International Speedway Builds Its Future

Earnings season has raced around the corner yet again, and one of the early reporters, International Speedway (NASDAQ: ISCA  ) is already out the door with fiscal first-quarter numbers. International Speedway is an interesting business to watch as it can serve as a barometer for its demographics' spending habits. NASCAR, as many are aware, is the highest-grossing professional sport in the U.S. The first quarter is a big one for both the sport and International Speedway -- including the Rolex 24 and the iconic Daytona 500. The company plays in a very profitable, growing industry. Let's see how things are going.

The results
Tough weather conditions and a cautious consumer have kept many a company in the doldrums lately, though International Speedway was able to overcome headwinds for a decent, if lackluster quarter.

The company grew sales by just about $3 million to $131.8 million, though its operating income fell by an equal amount to $22.3 million. Causing the rift were various charges and benefits. On an adjusted basis, International Speedway came away with $15.5 million in net income, or $0.33 per share. This was flat with the year-ago figures.

A big part of the company's sales come not only from ticket sales but corporate partnerships. For the full-year 2014, International Speedway has secured 87% of its gross marketing partnership revenue target, in addition to the recent announcement of a Founding sponsorship with Toyota for the company's overhaul of the speedway. For the Sprint Cup series, only two (of 20) open slots remain, and the Nationwide Series is right behind it with three remaining partnership slots. Overall, these are fairly consistent figures with historical trends.

Building out
International Speedway's tepid growth may concern investors given the more than 20 times forward earnings ratio, but this is a company investing heavily in its future. The business has two huge projects in developments -- DAYTONA Rising and ONE DAYTONA. The first project is an extremely expensive renovation of the iconic Daytona raceway. It is revamping the facility from the ground up, and will complement it with a multi-use entertainment facility right across the street -- ONE DAYTONA. Between fiscal 2014 and 2015, the company is spending nearly $400 million in capital expenditures. Physical construction on ONE DAYTONA is set for this summer.

DAYTONA Rising is about engaging the fans and growing audiences. The revamped facility will have "neighborhoods" that allow people to socialize while still watching the race. All of the seats will be replaced with larger ones (insert joke here). The company expects an immediate adjusted EBITDA gain of $15 million once this is complete, and mid-single digit growth thereafter.

At International Speedway's other locations around the country, small improvements continue to be made as well.

These are the elements that give International Speedway its growth-oriented valuation. The company doesn't look cheap today, but it's in the midst of a major investment period aimed at keeping the company the preeminent face of NASCAR for years to come. Risk-averse, growth-oriented investors compelled by the long-term strength of both the sport and the iconic assets that make up International Speedway should keep it close in mind.

 

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11/26/2014 3:59 PM
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