Liberty Media Corporation (FWONK) Earnings Call Transcript & Summary

Welcome to Liberty Media Corporation's 2026 Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded August 6. I would now like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations. Please go ahead.

Thank you for joining us this morning. 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 as mentioned in the most recent Forms 10-K and 10-Q filed by Liberty Media 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 statement 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, including adjusted OIBDA, [indiscernible] constant currency for MotoGP, the required definitions and reconciliations for Liberty Media Schedule 1 and MotoGP Schedule 2 can be found at the end of the earnings press release issued today, which is available on Liberty Media's website. Speaking on today's call, we have Liberty's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali; MotoGP's CEO, Carmelo Ezpeleta and other members of management will be available for Q&A. With that, I'll turn it over to Derek.

Great. Thank you, Hooper, and good morning, everyone. We are thrilled with the second quarter performance at both F1 and MotoGP, amidst the global uncertainty and credit to our operating teams in this challenging environment. Our businesses are motoring along at a speedy pace. Our priorities for 2026 remain unchanged, which are to build upon Formula One's durable business matter, established the foundation for MotoGP's next phase of development, and allocate capital with discipline. Since May, we have made tangible progress against each priority while keeping the distinct identity of each sport at the center of our approach. Formula One continues to demonstrate the breadth and durability of its platform. New technical era is producing compelling competition on track. There is immense demand from fans, promoters, commercial partners and media platforms. Meanwhile, our business continues to perform incredibly well with notable momentum across Paddock Club, licensing and sponsorship. In the U.S., Formula One momentum on Apple continues to build with viewership up year-over-year, season to date and total hours watched up 13%. We could not be more pleased with this result. The digital product is great and sponsors across the F1 ecosystem are very happy with our distribution on Apple. This season, F1 has attracted a much younger and more female audience in the U.S. on Apple TV. Our experience with Apple continues to reinforce the strategy of pairing a premium live coverage with product innovation and broader ecosystem breadth without compromising reach. Through Apple's ecosystem, F1 is being amplified, discovered and embraced by a new generation of fans, and we couldn't be more excited to see what this partnership will bring to our stores in the coming years. We are also creating more direct and frequent relationships with fans. Provisional content, licensing and experiential activations are extending engagement beyond race weekend. For example, Passenger Princess which in its first season generated close to 300 million views returned for second season last half. Our Las Vegas Grand Prix 10-year extension through 2037 is a milestone that underscores F1's growing U.S. presence. At MotoGP, we are beginning to capitalize on the significant opportunities ahead, and we are very happy with our progress so far. Raising the season has been exceptional with incredibly tight competition among the top 5 riders. More importantly, for the long term, MotoGP completed agreements with our manufacturers and teams through 2031, together with new technical regulations beginning next year. This establishes a stable framework for investment, promotion and commercial growth. We continue strengthening the organization including progressing on key hires and building commercial capabilities while pursuing growth in ways that are authentic to MotoGP. There is positive momentum in the business with new media agreements signed in Spain and Portugal and the extensions of the Malaysian and Silverstone Grands Prix. Fan activations like the 20,000-person immersive watch party in London in June, broadened access and visibility and underscore our priority of bringing the MotoGP experience closer to city centers. Our capital priorities at the Liberty level remain to support attractive organic growth, maintain a prudent balance sheet and evaluate opportunities that complement our existing assets. Brian will cover the financial results in more detail, and Stefano and Carmelo will discuss the operating businesses. Our confidence remains high in the durability of Formula One's growth and they're increasingly direct and always on fan relationships. Likewise, we continue to feel very excited by MotoGP's long-term potential as its organizational and commercial foundation take shape. Now I'll turn it over to Brian.

