International Speedway Corporation (ISCA) Q2 2018 Earnings Conference Call Transcript


Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool

International Speedway Corporation (NASDAQ: ISCA)Q2 2018 Earnings Conference callJul. 05, 2018, 1:00 pm ET

Contents:
Prepared Remarks Questions and Answers Call Participants
Prepared Remarks:

Operator

Good morning and welcome to the International Speedway Corporation 2018 Second Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterward, you will be invited to participate in the question-and-answer session. At that time, if you have a question, you will need to press the star key followed by the one on your touchtone telephone. As a reminder, this conference is being recorded on Thursday, July 5th, 2018. With us on this morning’s call is John Saunders, President and Greg Motto, Executive Vice President and Chief Financial Officer. After formal remarks, John Saunders and Greg Motto will conduct a question-and-answer period. I will instruct you on procedures at that time. Before we start, the company would like to address forward-looking statements that may be addressed on the call. Forward-looking statements involve risks, uncertainties, and assumptions. Actual future performance, outcomes, and results may differ materially from those expressed in the forward-looking statements. Please refer to the documents filed by the International Speedway Corporation with the SEC, specifically the most recent report on Form 10-K and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in these forward-looking statements. So with these formalities out of the way, I will turn the call over to John Saunders. Mr. Saunders?


John Saunders — International Speedway Corporation — President

Good morning everyone and thanks for joining us today on our second quarter call. Overall, our second quarter financial results are in line with expectations and the 2018 outlook. Despite certain attendance-related headwinds that impacted admissions revenue.

Our non-GAAP earnings improved to $0.37 per share from $0.30 per share in the second quarter of 2017. Key to this improved performance were increases in corporate sales, profits from the Hollywood Casino, contributions from ONE DAYTONA for those tenants that are now operating and the Tax Act of 2017. During the quarter we hosted six NASCAR cup weekends and one IndyCar event. Attendance for the NASCAR events was down approximately 10% on average.


However, the average ticket price increased to $74.52 or approximately 1%. We are pleased with the results for the NASCAR Cup events at Richmond which returned to Saturday night and realized an increase in attendance. Concerning the other NASCAR Cup weekends held during the quarter, we believe several factors contributed to softness in attendance, including lower capacity and construction for the monetization of the ISM Raceway and severe weather conditions which resulted in the postponement of events at Martinsville.

These headwinds are further impacted by recent retirements of star drivers. Looking into the third quarter, a three-hour rain delay affected attendance at Michigan. Attendance was also down at Chicagoland as a result of it’s moved to June of 2018 from September of 2017 and an extreme heat wave impacting the area. Going forward, we believe the new date which commences NBC Sports season coverage will better position the event in the market and expect attendance to improve in future years.


Advanced sales are mixed for the remaining events in the third and fourth quarter. Daytona is trending near last year and we are seeing positive signs for Watkins Glen. Sales are also trending toward expectations for fourth quarter events at Richmond and ISM Raceway, where both tracks will have completed newly renovated facilities. We will provide more outlook on the fourth quarter during our call in October. We remain optimistic our consumer-focused marketing and sales initiatives are working to bring ticket sales in line to deliver stronger admission and emission-related results. Our initiatives will continue to target new and lapsed customers through all traditional media, social and digital channels.


The overall objective is to spark interest and demand and to drive growth and fan engagement. Our strategies are focused on value-added options that enhance the live motor sports experience, Including exclusive VIP hospitality experiences and driver appearances. We have included ticket packages aimed at youth and younger demographics with kid pricing and family targeted promotions. Our new sales Academy, a program to attract and develop top sales talent is ringing the bell. The program focuses on targeting sales resources toward at-risk or lapsed accounts by establishing stronger account relationships and customized packages. Also, the recent realignment of certain ISC and NASCAR officers has resulted in new and innovative revenue opportunities aim to narrow the industry focus and promotional asset inventory toward two primary objectives; attendance and viewership.


