管理層發言
Welcome to Liberty Media Corporation's 2026 Second Quarter Earnings Call. 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 those 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, 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 all 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 model, establish 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. The 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's 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 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 sport in the coming years. We are also creating more direct and frequent relationships with fans. Original content, licensing and experiential activations are extending engagement beyond race weekends. For example, Passenger Princess, which in its first season generated close to 300 million views, returned for a second season last month. The Las Vegas Grand Prix's 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. Racing season has been exceptional with incredibly tight competition among the top five riders. More importantly for the long term, MotoGP completed agreements with all 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 Grand Prix. Fan activations like the 20,000-person immersive watch party in London in June broaden 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 their increasingly direct and always-on fan relationships. Likewise, we continue to feel very excited by MotoGP's long-term potential as this organizational and commercial foundation takes 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 count this quarter is especially challenging due to not holding the Saudi and Bahrain GPs in April and other differences in the calendar, resulting in a 44% decline in the race count for the quarter and a 27% decline year-to-date. With that in mind, I'll focus on year-to-date comparisons. As always, it remains best to focus on our business on a full year basis. As per the calendar variability, the business is performing incredibly well. Results reported year-to-date reflect a 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 race 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 2026 calendar changes may be necessary. We expect to return to a full 24-race calendar next season. The second quarter of 2026 held five races compared to nine races in the second quarter of last year. Year-to-date through the second quarter, F1 also had three fewer races with eight 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 eight out of 22 assumed races staged year-to-date with approximately 36% of season-based revenue recognized compared to the prior year period when 11 out of 24 races had been staged and approximately 46% of season-based revenue had been recognized. During the second quarter, media rights revenue was also impacted by the one-time revenue associated with the release of the F1 movie last year. Offsetting the decline was underlying contractual fee increases at our three primary revenue streams and revenue generated from new and renewed sponsorship partners. Other revenue declined due to lower hospitality and freight revenue from three 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 this were strong demand for the Paddock Club 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. The 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 event last year. Team payments as a percent of pre-team-share adjusted OIBDA were 61.7% year-to-date and were 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 four 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. Team 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. A reminder that we closed the acquisition on July 3, 2025. Our financial results prior to the date of the acquisition are presented on a pro forma basis, so the transaction occurred on January 1, 2024, for reporting purposes. 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. As a reminder, MotoGP flyaway races generally carry higher costs, including freight, travel and earn-out 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 race 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 event mix partially offset that revenue growth. Adjusted OIBDA also grew year-to-date, driven by both revenue growth and a decline in expenses. Cost of 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, whereby MotoGP now recognizes 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 and 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 EUR 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. At 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 variance. F1 and MotoGP are both in compliance with the debt covenants at quarter end. 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 podiums among Kimi, George, Lewis, Lando and Charles that have fueled excitement on track. The championship battle remains highly competitive, and I expect the teams to converge more and more as the season progresses. Attendance is up, audiences are up, digital numbers are growing and the fans are enjoying what they are seeing. The fans are the heart of everything we do, and they are loving the season. As you know, the safety and security of everyone in the sport remains our first and foremost priority. We have closely monitored developments 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 that we will recover the Bahrain Grand Prix, but it will be hosted by Malaysia, creating an exciting triple header alongside Baku and Singapore. I want to thank His Majesty the King of Bahrain, His Royal Highness Prince Salman of Bahrain and His Majesty the King of Malaysia as well as their respective governments and, of course, the FIA and the promoters for all their collaboration and flexibility in making this race possible. It once again shows that we can adapt, find solutions and deliver incredible results for the sport. Looking ahead, we continue to expect that Qatar and Abu Dhabi Grand Prix are to currently proceed as scheduled for a 23-race calendar this season and we expect to return to a full 24-race calendar next season. Engagement trends continue to underscore the strength of our sport. We welcomed 3.3 million attendees to date with all 10 races selling out through Belgium. Five races set new attendance records, including Silverstone, welcoming 564,000 fans, making it the most attended race in the sport's history. Our Sprint format continues to drive higher Friday attendances and stronger daily attendance through our race weekends. The success of the Sprint format continues to drive growing interest from promoters and we expect to expand the number of Sprint races next year and will provide further details soon. 