Thank you, Derek, and good morning, everyone. We'll start with the Formula One business. The race cap this quarter is especially challenging due to not holding the Saudi and Bahrain GP's in April, and other differences in the calendar, resulting in a 44% decline in the rate count for the quarter and a 27% decline year-to-date. With that in mind, I'll focus on year-to-date comparisons and as always, it remains best to focus on our business on a full year basis. Absent the calendar variability of the business is performing incredibly well. Results reported year-to-date reflect the 22-race calendar, the number known at June 30. Subsequent to the end of the second quarter, we have rescheduled the Bahrain GP, which will be held in Malaysia in October, bringing our expected rate count to 23 races for the year. We expect to start accruing season-based revenue costs and associated true-ups with respect to a 23-race calendar starting in the third quarter of this year. No additional '26 calendar changes may be necessary. We expect to return to a full 24-race calendar next season. The second quarter of 2026 helped dive races compared to 9 races in the second quarter of last year. Year-to-date through the second quarter, F1 also had 3 fewer races with 8 races held in the current year-to-date period compared to 11 races held in the prior year. Year-to-date, revenue declined 15% and adjusted OIBDA declined 30%, driven by the change in race count. The decline in primary revenue was driven by the calendar variance and its effect on recognition of season-based revenue. With 8 out of 22 assumed races stage year-to-date with approximately 36% of season-based revenue recognized compared to the prior year period when 11 out of 24 races have been staged at approximately 46% of season-based revenue had been recognized. During the second quarter, media rights revenue was also impacted by the onetime revenue associated with the release of the F1 movie last year. Offsetting the decline was underlying contractual fee increases at our the primary revenue streams and revenue generated from new and renewed sponsorship partners. Other revenue declined due to lower hospitality and freight revenue from 3 fewer events held year-to-date and lower F3 revenue due to the sale of cars at the beginning of the new F3 cycle last year, partially offsetting with strong demand for the pataclub at recurring events, continued growth in our licensing business and growth in the Grand Prix Plaza activities in Las Vegas. Adjusted OIBDA decreased year-to-date because of the lower event count. Revenue decline discussed above outpaced the decline in expenses. Decreased operating expenses included lower team payments and expenses related to the delivery of hospitality offerings, travel freight and other costs due to the calendar variance. SG&A expenses increased driven by higher personnel and information technology costs, partially offset by lower marketing costs as we lap the 75th season launch last year. The payments as a percent of pre-team share adjusted OIBDA were 61.7% year-to-date, and we're also accrued based on a 22-race calendar assumption. For the full year, we still expect to see roughly 200 basis points improvement in leverage on this metric, in line with the average that we've seen over the past 4 years. After 2026, for the remainder of the term of the new Concorde agreement through 2030, we expect the payout percentage to remain relatively stable. Key payments are best analyzed on a full year basis due to quarterly fluctuations in team payments as a percent of adjusted OIBDA. Now turning to MotoGP. Reminder that we closed the acquisition on July 3, 2025. So our financial results prior to the date of the acquisition are presented on a pro forma basis, so the transaction occurred on January 1, '24. The majority of MotoGP's revenue and costs are euro-denominated and as such, are subject to translational impacts from foreign exchange fluctuations. I will focus on constant currency results here. Similar to F1, I'll also focus on year-to-date comparisons. Year-over-year comparisons are impacted by the mix of races, not just the number. And a reminder, MotoGP flyaway races as generally carry higher costs, including freight, travel and fees. MotoGP race count itself was identical year-over-year for both the quarter and the year-to-date periods. Revenue increased at MotoGP year-to-date, driven by growth in rates promotion from event mix and sponsorship revenue due to new sponsors and underlying contractual growth. A reduction in contractual media rights and a decline in title sponsorship revenue related to a bed mix partially offset that revenue growth. Adjusted OIBDA also grew year-to-date driven by both revenue growth and a decline in expenses. Class to MotoGP Motorsport revenue decreased due to the impact of lower freight expenses from the race mix as well as lower hospitality costs related to MotoGP's new hospitality agreement with Quint, where MotoGP now recognized as revenue and costs related to hospitality on a net basis. Looking briefly at Corporate and Other results year-to-date, revenue was $12 million, which relates to the rental income generated by Grand Prix Plaza in Las Vegas. Corporate and Other adjusted OIBDA was a loss of $16 million includes Grand Prix Plaza rental income and our corporate expenses. At quarter end, Liberty Media had cash and liquid investments of approximately $1.5 billion, which included $1 billion of cash at F1 and $142 million of cash at MotoGP. Our debt was approximately $5 billion at quarter end, which included $3.3 billion of debt at F1, and $1 billion of debt at MotoGP with $497 million at the corporate level. F1's $500 million revolver and MotoGP's EUR 100 million revolver, both remain undrawn. We did reprice MotoGP's debt in June, and we priced a EUR 720 million term loan B, a USD 200 million term loan A and a new $100 million multicurrency revolving credit facility at attractive terms with future reductions in margin expected as the business delevers. Additionally, we repaid a portion of MotoGP's debt funded with cash from MotoGP's balance sheet. Quarter-end, Liberty Media's net leverage was 3.4x. That is a slight uptick from the end of the first quarter, but it's largely driven by the F1 calendar events. F1 and MotoGP are both in compliance with their debt covenants at quarter end. And with that, I'll turn it over to Stefano to discuss Formula One.