We expect this elevated sales culture to strengthen the sport going forward. Our financial position is strengthened by our contracted corporate sales and broadcast agreements that provide long-term visibility. NASCAR is a powerful brand with a loyal fan base that we believe is aware of, appreciates and supports corporate participation to a greater extent than fans of any other sports property. The number of fortune 500 companies invested in NASCAR remains higher than any other sport and has increased over 30% since 2008.

From a corporate sales perspective, we have agreements in place for approximately 91% of our 2018 goal and secured race entitlements for all remaining NASCAR series events. We are projecting a year-over-year increase for gross marketing partnership revenue at approximately 8%. Projects at ISM Raceway and Richmond Raceway contribute significantly to this increase. For 2018, broadcast of NASCAR Cup series events attract over $4.1 million average viewers per minute per weekend. We believe the year-over-year trends mirror the changing consumption patterns seen in the broader sports media landscape as TV viewership, in general, has seen a decline.


Last weekend, NBC took over the broadcast of the Monster Energy NASCAR Cup Series events for the remainder of the 2018 season which featured Dale Earnhardt junior’s debut in the booth. The ratings for NBC’s broadcast of last weekend’s event at Chicagoland were up 10% compared to 2017. NASCAR’s digital platforms have also delivered strong growth with approximately 2.1 million average unique visitors per race day, a 3% increase from 2017.

Domestic broadcast rights fees, which include digital streaming, continued to provide significant cash flow visibility to us, the race teams, and NASCAR over the contract term through 2024. We believe we are well-positioned to navigate the evolving media landscape through our long-term partnerships with industry leaders, NBC and Fox. We remain sharply focused on facility optimization, matching supply with demand improves yield and, as importantly, compromised or outdated inventory is removed allowing our tracks to repurpose such areas to elevate the guest experience with innovative offerings that generate more revenue.


We recently completed facility optimization projects at six facilities in 2018. Construction at ISM raceway is progressing on schedule as we anticipate the opening in November for the Can-Am 500 NASCAR semifinal weekend. The redevelopment focuses on new and upgraded seating areas, vertical transportation options, new concourses, enhanced hospitality offerings, and an intimate infield fan experience with greater accessibility to pre and post race activities. The previously announced partnerships with ISM Connect and DC Solar have positioned the project well to achieve the desired results. The cost of the project will be approximately $178 million which includes approximately $60 million of critical maintenance. Richmond Raceway’s infield redevelopment project is well underway with the grand opening plan for September.


The scope of the project will offer a variety of enhanced amenities for our fans, sponsors, teams and other stakeholders. These include the new Monster Energy NASCAR Cup series garages, with a fan viewing walkway, expansive social and engagement areas with concessions and a new media center. As we previously communicated, the cost of the projects are fully covered in the fiscal 2018 capital expenditure guidance and our five-year capital allocation plan. We continue to seek opportunities that increase utilization of our facilities on a year-round basis.

In the second quarter, we hosted the third consecutive Country 500 Music Festival at Daytona. As a result of a shift in strategic focus, we took on a greater promotional role resulting in a restructuring of the agreement with AEG. Unfortunately, advanced sales lagged for the event and were compounded by a tropical storm that impacted the Daytona Beach area during the event. The financial result did not meet our expectations and negatively impacted our second quarter earnings. Greg will discuss this further in his review of the second quarter financial results.


Moving forward, we will evaluate our options for the Country 500 at Daytona. For the remainder of 2018, we will host three more music festivals at Michigan, Auto Club Speedway, and Watkins Glen which we expect to contribute to our earnings and achieve our 2018 guidance. Development at ONE DAYTONA continues.

Many tenants have recently completed construction and commenced operations. We recently welcomed first-to-market brands such as Hy’s Toggery, Costa Living, and Claire de Lune. We eagerly await additional tenant openings in the near future. Entertainment is a key focus of ONE DAYTONA, Victory Circle is fast becoming the development’s focal-point already hosting multiple events from live music and car shows to meet-and-greets and community festivals. We expect ONE DAYTONA to be the epicenter for retail, dining, and entertainment in the greater Daytona Beach area. Construction of The Daytona, the Marriott Autograph Collection Hotel, continues to progress favorably and we anticipate a completion timeframe of late 2018 or early 2019.


