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Edited Transcript of TRK earnings conference call or presentation 1-May-19 2:00pm GMT

Q1 2019 Speedway Motorsports Inc Earnings Call

CONCORD May 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Speedway Motorsports Inc earnings conference call or presentation Wednesday, May 1, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marcus G. Smith

Speedway Motorsports, Inc. - President, CEO & Director

* William R. Brooks

Speedway Motorsports, Inc. - Vice-Chairman, CFO & Treasurer

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Presentation

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Operator [1]

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Good morning, and welcome to the Speedway Motorsports' First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded on Wednesday, May 1, 2019.

With us on this call is Marcus Smith, Chief Executive Officer and President; and Bill Brooks, Vice Chairman and Chief Financial Officer. After formal remarks, a question-and-answer period will be conducted.

Before we start, the company would like to address forward-looking statements that may be addressed on the call. This conference call contains forward-looking statements, particularly statements with regard to the company's future operations and financial results. There are many factors that affect the future events and trends of the company's business, including, but not limited to, economic factors, weather, the success of NASCAR and others as sanctioning bodies, capital projects and expansion, financing needs and a host of others both within and outside of management's control. These factors and other factors, including those contained in the company's annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, involve certain risks and uncertainties that could cause actual results or events to differ materially from management's views and expectations.

Inclusion of any information or statement in this conference call does not necessarily imply that such information or statement is material. The company does not undertake any obligation to release publicly revised or updated forward-looking information. And such information included in this conference call is based on information currently available and may not be reliable after this date.

So with these formalities out of the way, I will turn the call over to Marcus Smith. Mr. Smith?

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Marcus G. Smith, Speedway Motorsports, Inc. - President, CEO & Director [2]

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Thank you, Kim, and good morning, everyone. During the first quarter, we hosted 3 NASCAR triple header race weekends at Atlanta, Las Vegas and Texas Motor Speedways. In Atlanta, we hosted the Folds of Honor Quiktrip 500 Monster Energy Cup race, the Rinnai 250 Xfinity race and the Ultimate Tailgating 200 Gander Outdoors Truck race.

The following week at Las Vegas Motor Speedway, we hosted the Pennzoil 400 presented by Jiffy Lube cup race, the Boyd Gaming 300 Xfinity race and the Strat 200 Gander Outdoors Truck race.

We finished the quarter at Texas Motor Speedway with the O'Reilly Auto Parts 500 Cup race, the My Bariatric Solutions 300 Xfinity race and the Vankor 350 Gander outdoor truck race.

Through the first part of the NASCAR season, we are seeing a significant improvement in the ontrack competition. The new 2019 NASCAR rules package is creating more competitive close-quarter racing and is translating the positive impressions with fans. NASCAR recently shared that positive fan sentiment on social media is up over 4 points versus the same period last year, and TV viewership is up 3% year-over-year. That's significant when overall sports programming is down 9%. The average race day time spent on nascar.com year-over-year is up 21% also.

NASCAR is continuing to deliver for business, nearly half of all Fortune 500 -- or Fortune 100 companies and more than 1 in 4 Fortune 500 companies are invested in the sport.

As previously reported, all of our NASCAR cup series race entitlements for 2019 are sold, and all but one Xfinity Series race and 1 truck series race are sold as well.

As we look to our events for the future, we're very excited about the recent announcement of the 2020 schedule and what it will mean for both our fans and sponsors. We will kick off the early season's West Coast swing at Las Vegas with the second race of the year in 2020. We'll then welcome fans back to the southeast to a warmer mid-March day at Atlanta, Texas, Bristol, Charlotte, Sonoma, Kentucky and New Hampshire continue to hold their similar race weekends on the calendar through next July.

The night race at Bristol moves to September as the cut off in the first round of the playoffs in Las Vegas moves later in September to a more fan-friendly cooler race weekend in the desert. The Bank of America Roval 400 returns to Charlotte's more traditional mid-October weekend and an unpredictable cut-off race for the second round of playoffs. The 2020 NASCAR SMI season will end with a play off tussle a week earlier at Texas Motor Speedway, which will be more convenient for fans as it will fall in advance with the local hunting season.

We may not have to wait for 2020 for NASCAR fans to see a glimpse of the future. Recently, Charlotte Motor Speedway and NASCAR announced the format and rule specifications for the upcoming Monster Energy NASCAR All-Star race later this month. The 35th edition of this historic event will again have 4 stages with 5 laps added to the final stage from last year's event. This year's format produced a significant -- last year's format produced a significant increase in green flag passing. The stages were run 30 laps, 20 laps, 20 laps and 15 laps in the final stage for a $1 million bonus to the winner. What could be most interesting is it NASCAR will make a couple of technical changes to the cars that are under consideration for the new gen 7 race car, which could debut in 2021. So the All-Star race will once again, like its illustrious history, provide a peek into what could be the future of ontrack competition.

There's simply no experience like seeing a NASCAR race live. We are continuing to improve fan amenities, offer new experiences and provide affordable ticket packages for fans of all ages. With our 60th Coca-Cola 600 on the horizon at Charlotte Motor Speedway, we will welcome all 5 branches of U.S. Armed Forces as our guests for a Memorial Day weekend salute to the troops, and we will have prerace pit road displays of military vehicles and weaponry, which we know fans ages 8 to 80 will all enjoy.

Our track management and corporate sales teams are also expanding our focus on recruiting and creating new events like the recent Shell Eco-marathon America's STEM competition at Sonoma Raceway and the upcoming Electric Daisy Carnival Music Festival at Las Vegas Motor Speedway. We see great potential to maximize our premier facilities with unique event offerings like these.