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 nine locations this year to 13 locations next year. At the Belgian Grand Prix, we launched our new premium experience, The Out Lap, in partnership with LVMH. Early feedback from our partners and fans has been overwhelmingly positive, and we expect to operate this experience across Europe next season. Retail sales remain robust and highlight the underlying consumer demand for 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 Austin later this year. Building on the success of the specialty F1 Disney store in Asia, we launched another Disney retail hub at the Montreal race this quarter. Additionally, we opened two new F1 hub locations in Montreal and London, 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 this season at Silverstone, Monza, Monaco, Austin and Hungary, and we planned expansion next year in Austria. In Monaco this season, we added the third floor to the Paddock Club in addition to diversifying our premium product mix with five different experience packages. At Silverstone, we opened our Turn 1 Annex in our Paddock Club, taking our premium capacity to an all-time high this season. At Austin, we are excited to open our new structure at Turn 1 later this year, and we also have additional planned expansion next year. We also continue to see growth in our 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 Globo and SporTV 3, generating the highest audience for the event in eight years and the largest audience for any F1 race globally since 2020. In Italy, TV audiences are up 27% through Silverstone versus last year, helping drive broader growth in fan engagement across our ecosystem. In China, the momentum generated by the Chinese Grand Prix, where weekend audience more than doubled 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 followers 19% year-over-year with particularly strong engagement on TikTok. Our total YouTube views surpassed 13 billion, up 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 measures of viewership, we also recognize that our fan base continues to evolve, and so too does the way our fans engage with us across a diverse range of platform channels and experiences. For example, the LEGO Drivers Parade at Silverstone generated more than 70 million video views across multiple platforms, creating another culturally relevant moment that captured attention far beyond the live race 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 sport. 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 this season. The strength of the 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 negotiations and renewals, recently renewing with ServusTV in Austria in a multiyear agreement. Globally, our F1 TV product continues to perform well with F1 TV revenue, not including the U.S. where the arrangement has changed, increasing 18% year-to-date. Our race promotion business has never been stronger. While our calendar is fully allocated through 2028, interest from new destinations to host a race remains robust with many potential host cities seeking to develop long-term proposals that will drive tourism, investment and broader economic activity around a potential race weekend. Our active pipeline, despite our calendar being full, underscores the strength of the sport's 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 Afterparty concept featuring the iconic Backstreet Boys at the Sphere following the race on Saturday night. Our ticket sales are trending well ahead of last year with respect to both volume and revenue. In fact, we are already at month-end September 2025 levels as of the end of July, on a like-for-like basis excluding ticket sales for the Backstreet Boys. We have also recently announced our 10-year extension with the LVCVA, keeping the LVGP on the calendar through 2037. This extension reinforced the strategic importance of this race 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, attractions and watch parties performing strongly with attendance on track to surpass 2025 levels. Sponsorship activity remained strong during this quarter. We extended our agreement with Pirelli as our official tyre supplier to 2028 and welcomed Flexjet as our official private aviation supplier in a multiyear partnership. Additionally, we also announced Fever as our new centralized ticketing platform for f1.com starting next season, bringing the strength of their marketing platform to our sport and ensuring we continue showing up in the most culturally relevant locations. By partnering with Fever, we will deliver a smoother fan journey with more sophisticated technology to improve discoverability and ticket purchasing. Momentum around our licensing business continued to build. We recently announced a new multiyear global publishing partnership with DK Books, bringing our storytelling to a new level for fans of all ages to experience F1. We have also renewed our partnership with Automobilist, which continues to print F1 posters and calendars exclusively for us. We also recently partnered with Hasbro to launch a special F1-themed edition of MONOPOLY. In addition, we have signed multiple new agreements through business partnerships, including Gentle Monster and Uniqlo, and have many additional product launches planned 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 has 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 tutta! 