Construction for the shops at ONE DAYTONA, the retail development adjacent to ONE DAYTONA, is nearing completion. First Watch, a restaurant known for celebrating breakfast, brunch, and lunch just opened in June with another restaurant, Dahlia’s Mexican Kitchen, expected later in 2018. Completion of the overall shops project is targeted for late 2018. During the quarter, we announced a 9.3% increase to our annual dividend for 2018 further demonstrating our commitment on return of capital. ISC maintains strong visibility of future cash flow with over half of its revenues secured through the industry’s 10-year broadcast agreement and multi-year partnership agreements.


We will continue our strategic focus on consumer marketing initiatives to deliver growth through our core business. We will seek opportunities for increased utilization of our facilities through ancillary events. In addition, investments in qualified developments like the Hollywood Casino and ONE DAYTONA will provide further growth and shareholder value. I will now turn the call over to Greg to give you a financial review for our second quarter in the outlook for 2018. Greg.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer


Thanks, John, and good morning everyone. Before reviewing the financial results, it’s important to note several items impacting fiscal year-over-year second quarter comparability. These include; we hosted the Country 500 Music Festival at Daytona International Speedway in the second quarter of 2018 where certain changes in contractual agreements resulted in higher revenues and expenses being recorded. We received lease rents and incurred operating expenses related to ONE DAYTONA as a result of certain tenants commencing operations in 2018.

We recognized revenue related to insurance proceeds. We received the legal settlement in the second quarter of fiscal 2017 related to certain facility operations. Certain marketing and consulting costs recognized in general and administrative expenses that were not capitalized associated with the redevelopment project at ISM Raceway.


Accelerated depreciation and removal of assets not fully depreciated related to the redevelopment project at ISM Raceway and facility optimization projects at certain tracks. Capitalized interest associated with ISM Raceway in ONE DAYTONA and a lower effective tax rate associated with the Tax Cuts and Jobs Act. All of these are outlined in the earnings news release and are included in the GAAP-to-non-GAAP reconciliation where appropriate.

Now, looking at the income statement, admissions revenue for the second quarter was $25.7 million, a decrease of approximately $3 million compared to the same period in 2017. The approximate 10% decrease is primarily related to lower attendance and admissions for certain NASCAR and other events held during the quarter, some of which were impacted by inclement weather and in the case of ISM Raceway construction.


The increase in motor sports and other event-related revenues to $133.3 million is primarily due to increased TV broadcast rights, revenues associated with the aforementioned Country 500 Music Festival, increases in sponsorship and hospitality and other event-related revenues. ISC’s domestic television broadcast and ancillary revenues were $95 million for the quarter.

The decrease in food, beverage and merchandise revenue to $6.9 million is primarily related to the aforementioned lower attendance for certain NASCAR and other events including The Country 500 Music Festival. The increase in other revenue to $5.8 million is primarily related to rents received from tenants at ONE DAYTONA and certain insurance proceeds recognized in the second quarter of 2018, partially offset by a favorable legal settlement relating to certain facility operations in 2017. NASCAR event management fees increased to $50.2 million.


The increase is due to variable costs driven by higher television broadcast rights fees for the NASCAR Monster Energy Cup, Xfinity and Camping World Truck series events and contracted increases in non-TV NASCAR event management fees. Motorsports and other event-related expense increased to $44.6 million, primarily due to the Country 500 Festival. Also contributing to the increase were cost related to guest amenities during certain NASCAR and other events which drove increased motorsports and other event revenues. Food and beverage merchandise expense decreased to $5.2 million. The decrease is related to lower attendance for certain NASCAR and other events including The Country 500.