Thanks, Brian. The 2026 season so far has delivered some incredible racing and amazing moments for all of our fans. There have been great battles for poles among Kimi, George, Louis, Lando and Charles, that have fueled excitement on track. The Champs battle remains highly competitive, and I expect the teams to converge more and more as the season progresses. The news I knew would become reality is that attendance is up, audience are up, digital numbers are growing and the fans are enjoying what they are seeing. The fans are at the heart of everything we do, and they are loving the season. As you know, the CTS security of everyone in the sport remains our first and foremost priority. We have closing monetary developers in the Middle East region, originally hoping to bring back One Race to the region. But unfortunately, we were unable to do so as originally planned. Instead, we recently announced the great news that we will recover the Baring Grand Prix, but it will be hosted by the Malaysian, creating an exciting triple header alongside Barco and Singapore. I want to thank his Majesty the King of Bahrain, his Royal Principal man of Bahrain and his Majesty, the King of is Malaysia, as well as their respective governments, and of course, the press of the FIA, and the promoters for all their collaboration and the flexibility making this race possible. It once again shows that we can adapt fine solution and deliver incredible results for the sport. Looking ahead, we continue to expect that Qatar and Abu Dhabi Grand to currently proceed on schedule for a 23-race calendar this season and expect to return to a full 24-race calendar next season. Engagement trends continue to underscore the strength of our sport. We all go 3.3 million attendees to date with all 10 races selling out through Belgium. Five racers set new attendance records including silverware coming 564,000 fans, making it the most attended race in the sports history. Our Sprint format continues to drive higher Friday attendances as stronger daily attendees through our race recap, the success of the spring format continues to drive growing interest from promoters in other screen race, and we expect to expand the number of screens for next year and to provide further details sold. Our hospitality offerings continue to benefit from huge demand for premium experiences. The Paddock Club remains sold out for the rest of the season and House 44, which is also sold out this season has been a standout success. We plan to expand House 44 from 9 locations this year to 30 locations next year. At the Belgian Grand Prix, we launched our new premium experience, the outlab, in partnership with LVMH. Early feedback from our partners and fans have been overwhelmingly positive, and we expect to operate this experience across Europe next season. Retail sales remain robust and highlight the underlying consumer demand on F1 branded merchandise. At Silverstone, we introduced a new flagship retail concept that offers fans a broader and more diverse product assortment. We plan to expand this flagship format to Monza, Madrid and Norton later this year. Building on the success of the specialty F1 business store in Asia, we launched another distributed hub at the motor rate this quarter. Additionally, we also opened 2 new F1 Hub location in Montreal and further extending our retail footprint and following the success of the original concept in Las Vegas. That returns in November. We continue working with our promoter partners to elevate our premium hospitality experience, including adding new capacity, increases the season that Silverstone Monza Monaco, Austin and Hungary. And we planned expansion next year in Austria. In Monoco this season, we added the third floor to the Paddock Club in addition to diversifying our premium product mix with 5 different experienced packages. At Silverstone, we opened our term on Alex in our Paddock Club, taking our premium capacity to an all-time high this season. Global TV audience, led by several key strategic markets, including Brazil, Italy and China. In Brazil, the British Grand Prix reached a record of 18 million viewers across TV Global Sport TV generating the highest audience for the event in 8 years and the largest sources for any F1 race globally since 2020. In Italy, TV audiences are up plus 27% through Silverstone versus last year, helping drive broader growth in fund engagement across our ecosystem. In China, the moment generated by the Chinese Grand Prix, where we can do this more than double year-to-year has continued throughout the season supported by increased coverage and growing audiences. Our social and digital platforms continue to play an important role in bringing our younger digital first audience closer to our sport. We grew our social media follower 19% year-over-year with particularly strong engagement on TikTok. Our total YouTube views surpassed [ 1 3 ] billion, up plus 30% year-over-year, while our YouTube highlights views have reached almost 200 million views