F1 revenue crashes by 84% in first quarter

07/05/2020
NEWS STORY

As expected, F1 has been hit hard by the ongoing pandemic, with its revenue of $39m (31.4m) for the first quarter down 84% on the same period in 2019 when it was $246m (198.5m).

The sport's primary revenue streams are race hosting fees, broadcasting and advertising and sponsorship, and due to the ongoing coronavirus pandemic all three have been hit hard, and while racing is due to get underway in July and continue into December, it is unknown at what point fans will be permitted to attend.

Since there were no events held during the first quarter of 2020, primary F1 revenue consisted only of the elements of sponsorship contracts associated with non-race related rights that were recognized during the period, and no race promotion fees nor broadcasting fees were recognized.

Similarly, other F1 revenue decreased due to zero revenue recognized from the Paddock Club and other event-based activities and television production activities.

With no races due to take place in the second quarter, revenue is likely to be hit equally hard.

Operating loss increased and adjusted OIBDA decreased in the first quarter. There was no team payment expense recorded since such payments are recognized on a pro-rata basis across races on the calendar.

Other cost of F1 revenue is largely variable in nature and relates directly to revenue opportunities. These costs decreased primarily due to no races taking place and the deferral of non-critical expenses.

Certain costs were incurred during the first quarter in anticipation of the start of the 2020 race season, including freight, travel and technical costs relating to the Australian Grand Prix, which was cancelled on the eve of the event.

Selling, general and administrative decreased due to lower expenditures for discretionary items such as marketing and lower personnel costs, partially offset by the effects of foreign exchange related losses.

F1 implemented certain cost cutting measures, including salary reductions and UK government-supported furloughs affecting approximately 50% of its employee base, effective April 3, which did not impact first quarter results but will impact the second quarter.

F1’s total net debt to covenant OIBDA ratio, as defined in F1’s credit facilities for covenant calculations, was 6.0x as of March 31, as compared to a maximum allowable leverage ratio of 8.25x.

The Liberty SiriusXM Group holds an approximate 2.2% intergroup interest (5.3 million notional shares) in the Formula One Group as of April 30, 2020. These shares are not included in the outstanding share count of Formula One Group in Liberty Media’s most recent Form 10-Q. Assuming the issuance of the shares underlying this intergroup interest, the Formula One Group outstanding share count as of April 30, 2020 would have been 237 million.

The businesses and assets attributed to the Formula One Group as of April 22, 2020 consist of Liberty Media’s subsidiary F1 and other minority investments, including AT&T, and an inter-group interest in the Braves Group.

"We are thankful to the FIA, teams, promoters, our employees and other key partners for their support and efforts during this challenging time," said Chase Carey.

"We are moving forward with our 2020 plans, while working to strengthen the long term future of Formula 1 through new technical, sporting and financial regulations that will further improve the competition and action on the track and make it a healthier business for all involved."

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Published: 07/05/2020
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