Q3 2023 Live Nation Entertainment Inc Earnings Call
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Good afternoon, My name is John and I'll be your conference operator today.
At this time I would like to welcome everyone to live nation's third quarter 2023 earnings call and I would now like to turn the call over to Amy Young head of Investor Relations you May begin your conference.
Good afternoon, and welcome to the live Nation third quarter 2023 earnings Conference call.
Joining us today is our president and CEO, Michael Rapino, and our President and CFO, Joe Berchtold, who will start with prepared remarks from Michael and then we will take your questions.
Before we begin we would like 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 include.
Statements related to the company's anticipated financial performance.
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 cause actual results to differ.
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 the 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.
And with that I will now turn it over to our President and CEO Michael Latino.
Yeah.
Thank you for joining us as you can see from our results the structural tailwind behind our business are accelerating faster than ever.
As a fan demand truly globalize as an artist were able to more broadly than ever. This is fueling an unprecedented global desire for concert.
This is happening at all levels with both casual and diehard fans from small clubs to massive stadium events.
I'll start the conversation today and the next week or deeper into our results and how these trends are setting up the industry for ongoing growth.
Joe anything to add.
Thanks, Michael and good afternoon, everyone only thing for me to add is the given the investor presentations next week, we will keep today's call more brief unusual.
So with that Oh, I think we're ready to take questions operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate that your line is in the queue.
You May press Star two 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.
Moment, while we poll for questions.
And the first question comes from the line of Brandon Ross with light shed partners. Please proceed with your question.
Hey, thanks.
Just to start off since you guys last reported their spin.
At least two major articles on the Doj investigation into your company.
As well as some movement in both the legislative and executive branches on industry wide regulation can you just give us an update on what you know about the Justice investigation and then separately.
The potential impact of the proposed congressional legislation and I have a follow up.
Sure. Thanks Brendan.
Start first of all just on the Legislative which I think is pretty straightforward right. Now there is an all in pricing bill.
By centers camera on crews under consideration we're fully supportive.
Of Ah Theres, a bot sac.
Senator Blackburn.
Introduced.
Called Maine, which were also fully supportive of and in general everything we're hearing legislative things that I think are pretty consistent with what we outlined in a fair takeaway.
And things that we would definitely be supportive of.
On the Doj.
In the article that came out yesterday.
Not surprisingly, it's our impression that the Doj is taking at least the first level look at almost everything that our competitors complain about.
And from there they look further at some issues and not others.
Tell us they have a problem with something we talk to them about it but.
Let me emphasize there as far as we can tell nobody thinks that the fundamentals that drive our promotions business or unlawful we paid top dollar to artists and provide them with top notch tour support and those are good things.
I think the article also seems to reinforce that the investigation is looking at specific business practices versus our overall business model, which as I've said previously is my impression based on what I've heard.
On the specifics in that article on the agencies getting document retention letters I mean generally anyone the Doj seeks documents from gets a cover letter like this saying they should retain documents related to the investigation.
So all of this tells US is they think the agencies have relevant information, which seems pretty obvious given the topics that are being discussed and competitors complain about.
Finally, we obviously find it interesting is I think you tweeted that the timing of this always seems to come up with earnings.
We don't think Theres any real news right now concerning the investigation were completing our document production that they've asked for we haven't even started depositions.
And our impression is that the investigation is kind of in its mid stages at this point.
And yet you know we have another new story on the day before earnings, which we don't seem to think as a coincidence.
Okay and.
Getting to the business your forward looking metrics and especially the the Q3 ticketing results point to real continued strength for your business.
But there's a lot of trepidation now about consumer weakness, especially after some weak guidance from others in the experienced economy I know booking just said.
Some negative things just now is there anything in real time that youre seeing at all to suggest a falloff in trends at Ticketmaster.
No like the Rihanna is what the world will continue to sell but are the.
Tuesdays in Pittsburgh still.
Still holding up.
And.
Like really especially for Ticketmaster as you look forward.
Sure were seeing no issues, but let me give you that in the two piece I think you asked about first of all Q3, and then call. It October.
