Live Nation Entertainment, Inc.

Good day, everyone. My name is Hector, 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 first quarter 2022 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 risk and uncertainties that can 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 Forms 10-K, 10-Q, and 8-K for a description of risk 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 of 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. Momentum has picked up for all of our businesses over the course of the first quarter, and as a result, we have delivered financial performance that greatly surpassed our previous expectations and with AOI of 209 million. Artists are back on the road, and fan demand has never been stronger, a reflection that live events remain a clear priority for consumers as our social lives restart. Ticket buying serves as a leading indicator to our overall business. Ticketmaster's strong first quarter performance drove the company's overall profitability and shows how well our concert and sponsorship businesses are positioned to deliver record results this year. Despite some markets taking longer to reopen, the quarter was our second highest ever for transacted GTV, excluding refunds, trailing only Q4 2021, with March being our highest transacted GTV month ever. In primary ticketing, we're now benefiting from the 17 million new fee-bearing tickets we gained in 2021, which helped us drive transacted GTV for the quarter up 33% relative to 2019. This quarter was also added 7 million new additional tickets through new contracts with venues as well as content creators, setting us up for ongoing growth this year and into 2023. Our secondary ticketing GTV growth was even higher, up 106% relative to 2019, driven largely by average retail ticket price up 20% relative to 2019, and tremendous fan demand pushed up the market pricing. Ticketmaster gained additional market share by effectively leveraging its team and league partnerships across NFL, NBA, and other sporting events. And the market continued growing at double-digit pace, demonstrating high demand for live events as well as how much runway there is for continued pricing efficiently. Fan demand and signing of new contracts accelerated even faster than expected this quarter, reinforcing that Ticketmaster is the enterprise platform for choice. of teams, artists, and content creators, and continuing to be the most effective fan marketplace. Our sponsorship activity fully returned to Q1, delivering financial results that well exceeded 2019. We're seeing growth across a number of dimensions, expansion of existing relationships, new categories expanding our breadth of partners, and new ad units being created both on-site and online. The number of strategic sponsors that generated over $1 million of revenue per year has risen by almost 30% since 2019, with their committed spend up 70% and accounting for 80% of our total sponsorship revenue. About 60% of this growth has come from three categories of particular priority over the past two years, technology, telecom, and purchase path integration, which has collectively more than doubled their sponsorships since 2019. Much of our focus with brand partners is how we collectively elevate the fan experience. We've had great success with this in recent years, and so far this year, through our partnership with Verizon, we started powering our venues with cutting-edge 5G connectivity and are launching an initiative with Snap to give artists augmented reality capabilities at shows and festivals. At this point, sponsorship sales are up double digits relative to 2019, and we have a solid 90% of our planned sponsors for the year. positioning us for continued strong financial performance. The concert division, all leading indicators point to double-digit growth in fan attendance at our concerts relative to 2019. Approximately 11 million fans attended our shows in the first quarter, compared to 15 in 2019. This was expected as we planned for limited concert activity in the early months of the year to allow for markets to open. But more importantly, we continue to build our flywheel, with over 70 million tickets now sold for shows in 2022, up 36 compared to 2019. And committed show count is up 44% through the end of April relative to 2019, setting us up for continued ticket sales over the year. We continue to see the fans are showing up for the concerts they have tickets for, with attendance rates in the U.S. across all venue types at 2019 levels increasing. with no shows generally in the low-mid single digits. The industry continues to embrace market-based pricing, particularly on the best tickets, shifting $500 million to artists for shows this year, resulting from a double-digit increase in ticket pricing and reducing the price arbitrage in the secondary market. At the same time, in the U.S., the average entry-level price to get in and enjoy the show remains under $35, approachable for almost all fans. Early reads on consumer spending on our shows across the U.S. and U.K. also indicate fans continue their spending when they get to the show. We had 2 million fans attend shows at our theaters and clubs in the first quarter, with average per-fan revenue up 30% relative to 2019. And we've had four festivals over the past few months, totaling over 300,000 fans, with average per-fan revenue up 30% also. Looking ahead to the summer and the rest of the year, we remain optimistic that we are just getting going as all leading indicators reinforce record activity levels and financial results. Ticket sales were at record levels in Q1, with momentum building over February and March. We sold almost 20 million more tickets to our concerts this year than this point in time in 2019, with a large number of tours still to go on sale. And concert fans are showing no sign of slowing down, They're paying for the best tickets, attending the shows, and spending more on site as they create lifetime memories. We're continuing to build Venue Nation, our platform of operated venues, with a pipeline of 20 venues, including the recently opened Moody Center in Austin, in addition to adding 38 more festivals this year. Sponsors are looking to spend more this year on live entertainment than ever, and Live Nation's scale and global platform is making us the partner of choice. While the U.S. and U.K. have driven much of our activity over the past year, the rest of the world is now rapidly opening up. OSESA's financial performance for the quarter exceeded its 2019 results, and both Latin America and Western Europe are expected to have record attendance for our concerts this year. I continue to expect this just to be the start of our run. The global addressable markets for concerts, ticketing, and sponsorship all provide a long runway for continued growth. We have over 60 tours already under discussion for 2023, our earliest indicators of next year and great positioning for ongoing growth. With that, I'll turn it over to Joe.