Other operating expense increased to one million primarily relating to operating cost associated with ONE DAYTONA. General and administrative expense decreased to $26.3 million. The decrease is primarily due to reductions to property taxes and certain administrative costs. Depreciation and amortization expense decreased to $26.9 million for the quarter, largely due to lower accelerated depreciation associated with the ISM Raceway project and assets that had been fully depreciated or removed from service, partially offset by new assets placed in service associated with ONE DAYTONA. Losses on asset retirements decreased to 195,000 primarily due to demolition costs related to the ISM Raceway project in 2017, partially offset by removal of assets not fully depreciated in connection with facility optimization initiatives in 2018.


Interest income increased to 732,000 for the quarter, primarily related to higher yields on short-term investments. Interest expense of $2.9 million decreased slightly as a result of higher capitalized interest for the ISM Raceway project, partially offset by lower capitalized interest related to ONE DAYTONA. Equity and net income from equity investments of approximately $6.4 million represents our 50% interest in the Hollywood Casino at Kansas Speedway, and to a lesser extent, our approximate 33% equity interest in the Fairfield at ONE DAYTONA. This compares to approximately $5.8 million in the second quarter of 2017.


The increase is primarily due to higher operating profits at the casino. The effective tax rate for the second quarter of fiscal 2018 was 22.2% to 38.2% in the second of 2017. This is primarily related to lower federal income tax rate from 35% to 21%, associated with the recently enacted Tax Cuts and Jobs Act, and to a lesser extent, lower tax liability in certain states. For fiscal 2018, we expect the effective tax rate to be between 26% and 27%. Net income for the three months ended May 31, 2018, was $16.7 million thirty $0.38 per diluted share on approximately $44.2 million shares outstanding. However, when you exclude certain non-recurring costs, removal of assets and accelerated depreciation incurred in connection with the ISM Raceway and facility optimization initiatives and capitalized interest related to ISM Raceway in ONE DAYTONA.


We posted earnings of $0.37 per diluted share for the second quarter of fiscal 2018 compared to non-GAAP net income for the second quarter of 2017 of $0.30 per diluted share and adjusted EBITDA of $50.8 million for the second quarter of fiscal 2018 compared to $51.8 million in the second quarter of fiscal 2017. As for the balance sheet and future liquidity, at quarter-end, our combined cash and cash equivalents totaled $327.1 million and shareholders equity was 1.6 billion. Our deferred income was approximately $92.4 million up approximately 900,000 from the same period in the prior year. At the end of the quarter, total principal outstanding on debt was approximately $260.9 million, which includes $165 million in senior notes, $49.4 million in tip bonds associated with Kansas Speedway and $46.5 million for our term loan on our headquarters office building.


We currently have no borrowings drawn on our $300 million revolving credit facility. As it relates to capital spending for the six months ending May 31, 2018, we spent approximately $65 million Including capitalized interest and labor. We have established a long-term capital allocation plan to ensure we generate sufficient cash flow from operations to fund our working capital needs, capital expenditures at existing facilities, return of capital through payments of an annual cash dividend and repurchase of our shares under our stock purchase plan. We operate under a five-year capital allocation plan adopted by our board of directors covering fiscal years 2017 through 2021. Components of this plan include capital expenditures at existing facilities, the ONE DAYTONA development project and return of capital to shareholders.


Our plan anticipates capital expenditures for existing facilities up to $500 million from fiscal ’17 through fiscal ’21. This allocation will fund the estimated $178 million reinvestment at ISM Raceway, the previously discussed infield project at Richmond as well as all other maintenance and guest experience capital expenditures for the remaining existing facilities.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

While many components of these expected projects will exceed weighted average cost of capital, considerable maintenance capital expenditures estimated at approximately $40 million to $60 million annually, will likely result in a blended return of invested capital in the low to mid-single digits.


In addition to the $500 million in capital expenditures for existing facilities, we expect we will have an additional $107 million of capital expenditures, related to ONE DAYTONA including the shops. Since commencement of construction for ONE DAYTONA from fiscal 2016 through the second quarter of fiscal 2018, capital expenditures totaled approximately $97 million.

