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 Fourth Quarter and Full Year 2023 Earnings Call. And I would now like to turn the call over to Ms. Yong. Thank you. Ms. Yong, 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; and 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.

Thank you. We will now be conducting a question-and-answer session. The first question comes from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your question.

Hey, great, thank you. Good afternoon. Maybe one on the mix shift in the slate and one on Sponsorship. A lot has been made on the mix shift shifting more towards the 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 had two notable tailwinds to the Sponsorship business this year: MasterCard is replacing Amex, and you have Rock in Rio, which is a bi-annual event coming in this year. Is there any way you can help us size the contribution from these two factors and perhaps where else you're seeing demand in the Sponsorship business this year? Thank you.

Sure, Stephen. This is Joe. I'll go first. In terms of the mix shift, there are several dimensions of this. Let's start with deferred revenue. Deferred revenue in the 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, and amp 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 at the end of the year relative to what you'd expect 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 Q3. It's going to have a higher AOI per fan, because we're counting the beer money, the parking money, and 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 stadium tickets tend to be the highest price tickets, so you'll see a 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 amphitheater shows tend to go on sale closer in time to the 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 take place in Q2 and Q3. On the Sponsorship?

Stephen, does that help?

Yeah, that's helpful. And then, just on Sponsorship.

Yeah. I just want to give Joe a macro level on the kind of concert 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 monetize that around the world. We actually look at '25, as it looks like it's going to be a monster stadium year again as that pipeline kind of reloads itself. So, I wanted to just make sure on a macro level, we're seeing continual artist supply at record levels. And we made decisions this year, Usher could have been in stadiums. We wanted to get them in arenas this year and put a great show together. Justin Timberlake, Bad Bunny in arenas versus stadiums. So, you make those trade-offs in different years. But the good news for us is we're going to have a fabulous arena/amphitheater year and festival year around the world. That's going to drive our overall AOI margin cash flow. We'll probably bounce back with some bigger stadium activity in '25 and then the cycle will continue. But as we've stated over our Investor Day, we look at this as continual growth year-over-year for the next 10 years on a global basis. And we'll see that again this year. Sponsorship, to your macro point, the demand we're seeing is as strong as ever. I just spent some time in New York with my team with some 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 pipeline 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've seen nothing slowing down there.

Great. Thank you, both.

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

Hey, everyone. How are you doing? Joe, you mentioned amps extensively in your previous response regarding the mix shift this year. I'm interested in understanding the potential growth in the amp business moving forward. Your portfolio has remained relatively unchanged for quite some time, and you've done an impressive job of increasing per capita figures over the last decade. Where do you see the primary growth opportunities in the amphitheater business at this stage? I have some follow-up questions.

Yeah. Thanks, Brandon.

I'll start, and then you can go in there, Joe. Let me just address that. Brandon, you've heard us discuss it at our Venue Nation Day. We believe we are currently experiencing a double win. We have global scale that will keep growing due to international markets, along with more opportunities to monetize our existing scale. For the first ten years, we focused on building scale. In the past couple of years since COVID, we initiated our Venue Nation division and concentrated on hiring talent with skills in hospitality, high-quality food and beverage, and VIP clubs. We think our amphitheaters are managed very well, similar to how Southwest Airlines operates; they are efficient and have performed excellently so far. However, we are noticing that when we invest capital on-site, we achieve returns on capital of 20% to 30% by converting grassy areas into VIP or membership clubs. This summer at Jones Beach, when you visit the amphitheater, you will understand how these venues could potentially double their adjusted operating income when we enhance the way we operate and elevate the experience on-site. We believe the foundations of our 50 amphitheaters are outstanding and they perform efficiently. We think we can double the business by focusing on upgrades on-site. This includes successful initiatives like our Liquid Death concept that has greatly impacted our food and beverage sales, our custom-branded liquor, and the new clubs we are introducing to our VIP boxes and enhanced services. Currently, about 9% of our amphitheater business is in the premium category, but we believe it should be between 30% and 35%. If that were to happen overnight, it could effectively double our business in the long run. Simply put, if you upgrade your current setup and double your capacity for VIP services, your business would also double.