Thanks, Michael, and good afternoon, everyone. Given the unique situation in 2020 and 2021, Q1 of 2019 is the best comparison for us in terms of understanding our operations and key performance indicators. So while I will provide some commentary around our results relative to Q1 of 2021, most of our focus will be relative to 2019. Overall, our AOI of $209 million for the quarter was $361 million better than 2021, led by an improvement of $269 million in ticketing, $66 million in sponsorship, and $26 million in concerts. This was our highest Q1 AOI ever, exceeding Q1 of 2019 by $94 million, which had been our previous record first quarter. Let me give a bit more color on each division, then I will give you more on 2022 leading indicators. First, ticketing was again the star of the quarter, delivering $206 million in AOI, making it the second best quarter ever for ticketing, and more than doubling the Q1 2019 AOI results of $100 million. The first quarter of 2021 was heavily impacted by the pandemic resulting in an AOI loss of $63 million. Ticketing was successful across the board. Let me give a few key statistics for the quarter. Our growth came from both primary and secondary ticketing with transacted GTV excluding refunds up 33% and 106% respectively. Transacted ticket volume excluding refunds was 63 million tickets our fourth highest quarter ever and 7 million tickets higher than Q1 of 2019. Transacted ticketing GTV, excluding refunds, was $6.3 billion, our second highest quarter ever after Q4 of 2021 and 39% higher than Q1 2019. This was driven by concerts and sporting events whose GTV were up 49% and 73% respectively relative to Q1 2019. A continued shift toward more market-based pricing helped grow GTV levels, with average primary ticket prices up double digits for the first quarter relative to Q1 2019. And in resale, our average price increased 18%, while our overall resale GTV doubled compared to the first quarter of 2019, indicating that demand for the top seats across all live events increased continues to outpace efforts by sports teams, artists, and others to capture more of the full value from their events. As the first effectively normal Q1 since 2019, we are seeing that digital tickets have now become the norm across live events, with the NFL and NBA leading the way with 96% of fans using digital tickets to enter games, up from 53% in Q1 of 2019. More broadly, 72% of our tickets globally were digital in Q1 of 2022, relative to 33% in Q1 2019. With this level of digital adoption, we can now accelerate our efforts to foster our direct fan relationships this year and into 2023. Next, sponsorship continued to ramp up with the reopening of venues and expanded online opportunities. As a result, 2022 Q1 sponsorship and advertising AOI of $70 million grew by 75% relative to 2019 Q1 AOI of $40 million. This strength comes across both on-site and online, each delivering record Q1 AOI. The growth versus 2019 was driven by expansion of our online business, new festivals that launched in the quarter, and the addition of OSES's brand partners. Finally, in concerts, our AOI was a loss of $49 million, which compares to a loss of $74 million in Q1 of 2021 and positive AOI of $5 million in Q1 of 2019. As we indicated on the last call, we plan for fewer arena tours in Q1 this year, which typically drives our first quarter performance, resulting in concert seasonality that will be even more Q2 and Q3 driven this year than has historically been the case. In the quarter, we had nearly 11 million fans attend 6,600 events, continuing to be led by the US and the UK, which accounted for almost 80% of these fans. In comparison, Q1 of 2019 had 15 million fans and 8,200 shows when all of our markets and all venue types were fully open. For ticket sales through late April for shows playing off this year, our average ticket price was up double digits relative to the first quarter of 2019, Again, mainly driven by demand for the best seats. At the same time, our average entry price remains less than $35 overall and less than $30 for amphitheater and club shows. Michael mentioned that no-show rates were back to pre-COVID levels, so I wanted to give a few more specifics to hopefully set the record straight. Looking at the full year through mid-April for the U.S., our no-show rates were the same or better than the same period for 2019. For arenas, they were 1% better. For amphitheaters, they were 4% better. For theaters and clubs, they were on par. And all up, we are 2% better. We haven't had enough volume on other outdoor events to have meaningful metrics yet, but generally those venues had strong reopenings last summer, so we don't expect