At stabilization, which we target to be fiscal 2020, we expect this phase of ONE DAYTONA and the shops to deliver incremental annual EBITDA of approximately $10 million, and unlevered return above our weighted average cost of capital. For fiscal 2018, we expect total capital expenditures associated with our capital allocation plan to range between $140 million and $150 million, which includes between $120 million to $130 million for existing facilities, and an additional $20 million in capital expenditures related to the construction for ONE DAYTONA.


Based on our current plans for ISM Raceway, we have identified existing assets that are expected to be impacted by the redevelopment, and will require accelerated depreciation totaling between $6 and $6.5 million in non-cash charges over the 22-month project span. Despite not issuing specific debt to fund our projects, accounting rules dictate the Company capitalize a portion of interest on existing outstanding debt during the construction period. For ONE DAYTONA, since inception in 2016 through the second quarter of 2018, we have capitalized interest totaling $3.6 million.


For ISM Raceway, since inception in 2017 to second quarter of 2018, we have capitalized an interest totaling approximately $2.8 million. Return of capital to shareholders through dividends and share repurchases is a significant pillar of our capital allocation plan. For 2018, our annual dividend is $0.47 per share, an increase of 9.3%. We expect dividends to increase in 2019 and beyond by approximately 4% to 5% annually.

Through May 31st share repurchases for fiscal 2018 totaled approximately 156,000 shares of ISCA on the open market, at a weighted average price of $41.08, for total of approximately $6.4 million. At May 31st 2018, we had approximately $165.2 million remaining repurchase authority under the current $530 million stock purchase plan.


For fiscal 2017 through 2021, we expect our return of capital program to be approximately $280 million, comprised to close to $100 million in total annual dividends and $180 million open market repurchase of ISCA shares over the five-year period. At this time we expect this spending to be evenly allocated per year, although we will scale the repurchase program to buy opportunistically.

In summary, we have built the capital allocation plan based on conservative estimates that will maintain a strong financial position prudently and disciplined reinvestment in the business, and provide stable and growing return to shareholders. This includes $500 million capital expenditures for reinvestment in existing facilities, $107 million for the ONE DAYTONA development, and$280 million in dividends and share repurchases. As for our financial and liquidity position, this has been enhanced by the tax cut and Jobs Act passed by Congress in 2017, which will lower the single corporate tax rate from 35% to 21%.


We will continue to explore development or acquisition opportunities, beyond the previously discussed initiatives that build shareholder value and exceed our weighted average cost of capital. Should such initiatives be pursued, we will provide discrete information on such opportunities. Now for our outlook for 2018.

In an effort to enhance the comparability and understandability of our forward-looking financial guidance, we adjust for certain non-recurring items that will be included in our future GAAP reporting. We believe this adjusted information best represents our expectations for our 2018 core business performance. Please refer to our earnings release for the detailed list of items excluded from our fiscal 2018 non-GAAP guidance. For fiscal 2018, we are reiterating our previous guidance.


Our full year fiscal 2018 guidance includes, total revenues to range between $680 and $695 million, adjusted EBITDA will range between $241 and $252 million, which includes approximately $25 to $26 million in pre-tax cash distributions from the Hollywood Casino. Operating margin is estimated between 15.5% and 16.5%. Now non-GAAP effective tax rate is forecasted between 26% and 27% and non-GAAP earnings of $1.90 to $2.10 per diluted share. As it relates to quarterly earnings, we expect the third quarter of fiscal 2018 to increase between $0.15 to $0.20 per share compared to the third quarter third fiscal 2017.


This is primarily due to both the reduction in the tax rate and the date change of the NASCAR weekend at Chicagoland, moving to the third quarter of fiscal 2018 from the fourth quarter of 2017. In closing, we maintain a solid financial position developed over many years that affords us the ability to follow our disciplined capital allocation strategy, and maintain our leadership position in the Motorsports Industry.

We have a long-term capital allocation plan that extends through fiscal 2021 demonstrating our ongoing commitment to building long-term value. For the future, we are well-positioned to balance the strategic capital needs of our business with returning capital to our shareholders. We look forward to speaking with you on our next earnings conference call in October. With that, I will turn it back over to the Operator who will lead us through the Q and A portion of the call. Operator.