Yeah. And then the other half of it, Brandon, is that's making more on the shows from the fans that attend. In terms of the volume of shows, right now, with our current portfolio, if you assume a typical amp has about four months of activity on average, our utilization rate is running about 35%. 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, an amp there, on our hyper-local strategy of continuing to look for more spots that we can put an amphitheater in.

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 Concert's 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 Ticketmaster?

I'll start and Joe can jump in. Think of Platinum as dynamic pricing; it's about pricing smarter. Our excellent in-house team works daily with artists, agents, and managers on this. It can be as straightforward as adjusting the prices based on the day and location. For example, a Tuesday night in Phoenix has a different value than a Saturday night in LA. We aim to be smarter in pricing our inventory so that primary sales drive secondary sales. Looking at this from two perspectives, internationally, we're just starting out and there's significant growth potential. We've initiated this in Europe, but it's still in its early stages, and we plan to extend it to South America, Australia, and beyond. The reception has been positive; promoters and artists are eager for it as they realize they may be underpricing compared to scalpers. This is our strongest sales pitch. You'll see this evolve. In terms of the domestic market, we're further along—around the fifth inning. We've tackled the higher end, particularly with P1 Platinum artists, but we need to enhance dynamic pricing across all sectors, including amphitheaters and the lower-tier shows. By doing so, we expect to improve our sales flow and sell-through rates right up until the event starts. We believe this is a multi-year opportunity to further grow both our top-line and bottom-line revenues.

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 think of Platinum as being the market-priced ticket; 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.

Yeah. And then, finally not to overstay my welcome here, but one thing I noticed, I've been, I think, 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 by saying that our show pipeline has seen strong double-digit growth, primarily driven by the arenas and amphitheaters, as we've mentioned. Michael outlined all the reasons we're confident in our ability to execute at our amphitheaters. The volume of fans we expect to engage with, combined with our capability to enhance profitability from those fans, provides us with the assurance that we will achieve double-digit growth this year.

Great. Thank you, guys.

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

Hey, thank you. I guess first, Joe, 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 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 as 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 probe. Thanks.

Sure, let me start with the capital expenditures. We are currently projecting around $540 million in capital expenditures, with two-thirds allocated to revenue generation and one-third to maintenance. When looking at revenue generation, approximately $300 million is allocated to either new venues or significant renovations of existing facilities. Half of that, around $150 million, is dedicated to our top four projects, which includes a major renovation of Foro Sol, the premier international stadium located in Mexico City. Michael mentioned Jones Beach, and collectively, these projects are expected to yield a return of about 20%. We are seeing some variability in certain projects that cost tens of millions of dollars, with four of these aligning this year, contributing significantly to that figure. The remaining revenue generation will come from tactical updates in existing venues, such as a new VIP club, a new viewing deck, rock boxes, and innovative bar designs that typically provide high returns, generally between 40% to 50%. These improvements, along with initiatives at Ticketmaster closely linked to the sponsorship group and the development of new advertising units, are part of our strategy. On the maintenance side, it's mainly related to venues and some Ticketmaster aspects. We are monitoring these expenses closely as they continue to rise at a slower pace than our revenue and ticket sales, and we are working to keep them under control. In terms of...

I think the venue pipeline...

Yeah.

I believe we've been discussing the venue pipeline since our Investor Day. We're very pleased with the Venue Nation team and our global development team. These were skills we did not have in-house before COVID. Currently, we are considered best-in-class. Over the last three to four years, we have significantly scaled and assembled remarkable global teams. As we anticipated, when we enter RFPs that we were previously not involved in, we are performing well and winning some key venues worldwide, which we will continue to announce. We expect to see much higher scaling over the next five years compared to the past, mainly because we had not previously focused as much on international arenas, and we see a promising path forward in this area.

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 watch it play out, but we don't have any specific updates.

Thank you.

We're 100% cooperative.

And the next question comes from the line of Cameron Mansson-Perrone with Morgan Stanley. Please proceed with your question.

Thanks. 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 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? Thanks, guys.

