Morningstar | Raised Bid Helps Move International Speedway Closer to Pairing With NASCAR Organization
While International Speedway has struggled to steadily improve ticket prices, it continues to grow contracted broadcasting revenue as it finesses its experiential offerings. We still think that the company will continue to pursue initiatives to find alternate routes (digital, race changes, car configurations) to tap into consumer demand, boosting brand awareness, supporting a narrow economic moat. While Monster Energy's cup sponsorship has led to lower corporate sales growth due to lower contract economics prevailing after the departure of partner Sprint, revitalization efforts at Phoenix, Richmond, and Daytona should lead to incremental EBITDA margin gains starting in 2019, as these projects wrap. While we are generally concerned about the low-ROIC these projects generate, we believe they help the relevance and staying power of the NASCAR brand. While certain projects like the Hollywood Casino could stabilize revenue during periods of economic distress and generate positive returns on invested capital, necessary spending on track renovations could weigh on economic value creation. International Speedway generates decent free cash flow, but has a robust capital expenditure plan for 2017-21 (slated for $500 million for maintenance) which will hinder upside potential and is not expected to boost ROICs above a mid-single-digit pace. The $8.2 billion 10-year NASCAR television contract that began in 2015 represents a 45% average annual increase over the previous contract and will partially offset lower free cash flow from the increase in maintenance capital expenditures. The firm still generates most of its revenue from NASCAR-sanctioned events. The motorsports stadium industry is a natural monopoly at the local level, as each market can bear only one racetrack for NASCAR events.International Speedway's product competes with other recreational activities to which consumers can allocate their dollars, and low switching costs can temper profit potential. The company previously produced ROICs in the midteens, but these returns were largely affiliated with a period of stronger discretionary spending, as well as NASCAR's increased popularity in the mid-2000s.International Speedway owns motorsports entertainment facilities and promoter of motorsports themed entertainment activities in the U.S. The company's motorsports themed event operations consist primarily of racing events at its motorsports entertainment facilities. The company conducts, either through operations of the particular facility or through its wholly owned subsidiary, Americrown Service Corporation, food and beverage concession operations and catering services, both in suites and chalets. The company's subsidiary, Motor Racing Network, Inc. creates motorsports-related programming content carried on radio stations around the country, as well as on a national satellite radio service, Sirius XM Radio.
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