Live Nation Entertainment, Inc.

Good day, everyone. My name is John, 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 third 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 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 Forms 10-K, 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 gap 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. Live Nation delivered the biggest summer concert season in history and drove a record quarter. These results demonstrate the ongoing and increasing demand for live events globally, with attendance at events of all sizes from clubs to stadiums. Bands around the world continue prioritizing their spend on live events, particularly concerts. Despite varying economic headwinds, including inflation, we have not seen any pullback in demand as on-sales, on-site spending, advertising, all other operating metrics continue showing strong year-on-year growth. With this demand, revenue was up over 60% relative to 2019, with each division up at least 30%. and AOI up 45% to $621 million, with all divisions up at least 25%. As we expected, our performance this quarter was led by our concert business, which held 11,000 concerts for 44 million fans across 50 countries. As a result, we generated over $5 billion of revenue and $281 million in AOI for the quarter, up 67% and 44% respectively relative to 2019 Q3. Shows of all types continue having strong demand, with double-digit attendance growth across all venue types, including clubs, theaters, amphitheaters, arenas, stadiums, and festivals. Stadiums had a particularly strong quarter, with fan count more than tripling to nearly 9 million fans, driven by the global demand to top acts across a number of genres and audiences, such as Bad Bunny, The Weeknd, and Red Hot Chili Peppers. We delivered double-digit attendance growth across established and emerging markets, around the globe, from North America to Europe to South America, showing our long runway of global growth. Our venue nation division hosted more fans with attendance up 14% relative to 2019, the 19 million for the quarter, and 38 million fans year-to-date. Based on our current pacing, we expect to host more than 50 million fans at our venue nation and festival division. As we have grown attendance, we have also continued driving greater market pricing for our concerts. and now expect to transfer over $550 million of additional payments to artists this year, continuing our effort to help artists get the full value from their shows. And over the course of the summer, we continue to see strong on-site spend with no reduction in consumer buying habits. Ancillary per-fan spending is up 20% to 30% year-to-date in our operated venues across the U.S. and Europe. The consistent theme is that fans are eager to enhance their experience We continue elevating our hospitality operations to provide more premium options. We still have tremendous room to expand these high-quality experiences throughout our venue portfolio, which includes over 400 venues and festivals globally with almost 40 new venues in the pipeline. Band demand for live events was also clear in our ticketing business. We transacted $6.7 billion of fee-generating GTV on 71 million tickets. up 69% and 42% respectively relative to 2019. This demand remained strong throughout the quarter as two of the three months were amongst the top 10 transacted GTV excluded refund months ever. At this point, all top 10 months occurred within the past year. GTV growth was strong across both primary and secondary, up 61% and 132% receptively. Consumers drove 80% of the growth in primary GTV while concerts and sports together accounted for over 90% of our secondary growth. Globally, new venue clients continue to seek out Ticketmaster's service due to its effectiveness of our enterprise software platform, driving venue revenue combined with our leading online marketplace. As a result, we contracted 19 million net new tickets so far this year on a global basis. At Ticketmaster, we continue to advocate for fee transparency and live event ticketing, We advocated for all-in pricing mandate passed in New York early this year, which requires face value prices and fees to be shown upfront. And so we support the FTC mandating this nationally. We operate ticketing marketplaces in more than 30 countries around the world and have seen all-in pricing adopted successfully in many countries when mandated across the board. It's only works if all ticketing marketplaces adopt together so that consumers truly can accurately compare as they shop for tickets. Sponsorship had its biggest quarter ever following our previous record last quarter, driven by the strength of our festival and online partnerships. Our performance drove AOI of $226 million, 56% higher than 2019. Our sponsorship revenue growth has been broad-based, with North America up 48% and international up 93%. And we see strong demand both on-site and online, up 64% and 63%, respectively, this year. And our unique scale live events platforms, continue to attract new brands, and expand relationships with current partners. Festival sponsorship has been our largest growth driver to date, as we have effectively leveraged record festival attendance this year and compounded this growth with double-digit increases in per-fan sponsorship. Platform integrations have been a great growth driver with online partnerships. As we continue to drive value and monetize opportunities via Ticketmaster's purchase process, with non-service fee revenues up double digits relative to 2019. 