I'll start with all-in pricing. We're actually surprised and thrilled because we were always skeptical if we would be a leading example, worrying about potential negative impacts on conversions. However, consumers seem to appreciate it as they can see the total costs upfront. They are likely comparing prices across various platforms, realizing that the overall expenses are consistent. We see this as a positive experiment. In discussions with Congress and the Senate, it's clear this is a common direction everyone is embracing. I anticipate that this will eventually be legislated, and others will adopt all-in pricing as a positive development for consumers, which allows us to address issues like scalping. Regarding the promoter shift, it's a multi-layered process involving local, national, and global promoters. There are still many effective local promoters, which is why we have 100 offices in 40 countries. Contracts must still be managed locally, so having capable local teams is essential for successful execution at scale. Over the past decade, artists have evolved, often aligning with one global record label, one global agent, and one global publishing company, as touring has become their primary focus and expense. I attended a Drake show recently, and it was an amazing experience; he provides an incredible performance at significant costs to engage his fans. Artists today are seeking more national or global partnerships, whether with us, AEG, or CTS in Europe, because their needs have shifted. They require upfront funding and organizations with broader insights into data, marketing, and sponsorship, which helps them strategize their global operations—like deciding whether to perform in Japan or Hong Kong and managing logistics. Artists have transformed into global brands, much like their consumers. Younger managers and artists particularly prioritize global perspectives in their touring plans. Those managing a newly popular global artist definitely want to discuss their international touring strategy with a unified objective. This trend is ongoing and will likely continue to progress in the coming years.

Interesting. Thanks.

And the next question comes from the line of Jason Bazinet with Citibank. Please proceed with your question.

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, as Joe and I talked about, coming out of COVID, the prior to the last three years was obviously build back up that cash bank. We drained a lot during COVID, so we wanted to get the balance sheet strong again, get our staff, get everyone back in place, hire the skills we needed and plot through our real kind of five to 10-year strategy here. So, we think the way we're producing our AOI to cash flow return now, it's given us all the tools we need to deliver this ambitious growth plan that we laid out at our Investor Day. So, you'll see us move up and down depending if there is 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. The 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 risk. Thanks.

And the next question comes from the line of Ashton Welles with Evercore ISI. Please proceed with your question.

Thank you for the question. 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 see the ticket sales through my daily counts. We just launched sales last week for shows featuring Usher, Justin Timberlake, and Jennifer Lopez, and we just announced Jelly Roll this morning. These shows are selling out quickly from top to bottom. We're not noticing any slowdown in consumer demand. I was in Columbus, Ohio for a sold-out Drake show last night, which had two consecutive nights of sellouts and impressive merchandise sales. Attendees were purchasing a lot of sweatshirts, and the general manager informed me that we are achieving very strong sales numbers. Overall, we are witnessing consistent purchasing and attendance across the country and globally right now.

And we're seeing most of these on-sales still selling front-to-back, meaning most expensive tickets to least. 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. We really have the best per-cap on-site spending right now at our theaters and clubs, just given that it's Q1; those numbers continue to be strong and show year-on-year growth. So, all fronts are showing strong consumer demand globally.

Thank you.

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

Hello, everyone. Thank you for my question. When we look at the various business lines, how should we assess the growth trajectory of Sponsorship compared to Concerts? I'm essentially asking whether the recent outperformance and growth acceleration in concerts is contributing to a similar boost in sponsorship and advertising.

Yes, David, this is Joe. I believe there are definitely increasing advantages to scale in the Sponsorship business. Brands are telling us they want to connect with customers when they are receptive to their brands, which we can provide, but they want to ensure it's done at scale. That aspect of scale is crucial. They’re not interested in numerous small initiatives. Consequently, we're observing a significant rise in demand. We're surpassing $1 billion in revenue from Sponsorships and nearing 150 million fans. Additionally, we have sold over 600 million tickets through Ticketmaster. We’ve established a level of scale that continues to generate even more scale. Therefore, we anticipate robust and sustained growth in that business.

So just to follow it up, and I'm not fishing 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?

Well, 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.

Got it. Okay. Thank you.

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. I appreciate all your support, and we'll 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.