Welcome to the Liberty Media Corporation’s Third Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference will be recorded today, November 4th. I would now like to turn the call over to your host, Courtnee Chun, Chief Portfolio Officer. 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 10-K and 10-Q or Liberty Media Acquisition’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 and Liberty Media Acquisition expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Media or Liberty Media Acquisition’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 OIBDA. The required definitions and reconciliations for Liberty Media and SiriusXM Schedules 1 and 2 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. 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. So, let me start with Liberty SiriusXM. Last quarter, we discussed our intention to reduce debt at LSXM and we took actions during the third quarter. We opportunistically repurchased about 21% of the 1.375% Basket convert combining prudent debt management and effective share buyback. FWON paid $64 million and BATR paid $14 million to LSXM to settle their respective intergroup interest. The remainder of the repurchase was funded with LSXM cash and $27 million from an unwind of a bond hedge and warrant. Effectively, this was a share repurchase across the LMC equities with $179 million effective cost to repurchase 4.5 million LSXMA shares and $1.1 million FWONA and $500,000 BATRA intergroup interest shares effectively repurchased. We are still hedged on the remaining exposure under that convert with our intergroup interest. Turning now to SiriusXM itself. They reported solid third quarter financial results despite the macro factors impacting the business. The resilient sub base experienced a record low churn of 1.5%, revenue was up 4% and EBITDA was flat as we continue to make investments, including end product development. Despite soft auto sales, we continue to achieve vehicle penetrations with an enabled fleet of approximately $150 million. SiriusXM also set out strong cash flow business and guidance for the year, full year guidance for 2022. We continue to monitor headwinds in advertising and the reduced SAR impact on the top of the funnel. Sirius is also making progress in the streaming business. September was one of the biggest streaming sub-acquisition months they’ve experienced to date. And we continue to add exclusive and diverse content, both in and out of the…

Thank you, Greg, and good morning, everyone. At quarter end, Liberty SiriusXM Group has attributed cash and liquid investments of approximately $225 million, which excludes $39 million of cash held directly at SiriusXM. There’s also $1.3 billion of undrawn margin loan capacity at the parent level related to our SiriusXM and Live Nation margin loans. In September, Liberty SiriusXM Group paid approximately $284 million to repurchase $210 million aggregate principal amount of the 1.375% cash convertible notes. This was funded with $179 million of cash on hand as well as cash from the Formula One Group and Braves Group from the settlement of their intergroup interest held at Liberty SiriusXM, corresponding to the amount of notes repurchased. As a result, 1.1 million FWONA shares and $500,000 BATRA shares underlying the portion of their respective intergroup interest held by LSXM were canceled. Liberty SiriusXM Group also received $27 million of proceeds from the net settlement of the bond hedge and warrants related to the repurchase of the convertible notes. As of November 3rd, the value of the SiriusXM stock held at Liberty SiriusXM Group was $19.5 billion, and the value of the Live Nation stock held was $5.3 billion. We have $2.8 billion in principal amount of debt against these holdings. Total LSXM Group attributed principal amount of debt is $13.4 billion, which includes $9.9 billion of debt that’s directly at the SiriusXM level. Formula One Group had attributed cash, liquid investments and monetizable public holdings of $1.1 billion at quarter end, which excludes $1.1 billion of cash held at Formula 1. Total Formula One Group attributed principal amount of debt was $3.5 billion, which includes the $2.9 billion of debt directly held at Formula 1, leaving $567 million at the corporate level. During the quarter, we issued $475 million aggregate…

Thanks, Brian. The 2022 season has continued to deliver very impressive racing for all our fans and once again shows how the new technical regulation have delivered closer racing on the track. The interest in Formula 1 is huge from fans, potential partners and those who want to host the race. We continue to believe that this is due to us taking the right strategic decisions to grow the sport in the correct way and to focus on the most important priorities. Formula 1 just finished a couple of amazing weekends in Mexico City and in Austin, and the 2022 season has delivered exciting action on the track. Max Verstappen has been an incredible this decision, setting a record for most wins in the season with 14 Grand Prix wins so far in 2022 with his win in Mexico City last weekend. He secured his second world championship in Suzuka and Red Bull won the Constructor’s Championship, their first since 2013. The team dedicated the victory to Red Bull’s Founder, Dietrich Mateschitz. He was a visionary who helped transform our sport and they will be missed. Even with this championship settled, there is still a battle among the drivers and constructor as where they finish can have a meaningful impact both financially and operationally. Excitement for our sport continues to grow. Certainly, we’ve seen that in the race attendance and now had 10 races with crowds over 300,000 with three of those exceeding 400,000. Many of these events have been complete sellout. A great example of growing interest is Austin, where we welcomed 440,000 fans across the event, more than double the attendance in 2019. The promoter states that the ticket demand could have reached 500,000, but for this focus on maintaining a high-quality fan experience. We’ve also seen more…

