Q3 2021 Live Nation Entertainment Inc Earnings Call
Okay.
Not all the time.
Shoot.
Like.
She's a friend of mine.
To get a loan.
John.
Sure.
Ooh.
[music].
Good day, everyone. My name is Hector and that'll be your conference operator on theories call. At this time I would like to welcome everyone to live nation Entertainments third quarter 2021 earnings Conference call. Today's conference is being recorded following management's prepared remarks, we will open the call for Q&A instructions will be given at that time.
Before we begin live nation has asked me to remind you that this afternoon's call will contain certain forward looking statements that are subject to risk and uncertainties that could cause the 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 S E C 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 S. E. C regulation G. Live nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures and their earnings release or website supplement, which also contains other financial or statistical information.
To be discussed on this call.
Since to our business in the U S and UK and allowed us to work in conjunction with local health officials to mitigate transmission risks from our events.
On the labor front, we were able to set staffing requirements for our peak outdoor season without any show disruptions.
We also saw strong sand demand in our Ticketmaster results, we delivered its highest quarter ever.
Q3 was ticketmaster's fourth highest fee bearing G. T V quarter, excluding refunds led by sports leagues restarting in concert on sales for 2020 to wrapping up the <unk>.
Dish in Ticketmaster's secondary business delivered its highest G. T V month in September showing continued growth in this segment, even as artists and content owners continue shifting more of the value to primary cells.
And there's a fans came back sort of our brand partners, who continue to seek to connect to the live music fan as a result, our sponsorship and advertising business delivered over $100 million and AOR for the quarter. The first time at this level since Q3 of 2019.
The return of sponsorship and advertising has been largely driven by historic major partners along with the addition of new brands, including truly hard seltzer as well as coinbase and Selina and the Fintech segment.
So look forward to 2022, we're encouraged by all our leading indicators across each business.
Through October are confirmed show count across Amphitheaters Arenas Stadium shows it was up double digits relative to the point in 2019 for 2020 shows and through mid October we have already sold 22 million tickets for shows in 2022.
And demand has been stronger than ever for many of these on sales with a million tickets sold for each of the coal plate and Red Hot Chili Pepper tours and several other tourists already selling over 500000 tickets.
Masters on sale for 2022 also reinforces this demand.
We expect Q4 <unk>.
<unk> fee bearing G T V to be at record level, even after already selling 65 million fee bearing tickets for events next year.
Ticketmaster has also added clients representing over 14 million net new fee bearing tickets. So far this year further accelerated its growth on a global basis.
And our sponsorship and advertising business had similar success with confirmed pipeline for 2022 up double digits relative to this time in 2019 for 2020.
But at the same time, we're continuing our cost focus to deliver $200 million and structural savings.
Pre pandemic 2020 plan, making us more nimble and better positioned to invest for future growth as we get close to turning the page on 2021 are we remain more convinced than ever in the power and potential of live entertainment and the strength of our position.
No industry was more impacted by the pandemic over the last two years and no industry. So proven the durability of its demand in the face of such a disruption.
I fully expect we will continue to have bumps in the road in the coming months and it will take some time for international artist touring on a truly global basis, but the fundamental strength of live entertainment and live nation has proven out and expect we will only continue to grow up from here with that I will let Joe take you through more details on our results.
Thanks, Michael and good afternoon, everyone before getting into the detail on each business a few points of context for the quarter.
This is primarily a U S and UK driven quarter. These markets accounted for 95% of our fans in Q3 versus 75% in Q3 of 2019 and they represented 90% of fee bearing G. T V. In Q3 versus 80% in Q3 of 2019 second our concerts activity primarily ramped up.
For building R accelerated ramp up to open the buildings this summer new health and safety protocols and are generally tightened labor market.
At the same time as noted with increased average ticket price and higher onsite spending we increase the contribution margin per fan and did so to such a level that our profitability per fan net of operating expenses rose double digits.
Turning now to Ticketmaster is Michael said taken master had a record of $172 million for the quarter driven by its fourth highest fee burying G television quarter, excluding refunds and lower cost structure from its reorganization along with lower ramp up labor costs, as we accelerated activity faster than the rich.
<unk> of staff.
Primary ticketing was driven substantially by concerts, which accounted for over 70% of the fee bearing G television while sports was the second largest category and together they represented approximately 90% of all fee bearing G television.
Geographically North America accounted for 80% of fee bearing GTD as activity remained limited internationally outside the U K.
And secondary ticketing, we similarly saw concerts and sports account for over 90% of fee bearing G television.
So in this case sports was the primary driver with the launch a new football and basketball seasons.