2022 has been an incredible year of returning to live events and we expect to finish strong. Ticket sales for concerts this year were up 34% for the quarter and now stand at 115 million tickets sold for the shows this year, up 37%. And more importantly, momentum is strong with early signs pointing to continued growth in 2023 across our businesses. Ticket sales for shows in 2023 are pacing even stronger than they were heading into 2022, up double digits year over year, excluding sales from rescheduled shows. And our sponsorship business confirmed commitments for 2023 are up 30% from this time last year, showing the resiliency and long-term commitments that brands have for our business. Beyond these specific leading indicators, going into 2023, we expect we will drive growth in our concert business by adding more venues to our portfolio, continued increase in ancillary per-fan revenue, and further in our efforts to deliver market value for the shows to the artists. And in ticketing, we expect to also benefit from these market pricing trends while continuing to globally add new clients to our world-class platform. With that, I will turn it over to Joe.

Thanks, Michael, and good afternoon, everyone. As with last quarter, 2019 is the best comparison for us in terms of understanding our results, so most of our discussion will be relative to Q3 of 2019. For the company, our reported revenue of $6.2 billion for the quarter was $2.4 billion better than Q3 2019 or an increase of 63%. On a constant currency basis, our revenue was $6.4 billion for the quarter So there was roughly a 3% impact due to strengthening of the U.S. dollar. This was a record quarter for revenue for the second quarter in a row and bested our Q2 figure by 39%. And our reported AOI of $621 million for the quarter was $194 million better than 2019, up 45%, and led by an improvement of over $86 million in concerts and $81 million in sponsorships. On a constant currency basis, our Q3 AOI was $645 million. The FX impact of negative $24 million, or 4%, was largely driven by the devaluation of the euro and the pound. In year-to-date, we have converted roughly 76% of this AOI to adjusted free cash flow of $996 million. Let me give a bit more color on each division, then I will give you more on leading indicators. First, in concerts, Our AOI was $281 million for the quarter, which compares to $194 million in Q3 of 2019, an improvement of 44%. It was concert's strongest quarter ever, far surpassing the previous record of $200 million AOI in Q3 of 2018. It was a stellar summer season for concerts. We had over 44 million fans in the quarter, the most ever, growing 40% compared to Q3 of 2019 when we had close to 32 million fans. Looking a bit deeper at our fan metrics, stadium attendance more than tripled to 8.7 million fans in Q3 of this year, and festival attendance was 6.5 million fans in the quarter, up nearly 40% from Q3 of 2019, with premier events including Rock in Rio, Rock Verter, Reading, and Lollapalooza. Pricing has been a key part of our strategy in 2022, capturing market pricing for the best tickets while maintaining an affordable entry point for all fans. For tickets sold to shows at our amphitheaters, arenas, and stadiums globally this year, front-of-house pricing increased for each by double digits relative to 2019, while starting prices for all shows in the U.S. rose just 6% and remain under $35 on average. And giving you more details on ancillary per-fan revenue by venue type, in our U.S. amphitheaters, ancillary per-fan revenue was $38, an increase of $8 per fan over 2019 levels, or close to 30% growth. At our major festivals globally, increased spending on concessions, camping, and VIP experiences drove ancillary per fan revenue up by nearly 30%. And at our theaters and clubs in the U.S. and the U.K., ancillary per fan revenue increased by over 20%, driven by higher concession sales, fast lane entry, night of show upgrades, and the move to cashless payments. On the cost side, as indicated before, increases continue to impact us primarily in the venues we operate, amphitheaters, theaters and clubs, and festivals. But in all cases, we are delivering double-digit growth in profitability per fan due to increased ticket sales