Live Nation Entertainment, Inc.

Good day, everyone. My name is Diego, and I will be your conference operator on today's call. At this time, I would like to welcome everyone to Live Nation Entertainment's fourth quarter and full year 2021 earnings conference call. Today's conference is being recorded. Following management's prepared remarks, we will open the call for Q&A. Instructions will be given at that time. Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the company's anticipated financial performance, business prospects, new developments, and similar matters. Please refer to Live Nation's SEC filings including the risk factors and cautionary statements included in the company's most recent filings on Form 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in their earnings release or website supplement, which also contains other financial or statistical information to be discussed on this call. The release reconciliation and website supplement can be found under the financial information section on Live Nation's website at investors.livenationentertainment.com. It is now my pleasure to turn the conference over to Michael Rapinoe, President and Chief Executive Officer of Live Nation Entertainment. Please go ahead, sir.

Good afternoon, and thank you for joining us. The past two years has only reinforced the power of live music. and it's been great to see artists and fans reconnecting at scale around the world. Over the course of 2021, we saw the strength of live events. The year started in the midst of the pandemic, but by summer, fans were returning to shows, and by the end of the year, we had a record pipeline of concerts, ticket sales, and advertising commitments for 2022. Restarting our concert business in the second half of the year, we put over 17,000 concerts for 35 million fans in 2021, mainly in the U.S. and U.K. markets. For the final five months of the year, in the U.S. and U.K., we had over 15 million fans attend our outdoor events, festivals, stadiums, and amphitheaters, nearly 25% higher than during the same period in 2019. Through the ramp-up, we saw demand drive price increases, particularly with platinum and other front-of-the-house ticket pricing. Fans continue to seek the best tickets, and the ongoing rapid growth of the secondary market indicates there's more room to go. Fans on-site also continued spending more, with average per-fan revenue up double digits for the year relative to 2019 levels across each amphitheater, festival, theaters, and clubs. And as shows come back, so did the desire for brands to connect to our fans. As a result, sponsorship and advertising, AOI, It was roughly the same for the second half of 2021 as it was in 2019, which was a record level. This interest came from the mix of expanding long-term relationships with brands such as Bacardi, Heineken, and O2, as well as adding new partners, including Coinbase, Hulu, and Finch. Our ticketing business had the dual benefit of strong ticket sales for events in 2021, while also being the first of our business to benefit from our 2022 pipeline. Ticket sales were at record pace across every metric, with October, November, December being our top three months ever for ticketing GTV, excluding refunds. And the fourth quarter and the second half of the year also set records for a quarter and six-month period. At the same time, we continue to reorganize our business globally and improve our operations, establishing a more nimble and low-cost company. Looking at 2022 and beyond, To strengthen ticket sales, not surprisingly, we are seeing every leading indicator for 2022 up relative to 2019, reinforcing our confidence that we will have a record year in 2022 that sets us up for growth over the next several years. Helping accelerate our growth this year is the acquisition of OSESA, which gives us immediate scale in Mexico and establishes another path into a broader Latin American market. Looking at the leading indicators, starting with show count, through February, we were up 30% relative to 2019 across our large venue shows for stadium, arena, and festivals. Ticket sales through mid-February, we have sold 45 million tickets for shows this year, up 45% from 2019. We already have eight artists selling over 500,000 tickets for tours this year, including Bad Bunny, Dua Lipa, and Billie Eilish. And fans are coming to our shows. Our most recent data over the past month indicates no show rates or concerts in the U.S. are back to 2019 levels, eliminating any lingering questions on the resilience of the fan demand. Along with our fan growth, we continue building the portfolio of venues we operate, now at 320 globally, as we net added 31 additional venues in 2021, approximately half of which came through the Ocesta acquisition. Building our venue portfolio enables us to more rapidly grow our show count and fan base in 2022 and over the next few years. It positions us to drive onsite spending more widely while also providing additional assets to brand partners. Our sponsorship and advertising pipeline is similarly set for a strong 2022, up double digits through mid-February relative to 2019, with 80% of our planned revenue for the year committed. Taking this strong activity pipeline and combining it with our more efficient cost structure, I expect 2022 to deliver record financial performance overall for its division. The two-year wait for artists and bands is over. Never had the tailwinds for our business been so strong, and I believe this is just the start of what will be the strongest multi-year period for the concert industry. With that, I will let Joe take you through more details on our results.

