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 First Quarter 2024 Earnings Call. 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 first quarter 2024 earnings conference call. Joining us today is our President and CEO, Michael Rapino, and our President and CFO, Joe Berchtold. 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, regulatory and legal matters, 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 the earnings release. The release reconciliation can be found under the Financial Information section on Live Nation's website. With that, I will now turn it over to our President and CFO, Joe Berchtold.

Thanks, Amy. We understand there's significant interest in the situation with the DOJ, so I will address it directly. We are aware of press reports indicating that the DOJ's Antitrust division is considering filing a lawsuit against Live Nation, which may include a move to separate Live Nation from Ticketmaster. Currently, we are about to begin talks with senior division leadership regarding the matters their team has been looking into, typically at the final stages of an investigation. Decisions concerning the relief sought are usually made toward the end of that process. We recognize that some competitors and interest groups are pressing the DOJ to pursue a lawsuit against us for a breakup. I want to clarify that, as we've mentioned before, the DOJ's inquiry seems focused on particular business practices, rather than on the legality of the Live Nation and Ticketmaster merger or our overall business framework. Most of the issues brought up by the DOJ relate to our business practices rather than the merger itself, which were largely anticipated and resolved by the consent decree that enabled the merger. Based on what we know, we don't think a breakup of Live Nation and Ticketmaster is a legally valid solution. The merger was conducted lawfully, with the DOJ's review and approval, contingent upon certain divestitures and other measures. The DOJ has consistently asserted in court that the merger and settlement serve the public interest. Additionally, structural relief like divestiture is seldom granted and is applicable only when there's a strong link between the corporate structure and the alleged unlawful actions. We believe that link is absent concerning most issues in this investigation, as the conduct in question pertains to either our ticketing or concert segments, rather than spanning both. We are looking forward to our upcoming discussions with the division leadership and hope for a resolution to any outstanding issues. If we cannot reach an agreement, we are ready to defend ourselves in court. That's all we'll discuss regarding the DOJ on this call. Operator, can we now open the floor for questions for me and Michael?

I think you probably hit the biggest investor questions with your statement on regulatory, but I think there is one big question that's remaining in investors' minds. And that's, how do you see the relative value of Ticketmaster inside Live Nation versus as a separate stand-alone company?

Thanks, Brandon. I think we addressed this in our last call. At Live Nation, we run a very decentralized organization, and I'm very proud that we've built three incredible businesses: sponsorship, concerts, and ticketing, and we're about to embark on our fourth venture around Venue Nation. So these businesses all run incredible core businesses on their own. Ticketmaster, as you know, was a stand-alone business for many years. We're proud that when we took it over, we were able to bring some leadership to it, upgrade its technology, open up its platform and elevate its consumer and marketplace much like most enterprise platforms like Airbnb, etc. So I've always said these are incredible pieces around Live that we own. They are all part of what we think is a great portfolio. But I've also said these are incredible businesses on their own. So I think long term, together or separate these would all be very successful businesses. We happen to think that we like our portfolio today and plan on keeping it.

Great. And then you're continuing to express confidence in double-digit AOI growth this year. Obviously, you exceeded that in the first quarter, but deferred is actually down. Can you just quickly reconcile that? I assume the makeup is the profitability per fan based on the venue mix, but any additional color you could give would be helpful.

Sure. There are two parts to your question, Brandon. First, let's talk about consumer demand, and then we'll look at the numbers. Regarding consumer demand, we are not seeing any weakness. The indicators we analyze that show how well the events are selling and how fans are spending on our site remain very strong. We've mentioned some of this in our release, but let me highlight a few key points. For artists who toured last year and are on tour again this year, their ticket sales are consistently at or above last year's levels, and overall artists' revenues are also higher. There are no concerns regarding fan demand compared to last summer. Looking at our arena volume, which is the largest at this stage, even with a significant increase in the number of arena shows—which could lead to some competition—we are not experiencing any cannibalization. Sell-through rates are as strong as they were last year. When we examine on-site spending in theaters and clubs, where most of our activities occur in Q1, we observe notable growth in fan spending. So it's important to emphasize that point. Now, regarding the technical aspect, the situation with deferred revenue and ticket sales is entirely in line with what we've been stating for over six months; we anticipated that this wouldn't be a big stadium year. Stadium tickets are typically sold first and are the highest-priced, which historically results in a high deferred revenue figure at this time of year. With the transition to more arenas and amphitheaters, we expect the sales cycle to occur a bit later. The overarching narrative for the year will not focus on revenue as much, but rather on the audience in our venues, improved profitability per fan, and concert AOI growth driven by margin expansion. I remain confident in the double-digit growth we have previously projected.

