Live Nation Entertainment Inc

NYSE:LYV

Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to Live Nation's Fourth Quarter and Full Year 2023 Earnings Call. And I would now like to turn the call over to Ms. Young. Thank you, Ms. Young. You may begin your conference.

Good afternoon, and welcome to the Live Nation Fourth Quarter and Full Year 2023 Earnings Conference Call. Joining us today is our President and CEO, Michael Rapino, our President and CFO, Joe Berchtold.

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, 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 GAAP measures in our earnings release. The release reconciliation can be found under the Financial Information section on Live Nation's website.

And with that, let me open the call for questions. Operator?

[Operator Instructions] And the first question comes from the line of Stephen Laszczyk with Goldman Sachs.

Maybe 1 on the mix shift in the slate and 1 on sponsorship. A lot has been made on the mix shift shifting more towards amphitheaters this year. maybe for Joe, just from a modeling perspective, could you help us think through how the mix shift will impact the cadence of revenue growth and margin expansion across the concerts and ticketing segments in 2024. And maybe how we should expect the business to pace towards the double-digit AOI growth you called out in the release? And then on sponsorship, maybe for Michael, you have 2 notable tailwinds to the sponsorship business this year, Mastercard's replacing Amex and you have Rock and Rio, which is a biannual event coming in this year. Is there any way you can help us size the contribution from these 2 factors and perhaps where else you're seeing demand in the sponsorship business this year?

Sure, Stephen. This is Joe. I'll go first. In terms of the mix shift, there's several dimensions of this. Let's start with deferred revenue. deferred revenue and a level to which it's up is impacted on a timing basis by what we've talked about in terms of stadium volume being lower this year, at volume being higher. So you have less Q4 far ahead on sales with the stadiums. So that's going to compress that deferred revenue line that you see as of the end of the year relative to what you'd see in a more normal year. then in terms of how that specifically flows through on the concert side because it's going to be a shift to more outdoor with the amphitheaters, it's going to be more heavily weighted to Q2 and in Q3. It's going to have a higher AOI per fan because we're counting the beer money, the parking money other revenue streams when we have the fans on site -- it will mean just on a top line basis, a lower revenue per fan because the stadium tickets tend to be the highest price tickets. So you'll see real divergence there between the AOI per fan and the revenue per fan. That obviously will translate into improved margin on the concert segment. this year, which should particularly come through in the second and third quarters. On Ticketmaster, the way it flows through is that it would have had fewer on sales in the fourth quarter because the amphitheater shows tend to go on sale closer in time shows.

So we still outperformed grew Ticketmaster, in the fourth quarter increased our number of fee-bearing tickets by about $5 million, but that was against the headwind of that mix shift. So we expect to be selling more of those tickets into Q1 and Q2 for the amphitheater. But because those tickets are deferred from a revenue recognition standpoint at Ticketmaster, you won't see the AOI on those tickets until the shows play off in Q2 and Q3. sponsorship Stephen, -- does that help?

Yes, that's helpful. And then just on sponsorship.

Yes. And I just want to give Joe a macro level on the kind of content supply just so we're aligned. This is going to be a great year. We're pacing ahead on our arena and our amphitheater business, which is the higher margin business, as we've talked about. So we're going to have a fabulous year. We're going to be able to to monetize that around the world. We actually look at '25. It looks like it's going to be a monster stadium year again as that pipe kind of reloads itself. So I want to just make sure on a macro level, we're seeing continual artists supply at record levels. And we're -- we made decisions this year. user could have been in stadiums. You wanted to we wanted to get them in arenas this year and put a great show together just in Timberlake Bad Bonney and arenas versus stadium. So it makes those trade-offs in different years. But the good news for us is we're going to have a fabulous arena amphitheater year festival year around the world. that's going to drive our overall AOI margin cash flow, probably bounced back with some bigger stadium activity in '25 and then the cycle will continue. But as we've stated over over our Investor Day, we look at this as a continual growth year-over-year industry for the next 10 years on a global basis, and we'll see that again this year.

Sponsorship your macro point, the demand we're seeing strong as ever. I just spent some time in New York with my team, with the clients, Verizon, et cetera, our demand in terms of clients that want to be part of this live experience surge right now is stronger than ever, as you can imagine, most CMOs want to sit down with us and talk about how can they have some part of this live explosion on a global basis. So we're seeing, as you've seen with MasterCard and updated deal with Verizon and others to be announced. Our pipe is up year-over-year. We expect this to continue to be a double-digit growth business as we've seen in the past, we see nothing slowing down there.

And the next question comes from the line of Brandon Ross with LightShed Partners.