Another contributor to our growth and ticketing is the continued signing new clients with over 14 million net new fee bearing tickets added this year through the third quarter.
These new client additions have been particularly strong internationally accounting for two thirds of our new client tickets.
Finally sponsorship sponsorship ally surpassed $100 million in the quarter for the first time in two years as it again had available AD units at scale, both on site and online.
Finally sponsorship sponsorship ally surpassed $100 million in the quarter for the first time in two years as it again had available AD units at scale, both on site and online.
Like our other businesses it was largely U S. In the UK driven together accounting for approximately 90% of total activity.
And as activity resumed we were also able to engage new sponsors, adding eight new strategic sponsors in the quarter.
As we look to queue for we see a continuation of the same trends we had in Q3 with concerts, we expect North America and the UK to continue ramping toward historical activity levels, while the rest of Europe and other international markets have limited activity given the lead time to plan concerts.
Billion dollars at the end of Q3 of 2019, which gives us the best like for like view of the demand pipeline already in place.
And then a reminder, on our debt that we continue with our liquidity covenants until we report Q4 this year at which point, we switched to a more traditional leverage test.
Given our current liquidity unexpected Q4, and 2022 activity levels, we do not anticipate any covenant issues through next year and expect to continue investing in growth.
With that let me open the call for questions operator.
Forward to next year at the end it probably we don't think that there's any issue in terms of getting back to the level of activity that we've had or the level of activity that we're talking about in terms of our pipeline of shows ultimately that is what the short term constraint is in terms of why we won't be doing 45, Meg it towards why you can't have 80%.
Growth in a given year does have to do with some of the short term ability to get your buses or to get your staff, but there is no. There is no long term constraints to the growth and we're still able to grow it in.
And next year in terms of the costs incurred it's different pieces for different folks that the artist is generally responsible for their crew and their operations that theyre being out on the road and were responsible for the venues that we operate.
And just to add.
Texture to that I mean.
We would have absolutely in July or August.
The idea that we had instantly hired 20000 people for summer amphitheaters.
Really what happened way back in April we would've had concern, but we surprisingly we're able to fully staff all of those jobs.
As Joe said marginal cost increase a few million dollars. So we did see that the the part time seasonal workforce that needed to come back to help kind of make the machine work, we're eager to get back. So we didn't have that challenge I think we're going to keep looking at how we do a better job of attracting and retaining them.
<unk> environment, but we don't see that as a cost.
Challenge, we think its an exciting category. So a lot of people like coming to work at the amphitheater clubs theater to lifetime lifestyle type job.
And as Joe said, we have no supply chain issues. The the artist gets on state Theres plenty of.
Trucks light staging etcetera to make sure the machine work on a global basis.
Thanks.
Our next question comes from the line of Brandon Ross with light shed partners. Please proceed with your question.
Hello, Thanks for taking the questions.
Just you talked about.
Your quarter until the return to lives it's been predominantly in the U S and UK wonder.
I'm wondering if you could give an update on when I I know, it's a big world out there, but when we can expect the rest of the world to get back to those 2019 levels and beyond that we've seen in the U S and the UK.
And then a follow up.
Yeah, I'll jump in and Joe can jump in we we had a global call yesterday. This week with all of our different president.
I'm very confident.
Obviously, Canada U S U K are fully opened.
Europe will be fully open by the end of the year. So we will have most of the main markets open into January.
Pacific Rim Latin.
Latin America, all looks positive in terms of being open fully for international artists.
By April.
So we think internationally on a global basis by April the world will be moving around again.
Doesn't overly affect our business short term because.
Most of the outdoor Stadium festival business is summer time, so that will be all fully up and rolling we have lollapalooza starting in April in Latin America.
And Australia festivals. So we think will be opened for prime season, and will be rolling around indoors in the main markets.
Europe.
Canada, and the U K between now and April.
Great and I wanted to focus a little on where our window business.
You talked about that prime season, starting in April and you extended your Amp season on festival season. This year as the summer got off to a late start.
Jean plan on keeping.
Talking ongoing to multiple developers around the world, who are building something and they want a 2000 seat of 5000 feet to 7000 feet, maybe an arena.
As an anchor into one of their developments. So we've really ramped up that division over the last two years.
And we see great opportunity around the world are continuing to expand our venue portfolio in these prime markets.
<unk> is an example, where there is no arena.
<unk> is an example, where there is no arena.
We're going to open that arena in the next couple of years.
It's going to be a monster of a return for us as a great single venue in the off the market right now for live shows to complement our club our theater our amphitheater.
Portfolio, so well.
We will continue to be very opportunistic in the markets around the world, where there is an opening for a live venue of any size.