So Q3 was a very strong volume quarter. So it was really driven by ticket volume 90 million fee bearing tickets.
We sold in the quarter.
And the growth came from both North America and internationally. So we're seeing that band demand consistent globally, 90% of the growth came from concerts, which again tells you that the fans are looking to go to the concerts.
The one thing I would note on Q3 is just a reminder, the last year, we had an unusual concentration of client renewal expenses.
Which are normally spread out over the second half.
But largely came together last year, but it really the quarter was about the tremendous volume of tremendous fan demand.
Load through Ticketmaster.
Looking more specifically at just October if we look at our Ticketmaster platform for the month of October ticket sales were again up year on year relative to last year.
They were up double digits in North America. So we're seeing no sign of weaknesses.
The other metric that we look at is as we look at just for our U S. Concerts Division, we track every week year on year.
<unk> and again over the past five weeks since the end of the quarter. Those sales continue to be up double digits. So we're seeing no weakness at all we gave you the leading indicators for.
Show commitments for next year, and we'll get into a more but feeling good about everything that we're putting on sale.
Thank you Brandon and Brandon just for more color yes.
I have weekly booking calls with over the 40 presidents around the world when we talk both from clubs up to stadiums and festivals.
And we have not seen anything.
Taper off in any sense or on sales for next year, whether it's an early festival across the pond or whether it's a a festival.
Hub tour, playing in Pittsburgh on a Tuesday, as you say or maybe the Blake 182, who toured last year now is back on tour again this year playing.
<unk> just to Cleveland on Wednesdays in Tuesday's Big on sales for that tour.
So we are not seeing any pullback in any way from a club to our stadium tour from Milan to Argentina, right now the consumer supply demand seems to be consistent across the globe.
Small to big.
Thanks very much.
And the next question comes from the line of Stephen <unk> with Goldman Sachs. Please proceed with your question.
Great. Thank you Joe Theres been a lot of focus on how the concert segment profitability would shake out this quarter I think just given the mix shift towards stadium shows and the slate this year and maybe offsetting that some dynamics around having a more matched revenue and expense structure compared to last year.
I was hoping you could help us unpack some of those dynamics and maybe size. Some of those factors just as we think about concerts profitability. This quarter I think it would be helpful. As we contextualize. This year and then look forward to next year.
Sure.
I think let me start by just noting that year to date, our concert margins are up year on year.
And for the full year I expect margin expansion of at least 50 basis points relative to last year, So making good progress verging on halfway back towards the 2019 levels and that's despite growth for the overall year that will be.
Definitely skewed to third party venues driven heavily by stadiums.
If we if we look at the quarter.
I think if we look at if we look at Q3 about 47% of our fans where in arenas or stadiums, which was pretty good proxy for third party buildings.
Comparable last year for that number was 42%.
So we had a lot more fans mix in arenas or stadiums this year.
Two buildings accounted for about 75% of the $7 5 million fans that we added in the quarter.
And that does two things as we've talked about in the past it drives our oi up because we're making money on these fans and it negatively impacts margin. So.
Thats why youll see quarter to quarter fluctuations, we don't worry a lot about but I think if you take the overall combination of high growth in third party buildings shifts the mix towards more third party buildings and make substantial progress in our margins for the full year I think we're pretty happy as we are.
Look at the totality of that.
Great. Thanks for that and then maybe one for Michael.
Coming up on lapping the launch of two fairly significant tours in Taylor Swift and beyond say I think there's some concern that his towards it'll be hard to replicate as we look ahead to next year I was wonder if you could talk a little bit more about how impactful these tourists warranty our business.
Current year and maybe looking ahead, how the slate for 2024 shaping up and you start the opportunity to compensate for some of the notable tourists.
Year over year. Thank you.
Yes. Thank you.
Well.
I've seen this written but we didn't promote the tailored store so.
I don't have that comparable to worry about in 'twenty or beyond say it was our tour wildly successful.
But when we look at any artist across Ticketmaster live nation, No artist is going to account for more than 1% of the tickets.
