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 first quarter 2023 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. These 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 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. 2023 is off to a tremendous start. For the first time in three years, all of our markets are fully open. And the common theme we are seeing around the world is that live experiences are a high priority for fans. In Q1, we delivered record results across all divisions, as well as record support for artists. From ticket sales to attendance and on-site spend, every sign points to incredible demand for live events. In the first quarter, over 19 million fans attended our shows across 45 countries, and we sold over 145 million tickets with record levels of activity across all markets. We delivered revenue of $3.1 billion and AOI of $320 million, up 73% and 53%, respectively, relative to Q1 last year. In general, all my comments will be relative to Q1 last year. This performance is indicative of a continued long-term growth and sets the stage for our record 2023, as we are more positive than ever about artists touring, fans attending concerts to see their favorite artists, and our role helping make this happen. But as clear as we look at our results and operating metrics, the global demand for live events continues to reach new heights. Demand has been growing for a long time and is showing no signs of letting up. Talking to fans, they say that live experiences are the number one leisure activity where they expect to spend more of the future. Naturally, this is leading to record levels of activity in both our concerts and ticketing business. First in concerts, we sold nearly 90 million tickets for shows this year, tracking more than 20% ahead of this point last year. These are early sales and have been driven by a record number of stadium shows and continued strong growth in arena tours. With many major tours from Beyonce, Drake, to Bruce Springsteen, demand has been so strong that even when artists add a number of additional shows, they still aren't able to meet all of the fan demand. As a further initiative to make tickets affordable to all fans, we launched today our Summer Concert Week with $25 tickets available to nearly 4,000 shows. When fans attend shows, they continue spending to enhance the experience. While our key outdoor season has not yet started, early reads from U.S. and European indoor venues that we operate demonstrate further growth in average per-fan revenue. As we provide more elevated hospitality options for fans, we have launched Vibey, which hosts destination events centered around live music, and launched this week with the sale of the U2 Sphere VIP packages selling out. We've also continued building our VenuNation portfolio, with new venues expected to host nearly 3 million fans at 1,000 shows this year, driving long-term growth and profitability across all our businesses. Our ticketing business benefits from the same structural tailwind as concerts, with further growth driven by our success in adding new clients, notably in international markets. As a result, we sold 73 million fee-bearing tickets in the first quarter, up 40%, and delivered $7.7 billion in fee-bearing GTV, up 60%. We are seeing growth in both volume and pricing across our global markets. This holds true across all event types, from sports to concerts, from biggest superstars to new artists. Our brand partners recognize the passion for live music has never been greater, and Alive Nation provides a unique on-site and online platform to connect with fans in meaningful ways on a global scale. And in the first quarter, we continued adding partners for 2023 and beyond, including Google Pixel, PayPal, and Levi's. With this, we have commitments for over 80% of our planned sponsorship of the year. Equally important, fans are embracing the value brands can provide to the concert experience, with over 70% of live music goers agreeing that brands can enhance their time at the show. Our team is the best in the industry at working with brands to develop programs that deliver value to fans, which in turn grows our brand relationships and attracts new ones. Our results for the first quarter demonstrate the success of our strategy and sets up for a strong growth in 2023. We expect to host a record number of fans this year, even against the 2022 comparison, which benefited from rescheduled shows attended by 20 million fans. Ticketmaster should deliver record activity, with around 600 million tickets managed globally this year. And our sponsorship business, even after incredible growth last year, looks to be on track for double-digit AOI growth this year. As we look to 2024 and beyond, we have all the necessary levers to build our flywheel globally and continue to compound AOI by double digits for the foreseeable future. With that, I will turn the call over to Joe to take you through more details.

