In a sign of the continued challenges motorsports promoters face, ISC this morning in a conference call lowered expectations for '16 after a decrease in admission-related revenue for Q2, which ended May 31. ISC’s total Q2 revenues were up 2%, from $164M to $167.6M, thanks largely to a contractual spike in broadcast revenues as well as strong corporate partnership sales. But admission-related revenue for Q2 -- which included six Sprint Cup weekends -- was down just over 8%, from $33.3M to $30.5M. ISC’s year-to-date admission revenue is seeing a 2.3% drop, from $63.8M to $62.3M, with the offsets in Q2 softened by gains made at Daytona Int'l Speedway in Q1. ISC President John Saunders attributed the Q2 drop to both lower attendance at tracks and a 3% decrease in the average ticket for Cup events to $72.09 (year to date, the average ticket price for Cup events is up 7% to $101.64, thanks to activities around the Daytona 500). As a result, ISC lowered its full-year guidance from $660-670M to $658-665M. Revenue related to broadcast fees were up 5%, from $115.1M to $121M. But food, beverage and merch sales for Q2 were down from $11.5M to $10.2M. Saunders noted that ISC has seen a 7% uptick in per-capita merch sales in '16 after the Fanatics model was implemented last year, but has also seen a decrease in gross merch sales due to the drop in attendance. At presstime, shares of ISC were trading at $32.18 per share, down 5.96% from the close of business last Friday.
LOOKING FORWARD: Saunders said ISC at this time does not believe that Q2 results “will be representative of results for events in the third and fourth quarters.” For Q3 so far, ISC saw drops at Michigan Int'l Speedway three weeks ago, but had those offset by gains this past weekend in admission and ticket prices at Daytona and an IMSA event at Watkins Glen Int'l. Saunders said ISC expects to meet or exceed admissions from last year for the second Cup race at Michigan on Aug. 28, plus the sole Cup race at WGI on Aug. 7. For Q4, Saunders said advanced sales are “slightly behind” their comparable events last year, though this is being offset by an increase in the average ticket price. Commenting that they “remain a bright spot for us,” Saunders noted that ISC is expecting corporate sponsorship sales to increase 11% this year, with 96% of corporate-sales targets for the year having already been met. ISC also is still expecting to see $15M in EBITDA for FY '16 from gains made by the completion of the $400M Daytona Rising renovation project. Year to date, ISC has seen net income of $41.7M, up 47% from 28.3M last year, thanks in large part due to the $8.3M it made from land it sold on Staten Island and increases in TV-rights fees.
OTHER NOTES:
-- Saunders hit on a range of other topics during the call, including continued efforts to land non-core activities for its 12 tracks, TV ratings and forthcoming renovations. On renovations, Saunders revealed that Darlington is likely to be the next track to be renovated after Phoenix and Richmond. Saunders noted that ISC has struck a public/private partnership with governmental agencies in Arizona for that renovation, whose details could be released by the end of this year. He added that ISC is in the process of trying to forge a similar public/private partnership with the state of Virginia for RIR.
-- On the 300,000-square-foot One Daytona mixed-use development project that is being built across the street from DIS, Saunders said ISC is currently in the process of selecting the general contractor for ISC’s portion of the retail/dining/entertainment process. Saunders said that the process will probably be wrapped up “in the next month or so.”
-- Saunders on Q3 and Q4: “We feel confident at this point in time that the third and fourth quarter admissions are going to meet expectations. There are a number of things that we’re tackling: consumer initiatives, an industry focus on youth initiatives and youth pricing, we talked about capacity management. We don’t look at that as just taking seats out; we look at that as overhauling the guest experience in addition to creating that sense of urgency and supply and demand. (The) big focus is on the at-track experience.
-- Saunders on non-core activities: “The main strategy that we have here is unlocking the value of 13,000 acres of real estate that we’ve got. It’s an asset on our balance sheet that we feel is under-utilized.”
-- Saunders on ratings: “When you step back and look at the consumption of the sport -- I mentioned TV ratings for Fox were down by 6% -- keep in mind that we started the season down double digits. And Fox working with NASCAR and the promoters was able to narrow that gap. And then to have NBC come out of the gate last weekend -- all good storylines, all good indicators (from that). And looking at the social consumption, it’s just off the charts.”