and ancillary revenue. Next, ticketing had another successful quarter, delivering $163 million in AOI, nearly 30% higher than Q3 of 2019. Q3 was our top quarter ever in terms of reported ticket sales in GTV, and it was our second highest quarter ever in terms of transacted ticket sales in GTV, behind only Q2 of this year. When we look at the year-to-date performance of our ticketing business, the numbers reflect the incredible demand we've had. Through September 30th, we have sold 197 million fee-bearing tickets, up 38 million tickets, or 24%, compared to 2019. GTV for the first nine months is $19 billion, up $6.3 billion, or 49%, compared to 2019. As a result, revenues are close to $1.6 billion for the first nine months of the year, which is up almost $500 million, or 45%, compared to 2019. And with all this, we drove AOI to $600 million, up 71%, as we deliver strong operating leverage. Across both sporting and concert events, ticket buyers continue to prioritize purchasing the best seats available, driving a 17% average price increase in the primary market year-to-date relative to 2019. Secondary pricing has risen by 10% on average, with sales volume up as well. With these increases, the average secondary ticket price in the U.S. remains almost twice that of a primary ticket, demonstrating additional opportunities for market-based pricing as well as a large buffer from any demand shifts. For those of you focused on margins, as we have indicated previously, it's difficult to evaluate based on a single quarter. Q3 margins were impacted by our mix of clients and shows along with technology investments. All of this is as expected. and align with our full-year margin expectations in the high 30s as we have been indicating over the past few quarters. Finally, growth in our high-margin sponsorship business continued this quarter with revenue up 59% relative to Q3 2019 and now up 64% year-to-date. We once again had high growth in both on-site and online sponsorship, driving record Q3 AOI of $226 million today. 56% higher than our Q3 2019 AOI. Looking back at sponsorships growth through the first nine months, we have seen our festival business nearly double and our platform integrations more than double. Our strategic multi-year, multi-asset sponsors now generate three-quarters of a billion dollars in revenue for us. Back in 2017, we have 56 such clients representing approximately two-thirds of our total sponsorship revenue. Today that number has grown to over a hundred such partners that account for 80% of our revenue growth in both the number of partners and the level of their spend, which demonstrates the value we deliver and the importance they place on our unique onsite and online scale platforms. As we look to the remainder of 2022, starting with our leading indicators through late October, all relative to 2019, Concert ticket sales are over 115 million tickets for events this year, up 37% and 20% higher than our full year 2019 fan count. Second, ticketing has sold over 200 million primary fee-bearing tickets for events this year, up 27% relative to 2019 at this point. Of these, 135 million tickets are for concert events, which is 38% higher than 2019. Related to this, we had $1.9 billion in event-related deferred revenue, consistent with our levels in Q3 of 2021, despite the deferred shows in last year's numbers. Excluding the deferred shows from last year's numbers, we would be up 35% year-on-year. A few other points on 2022. Given our presence in the UK and mainland Europe, we've experienced FX headwinds, and through the end of September, our AOI has been negatively impacted by $47 million. This was almost entirely in the second and third quarters as the US dollar strengthened significantly against the Euro and British pound. Based on current forward rates, we expect a 4% impact to AOI in the final quarter of this year. Due to some delays in construction projects as a result of supply chain disruptions, our 2022 capital expenditures forecast is now approximately $300 million, with roughly two-thirds allocated to revenue generating projects. We expect the key revenue generating projects, which are delayed, will still be completed early next year, so don't anticipate any impact next year on the return from these projects. We expect free cash flow conversion from AOI to be in the mid to high 50s for the full year. We ended Q3 with $2.6 billion of available liquidity between free cash and untapped revolver capacity giving us sufficient flexibility to continue investing 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 4.5%, positioning us well in this interest rate environment. In addition, the majority of our debt is long dated with only our 2023 convertible debt maturing within the next two years. We will continue to optimize our capital structure based on market conditions. With that, let me open the call for questions. Operator?