with over 15 million hours watched. While we continue to benchmark our sport engagement using traditional measure of viewership, we also recognize that our fan base continues to evolve. So to do the way our fans engage with us across a diverse range of platform channels and experience. For example, the Rego drives Pardieston generated more than 70 million video views across multiple platforms, creating another cultural relevant moment that captured the attention far beyond the libraries itself. To reflect this evolution, we are continuing to enhance how we measure and value fan engagement, building a more comprehensive view of how fans connect with Formula One across the entire ecosystem. Our partnership with Apple underscores this ability to interact with fans across multiple touch points, enabling a more holistic view of engaging with our sports. Since launching on Apple TV, F1 has attracted a younger audience while also expanding its reach among female fans. Our sport continues to build momentum on Apple TV, delivering strong viewership and engagement with fun this season. The strength of Apple ecosystem has already helped us reach and engage with new fans across the U.S. F1 isn't just being watched. It is being discovered followed and embraced by a new generation of fans across every Apple platform and device. Our growing fan engagement continues to translate into sustained interest from our commercial partners. With respect to our media rights, we remain active in our negotiation and renewals recently renewing with the Service TV in Austria in a multiyear agreement. Globally, our F1 TV product continues to perform well with F1 TV revenue, not including in the U.S. where the arrangement has changed, increasing 18% year-to-date. Our risk promotion business has never been stronger. While our calendar is fully allocated through 2028, interest from new destination to host a race remain robust with many potential host city seeking to develop long-term proposal that will drive tourism, investment and broader economic activity around our potential race we can. Our active pipeline, despite our calendar being full, underscore the strength of the sport commercial proposition in an era of expanding media reach, deepening partner engagement and growing consumer demand globally. We are equally thrilled with the phenomenal progress we have made this year with the Las Vegas Grand Prix. We have added our very first F1 after-party concept featuring the iconic Backstreet Boys at the sphere following the raise on Saturday night. Our ticket sales are trending well ahead of the last year with respect to both volume and revenues. In fact, we are already at month end September '25 levels as of the end of July. And on a like-for-like basis, excluding tickets for the Backstreet Boys. We have also recently announced our 10 years extension with the LVCVA, keeping the LVGP on the calendar through 2037. This succession reinforce the strategic importance of these risks to our local community partners, and we now have greater certainty to invest in long-term infrastructure and operational improvements, reducing future build-out costs. Grand Prix Plaza in Las Vegas also continues performing well with private events, attraction and was performing really well with the tenders on track to surpass 2025 levels. Sponsorship activity remained strong during this quarter. We extended our agreement with as our official type supply through 2028 and welcome Flexjet as our official private aviation supplier in a multiyear partnership. Additionally, we also announced Fever as our new centralized tiny platform for f1.com, starting New season, bringing the strength of their marketing platform to our sport and ensuring we continue showing up in the most cultural level in location. By partnering with fiber, we will deliver a smoother fun journey with more sophisticated technology to improve this curability and ticket purchase. Momentum around our licensing business continued to build. We recently announced a new multiyear global publishing partnership with the DK books, bringing our storytelling to a new level for fans of all ages crispiness F1. We have also renewed our part with the automobiles, which continues to print F1 posters and calendars for us. And we also recently partnered with a harsh broad to launch a special F1 thin edition of monopoly. In addition, we have sent mutinew agreement through our distance partnership, including Gentle Monster and Uniqlo and have many additional product launches plans with and without Disney globally. For the remainder of the year as we further the reach of our sport with iconic global brands. While we remain momentum across all parts of our business, we believe Formula One as an exciting growth journey ahead, and we are excited by the opportunity. We are confident that the foundation we are building today will drive enduring value for all our partners and stakeholders. Avanti Tupa, full speed ahead. And now I will turn the call to Carmelo to discuss MotoGP.