Thank you, Stefano, and thank you, Brian. We look forward to seeing many of you at our Annual Investor Day on Thursday, November 17th. Please visit the IR calendar on our website for registration details. John Malone and I will be hosting our annual Q&A session. If you’d like to submit questions in advance, you can e-mail investor@libertymedia.com. We appreciate your continued support of and interest in Liberty Media. And with that, operator, I’d like to open the line for questions.

[Operator Instructions] Our first question comes from Doug Mitchelson with Credit Suisse.

Greg, I just wanted to focus on Liberty SiriusXM Group. Just curious if you have any updated thoughts on the discount to asset value and sort of options and timing of options to improve that? And I guess as part of that, specifically, just curious if you could talk about the strategy around the Live Nation stake at Liberty and whether there’s ways for Liberty to create value with that stake beyond just being sort of an ongoing shareholder of Live Nation, which I’m sure you’re bullish on. But are there other ways for Liberty to create value with that ownership stake? Thank you.

Well, Doug, I think -- thank you for the question. I think we’ve gone through some of the options that are on the table and discussed them before, and I’m probably unlikely to do that -- to go through them all again, but to say we are aware. We’re paying attention. We’re taking actions to prepare ourselves for different choices, set ourselves up. And when we have something to announce, obviously, we’ll make the announcement. I just want to reiterate, we think Live is very attractive. We think that certainly the value is not fully recognized in LSXM. And we think there are things that -- businesses that are worthy to add on to Live that could be interesting, that are opportunities for us. So there’s much we can do around that book, around the Live stake in particular. But I’m less likely to go through every nuance on what we can do with LSXM because I think we’ve covered those before.

Maybe, Greg, as just a quick follow-up, you could help investors kind of shape time frames. Are there things that you can do that you think are material in the short term, next 12 months, or are these things that will take longer to play out? Anything thoughts around helping us with time tables?

Doug, I give you full credit for persistence, but I think I said what I’m going to say.

Next question is from Bryan Kraft with Deutsche Bank.

I’ve got one for Stefano and one for Greg, that you may or may not answer, but I’ll try. I think on past calls when asked about the ATB status of SiriusXM, you said that you believe it is an ATB. I was wondering if your conviction with respect to SiriusXM being an ATB has since increased. Can you say more definitively that it actually does have ATB status? And then Stefano, your comments on the attendance increases, I think, were really interesting. I think that the view on race promotion revenue historically has been that it’s sort of a flattish type revenue outlook given the high pricing on those deals and some challenged promoter economics. But with the increases in ticket sales and attendance you talked about and that must deliver a lot of value to promoters, do you think that that means race promotion revenue could become actually a significant and consistent revenue growth driver going forward? Thanks.

I’m going to let Stefano cover attendance first and then I’ll touch on the things I’m not going to answer with you, Bryan.

Okay. Thanks, Greg. Well, actually, you’re totally right. The attendance increase is just magnificent in terms of what Formula 1, is bringing mainly to new audiences. And that is true that the business model we are having with certain promoter is more related to the fact that there is a fee that they have to pay, there is the high-end Paddock Club that is on our side. And there’s -- not a challenge, but the big opportunity to move forward is how we can maximize the revenue and monetize the revenue that we can take from the fact that Formula 1 has become more and more attractive. That’s really what we’re going to do in the future. We have a different way to do it, and I’m sure that we’re going to capitalize this growth in the best way that we can in the next couple of years.

Thanks, Stefano. So Bryan, I’m going to give you confidence. I’m going to restate, I still believe SiriusXM as an ATB, no change in our position. These things tend to get resolved and firmed up at the time something gets tested, but that -- we still have that position.