any issues there. In general, the U.S. was ahead of the rest of the world, but the U.K. is now fully back to pre-pandemic no-show rates as well, And we have not seen any evidence in any markets of any long-term impact on our shows. Michael gave you the top line on our first quarter average revenue per fan growth, up 30% for both theaters and clubs and festivals. For theaters and clubs, key drivers include on-site concessions and upsells. And for festivals, the growth was heavily driven by on-site concessions and increased VIP purchases. All indicators of continued strong fan spending as they look to make the most of going to the show. Finally, COVID continues to have less and less impact on our concert schedule, and by March in the U.S., we canceled only around 1% of our planned concerts. As we look to the remainder of 2022, looking at our leading indicators through the end of April, first, confirmed show bookings are up over 40% overall and up double digits for each amphitheaters, arenas, stadiums, and festivals. Second, ticketing has sold 130 million fee-bearing tickets for events this year, up 26% from this point in 2019. Of these, 88 million tickets are for concert events, which is 40% higher than 2019. Related to this, we have $3.5 billion in event-related deferred revenue, almost twice the level of Q1 2019. These are largely tickets that have been sold by Ticketmaster for Live Nation concerts, but the revenue in AOI hasn't flowed through yet and will do so over the course of this year as events happen. On the sponsorship side, commitments are up double digits from this point in 2019, and overall we have more than 90% of our planned sponsorship net revenue for 2022 set. On the cost side, we're obviously tracking closely cost increases associated both with labor and in general with supply chain challenges and inflation. These costs tend to hit us primarily in the venues we operate, amphitheaters, theaters and clubs, and festivals. For amphitheaters and theaters and clubs, labor is the largest factor given we have our venues in place. Across this entire fan base, we expect our variable cost per fan, excluding talent, to increase by $2 to $2.50 relative to 2019. This remains well below our average revenue per fan growth, And so we still expect to grow average per fan profitability across our operated venues this year. Festivals have a broader range of costs given the wider set of equipment and services involved in building these events. Current projections are that variable costs per fan excluding talent will be up 7% this year, which is well below our expected increase in ticket revenue per fan. Helping offset all these costs, is the $200 million cost reduction exercise that we executed last year, which remains well in place. A few other points on 2022. We now expect OSESA will deliver full-year results in line with 2019 levels as Mexico is fully active, with most of their AOI flowing through our sponsorship and ticketing divisions. In light of the OSESA acquisition, we want to provide more guidance on a few line items below AOI which impact our earnings per share calculation. First, on depreciation and amortization, we expect the combination of these accounts to be roughly in line with 2019. The addition of OSESA is offset by the impacts of our reduced investment in CapEx and M&A over the past two years. With the acquisition of OSESA and anticipated strong performance of our festivals, many of which are joint ventures, we expect non-controlling interest expense will be roughly double 2019 levels. We are projecting accretion to be about $150 million this year. Again, the increase compared to 2019 is largely attributable to the OSESA acquisition. As a result of the additional financing opportunities over the past two years, our interest expense is now roughly $70 million per quarter. Finally, in comparison to 2019, we expect income tax expense will grow in line with our AOI growth. In anticipation of the growth opportunities ahead of us this year, we continue to expect 2022 capital expenditures to be approximately $375 million, with two-thirds of this spent on revenue generating projects. We generated $89 million of adjusted free cash flow this quarter and expect free cash flow conversion from AOI to be back in the 50s for the full year. We ended Q1 with $1.9 billion of available liquidity between free cash and untapped revolver capacity, giving us sufficient flexibility to invest in growth. We are comfortable with our leverage, with over 85% of our debt at a fixed rate, and our average cost of debt is roughly 4.3%, positioning us well in this interest rate environment. With that, let me open the call for questions.

