Good day, everyone. My name is Karina, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to the Live Nation Entertainment Second Quarter 2019 Conference Call. Today's conference is being recorded. Before we begin, Live Nation has asked me 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 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 ks, 10 Q and 8 ks 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 SEC Regulation G, Live Nation has provided a full reconciliation to the most comparable GAAP measures in their earnings release. The release from reconciliation and other financial or statistical information to be discussed on this call can be found under the Financial Information section on Live Nation's website at investors. Livenationentertainmentdot com.
It is now my pleasure to turn the conference over to Michael Rapinoe, President and Chief Executive Officer of Live Nation Entertainment.
Good afternoon, and welcome to our Q2 2019 call. We delivered strong growth for the quarter with AOI up 23% and revenue up 10%. Each of our businesses contributed to these results, with all of them delivering double digit AOI growth for the quarter. We continue to benefit from a strong tailwind in the live event experience based economy of today. The global ticket revenue for our concerts is up 16% for the first half of the year, as we continue to see a strong supply of artists touring matched with global consumer demand.
And within this, the ticket revenue from concerts outside of our top 100 artists is up 32% for the year, demonstrating that the demand for live music is strong and growing from the largest stadiums to local clubs. We have created the most scalable and unparalleled business model in the industry, building a platform that brings over 570,000,000 fans in 45 countries to live events each year. With our key metrics in concert, sponsorship and ticketing all pacing well ahead of last year, I am confident that 2019, the company will deliver again double digit AOI growth. Starting with the concert business through mid July, we have sold over 73,000,000 tickets for shows this year, up 6% or 4,500,000 tickets from the same point last year. This puts us on track to have nearly 100,000,000 fans attend 38,000 concerts this year.
In the second quarter, we had 27,000,000 fans attend 10000 shows, up 7% and 9%, respectively, from last year, and by far, our largest second quarter ever. As a result for the quarter, we grew AOI by 33% and revenue 11%. As we have discussed, our international business has been particularly strong through the first half, growing our fan base by 2,500,000 fans, the greatest growth coming from our arenas, stadiums and theaters. Globally, we continue to work with artists to enable them to capture the value from their shows. Through optimize pricing and Ticketmaster tools such as Platinum, we have delivered over $500,000,000 in incremental value to Artis since the start of 2018.
Through this, we have seen no reduction in demand and global sell through rates across stadiums, arenas and amphitheater is as strong as ever. Further, at our venues, we continue to increase average fan per spend by enhancing the fan experience, providing reasons for them to arrive earlier, spend less time in line and improving the quality of food and beverage offerings. As a result, I expect our ancillary revenue per fan and amphitheaters to grow by $2.50 this year. Overall, we continue to see tremendous opportunity for us to grow our global market share, both organically and via targeted acquisitions. Our just announced acquisition of Obsessed in Mexico, one of the top global promoters, continues our mission of building a global fan base of 125,000,000.
All this gives me confidence that we will again deliver double digit AOI growth in our concerts business this year. Our sponsorship business leverages our platform of nearly 100,000,000 fans, providing brands a unique opportunity to connect directly with music fans at scale. By continuing to attract new brand partners and expand relationships with existing ones, we grew our AOI by 12% in the 2nd quarter and revenue by 8%. Much of the growth continues to come from large strategic partnerships, all of whom utilize a range of our assets and span multiple years. This group accounts for over 70% of our total sponsorship and the number of these sponsors has grown double digits this year as we have added companies such as Adobe, Hyundai and Google.
As a result, the committed spend by these strategic sponsors is also up double digits through mid July. Globally, festivals in particular provide an attractive opportunity for sponsors to engage fans at a time when they are receptive to brand messages. And once again, our festival sponsorship is on track for revenue per fan to be up double digits this year, thanks in part to a growing portfolio of marquee festivals, including Lollapalooza, Rockin' Rio and EDC, which are in particular interest to brand partners. Given the attractiveness of our platforms to brands and the double digit growth in committed net revenue for the year, I expect we will deliver sponsorship AOI growth in the mid to high teens for the full year. Ticketmaster continues to demonstrate that it is the best global ticketing marketplace for venues, teams, artists and fan with fee bearing GTV growth of 13% at constant currency in the quarter, making it our highest second quarter GTV ever.
