Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Media Corporation 2018 Q3 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, November 8. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead..

Thank you.

Before we begin, we’d like to remind everyone that this call includes certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, including statements about business strategies; market potential; new services; product launches; discussions involving IR communications; SiriusXM’s proposed acquisition of Pandora, including its expected timing and effect on our ownership interest in SiriusXM; plans for the Battery Atlanta; matters related to Formula One, including digital initiatives, new races, the Concorde Agreement; sporting regulation changes and sponsorship opportunities and other matters that are not historical facts.

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation, possible changes in market acceptance of new products or services, the ability of our businesses to attract and retain customers, competitive issues regulatory issues and the availability of capital on terms acceptable to Liberty Media.

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 statements 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, including adjusted OIBDA of Liberty Media and adjusted EBITDA of SiriusXM. The required definitions and reconciliations, Schedules one and two can be found at the end of the earnings press release issued today, which is available on our website.

This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor Holdings. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These forward-looking statements speak only as of the date of this call, and Liberty TripAdvisor Holdings expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty TripAdvisor Holdings' expectations with regard thereto or any change in events, conditions or circumstances on, which any such statement is based.

Now I would like to introduce Greg Maffei, Liberty’s President and CEO..

Thank you, Courtnee, and good morning to all of you out there. Today on the call, besides myself, we will have Liberty CFO, Mark Carleton; and Formula One Chairman and CEO, Chase Carey. During the Q&A, we will also be available to answer questions regarding Liberty TripAdvisor.

So beginning with Liberty SiriusXM, we continued our repurchases of the Liberty SiriusXM stock and bought an additional $134 million from August 1 through October 31. We effectively bought the SiriusXM shares at a price of – a luxury price of $4.91 over this period. We think this compares quite favorably to yesterday’s close of $6.30.

Commenting about iHeartCommunications for the moment. Their bankruptcy process continues. We watch with interest, but it’s unlikely we’ll increase our investment in iHeart at this time. Looking at SiriusXM, we had another outstanding quarter. Revenue of $1.5 billion was a new quarterly record. Self-pay net subscriber adds were up 298,000.

We recorded adjusted EBITDA, which was a record, and it drove the margin over 40% for the first time. Liberty Media’s ownership stood as of October 22 at 71.2%, but I would note that when the Pandora deal closes, of which I’ll comment more in the moment, we expect our ownership to fall to about 65%.

Looking at Pandora, the acquisition is moving forward. We filed the S-4 on October 31. Yesterday’s close, Pandora was trading below the indicated deal price, suggesting the deal will get done. And we expect the close to occur early in the first quarter of 2019. Looking at the Formula One Group, great 2018 with exciting outcomes.

Lewis Hamilton secured his fifth championship. We still have two more races to go and we expect excitement because the constructor championship is still on the line. In sponsorship, we signed data rights deals during the quarter with ISG to produce live Formula One betting, offering.

As we’ve mentioned many times before, this business is hard to compare on a quarterly basis. This quarter, we had eight races versus six in the comparable period in 2017 so we mind you to take a longer-term look. With that in mind, we are revving for an exciting 2000 season, and we’re quite excited. Live Nation posted its best quarter ever.

Revenue up 11%. All divisions delivered strong quarterly AOI results although through the quarter, we had 71 million fans attending over 24,000 shows in 40 countries. The sales in this business only continues to increase, and we’re on track to deliver another record year of results across revenue, AOI and free cash flow.

The Braves, great season, clinched the 2018 NL East Division title, advanced to the playoffs for the first time since 2018. In the last couple of weeks, we’ve had other awards. Recently, three Golden Gloves were handed out for Freeman, Markakis and Inciarte that’s the highest number in the National League matches the number that the Red Sox received.

Looking at the financial side for a moment. We did sell the residential portion of Battery Atlanta for $156 million in October. The Braves received cash proceeds of approximately $61 million net of debt in our JV distribution. We expect to redeploy these funds for the next development phase of the Battery Atlanta.

And over at Liberty TripAdvisor, TripAdvisor posted a fantastic quarter, and the market is responding accordingly well this morning. Strong consolidated adjusted EBITDA growth. We increased revenue per hotel shopper, which offset expected hotel revenue shopper declines due to our marketing optimizations.

We accelerated revenue growth in experiences category in which we are the leader in both bookable inventory and revenue. We are projecting healthy, consolidated adjusted EBITDA growth for 2019. With that, I’m going to turn it over to Mark Carleton for more on our financial results..

Thank you, Greg. At quarter end, Liberty SiriusXM group had attributed cash and liquid investments of $80 million excluding $46 million of cash held at SiriusXM. The value of the SiriusXM common stock we held at Liberty SiriusXM as of November 7 was $20 billion, and we have around $950 million in debt against these holdings.

Formula One Group had attributed cash and liquid investments of $106 million excluding $45 million of cash at F1.