Operator? Thank you. At this time, we would like to conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad, A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question comes from line of David Karnofsky with J.P. Morgan. Please proceed with your question.

All right, thank you. Michael, you've given a lot of great leading indicators for 22, so I apologize to jump ahead, but you did mention in the release 60 tours in discussion for 23, and I was hoping you could put some context around that, how elevated would that number be, you know, kind of relative to what you might normally be looking at this early on, and is there a way to kind of think through how much of that is sort of backlog, continue to work through from the organically increasing your footprint?

Yeah, thank you. The 23 is really no backlog. The 22 is the year where we would have flushed out any rescheduled tours from 2019, 21, wherever. So 2023 is kind of, if you want to call almost back to business. And yes, it's a very vibrant pipe. I think we said of the investor date, if you want to kind of scale back and look at the next five years, You can kind of look at what we did going into 19 where we looked at the industry growing at almost 10% a year on a compounded basis. We think the industry is going to be doing that again. It's back to full growth, high-quality growth sector industry, and we think we tend to outperform the industry. So we look at 23 will be, if you want to call it a record year, coming off of 22, and we think we're in for multiple record years of growth.

Okay, great. And then just on Ticketmaster, I was wondering if you could just walk through some of the drivers of the strong secondary growth you're seeing. In particular, you mentioned share gains, whereas in the past, I think we tended to think of market shares for you and your competitors as generally stable. Maybe you could just speak to some of the initiatives you're taking at the league or team level to kind of drive that higher. And then just as a follow-on, is there any update you can provide on the NFL relationship, just given that's now extended to 2026? Thanks.

Hey, David, this is Joe. I'll take it. I think the questions are related. Start with the NFL. We entered the partnership with the NFL four years ago, I guess. And that relationship was really technology driven. And it was a mutual strategy of figuring out how do we shift the industry to digital ticketing? How do we understand identity, enable relationships with the fans for the leagues, for the teams, as well as for Ticketmaster? And that's proven to be very successful. And obviously coming out of COVID, not surprisingly, the NFL said, What's the next technology agenda? We worked with them on deploying NFTs, and they said, this is all great. Better to talk now about linking back up for the next five years so we know we can work together and figure out what's the next technology unlock. How do we continue to use technology as really it's the core of the relationship or the starting point of the relationship with the fans? So that's what led to the renewal. We're excited about it. We think the NFL has been a great partner and will continue to be. So naturally, as you do that, we continue at Ticketmaster to get smarter and smarter about the fan as well. That lets us continue to use our alignment and our mutual interest with the teams and the league in terms of driving Ticketmaster's share in the secondary. So we're taking all the data. We have all the information. We're working – with them on all of their assets to help acquire customers to use all the season ticket holder inventory to continue to drive our share and provide a great marketplace, a great experience for fans to be buying those tickets. So a combination of all of those has led to increasing share, which is, as Michael talked about, part of how we've doubled secondary in the first quarter relative to 2019. Thank you.

Your next question comes from Steven Lasik with Goldman Sachs. Please proceed with your question.

Great. Thanks for taking the questions. To start, I think there's been a fair amount of concern on the macro front. You touched on it a little bit at the end of your prepared remarks, but I was curious if you're seeing any signs of consumers changing their spending habits, whether that's on the initial ticket purchase or once they get to the venue, against what's turning out to be a pretty difficult inflationary environment. Any data points from the last few weeks I think would be helpful there.

Yeah, I think, this is Joe, I think all of the data points that we're seeing continue to be very strong. Look at our concert ticket sales. As we look at March and April, each of those months, ticket sales were up 20% plus relative to 2019. So through March and April, I think we've seen some of these pressures, the guests and so on, for a few months now, so not just a few weeks. So we've seen no impact at all on on the concert ticket sales. We talked about the pricing seeing no impact on the take rate of those tickets and the on-site spending, the APFs, again, seeing those up substantially relative to 2019, so no impact there. So from all the different angles that we've looked at it, we have not seen any pullback in consumer behavior. I think that this continues to be part of People want to get out, have a social life, to spend on experiences, taking money away from spending on goods. And a lot of what we do is we spoke to the $35 overall average entry price for a ticket or $30 for clubs and amphitheaters. It continues to be a very affordable night out for those that need to be most conscious of that.

Thanks. That's helpful. And then I think in the press release, you mentioned some opportunity to create new ad units on the sponsorship side, both on-site and online. I was wondering if you could talk a little bit more about this opportunity and the new inventory, how much of it you expect to create over time, and whether that might help bring in new ad categories.

Well, it is creating new ad categories. We talked about that in the technology space, in the fintech space, throughout the whole purchase path integration area. All of that is creating new categories and that's what's driving even this year a lot of the growth in the sponsorship business. Michael talked very explicitly about what you're seeing on site, two great examples of how technology is being used to enhance the live experience with Verizon putting in the infrastructure with the 5G connectivity and with Snap as a great product development, product design organization coming up with some ways to use their products in augmented reality to enhance the on-site experience. So really, on the on-site piece, this is all about how do you make a better and better fan experience. And we've got great brands, partners that we work with that are looking to do more and more to make that possible. And then as we continue to work on the Ticketmaster Marketplace, tie that in with the increased data that we have from the digital ticketing that we were just talking about, How do we create more tailored ad units and make more opportunities for more sponsors to connect with those fans as well?

Great. Thank you.

Your next question comes from Brandon Ross with LightShed Partners. Please proceed with your question.

Hi. Thanks for taking the questions. Just wanted to build on the macro concerns that the last analyst kind of laid out. And in so far as inflation and gas prices are concerned, I think the results speak for themselves, but investor pushback has now moved to the possibility of recession and how that would affect you given how deeply consumer discretionary you are. How do you think about your positioning at this point if a recession scenario played out? Your company and the industry looked very different than it did in 2010. When we last saw that kind of macro pressure, can you kind of compare and contrast? And I know you are booking those acts for next year kind of far in advance. How much flexibility is there in those contracts?