Questions and Answers:

Operator

At this time, if you would like to ask a question, please press star, the number one on your telephone keypad. We’ll pause for just a moment to compile the Q and A roster.

Operator

Your first question comes from Jamie Katz, please go ahead.

Jaime Katz — Morningstar Equity Research — Analyst

Morning everybody. Thanks for taking my questions.

John Saunders — International Speedway Corporation — President

Good morning.

Jaime Katz — Morningstar Equity Research — Analyst


I’m curious in the press release the way that the text was written surrounding revenues, was that they were impacted by weather, construction and then a general trend of lower sales and I’m curious first if that was by order of magnitude.

Second, I’m trying to think about which part of that is temporary and which part is permanent if there’s this general trend of lower sales. Then third, was that sort of in line with your internal expectations or was that still a little bit softer than you originally anticipated? Thanks.

John Saunders — International Speedway Corporation — President


Well, if I heard your questions correctly Jamie, weather was a big impact in the quarter. We had a postponement, we had snow in Martinsville and had to postpone the events. Then as we entered into the third quarter, we had rain delays at Michigan and massive heat wave in Chicagoland. So, weather was an important part but all in all the attendance was a little softer than expected.

We still have an issue with star power and hopefully this stable of young drivers coming along we’ll start to win and build their brands. But I would also say that I talked about our sales academy on the call and we have retooled elevated our sales culture and the sales academy is where we have recruited high-powered, high-talent sales individuals who are focused on building customized relationships and that’s all they do, is build customized relationships with what we consider to be at-risk renewals or retentions and they are commissioned. That’s not something we’ve done in the past. They are ringing the bell as I mentioned in the scripted remarks.


The other thing that we have done is we have dual officer roles within NASCAR and ISC particularly, Craig Need on the media and innovation side and Daryl wolf and consumer marketing and corporate sales side. We are getting the industry aligned on being solely focused on attendance and viewership and streamlining the assets and our focus as we go to market. We think we’ve seen some early on when we’re not out of it yet but we think these initiatives are going to bear fruit. So, we remain optimistic in these initiatives and we’re going to stick to them.


Jaime Katz — Morningstar Equity Research — Analyst

Okay. The commentary on corporate sponsorships was impressive but I’m curious about the commentary surrounding bookings ahead for the third quarter, it sounded like there were some pluses and minuses, I think you noted that it was mixed ahead.

So, if we took out Chicagoland from the third quarter, would we be looking at a slight downtick in admissions revenues again or could we be looking at something a little bit more wide than that if you’re willing to comment on it?


Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Hey Jaime, this is Greg. Yeah, there would be a slight downtick as we mentioned, we did take a weather impact in Michigan already which we had a three hour delay on that event. Otherwise, as John mentioned, this weekend we’re running the Coke Zero Sugar 400 in Daytona and that’s trending near last year, Watkins Glen is looking really strong.

The outlook for the fourth quarter, we’re still early on for many events have a lot of sales to go in the cycle. The projects at Richmond and in ISM Raceway are trending toward our expectations. Honestly, we expect to announce the future sellouts in the future where our events are the only ones that have announced sellout soon in recent years. So, again as John mentioned, we feel that the strategies we are implementing are yielding dividends for us and helping to offset some other headwinds.


Jaime Katz — Morningstar Equity Research — Analyst

Okay, and if I could squeeze one more in, I know it’s a little bit early but Monster goes through next year now and there’s been some speculation that maybe the approach or some talk that the approach next year might be a little bit different to sponsorship going forward, if you have any commentary surrounding that I know it’s sort of in NASCARs who will have a little bit more but just curious if you have any insight?

John Saunders — International Speedway Corporation — President


Yes, we do it Jamie. This is an initiative that is being led by Steve Phelps at NASCAR and Daryl Wolfe, who is an Officer of both companies, and they have been communicating a new integrated sponsorship model for the industry.

