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SMI announces second quarter earnings

Bristol Crowd
Bristol Crowd

Speedway Motorsports, Inc. (SMI) (NYSE:TRK) today reported second quarter 2018 total revenues of $165.8 million, net income of $31.9 million or $0.78 per diluted share, and adjusted non-GAAP net income of $30.8 million or $0.75 per diluted share. Six month 2018 total revenues were $240.2 million, net income was $29.2 million or $0.71 per diluted share, and adjusted non-GAAP net income was $28.1 million or $0.68 per diluted share. These results were within management's expectations, and SMI reaffirmed its full year 2018 non-GAAP earnings guidance of $1.00 to $1.20 per diluted share as further described below.

These results reflect the negative impact of unusually poor weather surrounding NASCAR racing events at our Bristol, Charlotte and Texas Motor Speedways and Sonoma Raceway this second quarter, and our Atlanta and Las Vegas Motor Speedways in the first quarter – all six of our speedways that held events. Management believes many revenue categories continue to be negatively impacted by changing demographics, evolving media content consumption, the lingering effects of lower consumer and corporate spending, and underemployment in certain demographic groups.

Las Vegas Motor Speedway is hosting a second annual Monster Energy NASCAR Cup race weekend this September 13-16. As management expected, admission revenues from its first quarter 2018 NASCAR events were lower on a comparable year-over-year basis. The Company believes the initial strong appeal of these new playoff races in the Las Vegas market reduced the demand for their first quarter 2018 NASCAR events. However, net increases in current full year and long-term future profitability are expected from realignment of these third quarter 2018 racing events.

Second Quarter Comparison

  • Total revenues of $165.8 million in 2018 compared to $170.0 million in 2017
  • Non-recurring benefit of state income tax law change of $1.1 million or $0.03 per diluted share in 2018
  • Impairment charge for goodwill of $1.1 million pre-tax, $698,000 after tax or $0.02 per diluted share in 2017
  • Net income of $31.9 million or $0.78 per diluted share in 2018 compared to $27.3 million or $0.67 per diluted share in 2017
  • Adjusted non-GAAP net income of $30.8 million or $0.75 per diluted share in 2018 compared to $28.0 million or $0.68 per diluted share in 2017

Year-to-Date Comparison

  • Total revenues of $240.2 million in 2018 compared to $246.5 million in 2017
  • Non-recurring benefit of state income tax law change of $1.1 million or $0.03 per diluted share in 2018
  • Accelerated depreciation and removal costs on retired assets aggregating $4.6 million pre-tax, $2.9 million after-tax or $0.07 per diluted share in 2017
  • Impairment charge for goodwill of $1.1 million pre-tax, $698,000 after tax or $0.02 per diluted share in 2017
  • Net income of $29.2 million or $0.71 per diluted share in 2018 compared to $25.4 million or $0.62 per diluted share in 2017
  • Adjusted non-GAAP net income of $28.1 million or $0.68 per diluted share in 2018 compared to $29.0 million or $0.71 per diluted share in 2017

The Company now excludes the 10% broadcast rights fees that NASCAR retains for itself from both broadcasting revenue and related event management fees. Amounts for NASCAR broadcasting revenue and NASCAR event management fees were revised by $9.2 million and $13.1 million in the three and six months ended June 30, 2017 (comparable amounts were $9.6 million and $13.7 million for 2018). The revision had no impact on net income or loss, earnings or loss per share, balance sheet data or cash flows.

“Despite the exceptionally bad weather, SMI’s second quarter and year-to-date results for 2018 were within our expectations," stated Speedway Motorsports Chief Executive Officer and President Marcus G. Smith in a statement. “While adverse weather conditions have negatively impacted our admissions and certain revenue streams at all six of our NASCAR Cup weekends and certain smaller events, our results reflect higher sponsorship and ancillary broadcasting revenues on a comparable year-over-year basis.

“Our aggressive sales and marketing teams have sold all NASCAR Cup, Xfinity (except one) and Truck series entitlements for 2018, and many for several years beyond. We are increasingly optimistic that our innovative marketing strategies, including focus on broader use of our first class facilities in premium markets, are resulting in long-term opportunities for increased revenue streams and profitability. We continue to build financial strength through execution of our long-term strategic goals of debt reduction, share repurchases, and restrained capital spending, and benefit from lower cash taxes under the recently enacted federal Tax Cuts and Jobs Act.

“Anticipation continues to build around our upcoming inaugural NASCAR Xfinity and Monster Energy Cup Series playoff races on Charlotte Motor Speedway’s new 2.28-mile ROVAL™ September 29-30. The ROVAL is NASCAR’s ‘newest track’, a combination of Charlotte’s legendary oval and a world-class road course. It will provide fans a unique opportunity to see all of the road course action without the race cars ever leaving their field of vision. The Bank of America ROVAL™ 400 weekend will feature the first road course races in NASCAR’s Monster Energy Cup and Xfinity Series playoffs. The competition should be outstanding entertainment for our fans, and could set the stage for similar racing at other motorsport facilities. This is another chapter in SMI’s long history of delivering innovative, unparalleled entertainment to our long-time loyal and next generation race fans."

When it comes to the rumors of NASCAR being for sale, SMI executives had no “strategic thoughts" on the issue.