Live Nation Weathers Rough Quarter

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UPDATED: While tours and festivals for later this year are being announced every day and Live Nation’s stock recently reached an all-time high based on the concert industry’s anticipated return to health, the company’s first-quarter earnings report showed that the concert industry is just beginning to revive, it had a rough quarter — as it had predicted on its last earnings report, and as would be expected.

The company’s adjusted operating income loss for the quarter was $152 million, which consisted of $323 million in operational fixed costs and $171 million of contribution margin, which included $149 million from operations. It ended the first quarter with $1.1 billion in free cash compared to $643 million at the end of 2020, an increase of $462 million.

Year over year reflected how rough the past 12 months have been: Concert revenue was down 76% from $993.4 million to $239.4 million, ticketing was down 90% from $284.3 million to $28.3 million, and sponsorship and advertising were down 75% from $90.3 million to $22.6 million. Overall revenue for the first quarter was $290 million, and the company lost $145 million from its concert business and and $120 million in ticketing. Live Nation lost about $300 million in the quarter overall.

The company also announced that longtime CFO Kathy Willard will be retiring, with president Joe Berchtold adding the CFO role to his responsibilities  — the timing not only signals confidence that the company and the industry are coming out of lockdown, it also removes her $950,000 salary, along with substantial other earnings, from the company’s balance sheets.

The global refund rate for Live Nation concerts that are rescheduled and are in or have gone through refund windows remains at 17% — in other words, 83% of fans are holding on to their tickets — the same as the prior quarter. For festivals, 65% of fans are holding on to their tickets.

The company said it expects the second quarter of 2021 to be the first year-over-year improvement since the last quarter of 2019 and expects to begin generating positive adjusted operating income in the second half of this year. Regardless, they are planning to reduce costs by $750 million for 2021.

During the earnings call, Rapino also spoke optimistically about the company’s growing livestream business — particularly its partnership with the Veeps livestreaming platform — as a way of adding value even once concerts resume. As an example, he proposed a “Lollapalooza Weekend” where for around $50 a fan could watch the entire festival from home.

“When we reported our 2020 results in February, I was optimistic that we would soon be returning to live events, and since then, our confidence has increased for our key markets,” CEO Michael Rapino said in his prepared comments. “In the U.S., over 40% of the population has received at least one vaccine dose and most states are now fully or partially reopen with more restrictions being lifted daily. In the U.K., over 50% of the population has received at least one vaccine dose and their reopening roadmap is tracking to plan. Although Europe remains a few months behind on vaccinations, they are progressing and recent discussions about reopening to international visitors this summer are encouraging.

“Alongside these trends, we are also seeing the effects of significant pent-up demand as fans are buying tickets and events are selling out faster than ever before. In the U.S., Bonnaroo, Electric Daisy and Rolling Loud festivals all sold out in record time at full capacity. In the U.K., we have 11 festivals planned for this summer, including our largest ones – Reading, Leeds and Parklife – where tickets have already sold out, and in New Zealand, the country’s largest festival, Rhythm and Vines, also quickly sold out.” He also pointed to tours by Dave Matthews, Luke Bryan, Maroon 5 and others as “showing artists’ increasing confidence in performing this summer.”

However, the industry’s eyes remain largely focused on the horizon — with that horizon being 2022. “Given the longer lead times associated with global arena and stadium tours, we expect these will start later this year and into 2022,” he said.
“We are already seeing confirmed major tour dates for 2022 up double digits from the same time pre-pandemic in 2019 for 2020. Many of these artists will have multi-year tours, spanning the U.S., Europe and often either Asia or Latin America, setting us up for a strong multi-year growth run.”

Rapino also pointed to the company’s brand partners, saying that its committed sponsorship activity is “up double digits for next year relative to where it was at this time pre-pandemic in 2019 for 2020,” although further details were not offered.

At the end of the first quarter of 2021, the company had total cash and cash equivalents of $3.0 billion, which includes $1.1 billion of free cash. This free cash, along with $964 million of available debt capacity, gives the company $2.1 billion of available liquidity. The company believes this level of liquidity allows it to fund operations until the expected return of concerts beginning in the summer of 2021, preceded by ticket sales earlier in the year.

 

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