Sure, Brendan.

I'll start and then Joe can jump in. I mean, what we always think is one of the great advantages of our business is the pricing is variable. Right, so there is no set cost of goods. The cost of goods is determined by the artist if they go on the road, and they're variable. So that makes our product something that can move around on pricing, whether it's taking advantage of the front row pricing that's underpriced or moving the total ticket price down in the back end of the house or reducing the overall price of the ticket to meet the market and the demand. So historically, this is an industry that's been fairly recession-proof. It's still, as we've seen... This is still one of the top three entertainment choices for a consumer, but the most affordable. So you may not in a recession take that trip. You may not have a large purchase of a dishwasher, but you will still go down to the amphitheater or the club or the theater and have a great adventure and a night out for the value. So we have always seen historically over time, The consumer still looks at the concert as a high-value item that even during a recession, if there was a pullback, this is something they still can afford to do, and it's actually a great alternative to a higher-priced maybe travel package. So, one, we think it is still a very affordable option for consumers, and pricing is will continue to be something that we can adjust if we see any pullback. Artists always have one motive, the same as ours, fill the house, get everyone in the house. So right up until the hour of the show, we always look at variable and dynamic pricing options to say how do we get the house full. Joe?

Yeah, and just to build on that, first is we now have a level of information that we didn't have even 10 years ago and almost no industry has. called the secondary market. So to Michael's point on pricing flexibility, we have the benefit of knowing real-time what is market pricing. And so on one level, you can make that billion dollars plus of price arbitrage that exists on our tickets. That's the first wall of defense in any recessionary environment. That pricing comes out first before our pricing is even impacted. And we have a great read on what is the supply-demand dynamic to be adjusting as we go along. And then along with that, again, you have, again, the macros of the shift of spend from goods to experiences, which is continuing. You have the wealth buildup and the biggest gains in terms of the income with a lower quartile. So you've got good revenue there. still you've got affordable entry prices that we've talked about on the tickets. So we continue to think that as long as we stay focused on what is the value perceived by the fan, stay aligned with that, we'll be able to bring the ax out and sell the tickets.

Great. And then for the first time that I can remember, at least you called out the per caps at theaters, clubs, and festivals. It's not something you usually talk about. That's, That's usually the amphitheater opportunity. Can you kind of help us understand where you stand relative to the amphitheater opportunity on per caps at those other owned and operated venue types and how much upside there could be for investors in that area?

Yeah, we called out the theaters and clubs and the festivals this quarter because we knew that all you guys were going to want some data on what's going on with the fans on site. It being the first quarter, we don't really have amphitheater data yet. So we were trying to use what data we could have on our other buildings, the theaters and clubs and festivals, and then also to tie that back to any questions on costs. That was the purpose of doing that, was to give everybody comfort that we had still very strong on-site consumer behavior. We don't have the data on amphitheaters yet for the summer, but again, taking that as the leading indicator, we feel good about it, and we think there's a long runway. We talked in February about how we still think that there is 30%, 40%, 50% increase in our on-site spend as we do a better job on some of the VIP and premium offers and do a better job of how it is we're marketing and selling upsell opportunities on site.

Great. Thank you very much.

Your next question comes from Stephen Glagola with Cowan. Please proceed with your question.

Yeah, thanks for the question. Joe, on Latin America expansion, can we just unpack sort of the assessor guidance of delivering full-year results in line with 2019 a bit more? I have, from my calculations, about like $500 million in revenue and $85 million in EBITDA. Is that correct? Is that sort of the baseline? And then, you know, typically you guys have been able to organically grow on your M&A 70%, 80% plus. you know, in the first couple of years after, you know, consolidating that asset. Is that a similar type of growth that we should, you know, expect as analysts in our model?

So I guess let me break into a couple of pieces there. So this year we expect both Mexico and Latin America broadly to do well. I think that it would be a very strong Latin America year relative to 19, even without OSESA. Having OSESA only makes it all that much stronger. Your numbers aren't terribly far off. You have to kind of triangulate, but they're within the general ballpark of what our numbers would be for 19 and therefore for 22. I don't think we're ready to start declaring the specifics of what OSESA is going to be in 23 or 24 yet. Give us a little time to get there with them, and we'll keep you updated on it. But we do see Mexico and Latin America more broadly, certainly as one of our great growth drivers over the next few years.

Okay, and then thanks for that.

