Edited Transcript of International Speedway Corporation Q3 2014 Earnings Conference Call…
Company: International Speedway Corporation (ISCA)
Event Name: Q3 2014 Results Earnings Conference Call
Date: October 7, 2014 9:00 AM ET
International Speedway Corp Q3 2014 Earnings Call – Webcast audio
Operator: Good morning and welcome to the International Speedway Corporation 2014 third quarter earnings call. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, October 7, 2014.
With us on this morning’s call are John Saunders, President and Dan Houser, Senior Vice President and Chief Financial Officer. After formal remarks a question and answer period will follow. The operator will instruct you on procedures at that time.
Before we start the company would like to address forward-looking statements that may be addressed on the call.
Forward-looking statements involve risks and uncertainties and assumptions. Actual future performance, outcomes, and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by the International Speedway Corporation with the SEC, specifically the most recent report on Forms 10-K and 10-Q which identify important risk factors which could cause actual results to differ from those contained in these forward-looking statements.
So with these formalities out of the way, I would like to turn the call over to John Saunders. John?
John Saunders – President
Thank you. Good morning and thank you for participating on today’s call. We are pleased to report sold results for our third quarter 2014.
Revenues increased approximately 11% driven by higher TV rights, the timing of an IndyCar event, and the consolidation of Motorsports Authentics. The chase for the NASCAR Sprint Cup has begun and the drama is building with the field of 16 challengers now narrowed to 12 contenders. Stay tuned through the upcoming weeks as NASCAR sets the stage for the most exciting season finale in its history at Homestead Miami’s Speedway in November.
During the quarter, we hosted four Sprint Cup Weekends and the IndyCar Finale at Auto Club Speedway which was conducted in the fourth quarter of 2013. Michigan hosted its second annual Faster Horses Country Music Festival to great success and paving the way for value building ancillary events across our business that can produce incremental EBITDA and cash flow.
Overall, admissions were strong considering the impact of inclement weather for the July event in Daytona. We continue to see encouraging signs of stabilizing attendance and positive impact from our capacity management initiatives with retention rates stabilizing or actually increasing for some events.
While we are still working our way through a tough market in Michigan, attendance was up for NASCAR and IMSA events at Watkins Glen and the standalone nationwide race at Chicagoland. Importantly, again this quarter, we saw a pleasing increase in the average ticket price driven my fans opting for higher price and value offerings.
So far, in the fourth quarter results have been mixed. While attendance was up for the cup event in Chicagoland, units were soft for Richmond and Kansas. It’s important to note we had a new date and inaugural night race in Kansas — at the spring race at Kansas and that we experienced solid attendance and average ticket price increases exceeding expectations. We believe that a good portion of the softness for the fall event was a demand shift to spring event.
Looking to the rest of the year, advance ticket sales and trends are encouraging. Talladega and Martinsville are on track to meet or exceed expectation, and we are optimistic that the Sprint Cup Phoenix and the season finale Homestead Miami events will reach sellout, great success indicators to the new championship format coupled with our capacity management initiatives and a relentless commitment to exceed our fans’ expectations.
TV ratings, as I discussed last quarter, this season have been challenged by inclement weather which has continually cycled week-to-week momentum that broadcasters believe is necessary to support healthy ratings performance. This quarter, we again experienced a negative impact to ratings with the Coke Zero 400 rain out here in Daytona.
Despite this erosion, NASCAR is pulling huge numbers when compared to other sports properties. Looking beyond the broadcast, NASCAR’s digital platform is experiencing explosive year-over-year growth. Coupled with an average of 5.4 million viewers per event, the overall consumption of the sport, particularly on race day, is promising, and we continue to see increases in key demographics, including Hispanic viewership and the 18 to 24 year old male demo.
We are now in the final segment of the broadcast season and of ESPN’s airing of NASCAR events. To date, we have been pleased with ESPN’s promotion of the new Chase format and remain optimistic we will see positive metrics as the Chase excitement builds.
On the corporate partnership front. We are pleased with how the year is progressing. At this point through fiscal 2014, we have agreements in place for approximately 97% of our gross marketing partnership revenue target. We have all 20 NASCAR Sprint Cup series event entitlements sold, and one remaining of our 15 NASCAR nationwide series event entitlement currently in negotiation. This compares well to last year at this time when we also had approximately 96% of our gross marketing partnership revenue targets sold and entitlements in place for all NASCAR Sprint Cup and NASCAR Nationwide events.
In addition, we currently have 16 of our 20 NASCAR Sprint Cup event entitlements under contract for 2015 with three of the remaining four races in contract negotiations. Looking beyond 2015, our sales team is engaged on many fronts pursuing additional founding sponsors for Daytona Rising and as demonstrated by the four championship weekend contract extension securing partnerships that will maintain contract revenues into the future.
During the quarter, NASCAR announced the 2015 event schedule with the following changes that will impact our calendar of events. The spring NASCAR Sprint Cup event in Phoenix will be held two weeks later in March moving from the second race weekend in 2014 to the fourth race weekend in 2015. The Chicagoland Speedway NASCAR Nationwide weekend event conducted in the third weekend of July in 2014 will be held in the third weekend of June in 2015.
The Coke Zero 400 Sprint Cup event at Daytona International Speedway will be conducted on Sunday night of the Fourth of July weekend. The Darlington Raceway Sprint Cup weekend events will move from the eight race weekend in April 2014 to the 25th weekend, Labor Day in 2015. And the fall Kansas Sprint Cup weekend will move from the 30th race weekend in October 2014 to the 31st race weekend in 2015.
We are excited about NASCAR’s 2015 schedule, particularly the moves for Phoenix and Darlington dates. The Coke Zero 400 powered by Coca-Cola will move to Sunday July 5th for 2015 and will mark the kickoff event of NBC’s return to NASCAR. The event will debut several new elements of Daytona Rising at Daytona International Speedway. 50,000 new grandstand seats along the front stretch, vertical transportation, concessions, restrooms, and social areas. The 2015 schedule offers multiple opportunities, and we’ll have more to say about the impact as part of our 2015 guidance when we speak with you in late January.
Regarding Daytona Rising, the project continues to proceed on schedule and on budget. In fact, we have scheduled the topping out ceremony celebrating the midway mark for October 15. Daytona International Speedway and the France Family along with Bart Malow, our general contractor, will preside over the installation of the highest piece of steel on the project, commemorating this construction milestone. We are making great progress on additional founding sponsors and hope to have exciting news soon that will augment our tremendous Toyota partnership.
We filed the necessary documentation with the Florida Department of Economic Opportunity to be eligible to receive Florida state sales tax incentives through the newly created Florida Sports Development Program. These incentives can in total up to $3 million per year for the next 30 years to be utilized for speedway improvements.
Our proposed mixed use development across from Daytona International Speedway, One Daytona is steadily gaining momentum. We continue to advance project leasing, financing, and finalizing contractor agreements.
One Daytona has selected Shaner Hotels and Prime Hospitality Group as its hotel partners. Shaner Hotels and the PHG are planning 145 rooms, full service boutique property and we are working with global hospitality leader Marriott International to bring an exclusive Marriott autograph collection hotel to One Daytona. This type of upscale property reiterates our commitment to offering an unparalleled hospitality experience for our fans, visitors, and residents in 2016.
Earlier this year the One Daytona joint venture formed a community development district or CDD. The CDD is a local special-purpose government framework under the Florida statutes for managing and financing infrastructure required for community development.