Q4 2019 Earnings Call
[music].
Please standby everyone we're about to it.
Good day everyone.
My name is to Laurie I will be a conference facilitator for today.
At this time I would like to welcome everyone to live nation entertainments fourth quarter and full year 2019 conference call.
Today's conference is being recorded.
Before we begin live nation has asked me to remind you that the subpoenas 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.
If you see filings, including the risk factors and cautionary statements, including other companies. Most recent filings on forms 10-K, 10-Q, and 8-K for a description of risks and uncertainties that can adapt the actual results.
Like nation will also referred to some non-GAAP measures on this call in accordance with the FCC regulation G. Live nation has provided a full reconciliation to the most comparable GAAP measures in the earnings release, the release reconciliation that other financial or statistical information to be discussed on this call can be found under the finance.
All information section on live nation's website <unk> investors Dot live nation Entertainment Dot com.
It is now my pleasure to turn the conference over to Michael Rapino, President and Chief Executive Officer of Life Nation Entertainment.
Please go ahead Sir.
Afternoon, and welcome to our fourth quarter and full year 2019 conference call.
For the 19th live nation to work its ninth consecutive year of gross.
When you up 7% and Hawaii up 14%.
Starting with the.
Business concerts fan count was up 5 million to 98 million globally, driving a why gross and all of our divisions concerts sponsorship and ticketing.
In straight in the effectiveness of our flywheel business model.
Concerts segment fans continue to find a live experience from clubs shows true arenas to festivals talk entertainment choice.
Best way to celebrate their favorite artists and show the experience what other fans in the U.S. over the past five years consumer spend a lot of entertainment has grown several percent annually, providing strong structural tailwinds strike increased demand for concerts globally.
Well, there's demand dynamics in 2019, we delivered growth in concerts revenue of 8% and alewife, 7%. This growth was broad based across our portfolio, what international and the count up 11% well in North America arenas festivals theaters and clubs contributed to our gross.
Globally festivals theaters and clubs attendance was up double digits, highlighting the strength of our global footprint and the value of a diversified portfolio markets genres and building types.
Been able to our consistent grossed over the past several years.
Across all of the artist free workforce, we invested well over 6 billion to promote 40000 shows and 42 countries with live nation by far the largest financial supporter of artists and music I wish ticket prices for amphitheatre at a winner shows are up double digits. Since 2017, well cells are dynamic place plot them tickets are upset.
66%.
A year across 3000 shows that's artist <unk> more of the best seats in the house sold at face value at the on so even with these increases concerts remains a great deal for sands relative to other life experiences our average ticket price for concert at any one of our wrapper Ciders was $46 in 2019 Robert.
To a $75 and be a game 400 foot NFL game.
Once at the show average costs and spending grew as well that our amphitheater spending grew by $2 at 50 cents to over $29 per head as we improved our product offerings reduce friction with shorter lines and approved VIP hospitality offerings.
The hospitality focus also grew onsite spend do that our festivals theaters and clubs. The result of a better experience for our fans across our operated vendors.
We added 38, new venues in 2019, including six new stuff tools, and 18, new theaters and clubs.
Has gotten better at on say hospitality over the past several years. This opens up more opportunity for us to operate more buildings, where we make more money for fan, which accelerates the onsite monetization part of our flywheel.
The strength of our business is continuing with concert tickets sold through mid February for 2020 shows up 10% just 38 million.
Hi played a 4700 confirmed arena stadium, an atmosphere shows up 30% for the same time last year.
I'll bet you types of strong show count growth led by North America Stadium and arena concerts.
And our high margin sponsorship business, we grew revenue by 17% and now why by 16% 2019.
When you spot supports a key driver in the year.
Well did just globally with broad growth across amphitheaters festivals theaters and clubs.
Festivals had a particularly strong year with the addition of rock in Rio Tripped portfolio Marquee Festival sponsorship in this segment was up over 50%.
Our top strategic sponsors I've also been a key driver or spot ships segment was 88 sponsors collectively spending approximately 400 million to reach our fans and revenue from the scrip up 19% in the year.
