Welcome to the Liberty Media Corporation's 2023 Q1 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, May 5. I would now like to turn the conference over to Shane Kleinstein, Vice President of Investor Relations. Please go ahead.

Thank you, and 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 Liberty Media's 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 expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media'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 for Liberty Media and SiriusXM including adjusted OIBDA and adjusted EBITDA. The required definitions and reconciliations for Liberty Media and SiriusXM Schedules1 through 3 can be found at the end of the earnings press release issued today, which is available on Liberty Media's website. Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Thank you, Shane, and good morning. Today speaking on the call, we will also have Formula One's President and CEO, Stefano Domenicali, and Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling. I'm going to first update you on the split out of the Braves and the creation of the new Liberty Live Tracker. We filed the amended S-4 and are pleased with the speed of the SEC review. We believe we are nearing the end of that SEC process and we are still targeting completion before the end of the second quarter. Turning first to Liberty SiriusXM. We continue our efforts to delever and simplify the balance sheet there. We raised $575 million of 3.75% LSXM converts, and we used the proceeds to repurchase 703 principal amount of LSXM debt, including $591 million of the 1.375% to convert and $112 million of the 2.125% SIRI exchangeables. We also repaid the remaining balance of those in April. That was a reduction in gross debt just over $400 million year-to-date, including the April activity. The reclassification of the LSXM tracker without the live stake will simplify our structure further, and we continue to be focused on rationalizing SIRI and LSXM structures in the near term. Let me look at SiriusXM itself, as expected, they had a challenging first quarter due to the SAAR and ad market trends. We expect this is the low point of the year on net pay -- net self-pay net adds. Due to the lower Q4 trial starts, the seasonal Q1 higher churn and the pullback in marketing as we will wait to roll out our new app. Advertising did perform better than expectations and podcasting continues to be a bright spot. We saw solid progress in rolling out 360L, our revolutionary new product enhancement, which leverages…

Thanks, Greg, and good morning, everyone. At quarter end, Liberty SiriusXM Group had attributed cash and liquid investments of approximately $337 million, which excludes $53 million of cash held directly at SiriusXM. There's also $1.5 billion of undrawn margin loan capacity at the parent level related to our SiriusXM and Live Nation margin loans. As of May 4, the value of our SiriusXM stock held by LSXM was $11.5 billion, and the value of the Live Nation stock was $4.7 billion. We have $2.7 billion in principal amount of debt against these holdings or $2.4 billion pro forma for the additional paydown that occurred after the quarter. Total Liberty SiriusXM Group attributed principal amount of debt of $13 billion, which includes $9.6 billion directly at the Sirius level. In March, Liberty SiriusXM Group issued $575 million aggregate principal amount of 3.75% LSXMA convertible notes due 2028. We used the net proceeds of this offering to repurchase $591 million principal amount of the 1.375% cash convertible notes and $112 million of the 2.125% SIRI exchangeable debentures. In addition to the proceeds raised from the new convertible, LSXM used cash on hand, including $39 million from the proportional net settlement of the bond hedge and warrant and cash received from Formula One Group to retire 3.1 million FWONA intergroup interest shares underlying the corresponding portion of the convertible repurchase. Subsequent to quarter end, Liberty SiriusXM settled the remaining 2.125% SIRI exchangeables for $275 million at the April-foot call date. There's approximately $199 million remaining on the 1.375% cash convertible notes, which mature in October. All remaining intergroup interest are expected to be settled and extinguished in connection with the bright spin-off and additional information regarding the intergroup interest is available in our press release and as well as the S-4 that was…