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 outstanding 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, with only 24 points splitting the top five riders season to date and notable strength from Aprilia. To date, 12 riders across seven teams and three manufacturers have made the podium. Congrats to Ai Ogura on winning his first GP at Assen, our first Japanese winner since 2004 and the first graduate of the Asia Talent Cup to win a Grand Prix. Consistent with our history, we have successfully signed the manufacturers' and teams' agreement for the next five years. This renewal provides the necessary foundation to grow our sport collectively. The most important outcome from this agreement is the strong alignment across all parties on a shared vision, which is to evolve our sport while maintaining its 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 riders to reinvest back into their commercial efforts as we work collectively to realize our reach. We will increase our investment into the sport with shared responsibility across manufacturers and teams to help drive the long-term commercial success of MotoGP, creating a strong brand to continue innovation and performance and reinforcing MotoGP as a premium global sport. We continue to grow MotoGP engagement, both on and off track. Across the first 11 races, attendance is up 4% with record attendance in Thailand and Germany. We also continue to see growth in our TV audiences with viewership up 3% through Mugello with notable strength in our U.S., Spanish and Austrian markets. We also recently hosted a watch party for the Dutch Grand Prix at the Outernet in London, drawing over 20,000 visitors and look forward to running the same activation for Silverstone. As we broaden our reach, we see attractive opportunities to engage fans in creative immersive experiences in key markets around the world. We remain focused on extending MotoGP's global footprint and are encouraged by the momentum across our digital and social footprints. We ended the quarter with 63 million social media followers, a 3% increase year-over-year, with particularly strong performance on TikTok, where engagement increased over 80%. Our Chinese social media platforms also delivered strong growth with followers increasing 26% as we continue to deepen our presence in key growth markets. Digital engagement, excluding video parts, increased over 30%. We had a productive quarter with several new and renewal partnerships across our business. In the media rights area, we continue to strengthen our overall footprint. We have recently renewed with Sky DACH covering Austria, Germany and Switzerland, with DAZN in Spain and Portugal and with RTBF in Belgium in multiyear agreements. We also continue building momentum in race promotion, extending agreements with several promoter partners, including Malaysia to 2031 and Silverstone through 2028. Looking ahead to next year, we are excited to return to Argentina at Buenos Aires and for the debut of Adelaide GP; we look forward to unveiling the first visual renderings of the new Adelaide circuit over the next few weeks. In our sponsorship business, we signed CAA as our global sponsorship agency, further strengthening 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 Quint where we are working together to enhance the premium hospitality experience at our events. We are excited by the path ahead and remain encouraged by our early momentum. We look forward to continuing to update the investor community on our progress. Now I will turn the call back over to Derek.
Great. Thank you, everyone. We appreciate your continued interest in Liberty Media. With that we'll open the call up for Q&A. Operator?
分析師問答
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 inked a 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. 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. 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. I have to start on the media rights. As you know, media rights across the globe ebb and flow depending on who the players are, what rights are coming up and other factors related to the dynamics of the different subscription businesses or broadcast businesses in those markets. We are constantly in discussion with partners, not only during negotiations but outside of that because they're our partners, and we're always trying to build and generate as good a product as we can with them. Through those discussions, we're hearing about what's going on in these markets, whether digital players are coming in globally and what their expansion aspirations are. More broadly, we feel good that we have great products and content that people want. We are subject to some things outside of our control. The things we can control are continuing to make the sports that we own as compelling and interesting for our partners as possible. That is how we put ourselves in the best position as we go to market every time. We are constantly having discussions with these partners. From time to time we have taken advantage of opportunities to renew deals early because it makes sense, and we will continue to look for ways to do that because we are interested in the long-term stability of our product and making sure we're with the right partners. Just like with race promoters, if we can find the right partners who will invest for the long term, we think that builds our brand and value in our sports. As to specifics, we are encouraged by where the Apple deal has gone. We are encouraged with F1's recent renewals with Sky. And on the MotoGP side, we are very encouraged by recent deals, particularly with DAZN in Spain and Portugal, which are important markets for us. Stefano and Carmelo, would you like to add anything?