Both concerts and Ticketmaster, just to remind you, it's a huge upside in Mexico in ticketing in that we're only a 30% owner of TM Mexico and now Now that we own it, we've already had the team down there. We're upgrading. They're still living on a green screen with not much feature functionality. So big upside, secondary, et cetera, to add in Mexico and throughout Europe. So big growth opportunity both in concerts and sponsorship and ticketing.

Okay. Thanks, Michael. And just one more on modeling questions for the rest of this year and guidance. You have these two, obviously the Big Rock in Rio Festival scheduled this year that had an outsized impact, I believe, on the sponsorship segment in 2019. How should we be thinking about that impact on the P&L this year? And then also, this is the fourth consecutive quarter now with ticketing AOI margins above 40%. I believe this is probably just driven because most of the business is in the U.S. and U.K. right now, but is that something – you know, we can expect throughout the remainder of the year? Or do you expect that to moderate closer to the mid-30s as the year progresses?

In terms of Rock and Rio, I think we've got that again this year. So I think it would be consistent with 19 in that regard. And in terms of Thick of Mass, you're right. It's continuing to do great. The margins are flowing through. It is benefiting from the U.S. waiting, if you will, right now. But with the cost taken out, we think that this year will probably be a high 30s margin when all is said and done, and you get some rebalancing with some of the international, which is a lower margin business.

All right. Appreciate it. Thank you, Joe. Thanks, Michael.

Your next question comes from David Katz with Jefferies. Please proceed with your questions.

Hi, afternoon. Thanks for taking my questions. There was some earlier discussion around broad-based consumer trends, but I recall at your investor event, there was a fair amount of talk about utilizing the premium end of pricing and platinum and other kinds of high end. Can you maybe unpack the price ranges on things? And Joe, I know some of your comments were addressed more toward the average or even the value customer. Are you seeing any change at all, positive or negative, at the high end?

No, absolutely. The overall double-digit increase is driven by the high end. Across our major stadiums, arenas, amphitheaters, I think we've probably about doubled the number of tickets to go into what we call the platinum or market-based pricing. Yep. So more than anything else, it's probably more of the tickets are getting market-priced or closer to market-priced. And then depending on the artist and the show, yes, it's also flexing upward from where it would have been historically as we try to get closer to the true market price. Even as doing this, you can tell by our commentary about the size growth of the secondary, we've helped move $500 million to the artist this year. But I think the secondary has grown more on our ticket. So it's not that we're out there capturing every penny even while getting these increases this year, but we're continuing to try to move in that direction.

Understood. And if I may follow up in a different direction, it's the first time probably in two and a half years that we would even raise it. But how are you thinking about sort of leverage and cap structure and how much cash versus how much debt? I see a pattern going back a number of years, but any change in how you might think about that going forward?

Well, I think one of the things that gives us a lot of comfort is that over 85% of our debt is fixed rate. So we're sitting at 4.3% in a pretty fixed debt structure with short-term increases having a fairly limited impact on us. So I think we're feeling fine about our total debt level. Our total coverage based on our AOI, I think, continues to be very robust, and we don't have any concerns about being able to grow in from an AOI standpoint into our debt.

Okay. Thank you.

Your next question comes from Ben Swinburne with Morgan Stanley. Please proceed with your question.

Thanks. Good afternoon. I have two questions. First, back on Ticketmaster, I think you guys talked about or had in the movie 7 million new fee-bearing tickets, one in the quarter, 14 last year. I mean, it's really strong in terms of adding new business. Can you talk a little bit about any context to what kind of business you're adding, U.S. versus international venue type and And what's driving that and whether you're seeing any increased competitive behavior. We sort of hear about competition on the primary side, including on price, but it doesn't seem like it's affecting Ticketmaster share gains at all. So just be interested in some more color around the success there and whether this pace can keep up.

Yeah, I think the 7 million story is the same as the 17 million story. When you're at this scale, it's everything. International has been very strong recently. which has been driven by the dramatic improvements in the international product that we've had as we moved to a single integrated platform and that has further differentiated us particularly internationally relative to where we've been. At the same time, we've had continued success in the U.S. and many of the discussions are product driven. The confidence that working with Ticketmaster, you're only going to have the best enterprise products in the best marketplace today but the level of investment that we're making and the scale of the dollars being spent to build new product is unparalleled in its commitment to continuing to enhance for the teams and the artists and the fans what their experience is going to be. You always have price pressure. You have price competition and everything. There's no new news there. That's what you always have. It's always your job as a company to figure out How do I continue to create my product so that it's differentiated so that it reduces the price? And then how do I continue to get more efficient and make money in other ways off my flywheel so that overall my aggregate economics continue to improve? Nothing new there.