We believe this will yield more revenue for all the stakeholders. Let’s face it, we as a business model historically, it hasn’t been easy to transact and even though NASCAR offers a good ROI for sponsors in the sport, sponsors have to go to the race teams, they have to go to the tracks, they have to go to NASCAR. So this model, think of it in terms of the Olympic model.


We may not have a title, a series entitlement going forward after Monster Energy, we may have presenting sponsors. But the whole idea here is to drive incremental EBITDA for all the stakeholders, improve retention rates and partner standard satisfaction, leverage opportunities for our media partners and grow the in-market activation which has a direct correlation to driving fans to the live experience.

So, it’s early on, the team has done a good job, Darrow and Steve Phelps have done a good job of meeting with all the stakeholders to explain this and everybody is embracing the opportunity. It’s innovative and we have expectations that it will succeed. So we’re excited about it.


Jaime Katz — Morningstar Equity Research — Analyst

Excellent. Thank you so much.

John Saunders — International Speedway Corporation — President

Okay, thank you Jamie.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Thanks Jamie.

Operator

Your next question comes from the line of Tim Conder, please go ahead.

Timothy Conder — Wells Fargo Securities, LLC — Analyst

Thank you. John, just to continue on that last question that Jamie asked, you said that there may not, still a lot of work to be done, but there may not be a broad sponsorship for the overall series getting sponsor basis. Would there be bundles of tracks, bundles should I say of races or would it just be every individual race that negotiated at the NASCAR central level, any additional color I guess on the conversation there?


John Saunders — International Speedway Corporation — President

Well, at a high level Tim, again, think of it as the model that’s used for the Olympics, where you have tiered sponsors. Those at the highest tier, get certain assets that others at lower tiers don’t get but it is designed to include entitlements, race entitlements.

Let’s face it though, when Sprint was in the sport, they were writing a check somewhere north of $75 million a year and we the industry, don’t know if that is viable going forward for long-term deals. But when you think of the Olympic model and at the highest tier delivering exclusivity to four, five, tier one call it sponsors, that collectively that revenue would exceed a Monster Energy or a Sprint or any other singular sponsor to have the entire series entitlement.


I don’t know if I’ve answered your question, but it’s also an increased opportunity for activation for all the brands that are in the sport. So, we’re optimistic.

Timothy Conder — Wells Fargo Securities, LLC — Analyst

No. No. No. Very helpful and much appreciated there. The other thing I wanted to ask here, again a lot of the weather issues as you’ve mentioned we’ve seen here. But if we look out through your 2020 in and John, Greg, whoever wants to take this and some of the numbers you were throwing out there.


In general, what’s built in from your expectations from admissions line perspective and so forth? Just brought annual top-line basis? Then just to clarify also, Greg if you were mentioning lower to mid single digit ROIC through 2020, was that just when Daytona project or was that all the collective projects that have been announced just to clarify that?

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Yes Tim, this is Greg. I’ll take that. So, well, specifically when it comes to guidance for our outlook we’ll provide that on a year to year basis. I think though it’s important to go back to the strategies that we’re targeting, that we’re focused on to target the admission stabilization and positioning for growth. That combined both operationally and from a capital standpoint.


So, it kind of leads into your other question about the low to mid single digits of ROIC. That’s on the overall CapEx spend for the business. We have about $40 to $60 million of maintenance CapEx that we spend annually just to keep these facilities up to shape and meet our current expectations.

Then what we do is we also look at some innovative ways we can expand that capital to grow a higher return on the invested capital and that’s the projects in Daytona, that’s the projects that ISM Raceway in Phoenix, the projects in Richmond.

It’s also inclusive of our facility optimization projects, where in some cases we take down capacity and we put in other amenities where- that are driving demand, whether it be camping or corporate or group hospitality, it’s ways to monetize the footprint that we have in multiple opportunities to drive revenue.