Yes. A couple of points. First, the beauty of what we are doing is that we control the content and we produce it. This is an incredible asset and an opportunity to redefine reach in the media world. We don't have to forget that reach is achieved not only through great deals with major media partners, but also through other ways to produce content and connect people. There are many platforms to reach people that create value for media broadcasters, either through traditional products or digital platforms. The partners working with us want to renew earlier than the expiration date because they see the value of our product. On our side, we evaluate market-by-market to see if new trends can be monetized or help us reach a different dimension of reach. We are in a great spot today. We have a sport that produces content that gives us leverage to monetize across different platforms around the world. We can monetize as much as possible in each market and each contract. On the Las Vegas question, I think Vegas is becoming one of the most important events and has shown tremendous potential since the beginning. If we compare the economic impact that F1 had versus the Super Bowl, we were bigger, which indicates potential to keep growing and to control costs more. Having the 10-year extension with the LVCVA means we can build stronger potential for this Grand Prix to be even more profitable. That is already the case because this product has been fantastic. This trend of growth in profitability and not just ticketing but also positioning as an F1 product is becoming a relevant example for promoters around the world. Emily Prazer, the CEO of the Vegas Grand Prix, and her team have done a tremendous job focusing and making sure that together with F1 we can produce an even stronger product for the future. This year's event will be phenomenal. I won't anticipate new racing content now because the core of our product remains what we do on track. Extending the experience is the key factor of our success so far around the world.
Our next question is from Stephen Laszczyk with Goldman Sachs.
Brian, you called out that absent the calendar variability at F1 this year, the business is performing exceedingly well. I was curious if you can speak a little bit more to the underlying performance you've seen year-to-date and if there are particular parts of the business that are performing better than expectations heading into the year.
Thank you for the question. The calendar variability makes it very challenging because you have lower proportionate revenue recognition. But if you look through that, we're seeing really good growth in sponsorship as we did last year, really strong performances in licensing, and strong demand for the Paddock Club. Obviously, with fewer races you don't necessarily see those come through the numbers in the quarter, but those are three areas I would specifically call out.
Licensing is on the trajectory we expected and there is tremendous effort to further scale this revenue stream. Stay tuned because there will be additional developments—it's important that we keep growing that revenue stream. Paddock Club is related to experience and will create more opportunities to grow revenues because experiential opportunities are a key focus. We ran an experiment in Spa offering an exclusive customer experience with a world-class chef, a tour and unique food experiences on Saturday night. These are ways to create experiences that money cannot buy. Our approach is to create more of these experiences which will positively impact revenues. Also, we were able to react in a difficult situation with the Bahrain Grand Prix, finding a place to host it in Malaysia, which shows our vitality and ability to find solutions. That's what will happen in the future with regard to revenue streams; I see great potential over the next five years.
Great. And then 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. Could you talk more about the investments you're making in the business and how we should think about SG&A pacing into the back half of the year and into 2027?
The two biggest factors are marketing and FX. We lapped the 75th anniversary last year which affects marketing comparatives. Foreign exchange has negatively impacted SG&A through the first half of this year; as our cost base in the U.K. changes with pound movements, that affects reported SG&A. Outside of those items, there's investment in personnel, so personnel costs are higher than the prior year. SG&A is slightly higher at LVGP largely because we took over the sales function from Quint last year and that was being built up through 2025; you have a full year of it now and that shouldn't be an ongoing new impact beyond the build. We also 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 it as a big future opportunity. Can you talk about the key levers to make this a bigger part of the business over time?
The beauty of what we are doing is continually finding 'what's next' and opportunities the market presents. We have already made significant progress across categories we can offer to customers. Investment in digitalization will allow us to grow the commercial opportunity further. Different markets provide different visibility and opportunities, which will allow us to maximize revenue connected to those markets. We are focused on renewing major partners earlier rather than waiting until expiration. One area we want to protect is AI-related rights—it's too big to give exclusively to a single partner. Our ability to structure that area of business creates many other opportunities. Key licensing partners are growing year-by-year and through different propositions, capsule collections and content we are creating broader reach with fans. We are now in a strong position to monetize these opportunities and move customers through our partners, giving us great visibility into a strong future revenue trajectory.
On the MotoGP manufacturers and teams agreement, the key point is we have another five-year deal with the teams and manufacturers and everyone is aligned on outlining the technical aspects of the sport. The other key components are how we'll build the sport together, both as a product and commercially. The process has been long with gives and takes, but we've emerged with both sides working together to build the sport in a way that benefits everyone. Carmelo, would you like to add color?