Good morning, and thank you, Stefano. It has been an understanding first year growing our sport with Liberty Media, and we look forward to building on this momentum with Liberty's continued support. Our season this year has been incredible. The competition has never been tighter across the region. With only 24 points splitting the top 5 drivers season to date with notable strength from Aprilia. To date, 12 drivers across 7 teams and 3 manufacturers of Maipodium. Congrats to Ayogura, winning his first GP assassin. Our first Japanese winner since 2004 and the first graduate of the Asian talent cap to Winner. Consistent with our history, we have successfully signed the manufacturers and agreement for the next 5 years. This renewal provides the necessary foundation to grow our sport collectively. The most important outcome from this agreement is a strong alignment across all parties on a shared vision, which is to evolve our sport while maintaining each unique heritage. Under the new agreement, we are collaborating on ways to optimize cost while preserving the competitive integrity of the sport. Allowing teams and writers to reinvest in back into their commercial efforts as we work collectively to rise our reach. We will increase our investment into the sport. We share responsibility across manufacturers and teams to help drive the long-term commercial success of MotoGP, creating a strong plan to continue innovation and performance and reinforcing MotoGP as a premium global export. We continue to grow MotoGP engagement, both on and off track across the first 11 races attendant is plus 4% with record attendance in Thailand and Germany. We also continue to see growth in our TV audiences, with viewerships up 3% through Mugello. We will notable the strength in our U.S., Spanish and markets. We also recently hosted a watch party for the Dutch Grand Prix at the Autonet in London, growing over 20,000 visitors and look forward to running the same activation for As we broaden our reach, we see attractive opportunities to engage funds in creative immersive experience in key markets around the world. We remain focused on extending MotoGP global footprint and are encouraged by the momentum across our digital and social footprint. We ended the quarter with 63 million social media followers, a plus 3% increase year-over-year, with particularly strong performance on TikTok, where engagement increases over 80%. Our Chinese social media platforms also delivered strong growth with followers increasing plus 26% as we continue to deepen our presence in the key growth markets. Video with excluding video parts, increases over 30%. We have a productive quarter with several news and renewal partnerships across our business. In the media rates, we continue to strengthen our global footprint. We have recently renewed with Sky Dutch covering Austria, Germany and with a ton in Spain and Portugal and with RTBF in Belgium, in a multiyear agreement. We also continue building momentum in race promotion, extending agreements with several promoters partners, including Malaysia to 2031 and Silverstone through 2028. Looking ahead to next year, we are excited to raise again in Argentina at Buenos Aires. And for the review of GP, we look forward to unveiling the far visual renderings of the new Adeline circuit over the next few weeks. In our sponsorship business, we signed a CAA as our global sponsorship agency. Fuze straining our commercial platform and capitalizing on our brand refresh and growth. In hospitality, we are encouraged by the early momentum with our expanded partnership with -- where we are working together to enhance the premium hospitality experience on our events. We are exactly by the path ahead and remaining encouraged by our early momentum. We look forward to continue to update the investor community in our progress. Now I will turn the call back over to Derek.