Formula One Group has attributed public market securities with a market value of approximately $4.4 billion as of November 7, including the intergroup interest for the Braves Group and our stake in Live Nation with $2 billion of attributed debt excluding the debt of F1. Braves Group had attributed cash and liquid investments of $78 million.

At quarter end, Liberty SiriusXM group had attributed a principal amount of debt of $7.6 billion, which includes $6.6 billion of debt at SiriusXM. Formula One Group had an attributed principal amount of debt of $5 billion, which includes $2.9 billion of debt at F1, and Braves Group had an attributed principal amount debt of $629 million.

F1’s total net debt to covenant OIBDA ratio as defined in their credit facility calculations was approximately 6.5 times as of September 30 as compared to a maximum allowable leverage ratio of 8.75 times. The calendar – race calendar variances between 2017 and 2018 resulted in income of 22 races following in the trailing 12 months in the calculation.

Income from only 21 races will be captured in the trailing 12 months for the year ended 2018. So we expect the reported leverage ratio will increase accordingly at year-end based on those race counts. We set a target total net leverage ratio for Formula One of five to six times bank covenant OIBDA.

Please note these leverage ratios are for the Formula One business and not for the Formula One Group overall. So with that, I will turn it over to Chase Carey to talk a little bit about Formula One..

Thank you, Mark. Lewis Hamilton secured his fifth world championship at the Mexico Grand Prix at the end of October, an outstanding achievement, which puts him on par with Formula One legend Juan Manuel Fangio and now only behind Michael Schumacher in the all-time list of championship titles. Congratulations to Lewis.

We still have two more races in the 2018 season in Brazil this weekend and then Abu Dhabi during Thanksgiving. And we expect to see continued excitement and drama among the drivers, and the teams will be focused on securing final placings in the constructors championship. To date, the 2018 season continues to impress in a number of areas.

Live attendance, in aggregate, is up 3% year-on-year at the 16 tracks with comparable data from 2017. And we’ve had a great response to the enhancements such as the fan zones, merchandising track tours, hot labs, champions club, Paddock and Paddock Club. Television reviewing on race day on year – year-on-year is down 5%.

However, that is largely due to our move from free to pay-TV in Italy. Excluding Italy, our television viewership is up 1% year-on-year, and our Saturday viewership for qualifying is up even more. We’re especially pleased with our performance in our two key growth markets, the U.S.

and China where viewing figures are showing uplifts of 50% and 265%, respectively. For the digital engagement, while still early in our initiatives to upgrade and expand our digital platforms, our interactions during race week are up 31% and our video views are up 66%.

And we continue to bathe for the second year, running the fastest growing sport of social media. We now have 18.1 million followers on our social platforms and counting, up about 50% on a year ago. We finalized the 2019 calendar with renewals of the Japanese and German race contracts.

And with that, 2019 will replicate the 2018 race calendar in both number of races and locations. We’re already looking forward to 2020 and are thrilled that Formula One will add a newly announced Hanoi race in that year.

This location is part of our strategy to expand our – extend our reach and brand in Asia, and Vietnam its a dynamic country with whom we’re excited to partner. We’re in continued discussions around additional opportunities to develop the race calendar, including the previously discussed race in Miami.

Speaking of which, we held our fourth and final fan festival of the year in Miami which overlapped with the U.S. Grand Prix in Austin in October. The fan festival featured a live car rundown Biscayne, Boulevard, which attracted an estimated 80,000 spectators, which was featured heavily in social media.

The weekend kicked off with an amazing stunt by Redbull with an F1 car driven by F1 commentator and former racer, David Coulthard doing doughnuts on top of the high-rise. If you haven’t seen this video, I encourage you to seek it out.

As we look toward the 2019 season, we will continue to host fan festivals as a way to engage and attract fans and build the F1 brand and currently anticipate expanding our fan festivals in 2019. We made further progress in our other main commercial areas.

On the television part of the business, we completed additional renewals that matter surpassed our target in both free and paid television platforms and include digital opportunities. We know that offering compelling content on multiple platforms is key to reaching our existing fans and attracting new ones.

For our nascent OTT product, we launched a mobile platform in September, which further enhances the offering, and we look forward to a full commercial launch in 2019. We will continue to improve the product and content offering in the off-season and over the coming years, but early response since our mobile platform launched has been positive.

We just completed the second event in the F1 new balance Esports ProSeries in which drivers race on F1 – 2018 the official game of the FIA Formula One world championships, which was released on August 24.

This year nine of the Formula One teams have entered teams, giving the drivers a once-in-a-lifetime opportunity to race with the backing of some of the most prestigious names in motorsport racing following an intensive qualifying draft process. The two events have been stream live via Facebook and broadcast globally on selected TV networks.

Our Esport events this season have accumulated over 67 million impressions and 13 million – 13.1 million views on social media, about double what we were – where we were the same time last year through the semifinals. We look forward to the grand final later this month where the winner will receive $200,000. Regarding sponsorships.