We've seen some noise in the press recently around festival demand and that maybe some of the more established events in the U.S. and Europe are seeing challenges in moving tickets. Just wanted to see if you could dig in a bit on what you're observing for live or even the industry?

Yes, I'll start. We've read some of it also. We haven't seen it in our business. We have over 100 festivals around the world. I think currently, ticket sales are up double digits year-over-year. So we're seeing a strong start to our festival portfolio. We also remind you festivals are a huge business around sponsorship, similar to venues with our sponsorship up over 20% year-over-year on festivals, so we're seeing a strong start to them. We're a global company, so we do see that having a portfolio helps. We've launched some new festivals internationally. We launched about 10 new festivals a year. You're lucky if 50% of them make it to the next year. And I think this year, we started 10, we shut down six. So you're always kind of cutting off the weak performers and restarting some new ideas. I think the only trend we see overall is, I think the three-day massive festival that's going to appeal to everybody with a great unique headliner. The kind of with the original part of this business, that seems to be really hard to deliver year on, year out, whether it's Coachella or Bonnaroo, those are big missions to deliver and artists are making a lot of money in arenas and stadiums. So it's not as easy to get that special headliner. Where we're seeing great success, though it's one- or two-day festivals that are appealing to a more niche, and it's maybe 35,000 people, and it's exactly right down a certain genre of music or a lifestyle, and it's maybe a higher-end business like BottleRock does in Napa. And we've got a couple of great calling festivals out on the coast or Eddie Vedder festival on the beach outside of San Diego. So we are seeing probably a shift to more niche one- or two-day festivals with higher per heads, higher sponsorship value and less big swings across, let's go after a three-day 100,000 people. There's still, though, the Coachellas, the Lollapaloozas, the Austin City Limits, they're kind of rites of passage, so they seem to have a life and will live long. But definitely, if you're starting a new one, you're probably starting a more niche strategy and trying to make sure it's a better experience versus just putting 75,000 people in the field. But to us, a big part of our business overall, it's a nice piece in our overall portfolio to drive our sponsorship business, and it's on a global basis, a nice piece of our overall portfolio.

And then on your venue strategy, just as you look to deploy capital to locations around the world, can you discuss kind of criteria where it's best for Live Nation to execute independently versus where we've seen you kind of partner with a third-party like the Oak View Group, for instance?

We are involved in a wide range of projects. We have partnerships with Legends and Spanaway Group in Boston, and we are currently exploring several opportunities across the U.S. in venues with 5,000 seats that involve various sports owners. There is keen interest from those operating sports arenas to expand their retail offerings. We are collaborating with potential partners from different NBA, NHL, and NFL teams to enhance their retail spaces, and we are willing to invest capital to support these developments. Our approach is flexible based on the developers we partner with; for instance, we teamed up with the Oak View Group in Austin when it made sense. Globally, I'm enthusiastic about this segment, which I referred to as a key focus area this morning. There is significant potential for expanding our business internationally, especially in the AMP Arena and large theater sectors. Our pipeline is extensive, with many projects set to launch in the upcoming years. Usually, we have the capacity to handle these projects independently if the financials align, but we also evaluate partnerships when they offer better returns. We are viewed as a preferred partner by developers, which gives us a wealth of opportunities that currently exceed our capacity for execution, but we are quickly enhancing our capabilities.

Maybe one on sponsorship for Michael. Revenue was up I think 24% year-over-year in the quarter. It sounds like a lot of that was driven by strengths internationally. Could you maybe just talk a little bit more about what's driving that growth in international? And is the step-up that we saw in Q1, something we should expect to see throughout the year, or is the fact that it's more internationally driven? Does that suggest it could be more Q1, Q4 aided as we move throughout '24?