Thanks, Brian. Good morning from Miami. We are thrilled to be back for our second Miami Grand Prix where the excitement in the city is as vibrant as year 1. This year event featured on expanded Paddock now located inside the Dolphin stadium and upgraded Paddock Club and a fully resurfaced track. We have 4 races into our record of '23 race calendar. While Red Bull has dominated the race to date, it is still very early in the season, and the raises have been packed with excitement and drama. A lots of fans have a unmatched cheer about with Aston Martin recent performance. Alonso first place finishes in Saudi Arabia marked his 100 podium, making him 1 of only 6 drivers in F1 history to claim this feat. The Australian Grand Prix feature in 3 red flags adding even more complexity to tyre strategy and ended with only 2 of 20 drivers crossing the finish line. The newsprint format was unanimously approved by the team's F1 and FIA in advance with [indiscernible]. We all believe that the new format is the right 1 for our fans and the sport and increase the level of intensity and action across the weekend. Starting this season at the 6 sprint events, all 3 days of the weekend will be packed with on track excitement. The Saturday sprint shootout is a shorter qualifying session to determine the sprint grid later that day. This makes the sprint stand-alone event with no bearing on the Grand Prix allowing drivers to find more aggressively without fear to race of the implication. Formula One is engaging with our plans across plateau. Global audiences exceeded 70 million viewers for the first 2 races of the season with significant increases in key markets across Europe and North America. In…

Thank you, Stefano, and thank you, Brian. And to our listening audience, we appreciate your continued support of and interest in Liberty Media. We hope you will all turn in to see the Miami Grand Prix free this weekend and the start of our Braves series against the Orioles tonight. And with that, operator, I'd like to open the line for questions.

[Operator Instructions] The first question is coming from David Karnovsky of JPMorgan.

Stefano, just on the new Sprint format. I'm interested to know what the response has been from your partners on the promotion side. How are they thinking about the potential lift to their own ticket sales? And then what's the process you had to determine what GP get that format? And is that something you can build into your contracts?

Well, thanks, David. Of course, we did think in accordance with the teams and with the FIA because, as you know, our idea is to make sure that during the racing we can, there is always actually on the track. Actually, the result of the first one of this year has been very encouraging. And every one of our partners, promoter, media partners and also team are very positive about that. Of course, there is something that we want to take as a lesson to learn and to see at the end of the summer, if there is something that we can learn to do even something better. But in a general term, the first we can of the Sprint format has been great. And I think that, as always, when you want to do something different in a very standardized ecosystem, the reaction of the, let's say, the traditional fans is the one that needs to be waited for longer term. But normally, with the new fans, we've seen a very, very positive reaction. Promoters were pushing for that. And I would say the real thing is that we don't want to go in a situation where in the future, where we gonna enroll the races with the Sprint format. We want to keep a limited number of it, maybe on to the calendar number and create something special with regard to the competition that we can give a supporting value with trophies and of course, commercial opportunity to these things. But I think that's the right way to go. And if I may summarize another thing that I think is important. I see a big trend today in motorsport, not to be stable, let's say, not to stay consistent with your regulation. We're just following what the base will be then just following what NDA has done. So that means that all the professional sport needs to listen to the request and to the new input that the fans, promoters and partners are asking to have more excitement around the games. So positive and looking forward to keep working on this project.

Okay. And then you've called out F1 TV in your releases for a few quarters now. Just wanted to see if you could update us on the product, where you see it in terms of the growth trajectory? And then just for Brian, to the extent someone buys an annual plan at the start of the season, is that all booked in the first quarter with the partner cost? Or is that proportion of little races?

So if I may, the first part of it, F1 TV is really working very well. You know that we are not providing any numbers on that, but what I can tell you in terms of quality, in terms of product and in terms of attention is also an opportunity to select new markets where there is not really a strong broadcast provider, and we are doing that with certain countries and the effect is very good. We have a new plan also to update some of the content that we want to give to our fans. And as I said, after a couple of years of very high investment, now we are paying back what has been a great decision taken a couple of years ago. Brian, you want to progress with the other question?

Yes, David, on your second question, it's proportional over the season.

The next question is coming from Bryan Kraft of Deutsche Bank.

Greg, I wanted to ask you, how should we think about the capital needs of the Liberty Live Tracker, both initially and over time, particularly as the business side of Liberty Live evolves and begins to invest in owning and operating venues. I assume that's still part of the plan. I mean, it seems like it's capital-intensive. So just wanted to understand how you might go about funding those endeavors.