In 2019, we broaden our brand partnership based by leveraging our power of life research with particular success into lifestyle space working with brands, including Revlon bonds Clinique as we demonstrated the importance their products to cost recovers.
All this reinforces the powerful platform of 98 million fans the priority of brands to reach fans during the live experience with over 70% of budgeted sponsorship net revenue for the year committed and despite 2020 being an off year for rock in Rio Brazil, We're confident we'll deliver continued growth in our sponsorship segment this year.
[noise] Ticketmaster filled it built its leadership position in ticketing in 2019 going haywire about 11% most of our growth came through reduced customer acquisition costs across both primary and secondary ticketing and some secondary ticketing volume, notably the NFL another sporting events.
Our international ticketing business door growth and fee bearing tickets and GTB led by our strong international concert ticket sales.
We now provide services in 31 countries and in 2019 delivered 115 million tickets internationally with tremendous opportunity for continued growth on a global basis, particularly in the 15 markets, where we promote concerts and don't yet have a substantial ticketing operation.
Good lessors recent entry into both the Taiwan, Singapore markets highlights international expansion opportunity leveraging our leading culture positions in these markets and now growing up kicking in presents to seven countries in Asia as we continue to build our flywheel across more of these markets.
North America top priority in 2019 was deploying presence our secure ticketing digital product.
Which we see as a key differentiating ticketmaster and providing venues teams artists with the information tools to maximize the San relationships.
This was deployed in over 700 venues by the end of 2019, including over 90% of major sports and live nation buildings offering 50000 events for 120 million fans more than half of home use digital ticketing is for entry.
We see our deployment in 2020 further accelerating and we're planning to presence and over 1300 venues by the ended the year with over 200 million fans attending events that these buildings at that point, we will cover 100% a major sports live nation buildings and 90% of all stands in North American Ticketmaster venues they can ticketmaster.
Sure by far the global leader in digital ticketing.
Artist driven initiatives, such as ticketing pull jabs entire tour with safe checks enable their strategy of getting tickets into the hands or the greatest fans is one demonstration of how digital ticketing serving content more effectively.
At the same time, we continue to scale, our global ticketing marketplace with the fourth quarter beat our second highest speak very GTB quarter ever selling over 60 million fee bearing tickets and delivering over 5 billion in fee bearing GTB Ticketmaster continues to lead the ticketing industry, both operationally and a digital ticketing looking at 2020 I'm calling.
But in ticket masters ability to extend that leadership position globally as we have more customers ticket more events and expand our digital ticketing platform.
In summary, 2019 was another strong year for live nation building, our global concert business and driving growth in our high margin venue sponsorship and ticketing business.
Looking at 2020 are double digit fan and show count growth. So far this year against a backdrop of very high artist activity across all venue types and markets sets up a flywheel to deliver another year of strong global growth.
With this I will turn the call over its Joe tickets your additional details.
Thanks, Michael.
Looking at our business segments first concerts as Michael indicated in attendance grew 5% to 98 million fans demonstrating the strength of our global portfolio and with this demand growth highlighting the strong fundamentals underlying our business.
Geographically international had a strong year with growth in stadiums festivals in theaters and clubs driving a 11% dandruff.
Peters and clubs globally, wet and growth for the year with 20% growth to nearly 30 million fans.
Festivals also had a strong year with seven new pest falls, including rock in Rio helping deliver 13% fan growth globally.
Our fan attendance is up from 47 million in 2010 closing out the decade by more than doubling our fan base. The key milestone the demonstrates that consistent in resilient growth at the core of our flywheel, creating significant scale overtime.
Looking specifically at the fourth quarter, but attendance to show count were up.
As lower heavily driven by an increase in advertising expense related to 2020 shows an increase fixed expense associated with continuing to build our flywheel and operate more venues.
It's higher than projected advertising expense from putting more 2020 shows on sale in 2019 concerts alewife for the year would've been up double digits.
Moving on to sponsorship in 2019, we again delivered double digit growth up 16% for the year.
International drill over 70% of this growth with the addition of rock in Rio helping drive both international and festival sponsorship growth.
