Live Nation Entertainment Reports Third Quarter 2020 Results

Highlights

• 83% of Fans Keeping Tickets for Rescheduled Shows
• $900 Million Cost Reduction Program Target in 2020
• $1.5 Billion Cash Management Program Target in 2020

LOS ANGELES, Nov. 5, 2020 /PRNewswire/ -- Live Nation Entertainment, Inc. (NYSE: LYV) today released financial results for the quarter ended September 30, 2020.

There have been no major changes in our business conditions or outlook over the past three months, and while we see signs of promise around the world as some live events return, most regions we operate in continue to have various restrictions on live events. For now, we continue to maintain a strong cash management discipline, while planning for the ramp up to resume live shows as soon as possible. 

Enduring Demand for Live
We also continue to see strong fan demand across the board. Our sales and survey data tell us fan demand will be there when the time is right. Our refund rate on rescheduled shows remains consistently low, with 83% of fans globally keeping their tickets. Our recent global survey indicates that 95% of fans are planning to return to live music events when restrictions are lifted, the highest point of confidence since the start of the pandemic.

Festival on-sales for next year have been strong, with EDC Las Vegas 2021 sold out in less than 24 hours at a higher capacity than last year, and with ticket sales for Reading, Creamfields and Isle of Wight festivals in the UK all pacing ahead of last year at this time. And we are encouraged by the enthusiasm for the recent events and gatherings that have started to take place, including our first sold-out arena tour with 20,000 fans in New Zealand, where business is headed back to normal.

Leading the Return to Live
Meanwhile, we are working on our roadmap to get back to live safely. We are encouraged by progress on testing technology, treatments and vaccines, which helps us build our plans. We still expect shows at scale next summer, but recognize that the exact timeline of this return will vary by region, and so we continue to focus on remaining flexible.

In preparation, there are two areas we are focusing on:

On the technology front, Ticketmaster is creating the tools we will need to make sure live events can deliver a variety of safety precautions when returning and enhance the fan experience well into the future. We recently unveiled SmartEvent, which includes new products such as our social distancing seat mapping tool and timed entry technology that have been created to give venues the flexibility to plan how to manage everything from venue access to box office interactions. Existing products, including our SafeTix digital ticketing technology, can fulfill new needs, including being a key facilitator for contact tracing when required. And the ability to integrate third-party applications with our digital ticketing platform enables a range of customizable features from contactless concessions to testing and health questionnaire tracking.

On the concert front, Live Nation is developing a set of standards for executing shows at our venues. We are collaborating with health experts to create show guidelines that put in place procedures which can adapt to various situations, across all regions. From venue sanitation procedures to fan-friendly policies on ticket purchases and the latest testing options, we are setting standards that will give fans, crews and artists peace of mind before, during and after the show.

As we look ahead, it is clear that the path to live will not be a straight line. As such, we will maintain flexibility and focus on innovating during this time.

Michael Rapino
President and Chief Executive Officer
Live Nation Entertainment, Inc.

Additional Information on Liquidity
At the end of the third quarter, the company had total cash and cash equivalents of $2.6 billion, which includes $951 million of free cash. This free cash, along with $963 million of available debt capacity, provide the company with over $1.9 billion in available liquidity. The company believes this level of liquidity provides it with the ability to fund operations until the expected return of concerts at scale in the summer of 2021, preceded by ticket sales earlier in the year.

The company will webcast a teleconference today at 2:00 p.m. Pacific Time to discuss its financial performance, operational matters and potentially other material developments. Interested parties should visit the "News / Events" section of the company's website at investors.livenationentertainment.com to listen to the webcast. Supplemental statistical and financial information to be provided on the call, if any, will be posted to the "Financial Info" section of the website. A replay of the webcast will also be available on the Live Nation website.

Notice Regarding Financial Statements
The company has provided certain financial statements at the end of this press release for reference.  These financial statements should be read in conjunction with the full financial statements, and the notes thereto, set forth in the company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission today and available on the SEC's website at sec.gov.

About Live Nation Entertainment: 
Live Nation Entertainment, Inc. (NYSE: LYV) is the world's leading live entertainment company comprised of global market leaders: Ticketmaster, Live Nation Concerts, and Live Nation Media & Sponsorship. For additional information, visit investors.livenationentertainment.com.

• As of September 30, 2020, total cash and cash equivalents were $2.6 billion, which includes $614 million in ticketing client cash and $951 million in free cash.
• Event-related deferred revenue was $1.4 billion as of September 30, 2020, compared to $952 million as of September 30, 2019. In addition, we had long-term deferred revenue of $103 million for events that have been rescheduled more than one year out as of September 30, 2020.
• For the nine months ended September 30, 2020, net cash used in operating activities was $(957) million and free cash flow — adjusted was $(924) million.
• We currently expect capital expenditures for the full year to be approximately $210 million.