Thanks, Bryan, for the question. As we've outlined, we expect to capitalize Liberty Live with a decent amount of cash. But candidly, to the degree we go out and do something large there, we'll have to find other sources of capital, other sources of cash capital. So I don't think it will be a massive generator of cash, as you would expect, looking what's in the asset base there. But we have some ideas that involve leveraging Liberty Live itself, not reliance as much on other trackers, if that's your fear, Bryan.

Yes, that was the nature of the question.

That's right. I just might have read that subject a little bit.

Well, a lot of people are asking about it. So I think it's good to get the message out there.

You get the ask it stright up front.

If I could ask you also maybe related on the F1 side. I mean, it seems like what you're doing in Vegas is really exciting. Do you see other opportunities to invest in F1's business by taking on the promoter role and other markets and investing in facilities to drive that longer-term growth.

Look, I think Vegas was unique and the opportunity and also the geography and a bunch of other factors, which made it the place where we should be the promoter first. We'll try not to have too much hubris and assume that we need to prove we can be a good promoter first. I don't look at a lot of other places where it's as obvious. I have mentioned in the past that I do think, in some cases, some of our partners in the promoter space are not necessarily as capital rich as Formula One. And so there may be opportunities for us to participate alongside them, maybe not a full co-promotion role but to take elements of the chain of value being created and further for both of our benefits. So we'll certainly look at that and talk to partners to the degree that's available.

And if you may add another comment, Bryan, and that is direct qualitative effect is that -- with this investment, we are pushing also after the quality of the promoters that are already very important for us in Formula One. So now the game is to have unique events that are working very, very well, of course, commercially viable, but I would say that direct effect as given to the system not lifting the qualitative approach of Grand Prix.

The next question is coming from Vijay Jayant of Evercore.

I have a couple on Formula One. So Greg, the $112 million of team payments in the quarter implies a little less than, I think, $1.3 billion for the year. Can you sort of talk about how team payments have been communicated to the team given the fact that this year you have something sort of different with the Vegas rates that is not sort of contractual? And is that something we should look at as a proxy and what you're sort of thinking on the full year EBITDA number? And second, obviously, the free cash flow was very, very strong at Formula One supporter and I'm assuming that had to do with ticket sales for I think Wave 1, Wave 2 on Vegas. Any way you can help us think about what sort of the underlying free cash flow excluding the ticket sales, if possible?

So I'll comment on the first and second. And then Brian, you want to add anything on the free cash flow when I'm done, that would be great. Looking at the team payments, I think if you look at our history, we try to manage that conservatively. Particularly in the first quarter of the year. And as you rightly know, probably even more conservatively this year given we've added some volatility of the payroll rather to the potential in -- by having Vegas. We think it's positive volatility. It's going to be a great event. But it is unknown. It is not as well experience and some of the other events that we have. So I think you should look at that as a conservative proxy for how we expect the year will go. The last thing we want to do is have teams overspending in anticipation of money that don't show up towards the end of the year. The free cash flow, you rightly note, because of the Wave 1 and 2 sales, a lot of cash has been brought to us as deferred collection, but it's generated in that free cash flow line. So it has probably overstated the true impact of the operating business for Q1, but we do expect to recognize that as free cash flow as the year progresses. I don't know. Brian, if you want to comment or can comment a little more on a more normalized level without providing Vijay too much clarity because gosh, we wanted to do some real work.

Yes. I mean to help the efforts, I guess, I would say, if you look at our tracking stock schedules, you can see the deferred revenue as of March 31, 2023, and you can go back and look at the -- you look at our first quarter from last year, you can see the deferred revenue related to Formula One at 2022. It's up roughly $130 million, give or take, and you could think of that largely being related to Vegas, although there are other puts and takes.