Her everyone. How are you doing? Joe, you talked about AMP in the answer to the last question a lot and the mix shift this year. I was actually curious what -- I want to better understand the future upside in the app business. Your portfolio has been fairly fixed for on time, and you've done a pretty incredible job of increasing per caps over the last decade. Where does the real growth come from in the amphitheater business at this point? I have some follow-ups. Yes, I'll start you can .

Just let me up on -- I think, Brandon, you've heard us talk about it at our remention Day. We think we're in a we're in this double win right now. We think we have global scale that will still continue because of international markets and more to come. But we also have incredible amount of opportunity to monetize the scale we have. And for the first 10 years, we built scale. We just kind of ran the scale. The last couple of years since COVID, we launched our Venue Nation division and really focused hiring up and bringing in new skill sets around hospitality, best-in-class food and beverage best-in-class, VIT clubs, et cetera. We think our amphitheaters or run very well. As I say, they run very well at Southwest Airlines. They're very efficient, and they've been great machines to date. But we think we're seeing when we invest capital on site we're getting 20%, 30% returns on capital when we turn that grassy area into a VIP club, a membership club, you're going to see Jones beats this summer. When you walk out to Jones beat this summer, and an amphitheater, you're going to call me and go, now I get it. Now I see with these -- the machines could double their AOI when you start to really treat them as as arenas have been doing a much better job about how do we upscale on-site elevate the experience and take over. So we think the 50 entities we have, the bones of them are amazing. They do an incredible job. They're efficient. We think we can double the business as we start to actually look inside the hood and upgrade on site whether it's our liquid death idea that there's been a huge surge in our food and beverage, our shake our own custom branded liquor that we launched on site to our new clubs we're rolling out to our VIP boxes to our elevated. If you look at our overall amphitheater business, about 9% of it is premium. We think that should be 30% to 35% to give you kind of macro numbers. if you doubled that overnight, your business would double in the long run. So just take your current house, upgrade it, double your capacity on a VIP business in your business would double. Simplest way to look at it.

Yes. And then the other half of it, Brandon, is that's making more on the shows from the fans that attend is in terms of the volume of shows right now with our current portfolio, if you assume typical AMP has about 4 months of activity on average, our utilization rate is running about 35% and -- so we still have a fair bit of space that we can put more shows into our amphitheaters. And while we haven't been growing by leaps and bounds, we are continuing to add an AMP here and amp there on our hyperlocal strategy. of continuing to look for more spots that we can put an amphitheater at.

Great. Then over the past couple of years, I know Platinum has been a pretty big tailwind for probably both the Ticketmaster business and the concerts business. And I was curious how far along you are in the rollout of platinum ticketing both in domestic and international and then how you expect platinum to continue to contribute to the growth at both concerts and ticket mask .

I'll start and Joe can jump in. Just think of Platinum it's dynamic pricing, right? It's just pricing smarter. And that's been a skill that we've been -- we have a great in-house team, Wix every day working with artist agents managers on this. And it may be as simple as just figuring out how reprice a Tuesday night in Phoenix is worth different than a Saturday night in L.A. So being a lot smarter the way you can price your inventory. -- price the front better, so the back sells out price, et cetera. We think if you look at -- I'll give you 2 kind of ways to look at it. Outside of the U.S., we're in the first inning. So we're just rolling this out around the world. So that's the great growth opportunity, obviously. We've had it in Europe, but still in infancy stages. We're going to expand to in South America, Australia et cetera. So first inning on the international business, well received when it gets there. Promoters are anxious for it, artists are anxious for it because they see when they sell an arena in Baltimore versus Milan right now, they look at the crowd system and say, "Wow, we're leaving too much on the table for for the scalpers let's price this better. So that's our best sales pitch. So you're going to see that excel. And I would say on the U.S. business, we're probably about in the fifth inning. The obvious stuff is done at the top end, some artists on the kind of the P1 platinum, but getting all the way through the business, amphitheaters, the B shows to see just dynamically pricing it better. and smarter all along the way, we see it happen. It will increase your take flow and sell-through rates all the way to the day the time you open the gates up. So we still think that's a multiyear opportunity to continue to grow our top line/bottom line.

The other way I think about it, Brandon, is that the typical secondary ticket is still almost twice the price of a primary ticket. So as Michael said, just you think of platinum as being the market priced pick it. artists are going to be more and more saying, I want that through the house. I want that to be closer to really take away that scalper margin.

Yes. And then finally, not not to overstate. I welcome here. But 1 thing I noticed, I've been -- I've been covering your stock for many years now, and I've never seen you give the double-digit AOI expectation in Q4. It's always Q1 where you give that guidance. What gave you the confidence to give that type of guidance at this stage versus the usual Q1?

