Formula One Earnings: F1 Will Be Selective About Next Race To Promote Despite Las Vegas GP Impact

Formula One FWONA kicked off 2023 with a decent start as revenue met and adjusted EBITDA was just ahead of our expectations. Management appears very positive about the impact of the inaugural Las Vegas Grand Prix in November which should generate roughly $500 million in revenue. The GP is also expected to be one of the five races with the highest profit economics as well. The race will be the first that F1 acts as the race promoter, which should allow for higher margins over the longer term, but comes with the risks that F1 usually pushes onto its partners. We think that F1 will be very selective in finding another GP to promote given the risks and the capital spending required to get a new race off the ground. We are maintaining our $55 fair value estimate.

Revenue for the F1 Group improved 6% year over year to $381 million as F1 held two races, the same as a year ago. Other F1 revenue fell 8% to $67 million due to easing of freight costs, which are a pass-through to the teams. The lower freight revenue more than offset the attendance growth at the paddocks at both races. The season kickoff in Bahrain attracted almost 100,00 attendees as F1 fans continue to travel anywhere for a race. The ability of F1 to draw fans to less traditional tourist destinations is one of the main reasons that flyaway events generate much higher race promotion fees than the traditional races. Some governments pay the promotions fees for certain flyaway races, particularly in the Middle East, making the additional cost relatively cheap versus the overall economic activity sparked by the GP.

Adjusted EBITDA margin for the quarter fell to 30.7% from 33.9% due to higher team payments, increased Paddock Club costs, and higher headcount. F1 also had added expenses tied to the Las Vegas GP in headcount, marketing, and construction.