If I may add one comment. So Vijay, I just want to add 2 comments that I think it's important to consider a true number that at the end of the day, it's important to remember that the teams are benefiting for what we are doing so far. I mean investing in Vegas for them is an incredible opportunity and directly also for them to develop their business. And indirectly, it will get our proposition even stronger as an ecosystem in Formula One. So I think that is really something that as I was mentioning, we have a prudential approach that gives you the baggage about what we need to do and need to deliver in this project that will be very, very important for all of us.

The next question is coming from Peter Supino of Wolfe Research.

On the Concorde Agreement, Greg, I wondered -- or Stefano, I wondered if you could comment on how you'd like investors to think about the timing of that renegotiation. And then the second question, Greg, if you would talk about Live Nation, your view of both the risks posed by the DOJ investigation? And then separately, the bear case that the business ought to slow down a lot in 2024. And after this post pandemic surge of supply?

Look, we have several years left to run on the Concorde Agreement. But I think there's a consensus among the teams and the FIA and ourselves that now might be a good time to try and strike while the iron is hot and renew and extend the Concorde Agreement. There's certainly no obligation to do that, and there's certainly no risk if that doesn't get done. As you may recall, we went right to the end and historically, in many cases, the teams have operated without a Concorde Agreement. They've basically done a handshake, then completed the deal post the period when the new Concorde Agreement was supposed to start. Our hope is that this time, we'll be able to change that dynamic in part because of the way that's changed and Stefano have changed the dynamic with the teams in particular, I hope we have a more positive relationship and everybody sees the benefit of going early and providing certainty for all involved. Stefano, what would you add?

Nothing because I think that you synthesize perfectly the situation. And I think that will be our strategy now.

On Live Nation, I would not say it's a DOJ investigation. You can always say that. But look, we've had a DOJ consent decree and monitor now for several years, and it was renewed. And there is a hotline that anybody can report what they perceive as violations of that consent decree and the DOJ has a monitor who is investigating continuously perceived or alleged to violations of the consent decree. There obviously is another track, which is a legislative potential, and we talked about some of those I mentioned, the couple of bills that are being considered I'm not sure those bills will get done, but in the main, we view those bills as positive. And frankly, I think anything that moves forward and ends the negative speculation about the regulatory side is positive because we do not perceive it nearly as big a risk as the market proceeds to be. On the business itself, hard to project what the consumer will do and you can imagine recession scenarios and the like. But we see none of that. We see strong demand, and we see it going forward with upcoming tours and our expectations, as I noted, the business is going to continue to grow.

The next question is coming from Stephen Laszczyk of Goldman Sachs.

Maybe one on F1 sponsorship for Stefano. It seems like you're finding a fair amount of success in stepping up some sponsors and some more comprehensive packages. You had Paramount+, MSC and LIQUI MOLY this past quarter. I was wondering if you could maybe talk about this more, how much opportunity do you think there is as you look out across your sponsorship portfolio to step more sponsors up? And if there's any constraints, especially with there being 10 global partners already that could limit us?

Well, thanks Stephen, for the question. I think that we always need to look behind to understand what we are doing today. I mean we were talking about all the 4 official partners just 2 years ago. Now we are heading to 10 official partner plus, an incredible group of technical projects that are part of our family. I think that our main goal is to for sure to connect with the potential business partners that are interesting to develop business together. But in any case, we don't have to over crowd our group in order to offer what they need and it's up to us to prepare for them different packages with different countries with different experience, with different opportunity. This is what we are doing and the fact that we are so strong in this moment that the pipeline is still very soluble for the future is giving us the clear ticket to work on the digital landscape to have different propositions, different markets, for example, as one opportunity that we have today or including other categories that are interested to come back in Formula One. So I would say now the real thing is not to work only on the of having more but making sure that each of them received the right qualitative answer to their question. And the other thing that I think is really relevant that gives in another way, the fact that we are serious on the sustainability platform because no one will invest today in a business that is not credible on this last stage. Therefore, that is another push that we have receiving from our partners to make sure that our goals with sustainability in net carbon in 2030 has been achieved. So it's, let's say, a constructive push that we are working together in order to be stronger and stronger together.