Thanks, Michael, and good afternoon, everyone. Given the unique seasonality we experienced last year, I'll provide an overview of our annual results, but also give some specifics on the fourth quarter as we believe that is a better indicator of what lies ahead for 2022 and beyond. Overall, our AOI of $324 million for the year was $1.3 billion better than 2020, led by an improvement of $800 million in ticketing, over $400 million in concerts, and $150 million in sponsorships. For the fourth quarter, we delivered AOI of $160 million, led by record quarterly AOI results in ticketing and strong performance in sponsorship. On the balance sheet, we ended the year with $1.5 billion in free cash and $2.3 billion in event-related deferred revenue. This deferred revenue is almost twice the level of Q4 2019, giving us one of several leading indicators for how strong 2022 is looking. Let me give a bit more color on each division, and then I will give you more on the 2022 leading indicators. First, in concerts we had 16 million fans attend 9,300 events in the quarter, continuing to be led by the U.S. and the U.K., which accounted for almost 90% of these fans. The strength of fan spending we discussed in Q3 continued through Q4, with consistent increases in ticket pricing and average per-fan spending. Concert ticket pricing was up 11% overall for the year relative to 2019, 14% in North America. As demand in many major venue types, amphitheaters, stadiums, and festivals showed strong increases as we put more tickets in market-based platinum and VIP pricing offers. Similarly, average fan spending at our amphitheaters ended up in line with last quarter's commentary at $37.50. for the year, up 25% from 2019. While this was helped by fewer promotions, it was largely driven by higher purchases, as average fan spending increased across the board from food and beverage to ticket add-ons, VIP, and parking. For our major festivals, average spending per fan also rose double digits, largely as a result of higher food and beverage and VIP sales. Finally, as we also noted last quarter, Operating costs per fan were up due to lower operating scale from fewer shows per venue, along with labor cost increases. But overall, our contribution margin per fan was up double digits as pricing, on-site spending, and other revenue more than covered any incremental costs. Next, sponsorship largely followed concerts' return to activity over the course of the year and into the fourth quarter. As a result, 2021 sponsorship and advertising AOI of $242 million was about two-thirds of 2019 levels, while Q4 AOI of $115 million was 39% higher than 2019 Q4. This strength comes across on-site and online as both parts of the business delivered record Q4 AOI. Again, our large festivals were a standout performer, increasing sponsorship revenue per fan by over 10%, versus the same festivals in 2019. Finally, ticketing was clearly the star of the quarter, delivering $212 million of AOI, which surpassed its previous best quarter, Q3 of this year, by over 20% and was 60% higher than Q4 2019, which was our previous best Q4. Ticketing success was across the board. Let me give you a few key statistics for the quarter. Transacted ticket volume excluding refunds with 65 million tickets coming in even higher than Q4 2019. Transacted ticketing GTV excluding refunds with $6.6 billion, 20% higher than Q4 2019. This was driven by concerts and sporting events whose GTV were up 22% and 55% respectively. Price increases helped drive the GTV levels. with average ticket prices up 17% for the fourth quarter relative to Q4 2019, and concerts and sporting event ticketing pricing each up approximately 20%. Our growth came from both primary and secondary ticketing, with transacted GTV excluding refunds up 16% and 49% respectively. And we added 17 million net new fee-bearing tickets from new clients to the marketplace in 2021, with most of that inventory coming online this year. And finally, our ongoing cost management helped drive ticketing's Q4 results, operating at substantially lower fixed costs than Q4 2019, as we both structurally reduced costs and also held the line on other costs being added back until we saw ticket sales fully return. So as we look to 2022, First, OSESA will benefit full-year results as Mexico is seeing live events starting to return. Most notably, their contribution will flow through our sponsorship and ticketing divisions. Looking at our leading indicators through mid-February, first, confirmed large venue show bookings are up 30% overall and double digits for each amphitheaters, arenas, stadiums, and festivals. Second, we have sold 45 million tickets for concerts this year, up 45% from this point in 2019. While it's too early to have much data on ticket pricing, early indicators continue to show the inelasticity of demand for the best tickets. Looking at our top 10 concert tours this year versus this point in 2019, average pricing is up over 20% as our average platinum allocation has increased substantially. And looking at secondary ticketing demand at Ticketmaster, five of their top 10 highest demand events ever have taken place in 2022, signaling that secondary markets continue to grow even faster than primary tickets. On the sponsorship side, commitments are up double digits from this point in 2019, prior to including OSESA. And overall, we have more than 80% of our planned sponsorship net revenue for 2022 already committed. A few other 2022 points. We continue to maintain a lower cost structure, and this takes into account labor cost increases within our perimeter as at the start of 2020. But obviously, adding new businesses, including OSESA, will come with additional fixed costs. And from a seasonality standpoint, we're going to be even more Q2 and Q3 driven this year than usual. Q1 activity is historically very arena driven with limited outdoor activity. And as we plan the arena tours for this year, we had most of them starting Q2 instead of Q1 to give the international markets time to fully open. It appears we planned that correctly. We continue to be on track with those plans, and certainly the leading indicators suggest the full year will be at record fan levels, but with somewhat lower concert activity this Q1 versus 2019. In anticipation of the growth opportunities ahead of us this year, we expect 2022 capital expenditures to be approximately $375 million, with two-thirds of this spent on revenue-generating projects. In addition, we ended 2021 with $2.1 billion of available liquidity between free cash and untapped revolver capacity, giving us sufficient flexibility to invest and grow. We are comfortable with our current leverage and will continue to reevaluate our balance sheet on an ongoing basis. With that, let me open the call for questions. Operator?