Got it. And then just on back on the macro, I know everyone's concerned given some of the other earnings results we've seen this quarter. Your sponsorship business, Joe, I think that's, It's largely sort of longer term contracts. You might have some, you know, kind of display advertising in there. We've heard some of the big digital ad players, their businesses have softened here in the second quarter. Can you just remind us sort of how long duration that business is for you guys? And if you're seeing any signs of softening in any part of your sponsorship business, just given what we've heard from other companies. Thank you.

We're not seeing any signs of softening. Michael gave you some of the numbers on the large relationships that we have, the million-dollar-plus relationships that have been our focus on growing the number of those relationships, the breadth of assets that we provide to them, and just how much of our sponsorship base they represent. So they're coming at it from multi-year, multi-asset, saying we want to be present at the festival, at the amphitheater, We also are going to have an online presence. It's a much higher level of integration than just a simple add-by would be with some of the other players out there. So we're not seeing that impact at all.

Thank you.

And, Ben, just to jump in also, I know you had brought it up also, our no-show rates, I know that's always been some rumor out there, but as we stated in our release statement, We're seeing no challenges at all. People are showing up to the shows. We are showing similar to 2018-19, your regular low-digit, no-show rate of people that don't make it to the show. But back to normal, people come to those shows, no issues at all in terms of showing up.

Yep, I saw that. Thank you, Michael.

Your next question comes from Ryan Sunbee with William Blair. Please proceed with your question.

Hey guys, thanks for the question. You mentioned 20 new venues in the pipeline and 38 new festivals. I guess starting on the festival side, is somebody coming from Ossessa, how many of these are maybe first time and were you able to pick up a large number here of festivals that struggled during COVID? And then on the venue side, how should we think about the timing of those opening up and maybe the size in terms of overall fan capacity that could add?

On the festival side, we have a few great festival companies in Europe and America. And part of the success of Live Nation has been about organic growth, continuing to grow the business, finding new market shares, new global entry points, and festivals being a big part of regenerating our business. So we're always looking to add every year and let our festival companies launch new ideas. And this year we've had some great success One of our young companies, C3, has been in business with a strong festival promoter, Jeff Schumann. We launched a When We Were Young festival out of Vegas. We hope to sell 40,000 tickets. We sold over 160,000 tickets in Vegas. So a huge success and a brand-new festival. So we love those stories. We encourage all of our festival entrepreneurs to take swings every year. We usually have a 50% success rate. Some of those go on to be great brands, some not. you fail fast and move on. So 38 was an indicator. I'll let you know. We have a large hundred plus portfolio of festivals around the world, like amphitheaters and venues. There are high margin business because of sponsorship, food and beverage. And not only do we look to acquire and bolt on when we can, but we are a big machine of organically creating new festivals and That's the majority of our growth, and this year we're back to full speed on letting our entrepreneurs go swing and create some new revenue for us. Great. Ben, Joe can jump in. It's a similar story. We're just starting, continuing. I mean, venues would be one that we didn't really slow down during COVID because they have a longer lead time. So if you look at our venue nation division that we highlighted in the investor day and kind of our continued focus around our 300 plus venues that we operate around the world, I think we said we have probably 75 in the pipe and we annually open up probably about 20 new festivals around the world. So we're on plan continuing to move on that aggressive front to continue to expand on a global basis, club theater and amphitheater and, We just opened a beautiful arena in Austin last week to record sales, record results. Proud of that one. And more to come. So continued opening and phasing throughout the years we've been doing historically.

Great. And then it sounded like 72% of tickets were digital in Q1 versus 33% in 2019. I know most of the attendance this quarter, though, came from the U.S. and the U.K., which I assume led to the digital rollout. So I guess how should we think about digital penetration moving forward? And maybe can you talk a little bigger picture if you're starting to act on that data that you're collecting?

Yeah, you're right. It's helped a little bit. I still think we end the year probably around 80% globally. A lot of this has to do with not just the infrastructure on our end, but rolling out the access control, new systems that have to get deployed for each of these venues and doing that on a global basis, just with some of the supply chain in terms of getting those pieces in place. It'll take a little bit of time. But we're making great progress and we're already acting on the data. I just saw some of the information yesterday looking at how we're using it for more effectively targeting the marketing. So when your email from Live Nation on what concerts, it's much more tailored to you than it was in 2019. As a result, the click-through rates and the buy rates are up substantially. And then as we get into the summer and we have people going to our operated amphitheaters, our operated festivals, we expect that we'll be able to use that digital connection to more effectively market, upsell, connect sponsors with fans, So we'll see all of that activity beginning in much more earnest in this year.

Thank you.

Your next question comes from Matthew Harrigan with Benchmark. Please proceed with your question.

