Formula One Earnings: Attraction to Races Continues to Grow and the Las Vegas Race Will Help

Formula One FWONA reported a strong third quarter as each of its races continued to be sold out. Plus, the distribution of content on various platforms helped to further monetize races. While preparation for the first Las Vegas Grand Prix required more capital expenditure and other investments in the quarter, the race is also likely to sell out in the fourth quarter and in the coming years, while attracting more sponsorships, with American Express being one of the most recent ones. We look for such new races to further strengthen one of Formula One’s intangible asset moat sources, its brand, which will not only attract more fans but will also bring in more sponsors and possibly some leverage when negotiating new terms of the Concorde agreement with the teams, the latest of which ends in the 2025 season. We are maintaining our $60 fair value estimate and view the shares of narrow-moat Formula One as fairly valued.

Total revenue of $887 million increased 24% from last year driven by the one extra race during the quarter—eight races versus last year’s seven—which pushed primary F1 revenue 27% higher than last year. Race promotion revenue increased due to higher fees and two races outside of Europe, one in Singapore and the other in Japan. The media revenue growth was driven by more F1 TV subscribers and more favorable distribution agreements. The sponsorship revenue increased as not only more sponsors jumped onboard, but the existing ones also increased their spending. The firm’s other F1 revenue increased 7% mainly due to the freight income generated from the two additional non-European races.

Strong revenue growth created operating leverage as adjusted EBITDA increased 25% from last year and represented a 22.2% margin, up 10 basis points. Excluding the Las Vegas Grand Prix planning costs, most of which we think can be considered one-time, margin increased by nearly 1 percentage point.