For the fourth quarter revenue was up 25% in April I was up 26%.
Helped by the second weekend of rock in Rio Brazil.
Our pipeline for 2020 is in good shape, demonstrating the strength of our concerts flywheel and driving all parts of the business and we expect to continue growing our sponsorship deal why despite not having rock in Rio Brazil. This year.
Finally ticketmaster.
Well GTV was flat in the quarter matching 2000, eighteens record fourth quarter coffee bearing GTV was down 2%.
North America fee bearing GTV was flat for the quarter, while international was down 8%, reflecting the geographic shift in 2020 stadiums versus last year.
Volume was up relative to our expectations for the quarter, reflecting both the timing shift in an even stronger 2020 pipeline concerts than was previously projected.
For the fourth quarter Ticketmaster AOL I was at the 23% due to a 9% increase in secondary GTV reduced customer acquisition costs and the benefit from Comping against last year's costs related to a third party data breach.
These same factors then drove our margin improvement for the quarter.
Looking at 2020, we expect a strong concert slate will drive ticketmaster's GTB, including a strong Q1, when we'll have most of our stadium and arena on sales.
A few more points.
Krona virus has had a lot of press lately. So I wanted to give some context for us first as it relates to China and Asia shows generally.
No cancellations had been minimal given our activity levels in China with 17 shows totaling approximately 75000 fans.
Looking over the next three months or age activity is limited 70 shows in 200000 fans in the region.
Second as it relates to Italy, we have 30 shows booked over the next three months with approximately 825000 fans.
Collectively this accounts for less than one half from 1% of 100 million plus fans, we expect to attend our shows this year.
More broadly while we expect that there will be further areas of break out over the next few months one of our strengths is that we are highly diversified geographically.
Thus far we've seen no pull back and fan demand more ticket buying outside of the specifically affected areas.
Overall, our attendance is weighted towards the latter part of this year with over 70% of our attendance expected from June through the end of year.
Finally on the assess acquisition.
You could make progress working with the regulators in Mexico on their review at this point, we expect the acquisition to close sometime in the second quarter.
With that I will turn the call over to coffee to go through more on our financial results.
Thanks, Joe and good afternoon, everyone.
Key highlights for the fourth quarter 2019, our revenue increased by 11% to 2.9 billion.
The language 81 million at 18%.
December 31st our deferred revenue related to teachers shares.
Was that 10% to 1.2 billion compared to 1.1 billion last year.
In terms was the primary driver revenue grads has it increased 12% from more fans in chaz.
Censorship revenue was up 25% usually benefited from the second weekend of rock in Rio Purcell.
And ticketing revenue grew 2% as a result of higher secondary ticket buying.
Hey line was up 18% driven by growth in sponsorship due to the four days a rock in Rio and improves resale volume in lower operating cost and ticketing.
Concerts and your line declined from the your advertising expense for 2020 shares and increased headcount and ranch in print really related to additional being used.
As we've noted before we recognize all show related advertising for future says that the ended the year. So the hairball you live on shelves for 2020 share increases our year end expenses.
Operating loss for the quarter was 83 million compared to a lot of 90 million in the prior year as a result on the higher right.
Now, let's turn the corner with 160 million compared to a net loss of 148 million in the prior year, driven mainly by higher interest taxes and non controlling interest expense.
For full year 2019 revenue was 11.5 billion is 7% increase over 2018.
Oh, I was 943 million that 14%.
In free cash flow adjusted was 499 million, 4% over last year, representing 53%.
Due to the timing of distributions to empty I partners.
Revenue growth was primarily driven by kind shared switching on the person as we saw attendance growth across North America renewed International Stadium.
Thompson theaters and clubs globally.
Thank you ship revenue was also strong with 17% kratz driven by rock in Rio high demand for our venue onsite sponsorship programs and gradually number of our strategic sponsors and related spend.
Our segments contributed to our anchor.
Concert, saying, Oh, I wish that 7% as we grew our fan base and number of shares you cross arenas theaters and clubs and festival.
Within credit fan on site span and our amphitheaters festivals in theaters and clubs.