Timothy Conder — Wells Fargo Securities, LLC — Analyst

Okay. Well, I guess one last one. Then within the ROIC that you put out there. So, you’re looking more for stabilization through 2020 and then missions top-line and just any broad top-line would be looking both stabilization or maybe just a very low single digit growth.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

I think it’s probably best that will give that guidance as we get into 2019. I think we have given guidance on that should help you is as we do these projects. We’re providing you with what we expect incremental EBITDA to be.


Overall again, our strategies are focused on the consumer side with stabilization in positioning for growth and complemented by these CapEx initiatives to drive some incremental growth.

Timothy Conder — Wells Fargo Securities, LLC — Analyst

Okay great. Thank you sir.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

No problem. Thank you.

John Saunders — International Speedway Corporation — President

Thank you, Tim.

Operator

Your next question comes from the line of Matthew Brooks. Please go ahead.

Matthew Brooks — Macquarie Capital — Analyst

Good morning guys.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Good morning to you.

Matthew Brooks — Macquarie Capital — Analyst

A couple of questions here. There has been some stories in the media about NASCAR being maybe up for sale. Can you comment on that at all and what that change might mean to you?

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Matthew, we have no comment on that.

Matthew Brooks — Macquarie Capital — Analyst

Okay. Second one, you talked about a few of the races in the third quarter in terms of the forward sales, is there any way that you can give sort of an overall number for forward sales than like it’s maybe roughly flat or down a little, would that be right?

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Currently about say flat to down overall but some of that will be mitigated or offset by the specific projects that we have coming in operations at Richmond and Phoenix.

Matthew Brooks — Macquarie Capital — Analyst

All right. Attendance was a little bit down in Q2 and you’ve got those weather disruptions to 3Q. A little bit of a disappointing resultfor the festival. Is it be fair to say that you’re probably looking at the result in about half of your guidance range?

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

We still have half of the season to run. Matt, I don’t think we’re at point where we can narrow the range. I mean, last year by way, example we ended with a very strong fourth quarter and came up closer toward the upper end of our range. So, I think we’ll be able to provide more guidance on that in the third quarter call in October.

Matthew Brooks — Macquarie Capital — Analyst

Okay. So, I guess depending on how well Phoenix does maybe as when it pick up list you might even have potential to beat your guidance by the end of the year?

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Yeah, we’ll provide more on the third quarter call.

Matthew Brooks — Macquarie Capital — Analyst

Okay. Thank you very much.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Thanks Matthew.

Operator

Your next question comes from the line of Greg Pendy, please go ahead.

Gregory Pendy — Sidoti & Co. LLC — Analyst

Hey guys, thanks for taking my question. Just one real quick one, it seems like the food and beverage was pretty outsized down relative to the admissions.

Is there anything to read into that? Was there any reason that kind of came in tracking maybe close to down 30% year over year?

John Saunders — International Speedway Corporation — President

Yeah Greg, so part of it was attendance related and then one of our facilities we also had a renegotiation of the contract for the food and beverage provider and that changed from an agreement where internally we would record gross revenue and gross expense to an agreement structure where we only record a percentage of sales. So, that had an impact to it as well.

Gregory Pendy — Sidoti & Co. LLC — Analyst

Okay great. Thanks a lot.

John Saunders — International Speedway Corporation — President

Thank you.

Operator

As a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. There are no more questions at this time.

John Saunders — International Speedway Corporation — President

This is John, I just want to thank everybody for joining us on this call and we look forward to talking to you on our third quarter call in October. So, thanks everyone and have a great weekend.

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Thank you.

Operator

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

Duration: 49 minutes

Call participants:

John Saunders — International Speedway Corporation — President

Gregory Motto — International Speedway Corporation — Executive Vice President and Chief Financial Officer

Jaime Katz — Morningstar Equity Research — Analyst

Timothy Conder — Wells Fargo Securities, LLC — Analyst

Matthew Brooks — Macquarie Capital — Analyst

Gregory Pendy — Sidoti & Co. LLC — Analyst

More ISCAanalysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Leave a Reply

Your email address will not be published. Required fields are marked *