Reconciliation of Certain Non-GAAP Measures to Their Most Directly Comparable GAAP Measures (Unaudited)

Forward-Looking Statements, Non-GAAP Financial Measures and Reconciliations:

Certain statements in this press release, including the Supplemental Information that follows, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements regarding the company's expectation that shows at scale will be held  in the summer of 2021; future fan demand for live events; the company's ability to create ticketing technology tools and to develop a set of standards for executing shows at its venues in order to make sure live events can deliver a variety of safety precautions when returning; the company's cost reduction program and cash management program targets for 2020; the company's belief that its current level of liquidity provides it with the ability to fund operations until the expected return of concerts at scale in the summer of 2021, preceded by ticket sales earlier in the year; the company's current expectations for capital expenditures for 2020; the company's current forecast of approximately $74 million in additional fan refunds for shows currently in the process of rescheduling, or that are rescheduled but not yet offering refunds; and the company's current forecast that event-related deferred revenue at the end of 2020, prior to additional ticket sales and based on the company's projected refund rates, will be approximately $1.4 billion. Live Nation wishes to caution you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, including but not limited to operational challenges in achieving strategic objectives and executing on the company's plans, the risk that the company's markets do not evolve as anticipated, the potential impact of any economic slowdown and operational challenges associated with selling tickets and staging events.

Live Nation refers you to the documents it files from time to time with the U.S. Securities and Exchange Commission, or SEC, specifically the section titled "Item 1A. Risk Factors" of the company's most recent Annual Report filed on Form 10-K, and Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K, which contain and identify other important factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date on which they are made. All subsequent written and oral forward-looking statements by or concerning Live Nation are expressly qualified in their entirety by the cautionary statements above. Live Nation does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

This press release contains certain non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable GAAP financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided herein.

Adjusted Operating Income (Loss), or AOI, is a non-GAAP financial measure that we define as operating income (loss) before certain stock-based compensation expense, loss (gain) on disposal of operating assets, depreciation and amortization (including goodwill impairment), amortization of non-recoupable ticketing contract advances and acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration obligations, and acquisition-related severance and compensation). We use AOI to evaluate the performance of our operating segments. We believe that information about AOI assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. AOI is not calculated or presented in accordance with GAAP. A limitation of the use of AOI as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI as presented herein may not be comparable to similarly titled measures of other companies.

Constant Currency is a non-GAAP financial measure. We calculate currency impacts as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior period's currency exchange rates. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.

Free Cash Flow — Adjusted, or FCF, is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities less changes in operating assets and liabilities, less maintenance capital expenditures, less distributions to noncontrolling interest partners. We use FCF among other measures, to evaluate the ability of operations to generate cash that is available for purposes other than maintenance capital expenditures. We believe that information about FCF provides investors with an important perspective on the cash available to service debt, make acquisitions, and for revenue generating capital expenditures. FCF is not calculated or presented in accordance with GAAP. A limitation of the use of FCF as a performance measure is that it does not necessarily represent funds available for operations and is not necessarily a measure of our ability to fund our cash needs. Accordingly, FCF should be considered in addition to, and not as a substitute for, net cash provided by (used in) operating activities and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, FCF as presented herein may not be comparable to similarly titled measures of other companies.

Free Cash is a non-GAAP financial measure that we define as cash and cash equivalents less ticketing-related client funds, less event-related deferred revenue, less accrued expenses due to artists and cash collected on behalf of others, plus event-related prepaids. We use free cash as a proxy for how much cash we have available to, among other things, optionally repay debt balances, make acquisitions and fund revenue generating capital expenditures. Free cash is not calculated or presented in accordance with GAAP. A limitation of the use of free cash as a performance measure is that it does not necessarily represent funds available from operations and it is not necessarily a measure of our ability to fund our cash needs. Accordingly, free cash should be considered in addition to, and not as a substitute for, cash and cash equivalents and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, free cash as presented herein may not be comparable to similarly titled measures of other companies.

Reconciliations of Certain Non-GAAP Measures to Their Most Directly Comparable GAAP Measures (Unaudited)

THIRD QUARTER 2020
Supplemental Information

Free Cash & Cash Used in the Quarter
Changes to the company's free cash balance from the end of the second quarter of 2020 to the end of the third quarter were as follows:

As indicated in Q2, the timing benefits to free cash totaling approximately $415 million from that quarter have largely reversed in the third quarter.

Ticket Refunds
The global refund rate for the company's concerts that are rescheduled and are in or have gone through a refund window is 17% through the end of the third quarter of 2020. Festivals have generally canceled this year's event, but for festivals where fans can retain their tickets for next year's show, approximately 63% of fans are keeping their tickets.

Across both concerts and festivals, since March the company has refunded $282 million for rescheduled Live Nation shows and $698 million for canceled Live Nation shows. Of this $980 million total, $350 million was from funds held by third-party venues and $630 million was from Live Nation-held funds.

The company still has some shows in the process of rescheduling, or that are rescheduled but not yet offering refunds; if the same fan behavior and mix as noted above is applied on these events, the company currently forecasts approximately $74 million in additional fan refunds from Live Nation-held funds. Given this estimate, the company has reclassified these funds from deferred revenue to accrued ticket refunds as of the third quarter of 2020.

Event-Related Deferred Revenue
The company's deferred revenue for events over the next 12 months was $1,362 million as of September 30, 2020 as compared to $941 million as of June 30, 2020, an increase of $421 million. This increase was largely due to events scheduled for Q3 2021 shifting from long-term to current deferred revenue.

In addition, the company had approximately $103 million of long-term event-related deferred revenue at the end of the third quarter of 2020.

The company currently forecasts that event-related deferred revenue at the end of 2020, prior to additional ticket sales and based on the company's projected refund rates, will be approximately $1.4 billion.

SOURCE Live Nation Entertainment