As a result, Ticketmaster's AOI for the quarter was up 20% and revenue up 6%. The addition of major clients such as Eventco in Canada, Chase Center in the U. S, O2 in Prague and 150 other worldwide further validates the Ticketmaster's content choice as the most effective ticketing platform in the world, with leading technology to service venues, sports teams and artists with an efficient marketplace that attracts and converts ticket buyers. Our industry leading digital ticketing rollout is ahead of schedule, with presence now expected to be installed at over 600 venues this year, including over 80% of major sports buildings and Live Nation Appentheaters. And as a ticket is increasingly digital, we have focused on ensuring our mobile marketplace are the easiest place for fans to buy and manage their tickets.
Because of that, we have seen a continued shift to mobile ticket buying, up 22% from the Q2 last year and now account for 45% of global ticket sales to date. At the same time, we've been improving our customer purchase process with increased conversion both across mobile and desktop. As Ticketmaster continues to be an effective and efficient ticketing solution for content and fans alike, I expect to continue growing its GTV and result in AOI this year and into the future. In summary, 2019 is on track for the company to deliver double digit AOI growth along with strong gains in revenue. Each of our businesses is contributing to this success, starting with the concerts as we put on more shows for more fans, then continuing to monetize fans at the concert, sell more tickets to the shows and further deliver value to our sponsors from our platform of nearly 100,000,000 fans.
With that, I will turn our call over to Joe to take you through more details of our performance this quarter.
Thanks, Michael. Getting into our business segments, 1st concerts. Live Nation concerts AOI in the 2nd quarter was up 33% and revenue was up 11%. Driving that growth, concerts had its highest second quarter attendance ever and for the first half of the year we saw fan growth across most of our venue types with arenas, stadiums and theaters each up over a 1000000 fans. And as Michael mentioned, we continue to optimize pricing, providing incremental artist revenue of $500,000,000 since the start of 2018 across all of our shows, driven largely by an increase of over 30% in front of house pricing at amphitheaters and arenas globally.
Looking to the full year, we have already sold over 73,000,000 tickets for shows this year through mid July, an increase of 6% and we now expect nearly 100,000,000 fans for the full year. Our pipeline of arena and amphitheater shows continues to be very robust with over 5,600 shows booked through mid July, up 3% compared to this point last year. Our international stadiums and arenas are looking particularly strong, driven by acts such as Metallica in Europe, Post Malone in Australia and Blackpink in Asia. While our amphitheaters are not driving substantial fan growth this year after attendance growth of over 2,500,000 last year, we continue to be very successful in driving ancillary spend per fan. And festival tickets are up double digits through mid July and we expect this to continue for the full year as our 100 plus festivals host over 10,000,000 fans this year.
We expect our theater attendance to be up over 20% for the year, in part benefiting from investments to expand our footprint with new venues such as the Fillmore in New Orleans and the Observatory venues in Southern California added to our portfolio in the first half of the year. With good visibility into the full year based on mid single digit growth in global fan attendance and continued operating improvements, we're confident that we will again deliver double digit growth in concerts AOI for the full year. Turning to our sponsorship and advertising business. Our sponsorship AOI was up 12% in the 2nd quarter, while revenue was up 8%. Most of our growth came from the sponsorship side, fairly evenly split between North America and international markets.
As part of the growth in strategic sponsors that Michael mentioned, we have also successfully expanded the breadth of our sponsorship categories with the addition of non traditional categories such as fashion, beauty and retail, including companies such as American Apparel, Pantene and Asics. Additionally, investments and increased spending from existing ones. Collectively, this has led to 18% year to date growth in sponsor committed net revenue for the year. And based on this progress, we are confident we will deliver mid to high teens AOI growth in sponsorship for the full year. Finally, Ticketmaster.