Stephen, this is Joe. I'll begin, and then Michael can join in. Much of what we're seeing in Q1 is indeed international, particularly driven by the strong performance of our festival business this year, especially in South America and Asia. We're pleased with how we are capturing the growth sentiment from the Southern Hemisphere, which will benefit our Q1 and Q4 performance. I expect to see significant growth in sponsorship during Q1 and Q4 this year as we're effectively building these businesses.

No, I want to remind you about the sponsorship and the numbers we're discussing. The growth is significant; we had an incredible comparable last year with two record years of impressive growth. Therefore, the fact that we are continuing to grow the business at these levels is a testament to the strength of our operations and the eagerness of customers to attend the show, regardless of the pipeline status. We are thrilled to achieve over 20 percent year-over-year growth in sponsorship after already seeing substantial increases previously. The demand from brands is substantial; although they are trying to figure out how to reach customers, they understand that being present on-site, engaging with consumers at festivals and various live experiences is crucial. This is a very dynamic area, and I believe we will continue to see this growth.

Got it. And then maybe another one for you Joe or unless Michael wants to jump in on sponsorship?

Sure. I think probably three factors that we're still going to watch play out over a bit of time. One is FX. As we noted, for Q1, we, on a reported basis, were up 7 basis points year-on-year. At constant currency, we were up 37 basis points. So clearly, that can have a material impact on how much we grow. Second is just what's the level of Q4 arena activity we have? Q4 is still in the process of being booked. And as you guys all know, the reason I don't love going too deep in the margins is because if we do a lot of arenas in Q4, that could bring down our margin while bringing up AOI, and we'll do that all day long. So there's still some visibility to get into those numbers. And then finally, we've talked on the last call about how '25 is already shaping up to be a tremendous stadium year. A lot of the stadiums that they couldn't get access to this year because of the Olympics or Rugby World Cup or any of a variety of reasons, they're already stacking up very strong for a great stadium year next year. The only accounting impact of that is you put those shows on sale in Q4; you incur the marketing expense to launch those shows, particularly for stadiums, and then you have to write off all that marketing expense at the end of Q4. So again, irrelevant over the life cycle of the tour, but from a strict accounting standpoint and impact on margins, the more stadium tours that we put on sale in Q4 globally, the bigger the expense we hit. So we'll work through all of those numbers as we get closer and provide more guidance. But right now, those are all big factors that have all really good things that have happened, but aren't yet at a point to declare exactly what the margin expansion is going to be.

I want to follow up on two previous questions regarding growth and the venue business. First, concerning the growth outlook for the year, you've mentioned there could be more subdued growth in the first quarter due to the venue mix this year, which makes a 20% growth figure look even better. Could you help clarify how we should view growth this year considering these factors? Additionally, regarding the increased capital expenditures from new venue opportunities, Joe, you've previously noted your approach of proving out capital expenditures before gradually increasing them over time. What does the higher outlook indicate about the opportunities you foresee with this additional spending?

Sure. On the growth, I think Q1 should tell you that we are right to be positive and optimistic about our ability to continue to deliver double-digit growth this year. I gave a little bit in the context of Brandon's questions, but as I step back and say, how is our growth going to look at the end of the year? I think it's going to be driven by concerts AOI, heavily concert margin. It will be second driven by sponsorship as we're continuing to, in particular, build out the international side of that business. And just Ticketmaster, because it's losing all those stadium high-ticket price shows, is going to have lower growth. So I expect all of the pieces to continue to grow, and all of them to be very happy coming off of what, as Michael said, were tremendous growth rates over the last couple of years. So to have all three pieces of the business continuing to grow is great. I just think that will be the overall tenor of how it is we look back at this year. And in terms of the venues and the CapEx, I think what we should take is that all the buildings that we're opening are performing at or above our expectations that the volume of opportunities, as Michael said, every developer is coming to us as their first choice, whether you're a sports team owner who wants to replicate what Fenway Group did around their park, whether you're an international player looking to renovate a building or to build something from the ground, the developers are coming to us because they think we’re effective operators and good partners in terms of helping them make the building successful. So I think it's just a continued build-out of the pipeline, and this is still incremental but continued strong performance and strong pipeline.