On our last call, I talked about our philosophy on how we approach both new and existing sponsors and the focus on building a broader array of offerings to service the needs of our partners and provide a real connection with our fans and sport.

On this call, I’d like to focus on the many wins we’ve had here in 2018, some of which include renewals of existing sponsors, DHL and Emirates with multiyear deals and expanded offerings, our first ever regional sponsorship deal with Petronas, partnership with Amazon Web Services, entering into sponsorship and data rights commercial partnerships with ISG to produce an F1 betting offering and listing New Balance and fanatic sponsors of the F1 New Balance Esports ProSeries.

I’d point out that many of these deals were done during 2018, and we look forward to receiving the full benefit of these new contracts in 2019. Sponsorship will be a continued area of focus in 2019, and we will enter the year with great momentum.

The F1 value proposition to sponsors will continue to strengthen as we expand and tailor the offering, grow the fanbase and reach new audiences. We continue to make progress on the motorsports side of our business to improve competition, action and unpredictability.

We’ve agreed on changes to the arrow regulations of the cars will be reintroduced in 2019, which should lead to an increase in overtaking and build excitement on the track for next season.

The unpredictability is amplified by a number of changes to the driver lineup going into next season with Fernando Alonso retiring, Daniel Ricciardo moving to Renault, Pierre Gasly his place at Redbull alongside Max Verstappen, Charles Leclarc heading to Ferrari and more.

They’re eager to see what this next season has in stored, and we’re focused on the larger list of sporting regulation changes to further improve the sport for our drivers and fans.

I’m often asked about the so-called Concorde Agreement, and we are making progress regarding the broader set of changes to cost structures, revenue distribution regulations and governance. During constant constructive discussions with the teams, at the end of the day, our interests are aligned.

We agree on the long-term objectives and we’re working towards finalizing the details for the 2021 season. Our team is busy working on all of these initiatives. With the majority of our hiring for corporate functions complete, we now have the organization largely in place and will continue to build and grow Formula One for long-term success.

Now I’ll turn the call back to Greg. Thank you..

Thank you, Chase. Appreciate the comments of both Mark and Chase. As a reminder, we will be holding our Annual Investor Meeting on November 14 in New York City. And yes, there will be a video. If you would like to register and see the agenda, please use the link on our homepage. We appreciate your continued interest in Liberty Media.

We look forward to seeing many of you next week. And with that, operator, I’d like to open it up for questions..

Thank you. [Operator Instructions] We’ll take our first question from Ben Swinburne with Morgan Stanley..

Thank you, good morning guys. Chase, just going back to your comments on the digital business and streaming.

Is 2019 a year sort of full steam ahead in terms of marketing and programming that product? I think this year, you launched at the beginning of the season, it sort of had fits and starts and you’ve been getting the tech ready and the device is ready.

Is 2019 a year that you think this business can hit its stride from a growth perspective? Or you see it still something to a multiyear project, just set any color on that since I think it’s a big opportunity for you guys. And then I have a follow-up..

You’re talking about the OTT product..

Yes. Yes, exactly..

Yes I guess – I think that’s right. It means it similar – it’s a multiyear project to get it to where we believe it can get to. But I guess, I’d say this year ended up being probably almost a data project. We didn’t launch it at the beginning of the season, I think, for a sport like ours to really achieve its potential.

It’s a season buy more than a race buy. We have more tech incoming as a lot of players who’ve gone into it initially, there are more technical bugs than you like. I think we probably were not surprised. We hoped they wouldn’t be there, but they were. And so I think really this has been a year – there are three steps in getting in building this out.

First is the technical platforms got to be reliable. Customers, they don’t tolerate glitches. I think, second, we got to define the content offering. People buy content. They don’t buy technology. So technical has got to work, but then we got to define the content offering, then we got to sell and market it.

We didn’t really do the latter this year because we were focused on – to get almost listings done sequentially. Got to make the technology platform stable, tell the content story, and then sell and market it. So I think 2019 will really be the first time we bring it to market as a commercial proposition to market and sell it.

And I think we feel good about the technological platform, the mobile – the adding the mobile platform is critical. It’s so much of people follow it today, not on desktops or following on mobile devices, and we didn’t get that in place until September. I think the content offerings improved, and will adding some of that though realistically.

The content is probably over the next couple of years will continue to add breaths and depth in terms of data and archival product. But we really – next year will be the first time we really sell and market it properly. So I’d say this was a year of getting ready to more commercially launch.

But next year, the year one, this is not a – this is a multiyear proposition. And we’re still – as we roll it out, clearly, it’s going to run at different and different countries. In some, it will fully and aggressively push it.

Actually, one of the, I think really exciting opportunities were developing is with some of our traditional broadcasters some of the deals we did, renewals we did for 2019 were sort of partnering with them to market and promote the over-the-top platform in a way to sort of working with them as supposed to against them because it is compatible.