For the Q2, Ticketmaster AOI was up 20% and revenue up 6%. Looking at our GTV growth in constant currency, total global fee bearing GTV was up 13% for the quarter and is now flat for the full year, with 2nd quarter growth making up for the pull forward from Q1 into Q4 of last year. The increase in global fee bearing GTV was driven predominantly by a 15% increase in primary GTV and international was the main driver of our fee bearing GTV growth, up over 40% for the quarter. Concerts activity continues to drive our growth, accounting for over 90% of primary GTV growth in the quarter, heavily benefiting from our theaters, festivals and arena activity. Secondary GTV was flat in the 2nd quarter with increased activity in sports offset by lower concerts volume and overall lower international activity.
Based on our results for the first half and our second half pipeline, we expect Ticketmaster to deliver mid single digit AOI growth for the full year. In summary, Q2 was an outstanding quarter demonstrating the continued strong supply and demand dynamics across all of our businesses. Looking at the Q3, comping $50,000,000 in AOI growth last year in Q3 and impacted by some shifts in concert timing into Q2, we expect Q3 to be up mid to high single digits. And as we continue driving growth across all of our businesses, we remain confident that 2019 will be another year of record top line and AOI results. I will now turn the call over to Kathy to go through more on our financial results.
Thanks, Joe, and good afternoon, everyone. Our key financial highlights for the Q2 of 2019, our revenue was up 10% to $3,200,000,000 AOI increased 23% to $319,000,000 and operating income increased 27 percent to $172,000,000 All of our segments contributed to the increase in revenue with concerts up $259,000,000 or 11%, driven primarily by international arenas and stadiums along with global theater and festival activity. Sponsorship was up 8% due to growth from strategic sponsors and festivals in both North America and Europe, and ticketing revenue increased 6% due to higher primary ticket fees. Our AOI growth of 23% for the 2nd quarter was again driven by all three segments, with each delivering double digit growth for the quarter. Concerts increased by 33%, ticketing was up 20%, and sponsorship grew by 12% from the growth drivers discussed above.
Our operating income increased by 27% for the Q2 over last year, driven by the increase in AOI, which also drove the increase in net income for the quarter to $103,000,000 as compared to $69,000,000 last year. For the quarter, accretion of redeemable non controlling interest was $14,000,000 with a diluted earnings per share of $0.41 Turning to our balance sheet. As of June 30, we had total cash of $2,300,000,000 including $777,000,000 in ticketing client cash and $1,100,000,000 in net concert event related cash, leaving free cash of $363,000,000 Net cash provided by operating activities for the 1st 6 months was $293,000,000 compared to $520,000,000 last year due to the timing of event related working capital. Free cash flow adjusted for the 6 months was in line with last year at $223,000,000 driven by our AOI increase, the timing of distributions to non controlling interest partners and the maintenance capital expenditures for the first half of the year. As of June 30, our total deferred revenue related to future shows was $1,600,000,000 consistent with 2018.
Our total capital expenditures were $139,000,000 for the 1st 6 months with 57% spent on revenue generating items. Our total debt as of June 30 was $2,800,000,000 dollars and our weighted average cost of debt was 4.3%. For the remainder of 2019, we continue to expect that accretion of redeemable non controlling interest will be $62,000,000 for the full year, with the remainder fairly evenly split between the remaining quarters. In Q2, we had a negative FX impact on revenue and AOI of about 2% and based on current rates, we expect them both to be impacted negatively by 1% to 2% in the 3rd quarter. We expect total capital expenditures for 2019 to be approximately $310,000,000 with more than half on revenue generating CapEx.
And we currently expect that free cash flow adjusted for the full year as a percentage of our 2019 AOI will be in the mid-50s. Thank you for joining us today. Operator, we will now open the call for questions.
Thank We'll take our first question
Just on OSSDA, I know you've partnered with them for a number of years, but how did the acquisition now accelerate this both on the promotion and ticketing side in Latin America? And then just as a follow on, can you provide any detail around what you expect for the timeline of regulatory approvals in Mexico and Colombia?
Sure. This is Joe. I'll answer those in reverse order. I think our expectations on regulatory approval was Q4 later in the year. We don't know the exact timing, so we're not building it into our expectations at this point, but probably in the late part of the year.