Sponsorship deal I grew by 16% and taking our largest contributor grew 11% from higher revenue and lower operating costs.
Operating income was 325 million.
19% over last year, driven by the increase in airline.
Our net income for the full year with 70 million.
60 million in 2018 due to our improved operating results.
Net loss per share with two cents after 75 million accretion of redeemable non controlling interest.
For 2018, these high 2% FX impact.
Revenue in a line.
Turning to our balance sheet.
31st we had total cash of 2.5 billion, including 838 million in ticketing client cash and 936 million in Nash concert event related cash.
Free cash and 697 nine.
Net cash provided by operating activities was 470 million compared to 942 million last year due to the timing of payables and ticket sales versus the prior year.
Free cash on adjusted was 499 million.
481 million last year.
Great total capital expenditures were 316 million.
Two person, which was spent on revenue generating items.
Our total new data as of December 2019, after our refinancing in October was 3.3 billion with a weighted average cost and 4.2%.
Our current expectations for 2020 include.
In concert, we expect moves to the like growth to come in Q3, we send in Q2 and are seasonally quieter in Q1, having a bit less activity than last year.
Sponsorship.
Thanks, Chris many years the rock in Rio Brazil.
Annual festival will not occur in 2020.
Ticketing. We currently expect this strong concert slate to drive growth and GTB with higher on sale activity.
Thank you late in Q1.
It is too early in the year for us to predict FX impact for 2020.
We will provide guidance in future calls as the year develop.
I live on guidance is currently at constant currency to 2019.
We expect our total capital expenditures to be approximately 375 million.
The increase largely driven by revenue generating expenditures.
And we currently expect accretion of non controlling interest to be approximately 55 million for 2020.
With about how it's done in the first quarter and the rest fairly evenly distributed across the remaining quarters.
Thank you for joining us today, operator, we'll now open the call for questions.
Thank you if you'd like to ask a question. Please acknowledged by pressing star one on your Touchtone telephone.
Mr in mind, or if you're using a speakerphone. Please make sure you need function is turned off to life signals from each accident.
Hopefully sometime a sound like indicate when your line is open.
Once again, that's star one other question or.
POS Please call me.
We'll take our first question from Brandon one like.
Hi, guys. Thanks for taking the question.
Mike May as well address the elephant in the room right off the bat with Corona and you gave us some really good color on Italy, and Asia. Thanks for that but I think investors want to understand the potential downside risk. If there are broader show cancellations, especially over.
The summer period.
To the extent that individuals so always canceled can you help us understand what the financial impact would be.
I know you you guys by many tours outright I think you pay artist what $8 billion per year or you left holding the bag. If if shows our cancelled and and then if there are regions that are affected by Corona since you have the flexibility to reroute tours and side.
Finally, you gave some really strong leading indicators for 20, obviously shaping up to be a big year without Corona. If there is major corona impacts would you would you anticipate that activity pushing out.
The 21.
I think that covers most of it.
Sure Brandon Joe blow it started and I can jump in.
The first thing just put it in that context is.
Your latter point anything that is being talked about is generally being talked about this in terms of tiny is not being talked about not doing the shows is we want to Scott artists.
He between the fundamental part.
They do and how they are never going to be so there were not talking any artist or same you don't want to between its all exactly where can I go when.
So I was just talking about I mean.
Absolutely as we look at very specific hot spot.
There's a certain we flexibility to reroute as need be or to happen come back and hit that area later as opposed to win was previously planned.
In general.
We pay the artist going to show occurs there's generally force majeure boxes.
If for some reason to show were to be cancelled.
When we win 80 artist.
But again, we think that that's going to be pretty limited where are we don't have some ability to either re routed to reschedule.
And brand a little color on the canceling the cost.
So there would be no cost, we don't pay an artist until they play as an artist says a if we cancel show next month in Midland, We don't give the artist there's no cost incurred and when the artist replace that show then we pay the artist. So these ones are actually the easier ones to manage I mean, the one.