And this is a product targeted at your hard-core customers who will pay more for a richer experience than the basic linear one. And I think it benefits everybody to find a way up to tap into the demand that those products those customers have for the product. So it will continue to certainly evolve.

Certainly, it’s going to be early days next year but long way anyway. Next year really will be the first time we start of take it to market as a commercial proposition. Again, it will vary by country how we take it to market..

Got it. And then, Greg, you’re both an executive and an investor so I hope you answer the question, at least address it. When we look at shares with Live Nation having been so strong over the last couple of years, and the stuff has really been getting cheaper and cheaper.

I’m wondering if you think the market is missing something because it seems like the business is now really starting to ramp? And then I guess, point two is there anything you can do structurally whether it’s with a live stake when you try to unlock value here..

You want me to answer that as an executive or an investor? Just kidding..

You get to choose..

Look, I think we have an embarrassment of riches. Live Nation has performed very well, seemingly well.

And Formula One, which is probably a – in someways a building story, then we knew when we purchased it that there would be efforts that needed to be done, investments to be made and headcount investments to be made in a lot of areas where there was no personnel. We knew that some of these cycles were ramping up. OTT ramping up.

Some of these things would take longer. I think most things coming to past have there been, as always, surprises to the upside and surprises to the downside when you buy a business, yes. But I think the fundamental peices is there.

And probably some overhang on the stock around the Concorde Agreement and the preception of uncertainty that’s not positive on what it could trade at. The – I think we remain very bullish as you heard Chase’s comments about the direction of the business. Turning to something structural, I think it’s complicated.

I think we expressed before that in some ways the Live Nation stake, which has a role obviously in live entertainment of different types fits well here but also could be argued that it fits better over on the music side with SIRI and Pandora. Today, that would be hard, given our Liberty Sirius discount to say that would be a good trade.

And I think the Liberty Sirius holders would be disappointed if we used Liberty Sirius stock to buy a relatively full priced item – relatively full priced Live Nation and transfer across. So we’ll see where that process goes.

I don’t – we have different ideas at various times so I don’t see an obvious solution in the short term unless the values realign better that would be structurally attractive for the Liberty Sirius side and to create a pure FWONK..

Got it. Thanks a lot..

We’ll take our next question from David Karnovsky with JPMorgan..

Just a question for Chase. How does Force India’s entry and then exit for the administration potentially impact your view, not only on things like budget cuts but also on how profitable and financially healthy the independent F1 team should be in general..

I think it probably reinforces what we’ve been saying that the initiatives that they proposed and we’re discussing on revenues and costs. There really have two goals. One is to make sport better, improve competition action, as we said, the others to make it a healthier business model to everybody.

I think today the business model is not where it should be, and I think that we need to address revenues. Teams agree with that the detail. The details are always going to require hard work and compromise to find the right ones because there are 10 different perspectives on the details, but I think everybody agrees in the goals.

And I think the challenge is, in Force India, sort of reinforce the importance of making it healthy. I think we can. I think, actually realistically, I think we can make it healthier business model, and the healthier sport.

So it’s one of these places where attacking – dealing with things like costs is actually not compromising the quality of the teams are the quality of competition. I think it’s actually enhancing it, for it.

It’s just breaking old habits and recognizing where people are to get today to get there, but I think we need to make it healthier for them, both healthier for the teams that are in it.

And I think it makes them much more exciting and enticing proposition for some of the potential new entrants that we think potentially could race in the track with us, it would be a great addition for fans. So I think it just reinforces the importance of improving that business model from both perspectives..

Okay. And then just a follow-up. Is there any update you can provide on your negotiation for the British Grand Prix post-2019? And is it feasible to move this race to other tracks or do a street race in London? And then separately is there any update you can provide on where you stand with regards to the Miami? Thanks..

Again, I think on ongoing negotiations, we said in the past, this sport seems to like to negotiate in public and I don’t think that’s the healthiest way to deal with things as partners. So I don’t think we want to provide a lot of inside the tent commentary on active discussions.

We value the Silverstone race, but we got to get to a place that works for us. And that was discussions are ongoing. There always other options, that’s part of one of the things we make sure is we’re continuing to develop an array of options.

We’re in a fortunate place right now that we have more places than one races that we can race, and that’s a good place to be, and we’ll continue to develop those options and again, make sure we are able to make the best decisions both for fans and for racing and for us as a business. All those things matter and we’re actively engaged.

Miami, clearly, an ongoing process, a lot of parties involved, which is not uncommon when you get up a street race that you’ve got sort of macro parties and micro parties there are interested so it’s just it’s a time-consuming process to navigate through all of those. I guess, I’d say it’s active. I think the fan festival was a help.

I think everybody in Miami thought it was a great experience. It was great energy, great excitement. As I said in the comments, meeting 80,000 people. And really, I think almost all the comments we got were positive and exciting about it. And I think really recognized it as a unique world-class event and sort of help to reinforce what we bring.