Great. Thanks, so much.
It just opens up increased spend it's been a long existing difference between those two moving to 100% cashless just raises the average because instead of being half of each.
And then we're seeing again structural trends people are going to a bit higher quality in terms of some of the alcohol some of our product offerings.
<unk> make it more of a deal for people to take higher price point product. So all of those we think are a continuation of the trends that we've seen over the past several years.
No reason to expect that that would be any different going forward.
In terms of the cadence for shows next year in general and Michael talked about this a bit youll see similar where Q2 and Q3 will continue to be our strongest quarters. That's when we will have a great Stadium next year.
It looks to be far and away the largest stadium year. We've we've had that'll be primarily in those Q2 Q3 outdoor months, obviously, our amphitheater and festivals largely those months and even the arena certainly here in the U S. You just have more avails.
Those months because of the timing of the sports season. So.
There is no reason not to expect similar seasonality in general as we've had historically.
Great. Thank you.
Our next question comes from the line of Steven <unk> with Cowen. Please proceed with your question.
Yes. Thank you Joe on the ticketing segment in yet another great quarter margins were at 46% on Oi I know you said prior Q2s, 40% margins shouldn't be extrapolated and I know you love talking about margins, but just wanted to see if you had an update on.
That mid single digit margin expansion that you talked about prior on an annualized basis is that still how we should be thinking about the ticketing business coming out of the pandemic or.
Are we talking about something higher than that now.
We set it before the good news is 22 was going to probably be a record year, but there's only so many fridays and Saturdays and.
Artists are pretty smart about how they root their tours and how they look at the world.
And find their right positioning so it kind of self regulate itself you're never going to have.
A bunch of tours on the same weekend piled on so that just <unk>, we have a more inventory to spread into 22 23, and we're talking 24 now so I would say, we we have a backlog but needs to still work through the system and 22, 23, which will be.
<unk> incredibly strong years, and then we continue to kind of just get back to regular.
We've had over the year double digit growth in the live entertainment space ongoing we project that to continue both on pricing and global volume demand.
And supply continues to grow around the world.
And thank you for that and if my car if I may just follow up on the perspective deal front you know I think when we last spoke activity in terms of potential acquisitions, we're starting to ramp up again and become more active any update their that's worth sharing.
Yeah, I mean, if you follow.
My Twitter or what you're up to we've been we've been pretty active you were back.
With our backlog of.
30, 40 things around the world, we're looking at that can keep propelling our business and growing our scale. So good.
Good good pipeline will continue to be very aggressive the growing our global market share and then monetizing products on top of it.
Thank you very much I appreciate it.
Our next question comes from the line of Orion Sunday with William Blair. Please proceed with your question.
Hey, Michael is extremely my question.
The 14 million net new TB customers.
The technician added this year, so far what can the primary drivers pulling that business are they looking for digital ticketing was there a change in in particular during the Covid and then it was two thirds of them being international and kind of like are these exclusive 16 partners alright, any any color that would be great.
Sure I'm.
<unk> business, because we are the best at it and we see that because we see the clients that may leave.
But end up coming back because the functionality that we provide is superior to others. We're seeing this in our Brooklyn Arena last week with a competitor trying to do a presale that broke.
And that's pretty basic stuff. So I'd just remind people we are in a global basis. The best of what we do that's why clients pick us.
And then we happen to be global and open it up all of our technology to a global base is going to be a great runway for the next while.
Yeah.
Got it that makes a lot of sense and then just sequencing of this past quarter.
It didn't sound like you called out a big impact from Delta here did you feel that at all.
And did you see much of a rebound there and I guess, if you pass it.
Well I think every month for us we continue to see ongoing growth in the reopening so it would be hard to separate out delta specifically versus reopening in general, but everything that we saw was more more fans going to more shows consistently contrary to.
Some of the press I've seen very low no show rates low to low single digit increases in terms of no shows as a result of the pandemic.
So.
It seems that the people that want to go to the shows are going at the shows and that's just continued to grow as a portion of the fan base out there.
Let's sit here thanks, guys. Thanks for the questions.
And to Joe's point I would just add also noticed is the it's all different genres and agents. So this isn't just young kids or go into shows because they're not scared that the Eagles just had a wildly successful arena tour, that's going to finish up this week in Seattle, the grateful dead wrong doing full.
<unk>.
Harry styles, obviously doing indoors too just record business.
As well as our our amphitheater business. So we did we werent sure going into the market.
[music].
Okay.
I can't believe this from the last six.
Sure.
Yes.
Yeah.
[music].
Okay.
Okay.
Yes.
[music].