I'll start. I think, first of all, our show pipeline is up double digits, very strong for driven by the arenas and amphitheaters. As we've talked about, Michael gave all the reasons why we're highly confident in our ability to execute at our amphitheaters now. So the volume of fans that we're confident in having and our ability to drive the profitability off of those fans gives us the visibility and confidence that we're going to deliver double-digit growth this year.

And the next question comes from the line of David Karnovsky with JPMorgan.

I guess, first, Joe, I wanted to see if you could provide some additional detail on the CapEx guide, where are you deploying the growth capital and what's driving the incremental spend. including for maintenance versus 23. And I know you've discussed potentially buying venues abroad, so I don't know if you could say anything on the pipeline for deals and how that could potentially look relative to past years? And then just secondly, in November, you had described a DOJ investigation is in mid-stages. So I wanted to see if you had any update here in terms of timing or where things stand overall with the Pro.

Sure. let me start with the CapEx. As we noted, we're projecting right now about $540 million CapEx, 2/3 rev gen, 1/3 maintenance. If you look at the rev gen, about 3 and million of that is either new venues or major renovations of existing buildings and about half of that, about $150 million is our top 4 projects would include a major revamp of -- for Soul, which is the top international stadium in the world, down in Mexico City. Michael talked about Jones Beach those projects would collectively have a return in the 20s. So we're definitely seeing some chunkiness now in some projects that cost tens of millions of dollars, happen to have 4 of them line up this year that drives a lot of that. The other rev gen would be a combination of tactical things in existing venues a new VIP club, a new viewing deck rock boxes, some new bar designs that are extremely high returns generally 40s, 50s plus percent sort of tactical improvements been some things at Ticketmaster heavily tied in with the sponsorship group and the creation of new ad units. And then maintenance is a combination, mainly venues, some Ticketmaster I think that's continuing to rise at a rate lower than our revenue lower than our ticket sales. So we're watching that pretty closely and making sure we have that limited.

In terms of venue pipeline, I think you -- we've been talking about it since our Investor Day. -- we're really happy about the Venu Nation team, our global development team. These were skills really going into cover, we didn't have in-house at any level. We're kind of best-in-class at this point. We've really scaled over the last 3 to 4 years. We got incredible global teams working around the band. And we're just seeing -- as we hope when we're walking into those that we weren't invited to. We're walking in and holding our own and winning right now some of some key venues around the world that we'll be continuing to announce. So we see it scaling over the next 5 years, much, much higher than it was in the past just because we hadn't focused that much on international arenas before, and we see a great path forward on these.

And then finally, on DOJ, I don't think we've got a lot to report. We continue to answer any questions they have. They control the timing. And we'll well what should play out, but we don't have any specific updates.

100% cooperative. .

And the next question comes from the line ofCameron Mansson-Perrone with Morgan Stanley.

Two, if I can. Michael, you've spoken in the past about kind of the current big shift in the promotion business being a move from kind of national booking and towards increasingly global booking I'd love to hear just an update on where you think we are in that shift today. And then I thought it was interesting in the release that you're seeing all in pricing lead to higher conversion. Is that something that you think can lead to adoption of third-party venues? Or do you think that stays at your operated venue portfolio for now?

I'll -- I mean all in pricing, I'll start. Yes, we're actually surprised and thrilled because we were always skeptical. If we would be the 1 led path, there was any conversion that would hurt us. But I think consumers are loving the add idea. They can see upfront. Ultimately, they're shopping multiple tabs anyway. So we're probably figuring out the true costs are the same. So yes, we think it's a great test. I would say most of all of the congressional senate all the stuff Joe and I are talking to everybody about this seems to be the common torture that everyone's running with. So I would assume this ends up being legislated somewhere over time, and I would assume others are going to start jumping on the all-in wagon is a good step forward for consumers, so we can worry about the other issues around scalping, et cetera. On the promoter shift, it is a -- it's always -- it's a 3-level shift, right? It's a local promoter or national promoter and a global promoter. Still lots of great local promoters, why we have 100 offices in 40 countries. Concerts still have to be executed local. So you have to make sure you have the best local staff in market that can execute at scale on an ongoing basis. Artist absolutely evolved over the last 10 years. much like they probably have 1 global record label and 1 global agent, a 1 global publishing company as curing became the most important category and expensive. These artists are putting on was at the Drake show last night. I mean he's a credible show he's carrying to those fans at a huge cost to give back. So the artists are over the last 10 years have started to look for a much more national or global partner, whether it's us AEG, CTS in Europe because their needs have changed. They needed up capital. They needed organizations that have a wider view on data, marketing sponsorship ways to help them think about their global business. Do they go to Japan or not? Do they do Hong Kong before or after? Do we do we get it all there. So artists have become globalized brands and consumer -- with the consumer as we've talked about, from the younger the manager and the younger the artist, the more global they're looking for. So if you're kind of the new manager managing a superstar that's popped on a global basis, you absolutely want to sit down with some want to talk about your global touring plans and when do you go where before with 1 common agenda in mind. So we're seeing that continual shift and I think you'll just see that continue to move over the next 5 years.