So I think that’s a positive step in it, but it takes time when you’re working through a process like in Miami, whether there’s many constituencies that we have to deal with. So we are – certainly, the U.S. remains priority. We’re engaged in discussions elsewhere in the U.S.

so it’s not just Miami and opportunities, but we think Miami really could be a great signature event for us worldwide, not just in the U.S..

Thank you..

And we’ll take our next question from Vijay Jayant with Evercore..

Thanks. One for you Greg. On the combined – combination of Sirius and Pandora, just want to get your outlook. Are there real opportunities, the synergies between the two or really turning around the Pandora business as someone who studied this business for a long time? And if you could sort of size that for us? If possible, that would be fantastic.

And for Chase, obviously, you talked about investment years into since the asset was purchased. Is 2019 the setup for healthy growth? You have momentum on sponsorship. You have some cash deals coming from meaningful step-ups. You have calendar relatively similar in any OTT product hopefully starts to scale.

So is 2019 the year we should start to see healthy growth? Thanks..

I’ll go first. Thanks Vijay. On synergies between Sirius and Pandora, I think they fall into both not on expectantly revenues synergies and strategic synergies, which may be somewhat tight and some cost synergies.

And I’ll take the latter first, there are some obvious duplicative on the cost side, and there are things that SIRI does at scale that will be additive to Pandora. How that exactly gets organized is still being worked through. And I would expect to hear more about that in the coming months from Jim Mayer and for Roger Lynch.

On the revenue side and the strategic side, I think we talked about in the past how we have an embarrassment of riches in the sense that our content is beloved by our users, our consumers, and we have – through the satellite system – a desirable niche in some cases, and lots of errors but we like to expand as time goes on, and we have limitations on what we can do.

So there are things you can experiment more broadly in Pandora that are going to be interesting for segments that we haven’t reached out as well. There’s obviously always the work that Pandora has done around mobile where they are ahead of what SIRI has done. Their 70 million monthly active users is a scale opportunity.

Obviously, mobile-first product but also their experiences outside the car are places where they can clearly help us and their relationships can help us. Flipping that, our relationships in the car, which is roughly half of listening are far stronger. And the things you can do to help bring them in the car to accelerate them are appealing.

Obviously, those 70 million monthly active users are a mix of pay, ad-free and ad-supported. And the on-demand pay subscription, the ad-free version of the Pandora and then the ad-supported version, the opportunity to sell, cross sell some of those into SIRI, which are lifetime value of a Sirius subscriber is far higher.

And given the nature of the fixed content cost, vast majority of our content cost are fixed at SiriusXM. The contribution margin on them is even enormously better to bring anyone we can bring across.

The opportunity to share content because we do have more unique content and share across to ensure that were exposing the good better aspect, if not the best aspect, of SIRI is interesting.

The opportunity to do more things together at scale in advertising where Pandora clearly lead SIRI has an ad business, which is four or five times as big and the opportunity to work on new areas like podcasts together in a more consolidated fashion. Those are a few examples where I think the revenue strategic side is quite attractive.

I expect you’ll hear more of this from Jim Mayer at our Investor Day and some of these will flesh out, and I expect you’ll hear more ahead when they go forward with their 2019 guidance, which they generally do around CES about that time.

Chase?.

And I guess – yes, in terms of where we’re at in the process of really building, in some sense, rebuilding, as Greg said, Formula One, yes, I do – I think we do expect 2019 to be a step forward. And that’s in so many ways 2017 and 2018, I think we described going it. We’ll start a foundation building and I think as you go through 2019.

We’ll expect 2020 and 2021 to have steps forward. So I do think we actually feel pretty good about where we are.

I mean, early on, we talked about coming in with a three- to four-year process – three- to four-year perspective and the early stage being investment with some of those investments starting to deliver the benefits and deliver on the opportunities that we’re building. And we do expect those sort to come through in 2019.

And again, niche is more the others in 2020 and sort of ongoing at 2021. We’re certainly not going to step forward, but clearly, we still believe there’s a lot we have, a lot of plans we have in place. I mean we talked about things like the U.S. and China that are fairly further down the road.

As I said, OTT is certainly going to be a very early stage product next year. So – and I think mindset – I also want to make sure – I think our priority for this business is to continue to be where we going to be in three years, not three months and knock yourself into sort of trying to focus on the prioritize the short term over the long term.

I think we believe – and the deeper we go into it, the more excited we are about the opportunities to grow the sport and want to make sure we really prioritize building that value over maximizing a short-term profit opportunity.

But that being said, certainly, 2019, we do expect that we start to deliver on the opportunities that exist inside Formula One..

Great. Thanks so much..

We’ll take our next question from Jeff Wlodarczak with Pivotal Research..

Good morning, couple for Chase. Chase, in the Concorde Agreement, is that something you expect to be done in 2018? And then given the time to engineer and build new engines, especially for potential new manufacture teams, at this point, realistically, we probably pushing the engine into 2021? And I’ve got a follow-up..