And then I'll let Michael talk about how Ocessa and how that's going to help us accelerate as we grow further in Mexico.
Thank you. Yes, we're excited about the acquisition. It's consistent with our ongoing strategy. We still think there's a big fragmented global business out there. A lot of bolt ons on both the concert, festival, venue side.
Some of them are chunkier than others. This happens to be a top five global business. So we think this is an overall smart business. It helps us on our sponsorship as brands are looking more and more for global solutions. It obviously helps our ticketing business and helps our global touring business.
Aside from it, obviously, lays a big foundation to how we can continue to build our Latin American business. So it checks the box on all of our core growth drivers and we'll be excited when we close in the fall.
Okay. And we saw some reports that Live Nation may potentially take majority ownership in Rock City. Can you confirm if this is the case and whether the Rock in Rio Festival will be included in your consolidated results this year?
Yes. Our guidance that we will give is all we did give is all based on Rockin Rio included and we will be able to consolidate for this year's festival.
Okay. Thank you.
We'll take our next question from David Joyce with Evercore ISI. Please go ahead.
Thank you. If you could please provide some more color on the sizing of CESSA and their activities in 2018 and what are the opportunities in Rock and Rio? I don't think you have the ticketing for that right now. But in the past, they've also taken that to other cities. Do you have any plans you can talk about there yet?
Thank you.
I'll work backwards. Rock in Rio is one of the top festivals in the world, probably on ticket sales over 700,000. It probably actually ranks as the biggest selling festival in the world. It doesn't happen every year. It happens every 2nd year.
And that's part of the magic that the brand has created. So we think in itself, it's a great big brand on a global basis. It obviously makes our entry into Brazil give us some complete kind of an instant office sponsorship division to start building out our own concert business. And then as well, you mentioned it will as we try to do with all our bolt on look to launch that to support our services in Brazil from there. Ocetto, we don't usually talk about these until we close them because of the size we did in this case.
So
we're not going
to give much details today on Assessa and the numbers. Those will all be out in an 8 ks when we actually close the deal. And CEA is a public company, so you could probably go figure out a lot of the math from the other side. But we're excited. There are strong business vertical like ourselves with ticketing, venues, sponsorship, festivals and touring.
So they've been our partner for years and we're excited now to have them part of our platform.
And moving on, we'll take our next question from Doug Arthur with Hubber Research. Please go ahead.
Yes, thanks. Joe, just looking digging into the metrics on the concert segment in the Q2, I mean, you highlighted the growth in international. It looks like your attendance in the North America was actually down, but obviously events were up. So a lot of smaller shows. Is the should we read anything into that for the Q3?
You talked about the fact that the amps are not going to be the big source of growth this year Or is this just kind of quarter to quarter noise?
I wouldn't read anything into it at all. It's a combination of quarter to quarter and geographic bouncing around. So we've talked a lot about stadiums are very strong in international, and that's where the stadium activity tends to have the bulk going on this year. So that's going to have some shift there. And whenever you have theaters as on fire as they are, that's not going to give you the same attendance per show.
So again, I wouldn't read anything at all into it. Amps did incredible growth last year of over 2,500,000 fans. So usually you don't see the same elements in the same geography driving your growth multiple years in a row. It tends to move around where the different pieces of the growth come from.
But to give us some perspective, if you look at AMPS over 5 years, they've been continually growing at a great flip. We expect them to keep growing. 2018 was an exceptional growth. If you leveled out that growth, this would be a great year.
Yes.
And we think next year and the year after, the business will continue to grow. But also we've been we've always said one of the great realities of Live Nation is we diversify ourselves on a global and venue platform. So sometimes international happens to be a little hotter than the U. S, amps are bigger than stadiums or stadiums might be bigger than arenas that year. And that's how we've always diversified ourselves, where one may be 50 shows less than the year before, but the other segment or the other country happens to be on fire.
So that's always been our goal Our global goal of have a diverse global business and you ride the cycles that way, but you net the overall growth continually.