Our next question is from Jason Bazinet with Citi.

I know you guys have always talked in the past about the flexibility that the trackers give you because you can sort of move assets and liabilities across. Is there -- but when I step back and I think about sort of broader Liberty, it feels like there is sort of a slow march towards asset-backed securities, right, like eventually the terminal year, it seems to me everything is going to be asset backed. Is that wrong?

Well, thank you for the question, Jason. I don’t think we’ve really seen a change in our procedure. We think the tracker has real value and gives us flexibility. But our history has also been that we created many, many asset-backed securities. Off the top of my head, I can think of the media, which was effectively DIRECTV, CommerceHub, Expedia, Liberty Expedia going to Expedia. The list goes on. And we’ve obviously breaking curate off on its own, I mean I can -- many, many times. And that’s going back in my 17 years. I’m not sure we’ve had a diminution in our interest in trackers or a change in our perspective that asset-backed securities certainly have their value at the right time and place.

Okay. Does sort of unwinding or shuttering the SPAC sort of nudge you more in the direction of not needing flexibility, or is that sort of a false interpretation?

Yes, I’m not sure I would read that as the interpretation. I think it’s a recognition of these things have a life, the market. At a moment in time, we thought there was an opportunity. We couldn’t find the one we wanted. Unlike many sponsors of SPACs who were playing for the carry, we had committed real capital and we’re concerned about and aligned with our shareholders in wanting to have a good return, not just a pop. I think SPACs are obviously challenged for many reasons, both because of the market reaction right now and also because of the regulatory profile towards them. So, that was a recognition of those factors, not any statement about lack of optionality or flexibility or desire for that.

Our next question comes from David Karnovsky with JP Morgan.

Stefano, I wanted to see if you could expand a bit on your media rights renewal with Sky. What drove the decision to do that deal early and across multiple territories? And then, Greg, just wanted to see if you could update on how you’re thinking about using Formula 1’s cash balance in light of your net leverage and decision on LMAC. Thanks.

Thanks, David. I think that when we talk about media rights is a landscape where we have to consider the evolution, mainly in the new market that is becoming attractive for Formula 1. In the more, let’s say, traditional mature market, I think that’s what we have taken as a decision to invest and to be stable with Sky means a lot, because in terms of the other opportunities in this market are not really the ones that can extend from the financial and also for the awareness point of view and the country point of view what we want to achieve. It is clear that the fact that we are growing give us potential for the future to see how in that kind of the dimension, not only pay TV, but also other means that could be interesting for us to be attractive for our business. Of course, we want to make sure that -- for the future decision, there is also the possibility for our F1 TV that is going tremendously well to be incorporated in the offer to our customers. So that’s really the strategy that we have taken so far. And this is, I would say, if you go back to Sky, the recognition of the value of that investment for the value of our F1 content in the world.

Yes. If I could just add on -- I mean, I reinforce the point. Sky is a great partner across 3 important geographies. But more than that, they’re a great partner in terms of their production. Most of you here in the U.S. are watching the Sky broadcast. And I have to tell you, I’m always very impressed with what they do and securing that and ensuring that good partnership for a longer period of time was attractive. As far as what our uses of cash are going to be, we have a high-quality problem that we have a great free cash flow generating entity in Formula 1 with, we believe, the potential to increase that over time. You’ve seen us buy back stock at various times at Formula 1. But we also think there are potentially in this market opportunities for all the reasons that I talked about the difficulty in the market, a nonmarket tested or no need to do external financing, ability to do something on our own could create interesting opportunities. So, we will continue to weigh both the flexibility that we’re provided by those free cash flows and the delevering against share repurchase, against other alternatives in the space like investing in our business at Las Vegas and outside opportunities.

Our next question is from Ben Swinburne with Morgan Stanley.