Yes, first on the Concorde, we have in private – again, I guess, I go back to conversations on discussions we have in private versus public. We’ve told them our goals in terms of targets in time. I’d rather get it done sooner than later though.

The challenge is everything we’re talking about is effective in 2021, and getting things done, they’re helped by having a deadline that sort of drives that. Obviously, if all these changes 2021, everybody would like to have it done, but there isn’t something that creates a pressure point to say it has to get done by December 31, 2018.

I’d like to have it done just because I think it’s sort of healthy for us to be focusing on the future but I think the conversations are good. We have targets internally, but I don’t think it’s constructive for us to try to put out externally target dates that are going to create a different dynamic around those discussions.

I think the discussions have been good. I think the discussions have been helpful. And I think the best discussions, again, are ones at this point we have with the 10 teams as partners, and they’re ongoing.

And we feel good about that process, and we’ll bring it to a conclusion in the right way, and hopefully, expeditiously, but we’re not going to put publicly out deadlines on it. I don’t think that helps the process.

In terms of the engine, the engine really isn’t a part of the Concorde Agreement as really governance dictates really how you deal with the engine. I mean, we can put something in place, but the engine is going to have things that are evolving.

It’s actually – I think we’ve actually pretty well got a path forward for the engines that sort of evolved in many ways through good constructive conversations with the teams. And a year ago, we’re probably headed towards a more significantly rebuilt engine.

I think as we got into discussions, I think – with all the teams, I think we all came to an agreement that the right path was more stabilizing the existing engine and marrying it to a series of sporting and technical regulations that improve competition and to help improve – address the economic issues around that.

Some of those sporting technical regulations are still evolving, and they will. And again, they won’t really – they won’t be part of the Concorde Agreement. The Concorde Agreement will lay out the governance process by which you put in place those sort of regulations, but they won’t lay those out.

So actually, I think, right now, we’re on a pretty good path. I mean, we agreed from early days, our goals in the engine for simpler, cheaper, louder, more power, let the drivers drive.

I think as we went through that, we felt the best is stabilizing the existing engine and then through sporting and technical regulations, trying to achieve our, stay alert, our objectives through those regulations to achieve what we wanted to achieve. And I think we’re pretty well aligned on that and the path going forward.

Down the road, I’m sure we’ll continue to be regulations that evolve with that, but I think the engine path is – I think we’re on these pretty well agreed to and again continue to be refined through the regulatory process..

So it’s more evolutionary than sort of revolutionary? And do you feel comfortable that you can attract outside engine manufacturers sort of the path you’re on at the price....

I think that’s why the regulations are important. I think what we really came to an agreement with I think every got everybody got persuaded by the stabilizing whenever you have a new engine, it sort of everything starts over, and there are always unintended consequences out of new engine.

So what is actually I think we agreed probably been the most stabilized for those objectives, whether it’s new or existing, is stabilizing the existing engine.

And the degree when I addressed the economics and things like that, it’s really through regulations because, I mean a factor, for example, that came out of this is dyno time, which is testing time, it’s probably one of the more expensive consequences because it lets you test open ended, so it throws stuff against the wall and test it.

So the degree you want to address sort of how much time and money can be spent testing an endless list of theoretical enhancements is probably an example as important as any tool to try to make the engines, both from a sport and competition perspective and a business perspective viable and attractive for an existing and new players.

So I think the intent of this was not just to improve to path for existing but actually develop the path that we think is enticing and interesting for new. And I think in doing it, one of the things we want to make sure is we want engines to be the engines to be different.

And the technology and the sport is incredibly important, and we are clearly – we have a technology that is miles beyond anything else out there at any level, the efficiency of these engines.

I mean, one of the stories that hasn’t been told well enough is this new hybrid engine that came out a few years ago, the incredible performance it gets today with a much more fuel-efficient basis than prior engines.

So I think we wanted to make sure we continue to have the hybrid engine that was road relevant today but at the top of the pyramid in terms of technology that in many ways is at the forefront of what’s going on in the world. So I think it’s achieving all those things.

And I think that part of that is what attracts the right new engine manufacturers into it as well. And I actually think the teams is we hope just a lot of things going forward. And I think it’s collaborative.

I think it was constructive, and I think it was much more as opposed to every man for himself in the past it was much more of a partnership in trying to agree on goals and agree in the best path to get there.

But I do think the path we’re on and we’ve had some discussion we are encouraged, and I think there is broad agreement that the path we’ve sort of landed on for going forward is the right path for everybody. Again, it’s existing and new..

Thank you..

We’ll take our next question from Bryan Kraft with Deutsche Bank..

Chase, I had two questions for you.

I was wondering if you could give us some additional color on the advertising and promotion revenue in the third quarter? Specifically, did the AWS and the Petronas relationships contribute or those still yet to come in 4Q? And then separately, I wanted to ask you what are the benefits that you’re expecting from the agreement recently signed with ISG to bring betting to Formula One? And just maybe at a high level, can you talk about the structure of the economics and what it means for Formula One and what the timing is for rolling that betting across the major markets? Thanks..