And The next question comes from the line of Jason Bazinet with Citibank. .

I just had a quick question on CapEx. You guys have been so consistent with this sort of 2%, 2.5% of revenues on CapEx given what's happening in your business and the high returns on invested capital we can see from the outside, why doesn't it make sense to sort of open up the envelope and spend a bit more.

Love this question. I think we -- as Joe and I talked about coming out of COVID, the priority of the last 3 years was obviously built back up that cash bank we drained a lot during Covet. So we wanted to get the balance sheet strong, again, get our staff, get everyone back in place, higher the skills we needed and plot through our real kind of 5- to 10-year strategy here. So we think the way we're producing our EY to cash flow return now, and it's given us all the tools we need to deliver this ambitious growth plan that we laid out in our Investor Day. So you'll see us move up and down, depending if there's a big opportunity, but we've been pretty consistent that we can deliver our growth that we've outlined for you with that current number. .

And I think the market just accepts it more if we demonstrate it and then do it a bit more. As you said, we've been demonstrating that return on the invested capital as we continue -- we spend a bit more. We demonstrate those returns. The market will let us spend a bit more. Market doesn't tend to want you to take big leaps and big turns. So we're not doing that. we're just steadily building a pipeline and as the market sees the demonstrated returns, then you earn the right to continue to do more of it.

Looking forward to the number being 3% or 3.5% of press .

And the next question comes from the line of Ashton Wells with Evercore ISI.

It would be great to get an update on the real-time indicators you guys are seeing on the consumer front, whether that's the performance of on sales or how shows are closing or on-site spending.

I'll start and then Joe can jump in. I mean I see the ticket sale of my daily ticket sale counts. We just went on sale. He's within the last week on Usher Justin Timberlake, Jennifer Lopez, just announced jelly roll this morning. The shows are flying up the door from top to bottom. So we've seen no slowdown on the consumer from -- I was in Columbus, Ohio for a sold-out Drake show last night. We had 2 nights in a row sold out. incredible high merch numbers. They were buying all the sweatshirts and on on-site, the GM told me they were -- we're doing really strong numbers. So we're seeing at our current business, they're buying and showing up across the country and across the globe right now.

And we're seeing most of these on sales still selling front to back, meaning most expensive tickets to lease. So we're seeing strong demand at all price points. We just went on sale with our lawn passes for our amphitheaters, up double digits in sale on that for the price-conscious fan. So that's going well. Shows are closing. If we really have the best per cap on-site spending right now for Ederer and clubs, just given the it's Q1, those numbers continue to be strong and show year-on-year growth. So all fronts are showing strong consumer demand globally.

And the next question comes from the line of David Katz with Jefferies.

When we think about the different business lines, how would we think about the trajectory or arc of growth in sponsorship relative to concerts. And what I'm essentially getting at is whether there is an acceleration of growth in sponsorship and advertising that has begotten from this outperformance in this acceleration that you're seeing in the -- on the concert side of things later on. .

Yes, David, this is Joe. I think absolutely, there are increasing benefits to scale in the sponsorship business. One of the things that the brands are telling us they're looking for is they want to reach customers at a time when they're open to the brands, which we have, but they want to make sure that it's at scale, that at scale really matters. So they're not trying to do a lot of different little programs. And so we're seeing a lot more demand. We're over $1 billion in revenue on the sponsorship side. We're closing in 150 million fans. So we -- over 600 million tickets on Ticketmaster, -- so we've now got a scale and that scale continues to beget more scale. So absolutely, we see a very strong continued growth in that business.

So just to follow up, and I'm not pushing for any kind of guidance or anything like that. But the growth rate in sponsorship obviously could outgrow and grow more than potentially that of concerts at some future day, right, if we're sort of plotting those lines.

But I think if you look historically, look back since 2010, concerts has consistently grown faster than our sponsorship business. And we think it continues to be a strong double-digit growth business. .

There are no further questions at this time. I would like to turn the floor back over to Michael Rapino for any closing comments. .

Thank you. Appreciate all your support, and we will talk to you at the end of Q1.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.