Great. And then maybe one for Greg. Could you just date us on the way you're thinking about capital allocation at Formula One, now that you had to trigger on your term loan this quarter. Should we expect this to give you some more flexibility from this point going forward to ramp leverage back to more historical levels?

Well, thank you, Stephen. I think, look, we are pleased to have triggered the reduction. Honestly, that's a nice benefit, but it has not been what's driving our thinking about capital allocation we are looking for and believe we will find attractive opportunities for our cash and our generated -- cash flow generation. I talked about some of those in the past, including the Vegas effort, which I think is going to generate a good return, ancillary businesses around -- which are synergistic and around our existing business and the potential for return of capital versus share repurchase. As I noted, we effectively did that this quarter for just over 3 million shares to the intergroup interest settlement. So I expect you'll see us look at all of the alternatives above. And again, it was nice to click off the 25 bps reduction, but that wasn't what drove our thinking. It's really the strength of the business, which is generating the capital.

The next question is coming from David Joyce of Seaport Research Partners.

A couple of questions. First on Formula One, what's the current view of Formula One, the league and FIA and F1 teams related to potential addition of work teams, what are the gating factors from here? And then secondly, if you could provide any update on your views of what's happening with the regional sports network as it pertains to Atlanta Braves?

I'll let Stefano handle the first part, and I'll hand the second question.

Thank you, Greg. I mean with regard to the situation of a new team potentially entering or interesting for F1. No, as I always said that there are someone that is quite vocal. Some others are quite silent. As you may know, David, there is a process in place that has been activated by the regulator to see and to collect the interest of other partners to be part of Formula One. The first step will be finished, I think, within the middle of May. And then there will be the analysis done properly, checking the technical visibility, the financial visibility and then we're going to have the discussion to see if any kind of potential enter will fit into the equation of creating more value to the sport. And that's something that we're going to take the decision at the right time within the end of this year. That's the plan. But of course, that is once again showing the growth of Formula One. I mean, just a couple of years ago, the [indiscernible] team was very small, actually, almost none. Today, the value of the franchise is very high. So we have the duty to protect the business and making the right decision. And this is something we're going to do within the end of this year.

And regarding the RSN. Look, obviously, it's a difficult situation given Diamond's filing. That having been said, we continue to receive payments from our Sports South contract. That is not true for some other RSNs out there, but my understanding is 3 or 4 have not received payments from Diamond. And that, I think, reflects the fundamental strength of the territory we have and the interest in the Braves such that our understanding is we have a profitable RSN. So it's unlikely that Diamond will view us as an executory contract which they wish to reject even if they were to reject it, which again, don't expect, I think there are other alternatives we could construct in the marketplace that would enable us to get paid and have our products shown to our fans, which is really the most important thing. And we're certainly prepared if we have to, to go out and exercise those alternatives.

The next question is coming from Matthew Harrigan of Benchmark Company.

Live Nation among its other [ Meritha ] absolute home run acquisition of OCESA for Mexico and Colombia. I think they said that and Asia were like 50% of AOI growth in the quarter year-over-year. I mean do you see there are many other targets out there to expand internationally as the music business is just now unbelievably globalized given the cross-market appeal of artists as Michael and [ Tino ] talked about yesterday?

Thank you, Matthew. You're right, OCESA is a great deal, and it's nice that Autodromo Hermanos business, who is also our partner in the Formula One Mexico City Grand Prix is being -- acting so successfully. There are other targets out there, probably not as many with the scale of OCESA that we could get done because of potential regulatory issues. But Live Nation has a long history of successfully adding primarily promoters into the fold usually in some point of a partnership agreement where the management stays involved, but we take some ownership interest as well. And I expect you'll continue to see that either in venues or promoter relationships where we continue to take advantage of the strength of our business and our ability to try and offer both fans and artists to global product. And the more we can fill in our global footprint, the better for both of them. Operator, I think we're done. And to our listening audience. Again, thank you for your interest in the Liberty Media Companies. We look forward to speaking with you next quarter, if not sooner. And have a great weekend.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.