased primarily as a result of increased marketing and research costs and foreign exchange movements.
F1’s total net debt to covenant OIBDA ratio, as defined in F1’s credit facilities for covenant calculations, was approximately 7.3x as of June 30, 2018, as compared to a maximum allowable leverage ratio of 8.75x.
The businesses and assets attributed to the Formula One Group consist of all of Liberty Media’s businesses and assets other than those attributed to the Liberty SiriusXM Group and the Braves Group, including Liberty Media’s subsidiary F1, its interest in Live Nation, minority equity investments and an intergroup interest in the Braves Group. There are approximately 9.1 million notional shares of the Braves Group underlying the Formula One Group’s 15.1% intergroup interest as of July 31, 2018.
BRAVES GROUP - The following table provides the financial results attributed to the Braves Group for the second quarter of 2018. In the second quarter, approximately $2 million of corporate level selling, general and administrative expense (including stock-based compensation expense) was allocated to the Braves Group.
The following table provides the operating results of Braves Holdings, LLC (“Braves”).
Baseball revenue is comprised of (i) ballpark operations, (ii) local and national broadcast rights and (iii) licensing and other shared MLB revenue streams. Development revenue is derived from the Battery Atlanta mixed-use facilities and primarily includes rental income.
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