And on the festival side, despite, I mean, you highlighted this at the end of the Q1 that at least 1 or 2 major festivals would move into the Q2 this year versus 3rd a year ago. Sounds like you're still pretty bullish on this festival outlook for the balance, certainly for the Q3?
No question. This is a great year for festivals. As we said, we'll have over 10,000,000 fans at our festivals this year. The portfolio continues to perform extremely well. Along with Michael said, it's part of the reason why we're in every venue type and why we have large portfolios.
So when we see the aggregate growing, we can have the type of success that we
are. Okay, great. Thank you.
And we'll take our next question from Drew Borst with Goldman Sachs. Please go ahead.
Great. Thanks for taking the questions. I wanted to ask about the on-site fan spending at your amps. I noticed that you guys did increase the guidance. You expect an additional $2.50 per fan this year, up from $2.
I guess the question is, as you're rolling out presence into your amps, I think one of the opportunities is to use the platform for promotions of concessions. And I guess I'm wondering connecting these two things, is that part of the reason you're seeing this incremental growth? Have you rolled out those promotions at the Amps using Presence? Or is that something that's still to come down the line?
Yes. Drew, this is Joe. That's first volume is the shift from $2,000,000 to $2,000,000 When we gave you the $2,000,000 at the beginning of the May, that was based on plans in place, hadn't really had shows to speak of in our ramps yet. Now that we've had a fair number of shows, we're comfortable giving more specific guidance based on what our results for the first 3rd plus of our shows have been. As it relates to Presence, 100% agree Presence is a great opportunity for us to engage fans on-site and the per cap spending will absolutely be part of that.
But it's not this year. That's as we're getting it fully rolled out and the promotions built, that'll be more of a next year and go forward opportunity.
Okay. If I could ask 1 or 2 more. On the Rock Rio Festival, you guys made some disclosures 8 ks when you made the acquisition about the financials of Rock City. I think if I did all the math right, it looked like the last time in 2017 when they had the festival, the EBITDA was somewhere on the order of $20,000,000 to $25,000,000 Can you just confirm, does that sound
about right? I mean, obviously, they might hope that it grows now that you guys are
sort of involved. But Yes
Yes, those numbers are reasonable.
Okay.
And it's a heavy sponsorship business as well.
Great. And then just lastly, probably for you, Kathy, just on CapEx, it looks like you're through the 6 months, you're at 130, up about 30%. Like can you just talk about sort of the full year expectations for CapEx?
We said that we expect full year to be around $310,000,000 at this point and over half of that's on revenue generating items. So it's including things like presence rollouts and increased benefits at the amphitheaters that's growing at APS and just
We talked about some of the theaters that we've been building. So again, we think revenue generating CapEx spend growth is a good thing. It's capturing the opportunities that are out there. And we think that I think it's running at 57% right now. We think that's a great use of the capital to keep building the business.
And then, sorry, just finally, really last
one on OCCESSA.
You know,
Tel Visa made some disclosures about, how much you're paying to them. It looks like it's about $272,000,000 for their 40% stake. But you're also buying another 11% from CIE. Is it somewhere in the order of we're talking about like maybe $350,000,000 to 375 sort of cash outlay for this acquisition? Is that about right?
That's so nice. Like we should
I mean, KA will be coming out shortly that will have all the numbers laid out. So rather than give loose numbers now, I think better to get that in fairly short order.
All right, very well. Thank you. Appreciate it.
And we'll take our next question from John Deeseur with Gabelli. Please go ahead.
Hi. Congratulations on a good quarter. I noticed that in the eBay numbers that StubHub was still up, I mean, the volume was up 6%, the revenue was up 7%. How do you think they keep growing given that you have been very effective at disintermediating the bots?
Just Tinker.
You're asking, right?
Is he going to ask me a Formula 1 question next? You
are 60% of value of Formula 1, so we should
as you call
it, Live Nation with an option on Formula 1.
That was a good note. I'll take it. We're not going to get into the competitor and stuff, Bob, you've been following numbers over the years. It's a tough business on its own. We think our business is long term has a great global opportunity.