Thank you. Two conceptual questions. The NFTs, it feels like it's a nice digital memorabilia compliment to an experience versus something that someone buys at Sotheby's and it's right in your wheelhouse. What innovation are you seeing with the NBA this season and the NFL? And is there a way to really personalize it even more and have more variety? And then secondly, as your investor today, you talked a lot about hyperslicing. Nomenclature sounds very interesting. Elon Musk. Does that also have some applicability to Mexico with Assessa and even some of the European markets? I know you talked about that, you know, really keeping the U S around 40% of the TAM, but some of those other larger markets, it seemed like you could apply that concept with local acts over a period of time. Thank you.

Yeah. On the NFT, I think, I think we're deep into discussions and product development and testing and Like all of the leagues are doing, we have a dual lens, if you want to call it. On Ticketmaster's side, we are working in tandem with the NFL and NBA on minting all of the tickets. We did all the Super Bowl tickets through Ticketmaster that were NFT souvenirs. We're doing it for the teams. We're working with Mark Cuban and others. So on the Ticketmaster side, we're getting to see all of the best versions of what some sports teams and brands are doing with NFTs. On the concert side, we've worked on our artist management division with our artists and seen some of the versions that they're looking at, whether it's in the metaverse, whether it's a Fortnite, or whether it's a song on an NFT. So we're looking and learning on that side. And on the Live Nation side, the NFT is really just an extension of what someone mentioned earlier, the digital ticket. I mean, the most important thing for us overall is to have identity tied to the ticket. So moving from a PDF ticket where we knew nobody, it had no contract, It had no rights. It had no carry-on value. Moving to a blockchain digital NFT ticket in general, that just opens up the doors to first having identity tied to the ticket so we can have a better conversation with you. And we think NFT, through that ticket, we can create a community of value and look at ways to add value to you on an ongoing basis if you've opened up and been part of the live ticket stub business. NFT today. So we think it's a great opportunity to add more value to the relationship with that purchaser. And we're going to keep experimenting ideas on that front. The second question, I didn't quite even, I didn't hear it well enough. Joe can jump in on you.

I'm sorry. Yeah, no, I got it.

Yeah. So on the hyperlocal strategy that we've been talking about, absolutely applies throughout Europe, throughout Mexico, Latin America, all of the markets. We're going into each country. We're establishing a beachhead, getting to some scale, leveraging that scale to then say, what are each of the specific markets that we can go to and expand the operation? So that's a core part. Somebody was talking earlier how when we make the acquisition, we grow it substantially. With Germany... When we grew in, they were operating in two cities and then selling off the concert in all the other cities. But there are 10, 12 cities in Germany where you could easily have the population to route your tour through. So that became the focus, and that's how we grew that business. So we'll be following that playbook globally. It is a large part of when you look at the TAM and why the TAM is so large. It's because all of that demand exists. through so many different markets, not just the ones where we're historically bringing shows to.

Great. Thank you. Your final question comes from Barton Crockett with Rosenblatt Securities. Please proceed with your question.

Okay, great. Thank you for taking the question. I wanted to ask a little bit about this 60-tour marker booked already for 2023, which is It sounds compelling, but it'd be great to have a little bit more context. And I was wondering if this might kind of get at it. Can you give us a sense of, at this time of 2019, how many tours, if any, did you have already booked for 2021? That might be one way to look at it. And secondarily, if you've got 60 tours already booked for 2023, how many do you have booked right now for 2022?

I think I can give you generalities to make you feel good that 23 is going to look good. That's obviously what you're trying to get at. So I think if you look at 20, to your point of how many did we have booked or how many would we be reviewing for a historic year at this time period, we would be about double where a historic marker would be if you want to use that as a basic line. So 60 would be a fabulous number to be talking about this time of year for a next year activity. So that kind of gives you kind of a robust feeling of what 23 will look to be.

Okay. And switch gears a little bit. On the recession question, you know, back in the last kind of the Great Recession, 08, 09, 010, Were concerts, in your experience at Live Nation, more a lagging indicator or a leading indicator? I would guess lagging. And so if there is a recession impact, you might be the last to feel it. But I was wondering if you had any thoughts about that.

Yeah, it was a lagging indicator. It didn't hit until 2010. We had it for one summer. And I think we had a lot less data on the market then than we have now. I talked about the secondary market and how that provides – such great transparency today into the specific supply-demand dynamics, the pricing, not just in the front of the house, but through the whole building. We didn't have that back then, so we were making a lot of decisions a lot more blindly. So we have better information. We're set up to be much more nimble in terms of how we respond to that information. And again, that was the one year out of not just the last but if you look over the past 30 years at a handful of different recessions, it was the one year when there was any decline in our business. Okay, that's great. Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session, and I'd like to turn the call back to Mr. Joe Birkhold and Michael Rapinoe for closing remarks.

All right, everybody. Thank you. Have a great summer. We'll talk soon.

This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.