I wanted to ask about the venue build-out project. In your comments three months ago, you mentioned a long-term growth view for the company to achieve a double-digit rate of AOI compounding for many years. If no large arenas of 15,000 to 20,000 seats are built outside the United States, can you still reach that goal? I'm curious if this capital project and its returns are factored into your long-term outlook, as we've heard this question from clients. Additionally, how are you measuring returns on capital for the company or specifically for these venues? Is it based on EBITDA? What are the numerator and denominator?

Yes. In terms of the venue build-out, of course, that's part of our long-term plan. I mean we lay out every year, generally at Liberty, the six or seven levers, and how it is we're going to continue to drive strong AOI growth over time. When we did that last year, venues were the largest component of that. So it's absolutely part of our thesis and part of how it is we're going to get to that continued strong growth rate. In terms of the performance, I mean it's a standard return on invested capital. So we look at it on a cash-on-cash basis, cash out, cash back to the business.

I just had two questions related to disclosures actually. I know you guys have been building venues for decades, but when you talk about standing up a fourth business with our destination, are you hinting that you might disclose that as a second segment or not? And then my second disclosure question is, I noticed in the Q, there was something, I guess, that FASB came out with in November about expense disclosures. I don't know if the Q says you're still sort of deliberating that? But any sort of color on what that FASB request is, and how you're thinking about it would be great.

Currently, we are not viewing our business venues as separate segments. Organizationally, concerts and venues are still part of the same structure, so it would be premature to categorize them as distinct segments in the future. We are focused on ensuring that everyone internally recognizes the importance of this area for growth, which is why we use this term broadly. Regarding any FASB updates, we are continuously studying new accounting regulations until we are required to implement them. Nothing will change in our approach; we will use the time available to fully assess our options and prepare any necessary revisions to comply.

Just wanted to ask about concerts attendance. It looks like there was a bigger step up in North American attendance compared to international attendance this quarter. So can you unpack that a little bit and talk about how you think about growth in each region for the year?

Sure. I think that is largely a function or fully a function of the international stadiums we had, particularly Southern Hemisphere in Q1 of last year and just fewer stadiums as we've been talking about. So that meant that the primary growth in Q1 was in North America. Overall, this year will define the trend of where international is going, which is an increasing share because a lot of the growth will come out of our amphitheaters. I probably would expect disproportionate growth out of North America. Again, I think it's out of character in the sense that if you look at all of the business where we're adding capacity with our venues, where we're adding ticketing clients, where our sponsorship is growing, we've got a heavy structural trend towards international growth and international being a larger portion. I think that just from a cyclicality standpoint this year, there may be a bit of aberration in that, but no change in terms of the overall trend.

Two questions, please. First, when you look at the metric of country attendance versus the population, the U.S. overindexes the rest of the world. What would be your path to growing that concert attendance per capita going forward? And then secondly, on ticketing, what are the plans from here for upgrading the ticketing platforms around the globe, and how much is in CapEx versus OpEx?

In terms of boosting fan attendance, we've been emphasizing a hyper-local approach in North America for the past few years, which has significantly helped us increase our reach on a per fan basis. This strategy will persist as we aim to expand our fan base in North America. Additionally, the annual touring of familiar artists continues, and we are introducing more artists into the mix. We've incorporated genres like K-pop, Latin music, and now Afrobeats, which attracts more fans and supports our growth. Regarding international markets, our potential for deeper market penetration in major cities where we operate varies. In many areas, we see opportunities for expansion through more venues, aligning with our international venue strategy previously discussed. In more saturated markets like the U.K., we will adopt a hyper-local strategy, focusing on driving activity in places like Manchester, in addition to London. Each market requires a tailored approach, but we're committed to fostering fan growth across all levels. Concerning ticketing, we believe we've made significant strides and consider our enterprise software system to be the best in the industry. We will continue to enhance our product offerings, with most costs being capital expenditures that have remained stable in recent years. We anticipate maintaining this level of investment as we roll out new products for enterprise customers and the marketplace without any major changes on the horizon.

Thank you, everyone, and we'll look forward to talking to you in the summer.

Ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.