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Edited Transcript of DVD earnings conference call or presentation 25-Jul-19 1:00pm GMT

Q2 2019 Dover Motorsports Inc Earnings Call

DOVER Aug 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Dover Motorsports Inc earnings conference call or presentation Thursday, July 25, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Denis L. McGlynn

Dover Motorsports, Inc. - President, CEO & Executive Director

* Timothy R. Horne

Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director

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Presentation

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Denis L. McGlynn, Dover Motorsports, Inc. - President, CEO & Executive Director [1]

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Good morning, everyone. I'm joined by Tim Horne, our CFO, who will read our forward-looking statement disclaimer. And then we'll get underway.

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Timothy R. Horne, Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director [2]

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In order to help you understand the company and its results, we may make certain forward-looking statements. It is possible the company's actual results might differ from any predictions we make today. Additional information regarding factors that could cause such differences appear in the company's SEC filings.

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Denis L. McGlynn, Dover Motorsports, Inc. - President, CEO & Executive Director [3]

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Thanks, Tim. With the postponement of our main NASCAR Cup race to Monday due to rain and with June's Firefly and Music Festival cut back to 3 days versus 4, revenues and profits for the second quarter were impacted. And you'll hear more about the details of that from Tim in a moment.

Looking at the NASCAR world in general, we were happy to see Fox report improvement in ratings and viewership for the first half of the NASCAR season. NASCAR has worked hard to improve the quality of the on-track competition, and it's good to see a positive response from the at-home TV audience.

Another NASCAR initiative we're firmly behind involves their embrace of sports betting to increase engagement among traditional fans and help create interest among the younger demographics. Recently, Deloitte published the results of a study of U.S. adults, which showed men aged 18 to 34 were 67% more likely to watch a sporting event if they had a bet on it.

Other major sports are attracting new sponsorship revenue from gaming-related companies looking to capitalize on the sports betting opportunities, and NASCAR wants to do the same. Meanwhile, networks are starting to develop sports-centric shows specifically related to betting. And Fox will release a sports betting app called FOX Bet this fall that users can download onto their cellphones and get up-to-the-date wagering data.

Delaware is one of only a handful of states with legalized sports betting, and live wagering is available on-site during our NASCAR weekend. We feel this is an important fan amenity that should continue to develop as sports betting becomes more mainstream among NASCAR fans.

As for capital projects, the reconstruction of our NASCAR Cup garage continues on time and on budget, and is expected to be fully functional in time for our October NASCAR weekend.

At this point, I'll turn it over to Tim for his financial review of the quarter.

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Timothy R. Horne, Dover Motorsports, Inc. - Senior VP of Finance, CFO & Director [4]

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Thanks, Denis. So we held our Spring NASCAR triple-header and hosted the Firefly Music Festival in the second quarter of both 2019 and 2018. If you look at the second quarter statement of earnings, you'll see our revenues were $24.8 million compared to $25.8 million last year, with lower admissions and sponsorships for our race weekend and slightly lower commissions from the Firefly Music Festival.

Our NASCAR weekend saw only the third Cup Series rain-out in our 50-year history. And although many of the planned anniversary festivities were canceled on Sunday, the event was an operational success on Monday afternoon.

Admissions were lower and corporate revenues were down, particularly from the loss of a large Cup title sponsor that we have had for years, while broadcast revenues were higher. On the expense side, person sanction fees were up about $400,000, while all other costs were consistent with last year, with the end result being gross profit for the event down compared to last year.

The 8th Annual Firefly Music Festival held over 3 days this past June was also an operational success. Similar to past years, we lease our property to the operator of the festival. And in addition to a rental fee, we also derive revenue from the sale of alcohol during the event. Rent was the same as in prior years, and our portion of the alcohol sales were down slightly compared to last year's event, given lower overall attendance, 1 less festival day and a somewhat younger demographic.

G&A expenses were fairly consistent with last year, of just over $1.8 million. Depreciation expense was down slightly at $794,000 and net interest expense was down compared to last year at $10,000 versus $33,000 last year, and that was from lower average borrowings offset by slightly higher rates.

Our effective income tax rate was approximately 27.1% versus 26.7% last year. So our net earnings for the quarter were approximately $5.5 million or $0.15 per diluted share compared with net earnings of approximately $6.5 million or $0.18 per share in the second quarter of last year.

Looking at the June 30 balance sheet, our financial position remains strong. We had no outstanding debt at June 30, and our cash at quarter-end was up to approximately $9 million. Contract liabilities, which used to be referred to as deferred revenue, are up compared to last June 30. Some of this is from timing, while we've added a few sponsors for the fall race compared to this time last year as well. Also included is a cash flow statement for the 6-month period, where you'll see our net cash from operating activities was just over $6 million compared to $4.5 million last year, primarily as we contributed $1 million to our pension plan during the first 6 months of last year and did not do that this year.

Capital expenditures were $2.1 million through 6 months, about 80% of which is for the construction of the new Cup Series garage, with the balance from equipment purchases and other facility improvements. And the result of all that was an increase in cash so far this year of just over $5 million.

As previously disclosed, in February of 2018, we granted a 3-year option for the sale of 3 parcels of land in Nashville, totaling approximately 225 acres. In June of 2019, we amended that option and the buyer exercised its option to purchase 2 of the parcels and pay a $500,000 fee to extend the option on the third parcel to March 1, 2022.

The sale of the 2 parcels is expected to close by the end of the month, with gross proceeds of just over $6.4 million. And assuming the sale of the last option parcel, we would still have approximately 1,000 acres and the speedway would remain intact while we continue to explore our future options.

That concludes our second quarter update. Thank you for your interest.