Yes, it is a very positive outcome. After the Liberty Media acquisition closed, we could start full conversations with manufacturers and teams and align on the vision and strategy for building MotoGP. The idea is to raise all boats and put together investment to allow teams to invest in their resources and grow their brands. The sport is in an amazing place from a racing perspective and the new regulations in 2027 will improve that further. It's been a great conversation with teams and manufacturers to align on the commercial side and strategy for building the sport.
Our next question is from David Joyce with Seaport Research Partners.
More on MotoGP, please. Can you help us understand how much of the cost base in the quarter was allocated to incremental growth initiatives as that sport aims to apply the Formula 1 playbook? And separately, on the sponsorship side there for MotoGP, how much of that is expiring in the next year that could result in either upgrading the sponsors or expanding relationships or getting step-ups based on the continued fan engagement growth there?
I'll start on the cost side. The investment phase is not pronounced in the quarter. Looking at year-to-date results, we do have higher marketing expenses as we try to grow the brand and some incremental investments in personnel, but those are not material. SG&A is relatively flat for the quarter. On cost of revenue, there are investments, but those are offset by changes in the schedule where you may have higher or lower flyaway costs; for example, we saw lower freight costs because of the race mix. So far, you're not seeing material increases in the cost base from investments other than some personnel and marketing costs.
On sponsorship, it's less about what's expiring and more about the opportunities to broaden sponsorship beyond a historically endemic sponsor base. We have a regular flow of deals that tend to be three to five years in nature, so periodically some come up for renewal. But the bigger point is that as we broaden the business and its reach, we see attractive opportunities to bring in sponsors well beyond a normal renewal paradigm and capture larger commercial partnerships.
Our next question is from Brent Navon with Bank of America.
We've seen Formula One increasingly add Sprint races to the calendar. How many more can realistically be added, and how does this filter through the business? Is this just extra race promotion revenue, or are there media rights, sponsorship and hospitality opportunities that come with it as well?
Sprint races started to create action on track and provide leverage for promoters and ourselves to create engagement across the weekend. We will have more Sprint races next year; we will announce the calendar and number in due course. The principle is simple: Sprint races are an opportunity to increment revenue streams and create new deals, as we have already seen. We want to do this the right way and preserve scarcity so it remains valuable commercially. We will move further in this direction next year.
A follow-up on media rights. A few months ago when you announced the Sky extension, Germany was noticeably absent from that agreement. There have been reports suggesting you may add a race back to the calendar in Germany. Should we interpret that as Germany being an untapped growth market, and how could bringing a race back help media rights discussions there?
Germany is a market in flux with broadcaster consolidation and digital players entering the market. It's more robust now than a few years ago. The market dynamics—RTL/Sky activity and streaming expansions—are factors. Those macro dynamics, coupled with the product we produce, determine how rights and promoter interest evolve.
RTL was an important step to increase reach in Germany. The future negotiation environment in Germany will be different from Italy or the U.K.; digital platforms may apply for rights. Germany has major manufacturers and partners with home bases there like Audi and Mercedes. I see Germany potentially becoming a very interesting market in the medium term that could have a positive effect both on media and promoter sides. This is not a short-term call, but the situation is moving in a favorable direction.
Our next question is from Ian Moore with Bernstein Research.
Everything you shared on premium hospitality, Paddock Club and related initiatives is encouraging. What are you learning about supply versus demand dynamics there? You've added a lot of capacity over the past couple of seasons. What signals give you confidence that demand for these experiences continues to outpace supply?
Today the signals are very positive. For example, for 2028 we have already allocated Paddock Club hospitality across our calendar, which indicates strong demand. We are seeing the market in full strength and teams have solid partners investing in F1. New products are very innovative and the team is focused on creating initiatives to stay at the cutting edge of sports entertainment. It's not only about pricing but about growing our people and capabilities to leverage what we have today. The signals are super positive and we will continue to extend that positivity as much as we can.
Thank you, Stefano. Thank you, Ian, and everybody else for participating today. We look forward to speaking to you more offline and seeing you in the coming weeks. Take care.