That you always have the more challenges when the festival gets cancelled on a Saturday afternoon. When 60000 people are sitting there. That's when you have some marketing and some sunk cost where it makes effect too when you have a month to month anything you can some of that advance is actually no cost incurred yet the artist isn't that the show the people aren't in the venue you havent.
Hey, the costs. So this is the easiest economics.
A challenge for us is to reroute and reschedule a show no cost to us.
As Joe said the good news is on a supply demand the shows not going away, it's just moving to a different quarter.
Artists, wilt, who or whether they have to a jump off this quarter and going to fall or 21, we won't net lose the business.
And the other demand for that were just you know.
Really.
With because we always talk about the resilience of the concert van is as of last night, we had a sellout in Australia on or on a festival that went out the businesses real strong consumers still seems to be buying the tickets on a global basis. So supply demand will be there we're going to take this cautiously as we watch the markets and we assume.
The hot Swappable flare up and it shall be cancelled here and there, but we're confident long term the show will happen the revenue will flow in the family show up.
On a macro and micro 2020, I think Joe mentioned most of our business doesn't start till the middle of June onward. So the next few months, we'll have some cancellations I assume here and there is some arenas and clubs, but the heart of our business happens in the summer and you know we're optimistic we hope that the that.
That can be handled in the summer months bring us some relief in mobile business as usual, but right now we're being cautious for looking at all markets doing the right thing for the artist we're playing along with the great demand of this this industry.
Great. Thank you for the color.
So most cubans flying burn with Morgan Stanley.
Hey, good afternoon.
I wanted to ask if you could help us think about the leading indicators you gave in your press release and on the old your opening comments.
Particularly tickets sold up 10% for 2020, 30% growth and confirm shows.
Could you give specific guidance financially for 2020, which I understand but just wondering if you could help put those two numbers into context, because they seem quite robust even even relative to the growth. He just delivered in 2019.
And then.
Secondly.
I apologize for asking more virus macro related stuff at times. So you understand why on the sponsorship side can you just help us remind us how much of that business has sort of.
Either annual multiyear relationships versus anything show specific just so we can think about if one or two.
I suppose shows our postpone if we should see that impacts sponsorship as well. Thank you.
On the sponsorship and then I'll know sponsorship would most of our we always talk our reports about our annual global strategic partners. So most of our contracts or our our over the one to three years there longer term, they're not very spin the ones that matter or over multiple events. Most most remarkable markets.
Multiple markets. So we don't have the beautiful part about our display of our business, which is dispersed over 30000 shows they don't have one weekend one show one event.
The $20 million Big event, it's really disbursed across the globe across different venues and genres, which is the part that makes us a bit risk adverse so we see no sponsorship risk at all for show canceled sponsor would get the show later, we'll make up for the show again going back to our first point as long as we're going to deliver and metals.
For the next two years the same amount of shows the growth.
Tickets that we've kind of deliberate for that sponsorship commitment then we see no pull back at all in the long term sponsor.
Thanks, Mike [laughter], we'll talk about the we've got we're headed for a a record 2020 business is strong strong and Joe will give you as.
What he can on how will you can model that children. As you said, we haven't tried to give you full year guidance for a couple of reasons. We don't generally try to do that in February but early and secondly, with the uncertainty on the specific timing on me are set to close it makes it just harder to give you with the overall year looks like.
But we absolutely are taking a lot of confidence based on being so far up in terms of that 30% on the show count.
10% up on the on the fan.
I think both of those there exactly leading indicators projections of where we're going to end up but I think they're strong indicators the will have.
Pretty good crop this year.
Thank you.
Okay.
Next we'll move on to co and now with Jefferies.
Hi, good afternoon, all thanks for taking the question.
On of stuff is there anything that you can provide any specifics as to why it's still being held up within Mexican government and then just second question is on a on a more broader level. There was a big transaction that closed in mid February with one of your your competitors in the multiples seems pretty high and so if we think about being added.
Value in the enterprise.
If we apply that multiple just for your ticketing segment. It seems like you can get the concept in sponsorship pretty.
At a pretty attractive multiple can you just talk broadly about how you think about the value embedded in the broader enterprise. Thank you.
