Formula One Earnings: F1 U.S. TV Ratings Improve, but Ceiling Begins To Appear

Formula One FWONA posted a decent second quarter despite revenue and adjusted EBITDA coming in below FactSet consensus. Part of the miss was due to the cancelation of the Imola Grand Prix in May due to flooding in that region of Italy. Prior to the earnings release on Aug. 4, Liberty Media completed the reorganization of its three tracking stocks. The Formula One tracker now only includes racing assets with F1 and the land for the Las Vegas GP paddock as the two largest pieces with no intergroup interests.

We are raising our fair value estimate to $60 from $55 to account for slightly faster margin expansion.

Revenue for the F1 Group fell 3% year over year to $724 million as F1 held six races versus seven a year ago. Other F1 revenue fell 9% to $67 million due to lower freight costs which are a passthrough to the teams. Race attendance remains impressive with both the Canadian GP and Silverstone reporting record crowds. Part of the Silverstone growth was due to adding an additional nonrace day that featured a Calvin Harris concert. Adjusted EBITDA margin for the quarter fell slightly to 19.5% from 19.6% due to lower revenue and added expense tied to the Las Vegas GP mostly offset by lower team payments.

Management was very positive about the growth in the TV audience globally and in the U.S. for F1. While the U.S. TV viewership does continue to expand, the rate of growth has slowed down and the races remain less popular than Nascar despite the large media hype around F1. The Miami Grand Prix in May was the second-highest-viewed live F1 race ever with 1.96 million viewers, but was down 30% year over year versus the inaugural Miami GP. The 2023 version was also outdrawn head-to-head by the Kansas Nascar race (2.35 million viewers) and the NBA playoff game (5.1 million). While we expect the Las Vegas GP to attract a large audience, we would be surprised if it outdrew Nascar’s debut Chicago street race in July that pulled in 4.62 million viewers despite a rain-delayed start.