Thanks, Michael, and good afternoon, everyone. Building on 2022, we started out this year with a record Q1, our highest first quarter revenue, AOI, fan count, and ticket sales. All of our markets are fully open, selling tickets, hosting tours, and connecting brands with fans. Our reported revenue of $3.1 billion for the quarter was $1.3 billion better than Q1 2022, an increase of 73%. On a constant currency basis, our revenue was $3.2 billion for the quarter, so there was roughly a 2% unfavorable impact due to the slight strengthening of the US dollar, primarily against the Canadian and Australian dollars. Given the limited FX impact on our numbers, The rest of my comments will just be a reported currency. Our reported AOI of $320 million for the quarter was $111 million better than 2022, up 53%, with an improvement of $65 million in ticketing, $50 million in concerts, and $26 million in sponsorship. Over half of our AOI growth came from our Asia Pacific and Latin America markets, where we are expanding our global touring activity and diversifying our historical seasonality. We converted roughly 59% of this AOI to adjust the free cash flow of $190 million, which is significantly higher than our 43% conversion in Q1 2022. In our deferred revenue, a key leading indicator of growth ended this quarter at $4.4 billion, up 28% from this point last year. Let me give a bit more color on each division. First, in concerts, we had the highest concert attendance ever for a Q1 with 19.5 million fans attending our shows of 79% compared to 2022 when we had approximately 11 million fans. Show count was 9,600 events, up 43% compared to 2022, with more fans per show due to a heavier mix of stadium and arena events and stronger than historical average attendance levels. As a result, our concert's revenue for the year grew by 89% to $2.3 billion, while we delivered $1 million in AOI, a $50 million improvement over Q1 2022. This is the beginning of what we see as a very solid year for our concert segment, including margin expansion relative to last year. Looking a bit deeper at our fan metrics, we had strong growth across the board. Stadium attendance more than quadrupled to 3.3 million fans this quarter, up from 800,000 fans in 2022. This growth primarily came from our Asia Pacific and Latin American markets. Arena attendance was 6.7 million fans for the quarter, up 3 million, or almost 80% from 2022, largely as a result of growth in Europe and Australia touring. Theater and fan club count was up 45%, and while it's not a large quarter for festivals, we did see festival fan count grow by 50% from our Mexico and Australia and New Zealand expansion. Overall, our international markets drove fan count growth, accounting for over 90% of our increase versus 2022. This was due in part to the closure still in effect in Q1 2022, That said, we expect continued strength across all global markets through 2023, along with some seasonal shift toward Q1 activity. Last year, we discussed the various cost headwinds at our operated venues and festivals. Thus far this year, cost pressures are declining, and our operational cost per fan is down across our indoor buildings, and we are forecasting that cost increases will remain below general inflation levels for our festivals and amphitheaters. As a result of these improved conditions, we expect overall profitability per fan will again increase this year as cost increases are more than mitigated by increasing average revenue per fan, pricing, and on-site sponsorship. Next, in ticketing, where our numbers reflect growing fan demand for live experiences. In Q1 2023, we sold 72.6 million fee-bearing tickets, up 21 million tickets, or 41 percent compared to 2022. Nearly two-thirds of the growth was driven by concert tickets, as North America concert ticket sales increased by 35 percent, while international concert ticket sales increased even more by 65 percent. With this increased ticket volume, GTV for the quarter was $7.7 billion, up 60 percent compared to 2022. At peak sales times during the quarter, Ticketmaster sold 15,000 tickets per minute in North America, with more than 20 million fee-bearing tickets sold each month globally. And in Q1, over 99.9% of all TM transactions were processed without any issues. While secondary ticketing volume grew at a similar rate, ours continues to be largely a primary ticketing business, with secondary ticketing accounting for only a mid-teens percent of our overall GTV. With these growing ticket sales, revenue for the quarter was $678 million and AOI was $271 million, delivering margin of 40%. It's hard to compare these margins to Q1 of last year, given the geographic mixed shift and increased cost of ramping our staff back up over the course of last year. But these margins are ahead of our full year 2022 numbers. and we expect margins for the full year to continue being in the high 30s. On the pricing front, average ticket prices on primary tickets rose by 16% compared to Q1 of 2022, driven by fan demand for the best seats, particularly at concerts. Average secondary ticket prices remain close to double that of a primary ticket, continuing to show the extent to which concerts and other live events remain priced below market value. We also saw revenue from non-service fees grow double digits as we further build ancillary revenue streams, including insurance upgrades and other upsells. Lastly, so far this year, we have signed clients accounting for nearly 8 million net new tickets, up 15% compared to this point last year, positioning us for ongoing growth. Finally, in our sponsorship business, top-line revenue improved by $54 million, or 47%. to $170 million in Q1. Our AOI for this high-margin business was $96 million, up 37%. Sponsorship's growth during the quarter was driven by the reopening of international markets that were closed in Q1 of last year, the increase in high-profile artists on sales that attract premium marketing partners, and the expansion of our venue network. We had double-digit growth in both on-site and online sponsorship, with on-site sponsorship representing most of our AOI growth year over year. From a geographic perspective, our international markets delivered 54 percent growth in the quarter, while North America had 26 percent growth. Contributing to our sustained growth since last year has been our strategic sponsors that generate over $1 million of revenue in a year. Relative to Q1 of last year, our number of strategic sponsors grew by 15%, while the revenue from those partners rose by over 20%. These marketing partnerships now account for 85% of our total sponsorship revenues. Sponsorship margins were slightly lower than average during the quarter as we had higher variable expenses due to artist activation costs for A-list talent pre-sales, with tickets sold for these key sponsor programs four times that of last year. As timing plays out, we anticipate that for the full year, variable expenses and margins will be in line with 2022. A few other points on 2023. We continue to project that CapEx will be approximately $450 million this year, with two-thirds on revenue-generating projects, including new venue builds and renewals, as well as other organic investments to support growth. The remaining one-third is on maintenance gap access. We catch up on deferred 2020 and 2021 maintenance. We ended the quarter with $2.4 billion of available liquidity between free cash and untapped revolver capacity, giving us ample flexibility to continue investing in growth. We're comfortable with our leverage, particularly given the AOI growth ahead with approximately 87% of our debt, at a fixed rate with an average cost of debt of roughly 4.7%. In addition, the majority of our debt is long dated and nothing is maturing within the next 18 months. The only notable change to our below the line guidance from Q1 is on accretion. Due largely to assesses impressive growth above previous projections, we estimate that accretion will be approximately 40% higher in 2022 and this should be factored into your EPS estimates. At this point, we don't expect any material FX impact on revenue or AOI for the year. With that, let me open the call for questions. Operator?