A few on F1 for -- I guess, for Greg or Stefano or both of you, on the ESPN deal, which is -- or Disney deal is now formally announced, at least from the press, you guys took less money -- it’s a lot of money, but less money than you could have had. I think I know why. But could you just spend a couple of minutes talking about why? What is new in this ESP and ABC deal besides more money that you think is strategic and sort of the benefits of this agreement and the duration that you picked because obviously the U.S. market is a huge opportunity for you. And then, maybe this is for Brian, but just -- you didn’t mention currency in the press release at F1. I didn’t know if that was a material or not material impact in the quarter. And G&A and corporate costs were both up quite a bit year-on-year and quarter-on-quarter, maybe Vegas related. Just any color there, if there’s onetimers would be helpful.

I’ll touch on ESPN first and then I’ll let Stefano add if it’s okay. Look, we have had a belief in the strength of the business, which caused us to cut initially a shorter deal without getting the highest paid last time. And on this renewal, we did the same. We wanted the broadest exposure. ESPN has been a very good partner. We think the opportunity to continue to grow the sport in the United States caused us to cut a relatively short-term deal with them because we think we will get -- do better on the renewals. So far, betting on ourselves has been the right strategy, betting on growth, betting on breadth rather than a current pay has been the right strategy and I think you saw that exhibited. There were other things that ESPN has been a great partner about, and I think the opportunity to work with them on things like F1 TV was a part of why they were a good partner and go forward on that basis. So, I’m -- we’re very excited about F1 and ESPN being together for the next three years. But I have to tell you, we’re also excited about the kind of opportunity we’ll see in three years when we renew with somebody. Stefano, what would you add?

I couldn’t agree more, Greg. I think that we need to recognize that because sometimes we have a very short memory. A couple of years ago, there were not so many media rights holder in U.S. that wanted to invest with us. And now we need to give the credit to ESPN that in terms of content, in terms of attention, in terms of how they are really following Formula 1, they did a phenomenal job, which will be even stronger in the next three years because we have agreed the positioning of the race in certain channels to have more attention to that. So, I think that we talked carefully about this step. And I think that the fact also that with this agreement, we keep as mentioning the F1 TV on our side means a lot. So I think that the best solution in three years’ time, we see how the market will develop. We are pretty sure due to the growth in U.S. that there would be other players that will be around the table and interested to be with us in the future.

Yes. Then, Ben, on your other twp questions, FX was pretty much de minimis for the quarter. We’ll just remind you that about 80% of our revenue and costs are actually in U.S. dollars. So, we do have ups and downs on FX from time to time. It was not impactful in the third quarter. And then on the G&A question, again, I would just reiterate, always better to look at this on a full year basis, but we did have a mix shift in the number of races that were either European versus flyaway. We lost Russia in the current period. So that has a bit of a margin impact. There was higher G&A to support the overall revenue growth and margin expansion on a year-to-date basis. And then, as you pointed out, on Vegas, still not material, but obviously, there are some costs in there related to Vegas as they have their prepared for their launch event and ticket sales.

Our next question comes from Barton Crockett with Rosenblatt Securities.

Okay. I guess two questions, if I could. The first is just the macro situation in Europe. It’s really kind of at levels that we haven’t seen in years, maybe in my lifetime, I don’t know about others. And I’m just wondering, at what point do you think that this could have an impact on the F1 business? It doesn’t seem like it has to date and maybe the answer is it never will. But at what point do you think we’d ever get to a point where this could have an impact on attendance at races and maybe an impact on race promotion fees because communities or promoters are economically challenged.

Thank you, Barton. I mean, let me figure out these things. First of all, being a world championship, we can spread around the world the risk of having this kind of situation to manage. On the other hand, the fact that we have long-term agreements will reduce the exposure to this risk. And what I can say and share with you is that we already see an incredible number of preregistration with regards to the ticketing of next year. So, this is a good sign in the context that you’re seeing mainly Europe where I’m living, it is clear that this recession is taking place. But I think that the way that we are structured, the way that we have done the deal will protect us -- will enable us to move forward in this direction. Therefore, I would say this kind of situation lets us think that we should be optimistic in this context that is, of course, we monitor. But this is what we see today.

Yes. I think -- and then if I can just add we’re seeing a case where look across our business, high-end consumers are still purchasing, whether that’s at Formula 1 or at Live Nation or at the Atlanta Braves. Demand for all those services is very high. And I think that is reinforcing the point that Stefano made, we have many promoters who are doing very well, including those in Europe. And there is high demand, both among consumers and therefore, promoter confidence on the -- against those long-term contracts. We feel very good.