We don't think secondary is a business in itself long term. We think it's a piece of the overall global ticketing business that we're in. So we like our global position. We like our product mix right now. And we like our client base.
So I'm not sure what they do.
I noticed that Aventon bought 48% of France Belay, option to take control of it in 4 years. So as you sort of look at the rest of the world, how would you sort of rank in terms of priorities, the countries you're looking at or the continents? We
wouldn't rank them. We think that we're in 44 countries. So I think Aventum is not nowhere near that. So we are a global business. So we look at opportunity more on a city by basis.
There are great opportunities to grow in New York that we're going to invest in as well as there are in Singapore and Tokyo. So being as diverse as we are on a global basis, we still kind of have our hit list of cities and markets where we think we're underdeveloped and that whether it's a promoter or a festival or a venue, we want to fill that portfolio in a bolt on. So you'll continue to see us shopping around the world where it makes sense to build that local market where we can drive our overall business.
We'll take our next question from Kyle Evans with Stephens. Please go ahead.
Hi. Thanks for taking my questions. Platinum looks like a great pricing solution. What inning do you think we're in for adoption? How much of the house could end up being dynamically priced if we look out into the future?
And are you seeing any kind of impact on your own secondary market where I think GTV was flat in the quarter?
Yes, I'll start and then Joe can give you some background. I mean, I'll just go macro. I think we're in the I think sports is in a very different inning than music, which is obviously because they're more controlled, the leagues can make global decisions. So I think sports is in the 6th or 7th inning in terms of how do they price the show or their content, how do they maximize it with the right combination of pricing. I think music is in the second, third inning on how do we best price our event, how do we price a Thursday show versus a Saturday and an aisle seat versus the middle at the beginning and the end subscriptions, all the different ways that the artists can engage.
So Platinum is a, I think, been a super tool to tell the artist that there's a great way on your on sale to get a higher price for a good seat. And that's been very successful. And I think that is still early days in the overall business. If you look at how much is still being traded on secondary, I would say there's still a huge opportunity for the artist to keep looking at finding that fine line between what his brand message needs to be and what his pricing strategy will be. We still think there's many innings left to capture more.
And when I say capture more, I always want to remind people, it's capture more, but it's sometimes it's price it less in the back. So it's a holistic strategy, right, on that dynamic pricing on how do you sell up the house by the time the performers on stage. And that's a holistic perspective that they're getting smarter every day on.
The shows where I've seen it have been kind of 1 to 2 points of the total seats. Where do you think that can go over time roughly?
Yes. I think we're averaging a bit higher than that across most of the shows, clearly a number of them sell quickly even if they're pricing. So you may not be seeing the full inventory. But we absolutely see room for that to continue to grow through the first 20% of the house in some cases and also further use of that pricing technology and intelligence to make sure that we're appropriately pricing all the other tickets. The other ones may not be dynamic, but there continues to be additional benefit from taking that machine learning and artificial intelligence and applying it to how you price the overall house.
Great. Last one, you broke apart the performance of the top 100 artists and the smaller artists. And I don't recall you talking about the business that way before. Is that a trend you expect to continue going forward?
Yes, for sure. I mean, we've been Joe and I always get asked that question, who's going to be the next superstar and we've been saying it for 10 years that this is a deep business. Consumers love going to the Troubadour and the House of Blues as much as the stadium. So we do 8,000 club shows a year, very few investors even acknowledge it or talk about it and just want to talk about the A show. So, we just wanted to continually remind that at all levels going to a live show is an incredible experience for the fan and we're seeing more and more club shows, theaters, small shows.
You look at things like Springsteen on Broadway, new ideas, new residencies, Madonna going up this year doing smaller theaters at a higher price. So I think you're just going to see more and more ways artists will look at traditional venues, smaller venues, unique venues, sizes to keep bringing their art to the consumer in a unique location and that's a huge opportunity for us.
Great. Thank you.
This concludes today's question and answer session. I'd like to turn the call back over to today's presenters for any additional or closing remarks.
All right. Have a great summer. Thank you all.
Once again, that concludes today's conference. Thank you for your participation.