Great. Thank you, everyone. We appreciate your continued interest in Liberty Media. That we'll open the call up for Q&A. Operator? .

[Operator Instructions] Our first question is from Kutgun Maral with Evercore ISI.

Two, if I could. First, I wanted to dig into the underlying trends across media rights. I think the Apple deal in the U.S. continues to get a lot of attention. But you think the number of other broadcast agreements since then, and we don't get as much visibility into the economics of those. I know every deal is different and the linear and digital media landscapes keep shifting. But could you give us a sense of how those conversations are generally evolving? And in broad strokes, is there a helpful way to think about the trajectory of media rights revenue as these deals get renewed or extended? And then second of all, I wanted to ask about the Las Vegas Grand Prix. It's very encouraging to hear ticket sales are trending well. I know you don't break out the financials separately and discretely for the race. But can you share any color on how profitability is trending year-over-year? Because if current ticket sales and revenue trends hold, and you continue to evolve the vendor contracts, it seems like profitability should be positioned to improve as well, but I'd appreciate your thoughts on how we should be thinking about the financial impacts of the 10-year extension going forward as well?

Sure. This is Derek. I'll just start, I think, on the media right. As you know, media rights across the globe are sort of -- they sort of ebb and flow depending on sort of who the players are, what rights are that are coming up and other factors as it relates to the dynamics of the different sort of subscription businesses, our broadcast businesses in those markets. And so we are constantly sort of in discussion with folks. Not only will or in negotiation, but frankly, outside of that because they are our partners in intra trying to build and sort of generate as good a product as we can with them. But through those discussions, you're constantly sort of hearing about what's going on in these markets, whether or not digital players are coming in globally in other markets, what their expansion aspirations are. And I think more broadly than I would just say that it's we feel good that we have great products. We have products, we have content that people want. We obviously, to some degree, are subject to sort of some of those things that are outside of our control. And the things that we can control are continuing to make the sports that we own sort of as compelling as possible and as interesting for our partners as possible. And that's what we do sort of to put ourselves in the best position as we go to market every time. Now we are -- as I mentioned earlier, constantly, having discussions with these guys. And so what you've seen from time to time is us also taking advantage of opportunities where we've renewed deals early because it makes sense. And we will continue to look for ways to do that because what we are interested in is sort of the long-term stability of our products and making sure where we have the right partners. And just like with the race promoters, if we can find the right partners who will invest for the long term, we think that builds our brand, that builds value in our sports. And so as we come back to the specifics of the question, I think that we are very encouraged by sort of where the Apple deal has gone. I think we're encouraged certainly with Etalon with the recent renewals with Sky. And then on the MotoGP side, also very encouraged by what we've just done recently, particularly with which Spain and Borge are important markets for us. Stefano and Carmelo, I don't know if you guys want to add anything to that?

Yes. I mean, Derek, I think that a couple of points on top of what Derek just said, first of all, the beauty of what we are doing is that we control the content and we produce it. And this is an incredible asset and opportunity to redefine what is now in media world, the redefinition of the reach. We don't have to forget that the reach is taken not only with the evolution of what we have had in terms of great deals with the great media We have other to produce content to other different ways to connect people. We don't have to forget the fact that now there is so many platforms to reach people that are creating value or the media broadcaster to connect with us either through a products or other products that would be digital or other platforms. And that's why the beauty of what we are having today in a global world is that the partners that are -- or together with us, want to renew earlier than what is the expiration date because they see the value of what they're doing. And on our side, making sure we take the right evaluation market-by-market, we're going to see if we can -- new trends coming in can be monetized or helping us to get to a different dimension reach. And otherwise, it will be different. So I think we are a great spot today. We are an incredible for that because of what we are producing gives the leverage to make sure that looking ahead. We are very point we can be a sport that can be produced in all the different platforms around the world, making sure that we can monetize as much as we can every single contract what we are doing on every single market. That's the point on media in my opinion, to add on what already Derek said, absolutely, but very clearly. And Derek, of course, if we can answer to the second question, I will follow you otherwise, I can go ahead with that point as you prefer. But I think that -- I think that what we don't have to forget is I start once again for one factor. Vegas is becoming one of the most important events that has already shown since the beginning, the potential of it. I don't want to forget that if we compare the economical impact that F1 did versus Super Bowl with respect, we were bigger. That means the potential to growing control even more the cost, having now the opportunity of having agreed the 10 years extension with LVCVA makes that can really build out even stronger the possibility for this ramp even more profitable, that is already the case because this is something that we knew that was a product that was being -- could have been fantastic. And this growth in terms of profitability and also not only ticketing wise, but in a number of positioning as an phone product that can have a great push to other promotes is becoming a relevant thing that is indicating to the world of sports business the way to produce events around the world. And this is very, very good. We are very happy, Emily Fraser, the CEO of the Vegas Grand Prix did a tremendous job with the team there, focusing and making sure that altogether, that one can produce even stronger product for the future. This year event will be phenomenal. I don't want to anticipate there will be some new comfort that we're going to do on the racing because we don't forget. The central product, Vegas, Miami, Madrid or whatever you are in the world is what we're doing on the track. And then being able to extend the experience that is the key factor being so successful so far around the world.