So no one tour, we'll ever heard us year over year, it's about our macro portfolio of artists and tours and we have a very good pipe as we've been saying for next year, We think next year.
Crazy to say, but sitting here looking at this year that we're looking at double digit growth over this year next year.
On ticket sales and our stadiums are gaining a lot of steam so we're very confident we're going to have.
Big record breaking tours on the road next year is that money just went up again and more to come announced more to be announced.
So we are very confident that both ticketmaster and live nation are going to have.
Big strong years next year with our pipes full.
We will overcome the sheer numbers.
Great. Thank you.
And the next question comes from the line of David Karnofsky with Jpmorgan. Please proceed with your question.
Hi, Thank you maybe following up on ticketing.
Like your revenue growth will outpace <unk> growth so interested to understand how non service fee revenue might have helped in the quarter and then Michael I don't know if you can say anything on the Mastercard agreement today from today and I don't know what other opportunities you see for sponsorship deals that kind of cover your international footprint.
Yes.
Sure I'll start just on the mid.
Ticketing absolutely.
Ticketmaster continues to benefit from the non service fee revenue sources. It has.
On the Upsells and other services that itself to fans as well as increasing array of services that it's providing to venues and promoters are all good sources that are helping us increase the profitability per ticket that we're selling.
At Mastercard.
So to have them onboard.
We've been working over the last couple of years to have a great diversity across our our partners on the payment side.
<unk>.
Thankfully, we didn't take any of the easy crypto money at the time, we worked hard to make sure. We had a stable great partners today looking at Citibank Paypal now Mastercard for international rounds out our global portfolio in that category.
At an overall economics, surpassing what we've historically had so very very happy to have them onboard big part of our business.
And continue to show strong growth in our sponsorship side and sponsors lined up to be part of the slide boom.
Thanks.
And the next question comes from the line of Ashton Wells with Evercore ISI. Please proceed with your question.
Thank you I think you guys are on track to add 6 million fans or so this year at your owned and operated venues is this sort of the right run rate to think about going forward or could this step up in coming years.
No. This is an area that we're absolutely focused on continuing to add venues. So the hope is is that we continue to build on that number I think it will probably not be linear year to year as we add to our portfolio, but it's an area that we're very focused on.
Building as that tends to be our highest profit highest margin band that we serve.
And the next question comes from the line of David Joyce with Seaport Research. Please proceed with your question.
Thank you a couple related questions that ticketing revenue, particularly blew away our estimate so I was wondering how much of that is for 2020 three events and how much for 'twenty 'twenty four and then similarly with deferred revenue being up 39% I know that some of that is due to the function of when the shows go on sale. So it's not an indication.
Later of what revenue growth would be but how much of that would be due to venue mix.
What are the tour type for the for 'twenty squeeze three shifts versus 'twenty 'twenty, four and otherwise how can we use these metrics on an apples to apples basis to help with our.
Outlook for 2024.
Sure. So first of all at this point through Q3, we've not sold a ton of tickets for 2024, it's why we focus more on what the show bookings are so we've sold and we sold more took tickets this year, which was part of what goes into the deferred revenue I'll come back to you.
But we've sold.
The order if I think 18 million tickets for shows next year, so relatively small portion of what we're ultimately sells.
So that's not the driver of our Ticketmaster results for Q3 to a very great extent, it's more of the other factors that I talked about.
And then deferred revenue is up because yes, we have sold more tickets for the shows.
Next year, we've also sold more tickets for the shows that are occurring in Q4.
And it's our expectation that because of that pipeline because as Michael noted.
Turned into a pretty solid period for.
For stadiums as well as arenas, we expect to see that deferred revenue number continuing to grow.
For the next seven or eight months.
Understood I appreciate it.
Yeah.
Ladies and gentlemen at this time, we've reached the end of the question and answer session I would like to turn the floor back over to Michael for any closing comments.
Thank you everyone. We look forward to seeing you in New York next week, we're excited about where we are as an industry.
And we look forward to taking you through details next Thursday. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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