There was some impact when those deals were signed during – actually, don’t know at Petronas off the top of my head. ISG certainly was not signed during the quarter. I think it was probably pretty late into the quarter. So yes, those deals will certainly be much more 2019 – have a bigger impact – much more significant impact in 2019 than in 2018.

But in terms of the actual percentage in the third quarter, I don’t know. I think it was – but I think it was sort of at the back end of the third quarter. I think the betting – I think the betting is a – we have responsibilities that go with it. We want to make sure it’s done in a healthy way.

We want to make sure it’s done as proper integrity tools around it, but I think it’s clear. Fans enjoy it, I think it makes it more interesting, makes it more exciting its an American – I look it in some ways fantasy football, which is a great enhancement to the NFL is a form of fun betting.

And I think that type of engagement in a sport widens its appeal to others, makes the experience better and, obviously, it’s business opportunities for us.

For us we’re sort of both a sponsorship element and providing probably a more expanded and interesting set of opportunities to engage with the sport and bet on things that might not be available and they’re not betting on the sport today, so it’s not – betting in the sport is not new but I think we can provide new and interesting ways.

We have to make sure we have integrity and disciplines around to ensure that anything, when bets on, is properly oversight and properly sort of policed and maintained. But we think it’s a great enhancement and a great additional dynamic dimension to this sport that we can both grow and develop these additional places for fans to bet.

And we do it recognizing there are things you have to be aware of and be responsible for when you’re interested in the world of betting..

Does Formula One share at all in the economics from the betting side? Or is it the sponsorship revenue that Formula One....

I think the primary – we’re not in the betting business. So we are more engaged with opportunities to bet than promoting the betting aspect of it, but we’re not in the gambling – we’re not in the betting business..

Okay. Thanks very much..

We’ll take our next question from Amy Yong with Macquarie..

Thanks. Maybe two questions for Greg.

First on iHeart, now that you’re not going to increase your stake, how do we think about your debt investment? How do you plan on monetizing it? And why do you think Apple is interested? What makes it more – why does it make more sense for them to own it versus SiriusXM and Pandora? And then on LSXMA apparently is giving you credit from buying back the stock.

The stock is lower than when you bought it. What do you think is going to change that view? Thanks..

I’ll start with the iHeart. I just don’t think we’re going to increase our investments at this time. It looks like the process how the bankruptcy proceedings will work, likely that some strip and mix of CCO equity, giveback debt that will be on the iHeartRadio business and then iHeart equity.

Our stake, if all comes to pass, it will be something like 5%-ish. I don’t think we’re long-term holders of CCO equity or of iHeart debt. We might hold equity. We’ll see. We’ll watch how that goes. I just don’t think at this time we’re going to be increasing our stake. I think there’s zero chance Apple buys this.

I guess nothing is zero but substantially low. You can pick yours an infinitesimally low number and pick that one for me, for my bet. But it’s a good rumor if you’re a holder of paper. And on – we’ve talked about this before. I don’t actually think the market is trading below our price.

When you look at – when we think about our price, we were buying at 4 90, which looks pretty good against the 4 91, even against the current 6 30. Yes, it has been higher various times. Maybe the stock outlook ahead of itself that iHeart.

Maybe the market didn’t love the fact that we issued at that price, but it’s probably not a terrible place to be an issuer and you feel pretty good about a buyer and a fraction of that price where we issued so that’s a good arbitrage in my mind.

How it gets cleaned up over the long term, I think we talked about some of these in the past, I think you expect we will to continue to shrink. I think you will expect that the available float is – as Sirius continues to shrink will tighten that may cause short-term perturbations but eventually, these lines are going to cross in one way or another.

And I think we’ll be happy we bought stock at 4 90 over the long term..

Thanks..

We’ll take the next question from Jason Bazinet from Citi..

I don’t know if this is for Mr. Carey and Mr. Maffei, but from the moment you bought Formula One, your Liberty stock sort of reacted very favorably because the buy side likes the asset and have a lot of confidence in Mr. Carey and the broader Liberty team.

But every quarter do you guys have reported I think over the last five or six have been disappointing even though you’ve been very clear about this being sort of foundational years to build for long-term growth. So my question is this.

As you take this step forward, as you described it in 2019 and 2020 and 2021, what is a reasonable range of expectations for top line growth? Is it low single-digit, mid-single-digit, high single-digit? Like, anything to help the buy side dimensionalize what success looks like or what failure looks like would be quite helpful..

I guess, I’ll answer. Greg can add anything he wants. I guess, I don’t think we’re sort of going to get into trying – trying to quantify, I guess it’s the pro forma guidance of where we expect it to be. I think we tried to be clear about 2017 and 2018 what our priorities.