Our next question is from Stephen Laszczyk with Goldman Sachs.

Brian, you called out that absent of the calendar variability at F1 this year, the business is performing exceedingly well. I was just curious if you could maybe speak a little bit more to the underlying performance you've seen year-to-date and if there's any particular parts in the business that are performing better than expectations heading into the year?

Yes. Thank you for the question, and I can certainly start, and I'll let Stefano add on. But obviously, the calendar variability makes it very challenging because you have lower proportionate revenue recognition. But if you kind of look through that, we're seeing really good growth on sponsorship, as we did last year. We're seeing really strong performances in licensing. The demand for the Paddock Club is very strong. Obviously, you have fewer races. You don't necessarily see that come through the numbers. But those are three areas that I would very specifically call out. Stefano, anything you want to add to the underlying performance of the...

I think, Brian, you reached the most important point. For sure, licensing is starting to be on the trajectory that we heard since a couple of years. There is a tremendous effort to characterize this revenue stream even stronger in the future. I want to say stay tuned because something happened because it's important that we keep growing that revenue stream as we always said. And then I go back to the point that we're saying -- that Brian was saying before is related to Paddock Club. Paddock Club is related to experience. And this is something that will create even more the possibility of growing our revenues in the future because experiential opportunity is where we are focusing our future. We did an experiment, for example, in Spar, offering a very exclusive customer, a possibility to have one of the best chefs in the world, a tour having a unique way of having a food experience at the end of the -- at the end of the Saturday night, this is another way to create things that you can money cannot buy. So that's our approach to create even stronger that kind of possibility that will have an impact on our revenues. That's definitely very, very important. And if I may, I do want to give for granted the fact that we were able to react in a very difficult situation. Because, of course, our way to embrace our -- our way to work is to over try to find the solution even if there are problems. The fact that with the Grand Prix, we wanted to bring home a race there and find that place to be Malaysia, not in Bahrain shows our fatality. We are reasons inside. We want to make sure that our friends and our partners will rely on us to find solutions. That's what will have future with regard to revenue streams that I see a great potential even in the next 5 years ahead of us.

Great. And then maybe just on the expense side for Stefano and Brian SG&A. At F1 looks like it continues to pace up a good bit year-over-year. Just would be curious if you could talk more about the investments you're making in the business and then how we should be thinking about the pacing of SG&A as we look into the back half of the year and then maybe even into 2027?

The biggest two factors are you have a marketing benefit because we had the 75th anniversary last year. We also have an FX impact where FX has negatively impacted SG&A through the first half of this year. Normally, we don't see something that large, but as our cost base in the U.K. changes, if you have changes in the British pound, obviously, that could be an impact. Outside of those two items, there's investment in personnel. So personnel costs are higher than they were in the prior year. SG&A is slightly higher at LB GP. The bulk of that is due to the fact that, as you recall, we took over the sales function from Quint last year, but that wasn't fully baked at the beginning of 2025. So it was being built up through 2025 and you have a full year of it now. So that's not a -- that shouldn't be an impact going forward. And then we do have higher IT costs as we invest in the business. Those are the primary items.

Our next question is from Matt Condon with Citizens Bank.

Stefano, you mentioned the commercial opportunity, and I know you've talked about in the past as being a big future opportunity. Can you just talk about the key levers to make this a bigger part of the business over time?

Sorry, Matt, can you repeat the question because the line was a little bit distorted on my side, sorry.

Sorry. No, I was just asking about the commercial licensing opportunity. And you talked about this being a big future opportunity. Just wanted to know the key levers to getting this to be a bigger part of the business over time.