I'll now turn the call over to Bill, who will give you the further financial review.

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William R. Brooks, Speedway Motorsports, Inc. - Vice-Chairman, CFO & Treasurer [3]

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Thank you, Marcus. Before I speak about the financial results of the quarter, I want to remind everybody, on April 24, 2019, we announced that Sonic Financial Corporation, which is owned by Bruton Smith and his family, submitted a proposal to the Speedway Motorsports, Inc. Board of Directors indicating its interest in acquiring all the outstanding shares of Speedway Motorsports common stock, not currently owned by Sonic Financial, Mr. Smith's families or entities controlled by Mr. Smith and his families. We refer you to Speedway Motorsports public statements on the Sonic Financial proposal, and we will not have any further comment regarding this matter on this call.

Our results for the first quarter ended March 31, 2019, significantly exceeded those the prior year as expected. While we always like to report increased results, these results are not directly comparable quarter-to-quarter because Texas Motor Speedway held 1 NASCAR Monster Energy Cup and 1 Xfinity Series racing event in the first quarter 2019 that were held in the second quarter of 2018. And they also hosted 1 Gander Outdoor Truck Series racing event in the first quarter of 2019, it was held in the fourth quarter of 2018.

The company's admissions and event-related revenues are again negatively impacted by poor weather surrounding our NASCAR racing weekends at Atlanta, Las Vegas and Texas in this period. And management continues to believe that many revenue categories are negatively impacted by several factors from changing demographics and evolving media content consumption to the lingering effects of recession and underemployment.

Most of our discussion of the 3 months ended March 31, 2019, compared to the 3 months ended March 31, 2018, will reflect the date changes in these other impacts. Our total revenues for the 3 months ended March 31, 2019, increased $31.9 million or 42%. Admissions for the 3 months ended March 31, 2019, increased by 3.5 million or 32.1% over the same period last year. This increase is due primarily to the 2019 Texas Motor Speedway race day realignments. The overall increase was partially offset by lower overall admissions revenue from certain NASCAR racing events held at Las Vegas Motor Speedway on a comparable year-over-year basis and poor weather surrounding some of our other NASCAR events at Atlanta Motor Speedway, Las Vegas Motor Speedway and Texas Motor Speedway in the current period.

Our event-related revenue for the 3 months ended March 31, 2019, increased by $7.5 million or 35.7%. This increase is again due primarily to the 2019 Texas race date realignments and to higher event souvenir sales revenues associated with third-party venues. The overall increase is partially offset by some lower track rentals at some of the company's speedways and lower event-related revenues associated with some reduced attendance and poor weather at our NASCAR racing events.

The NASCAR broadcasting revenue for the 3 months ended March 31, 2019, increased $20.9 million or 56.9% over the same period last year. This increase reflects the 2019 Texas race date realignment and higher contractual broadcasting rights fees for the NASCAR-sanctioned racing events.

Other operating revenue for the 3 months ended March 31, 2019, increased by $46,000 from higher Legend Car revenues. Direct expense of events for the quarter increased by $3.3 million or 25%. The increase was due primarily to cost associated with the race date realignments at Texas and higher event souvenir sales from third-party venues. The overall increase was partially offset by lower operating costs associated with reduced attendance.

Like the NASCAR broadcasting revenue, our NASCAR event management fees increased by $12.3 million or 59.9% from the 2019 Texas Motor Speedway race date realignments and higher contractual race event management fees.

Our other direct operating expenses for the quarter increased $373,000 from higher operating costs associated with the increased Legend Cars revenues, partially offset by decreased cost with lower nonevent souvenir sales.

Our general and administrative expense for the quarter ended March 31, 2019, increased by $884,000 or 3.6%. This increase reflects compensation and other indirect costs associated with the 2019 Texas Motor Speedway race date realignments, higher property taxes in the current period as compared to last year, and a combination of individually insignificant items.

Our depreciation and amortization expense for the 3 months increased by $434,000 or 3.3%, primarily from recording pretax accelerated depreciation of $360,000 on retired assets in the current period.

Our interest expense net for the 3 months ended March 31, 2019, was $2.8 million compared to $3.0 million for the same period last year from lower total outstanding debt in the current period as compared to the same period last year.

Income tax for the current year had an effective rate for the 3 months ended March 31, 2019, of 26.2%, and that compares to a tax benefit of 29.4% for the year ended March 31, 2018. Both of these rates reflecting the lower U.S. corporate federal tax rate under the Tax Cuts and Jobs Act enacted in December of 2017. These factors caused the net income for the quarter to be $8.6 million compared to a net loss of $2.3 million for the same period last year.

Our March 31, 2019, cash balance of $68.6 million, increased about $9.7 million over the March 31, '18 balance. Long-term debt of $200 million, declined $27 million from the $227 million balance at March 31, 2018.

Our deferred race revenue of $62 million at 3/31/19 increased over the 3/31/18 balance from the timing of events and the adoption of the new revenue recognition standards.

We expect capital expenditures to approximate $20 million to $30 million for 2019.

At this time, Kim, please allow the participants to pose any questions they have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) There are no questions over the phone at this time.

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Marcus G. Smith, Speedway Motorsports, Inc. - President, CEO & Director [2]

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Okay. Thank you very much, ladies and gentlemen, for your time today. We look forward to talking with you next quarter. Have a good day.

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Operator [3]

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This concludes today's conference call. You may now disconnect.