And in some way, I think people always sort of think once you’ve said you’re going to do something three months later, why isn’t it done. And it takes time to put an organization in place, I think equally you get into a business I think talked about this a few quarters ago or maybe it was last year.

Usually, you always find a few surprises that you usually know the good things so it’s something you find about a race, in particular, or a sponsor that was leaving. In some ways, those are opportunities, but opportunities to fix them.

So I think, in many ways, the handful of things we found early on that we’re working through are all opportunities for us as we address those and get everything to where it should be when opportunity to grow it. But I recognize the market nobody wants to sort of gravitate to the quarterly earnings – short-term quarter.

And not that we ignore it, but I guess we’ve tried to be as clear as we can that our priorities where, like I said from the get-go, where we going to be at 2020, not where we going to be in three to four years, not three to four months.

And we described the initiatives to get there, but I think that I don’t think we’re going to start trying to head down the road of quantifying – quantifying those components. Some of the initiatives we announced yesterday the race to Vietnam. It’s a step – a 2020 step, not a 2019 step.

But as we evolve the calendar in 2020, in 2021 and beyond, this is one of the opportunities, and we described the things that can drive the business. I think we feel pretty good about where we are. And realistically, I think there’s always a challenge when you describe where you’re trying to go. Again, I think it’s a reaction what you describe it.

Things should in a very short orderly process follow behind it. And realistically, it takes time to build, particularly a business that, again, really what we came into. And I said I think at the investor conference last year is sort of an organizational startup and a business turnaround. And those things don’t happen.

And whether – whatever expectations we’re in there in the short term, our focus has been building for 2020. So that’s – and I think we feel there are always surprises, as I think Greg said earlier. The world is never exactly as you expect it to be. But all things considered, we feel and I think we feel pretty good about where we are.

And – but clearly, we recognize equally there is real work to do and execution to do. Now there some things a little harder than planned and some things where you have an opportunity we didn’t know was there, whether it’s fixing something from the past or an area that is bigger than we thought it would be..

So if I could just add I’ll draw from the comments, we have – the market gave us credit the blocks as you rightly pointed out, Jason. We appreciate that. But sometimes the market can, also as Chase readily points out, expect to have immediate gratification syndrome.

We have gone and laid the foundation and a bunch of things including hiring, including building out substantial capabilities. We’ve absorbed quite places where the business may have been ahead of itself, for example, particularly with promoters adjusting to make that experience, and we’ve done things to set the business right for longer term.

I think the balance sheet we’ve driven a lot more flexibility. We think we’re building and the asset that we bought is the asset that we wanted, and we think we’re building a seminal sport that’s going to be critical to viewers and Liberty for long term. And I think it could’ve happened faster? Always.

Would I wish it happened faster? I’m sure Chase wishes it more than I do, but I’m very comfortable we’re headed in the right direction..

Very good. Thank you..

And we will take our last question from Brandon Ross with BTIG..

Hi, thanks for taking the question. For Greg, on SIRI, you mentioned a couple of times that you’re unlikely to invest further in iHeart. There’s a ton of free cash flow there.

What do you think is the best use of capital right now for SIRI at this point? And is there any M&A that you believe makes sense for SIRIUS?.

Well, I just want to actually point out, I said at this time, Liberty, we like to think, one of the advantages, whether it be a trip or at Formula One or at SIRIUS we can play the long game. We are – we have control a shareholder influence on a shareholder who has a long-term perspective.

Hopefully, our management team has a long-term perspective, and we can play the long game and look for when the right opportunity arises.

The substantial free cash flow at SIRI, you rightly note, is there because they are for a bunch of reasons related to the stock price rise and the interim are being somewhat held out of the market during the dependency of the Pandora transaction. SIRIUS has actually been delevering so there’s a bunch of free cash flow there.

I would expect that SIRI will work hard at its share repurchase program, given where the current price is versus where the price has been and how the business is proceeding quite nicely. I’d note that they have a substantial amount of free cash flow at the SIRIUS level. We have substantially less free cash flow at the Liberty SIRIUS level.

We do get roughly $140 million dividends. We do have a bunch of borrowing capacity, and we’ll try and take advantage of both those, as we’ve pointed out, to arbitrage the differences in the marketplace, but we do not have infinite capacity.

They have substantial capacity with – they got to be through – by year-end, they’ve got to be through net three times, subnet three times. And I think that’s a business that can be substantially greater.

I don’t see massive M&A in the short term just because, not due to financial constraints but due to management constraints they’re going to be absorbing and fixing and directing Pandora, and that’s absolutely in my mind the right thing to do. And they do have a real opportunity, I suspect, in their own share price..

Great, thanks so much..

Operator, I think that’s our time for today. Thank you very much to all the questioners and listeners. And as we said, we hope to see a bunch of you next week in New York. And if not, we’ll speak to you next quarter. Thank you for your interest in Liberty Media..

That concludes today’s call. Thank you for your participation. You may now disconnect..