Okay. And then, the other thing I was curious about is the fact that we’ve got the race winner, the team winners pretty well sown up well before the season is over at Formula 1 versus last year, things were pretty competitive, right, until the very end, the last lap. What difference does that make in terms of the financial arc of your business over the balance of this year? I mean is that a headwind in any way? Anything you can speak to based on historical or any other kind of anecdotes?

Well, actually, we don’t see any kind of risk at all. I mean, first of all, we have the last two races with sold down tickets and the number is really growing. The attention will be shift, of course, in other fight -- on the sporting -- from the sporting perspective. So that’s part of racing. And I would like to add, if I may, another comment. We are totally positive on the impact that the change of regulation throughout this year. And we cannot comment on the fact that the team, but specifically in this case, Red Bull or Max Verstappen did an incredible job. Maybe -- team didn’t take the right opportunities, but what we saw on the track is with real racing, that’s what we wanted. And I’m totally confident that next year, the fight on the track will arrive up to the end of the calendar. And -- yes. And as you have seen in the last races, on the sporting side, there is a lot of attention. There is a fight for places that also, for the team perspective, is related to the financial position and the financial rewarding, if they achieve a position better than the other team. So I think there will be a lot of interest in Brazil and Abu Dhabi, too, with no problem.

Our next question is from David Joyce with Barclays.

A couple on Formula 1. First, I was wondering if you could help us understand what’s incremental in the new agreement with AWS. And then secondly, I was wondering if you could explain what the gating factors would be to adding another F1 team? Is it allowed in the current concrete agreement, or would that require a renewal? And is it the factor of maybe the buy-in to keep everybody equal just being kind of prohibitive? But if you could just walk us through the thought process and restrictions there would be helpful.

Thank you, David, for the question. As you can imagine, on the incremental value of AWS, we cannot go into the details. But it is a very strong relationship that it’s starting from a very technical content point of view. We are working together with them on the preparation of the graphics. We are working together in order to give the right data to our customers and to our fans. So the fact that we have a new for -- so many years with an interesting increase in terms of financial contribution, it means that also AWS recognizes the power of our platform. With regard to the value or the process related to the possibility of F1 team to be into the championship, of course, there is the primary step that both us and FAA has to be an agreement for that. And I think that the first thing that we need to consider is this eventual possibility will bring an extra value to the championship. If so, of course, we’re going to discuss it internally and we see if this has any kind of a real potential new entry can give the benefit for the value of the championship. On top of it, there is a value that has to be recognized to the teams that are already into the championship because, of course, they cannot allow any dilution of their financial partnership with the F1 championship. So, this is what is written in the concrete agreement. But mainly the point is does eventually a new entry will bring a better position in F1 championship? This is really into value and in terms of value from the financial point of view and in terms of value from the sporting point of view. And if I may on that, it’s not a problem to having one more team to have a better racing. Therefore, we would see. We will monitor the situation. It will be a real incredible new entry team that we want to discuss with us, we are ready to discuss, but we are not in a best position today for that.

Our final question comes from the line of Matthew Harrigan with Benchmark.

Thank you. With the big inflection in interest in F1, especially in the U.S., are you seeing a lot more activity on the EA game, Codemasters game that’s been around forever, I guess, since 2000? And is there a potential with, I guess, the somewhat lean implementations of AR that are out there right now? Now that you’ve got a movie, it feels like video games and such are another area where you could probably increase your ancillary potential a little bit. Thank you.

Matthew, I think that the fact that we are bringing in new customers that are getting younger and younger will allow us to see on the licensing point of view an incremental opportunity to increase the revenue stream for us. And this will happen. We are pretty sure about it. We already saw this year an incredible effect on this. On the other hand, I would say what we need to stay always focused is that we are a physical sport on the track. So any kind of growth that is happening on the -- i.e. gaming that has to be translated to the passion that we want to see the people go into the track. And this is really the things that we are focusing because that’s an opportunity to stabilize the growth of our sport for the future.

So, operator, I think we’re done. Thank you all for your interest in the Liberty Media Group, and we look forward to seeing many of you in a couple of weeks in New York. And if not, until then the next call. Thank you very much, operator.

You’re very welcome. This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.