So let me take the first one on assessed.
When we started this several months ago, one of the things that we thought it was because it just gone through some reviews by the same government entity that they were very familiar with the business in would be a fairly quick process. As it ended up this transaction got oh with a different team and.
Front Department, So we had to start.
No, but more right at the basics in terms of the industry. So we weren't able to short cut it as much as we thought.
There's nothing that at this point based on those recent discussions to give us great concern just taking a bit longer.
In terms of in terms of the transaction.
I'm not our view is it simply them, we focus on building a great business, the ticketmaster and throughout all of our different pieces, it's up to you guys.
And then market the specifically value them, we're building units for long term value for our shareholders.
Wind down the flywheel and we expect there will be successful in doing that.
Thanks very much.
Isn't it is fine line into our audience Star one if you have.
Our comments at this time.
Our wine.
Well move next to Doug Arthur with Huber Research.
Just going back to covered by Jane for second Joe I'm wondering if you.
I mean, my concern would be on the festival business in Europe, if there was any kind of a wider.
Brad.
Yeah.
Okay obviously.
As you said most of that is in the summer a sense of ways off but.
Five years ago, The festival business in Europe is a big part of your.
Package I think it's less.
Today as you can probably a good carlson.
The markets, but I'm wondering if you could just sort of size.
Frames and size of that business for you. If there was some kind of slow down or less attendance or even to cancellations that rise in most of these large festivals.
Over on the continent.
Yeah, I think they are kind of well business would be in a low double digit portion of our total fan base.
And I think our largest single festival would probably be roughly half a percent of our fan base. So were.
Across the hundred didn't change basketballs, it's it's very diversified geographically diversified time wise.
Over multiple confidence so if there were to be a situation still as we get into July and August and you assume it.
Located geographically.
I would not expect that that you won't be a b abroad impact in terms of our fan Kim.
Oh, Okay, and then just one little detail question on the quarter I can I ask this question before but.
It looks like your your bed count a in North America in the fourth quarter was very high year over year and relative to recent quarters or is that yes. This continuation of a.
Massive growth in small clubs in theaters.
You know theaters and clubs that I mean, you called out specifically that.
And then the growth in my in my portion on the number of heaters and bonds to me and fair. So that is what throughout most of it in Q4 and there's no acquisitions in there right in North America.
Got it substance.
Maybe a club we leased in Philadelphia, Yeah, not not an acquisition of yeah.
Okay all right. Thank you.
Next we'll move on to Steven Nicola with Kelly.
Hey, good afternoon.
Perfect companies Investor Day presentation in November you guys highlighted a 60 million.
Dollar ticketing Eli opportunity from entering in new markets with a live nation promoter cousins. These markets primarily consisted of Latin American Asian countries. Just wanted to ask it in light of by Ticketmaster is recent Ags <unk> expansion into Asia, and Taiwan, Singapore can you just discuss high level.
The economics of both the Latin American ticketing and agent ticketing, how those markets may differ structurally from both the United States in Europe, and any incremental challenges in those markets.
You may be facing thanks.
[laughter] as well prepared.
We're in a you know agent age is less than <unk>, 0.01% and nothing of our of our business right. Now. So we're not a strong strong business works. Currently I think I would have said on and Liberty that on a global basis, we'd have a lot of opportunity left.
International and we look at.
Look all across the World from Latin America to South Africa to Asia, We think all those markets in India et cetera are going to be long term great markets for us that are up where we have low market share and and are starting to put some shows.
So we were happy we got a flag in the ground in Singapore and in Taiwan small little businesses.
We hope to get more flags in the ground overtime and we think in you know three to five years. So now we hope the Asian business.
Is this is a big contributor to our overall business as well as Latin America, but those those are emerging markets still very new lots of upside, but but not a today don't actually contribute much to the bottom line.
Alright, thank you.
[noise] that does conclude our question answer session apples time, I'll turn the call back over to our speakers for any final or additional coming.
Thank you.
Thank you everyone that does conclude todays conference call.
Thank you all for your participation.
[music].
[music].
[music].