The opening of Daytona Rising led to a strong Q1 for ISC, but projected softness for the next quarter and TV ratings drops so far this NASCAR season led to sharp questioning from analysts. For the three months ended Feb. 29, during which ISC’s races were all at Daytona Int’l Speedway, ISC saw $142.6M in revenue, up 4% from $136.5M in Q1 ’15. After expenses of $111.5M and income taxes of $12.3M in Q1, ISC saw $19.8M in net income, up 32% from $15M from last year. Admissions were up 4.3% from $30.5M to $31.9M, with the average ticket price of grandstand seats for the Daytona 500 up 22%. ISC President John Saunders attributed that to a greater number of seats in premium areas. Food-and-beverage and merchandise sales also were up. Corporate sales were a particular strong point for ISC, as Saunders noted they “helped drive the first quarter results.” He said, “Looking forward, we are encouraged with this area of the business.” This includes DIS’ injector partners, four of which have been filled for 10- to 15-year terms worth $2-2.5M annually. One injector is left to be sold. ISC is projecting corporate sales to be up 11% for the full-year FY ’16 from ’15. As of now, ISC has 92% of corporate sales targets for ’16 contracted and one Cup entitlement plus a couple Xfinity Series entitlements unsold for the rest of the season.
AREAS TO IMPROVE: Saunders said ISC is “seeing some softness in attendance for the second quarter,” with advance sales trailing ‘15 by approximately 10%. ISC attributed that to factors including Jeff Gordon’s retirement, Tony Stewart’s absence this season and “strength and demand shifting to the fourth-quarter events as a result of the new Chase format.” During questioning from analysts, ISC declined to note which races were seeing the most softness but during a call looking at ’15 earnings in late January, Saunders said, “We have our challenges in Michigan and also in Richmond, and those are probably going to be the laggers.” Beyond Q2, Saunders said DIS’ second Sprint Cup Series points race of the season, the Coke Zero 400 in July, is “currently pacing ahead of last year, and advance sales for the other events in the third and fourth quarters are trending flat to slightly up over 2015.” ISC maintained during the call its full-year outlook, which includes a projected $660-670M in revenue.
ONE TO WATCH: ISC also hit on One Daytona and other potential capital expenditures during the call, with the mixed-use development across the street from DIS currently projected to open in the latter portion of ’17, with those revenues mostly starting to show in ISC’s books starting in ’18. Additional capital expenditures for the project in FY ’16 and ’17 will be between $120-150M. Of that, Saunders said about $90-100M will be financed through borrowing, with the balance “coming from public incentives and the value of the land.” Under the $600M capital expenditure plan it set in place from '13-17 to upgrade tracks, ISC has $170M remaining to spend on capital expenditures at existing facilities in ’16 and ’17 now that Daytona Rising is complete. The corporation has indicated that the next two tracks it will renovate will be Richmond Int’l Raceway and Phoenix Int’l Raceway, though firm details have yet to be released.
RATINGS A HOT TOPIC: Even though ISC is a facility-based corporation, the topic of NASCAR’s television ratings were a repeated theme hit on during this morning’s call as analysts peppered Saunders and ISC Exec VP, CFO & Treasurer Dan Houser on the topic. Television ratings and viewership have been down year over year so far in ’16, but the first four Sprint Cup Series races of the year won the weekend and the sport continues to see gains in the digital and social realm, leading to a debate about where the sport is at from a consumption standpoint. Saunders during the call noted that final Nielsen ratings for the first five events of the season averaged a 4.3 versus a 4.9 in ’15. He also said TV viewership in general has "been [experiencing] a decline in households using television (HUT).” Houser later hit on the topic and theorized that the emphasis the sport has put on The Chase may have had the unintended consequence of making it less desirable to follow the early portions of the season. He said, “One of the things that could be a factor … is that we may have been, as an industry, so successful at focusing on the drama of The Chase that we sucked a little of the sizzle out of the beginning of the season. So that’s one of the things that the whole industry -- NASCAR -- is very focused on."
