Live Nation Entertainment 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended March 31, 2022

or

For the transition period from to

Commission File Number 001-32601

LIVE NATION ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

9348 Civic Center Drive

Beverly Hills, CA 90210

(Address of principal executive offices, including zip code)

(310) 867-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

On April 28, 2022, there were 228,063,872 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 3,569,853 shares of unvested restricted and deferred stock awards and excluding 408,024 shares held in treasury.

LIVE NATION ENTERTAINMENT, INC.

INDEX TO FORM 10-Q

PART I—FINANCIAL INFORMATION

LIVE NATION ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

See Notes to Consolidated Financial Statements

LIVE NATION ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

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“Live Nation” (which may be referred to as the “Company,” “we,” “us” or “our”) means Live Nation Entertainment, Inc. and its subsidiaries, or one of our segments or subsidiaries, as the context requires. You should read the following discussion of our financial condition and results of operations together with the unaudited consolidated financial statements and notes to the financial statements included elsewhere in this quarterly report.

Special Note About Forward-Looking Statements

Certain statements contained in this quarterly report (or otherwise made by us or on our behalf from time to time in other reports, filings with the SEC, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. Forward-looking statements include, but are not limited to, statements about our financial position, business strategy, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, the effects of future legislation or regulations and plans and objectives of our management for future operations. We have based our forward-looking statements on our beliefs and assumptions considering the information available to us at the time the statements are made. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “target,” “project,” “seek,” “predict,” or variations of such words and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth below under Part II—Other Information—Item 1A.—Risk Factors, in Part I—Item IA.—Risk Factors of our 2021 Annual Report on Form 10-K as well as other factors described herein or in our annual, quarterly and other reports we file with the SEC (collectively, “cautionary statements”). Based upon changing conditions, should any risk or uncertainty that has already materialized, such as, for example, the risks and uncertainties posed by the global COVID-19 pandemic, worsen in scope, impact or duration, or should one or more of the currently unrealized risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary 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. We do not intend to update these forward-looking statements, except as required by applicable law.

Executive Overview

The first quarter of 2022 was a record start to the year for our company, a remarkable feat considering our position one year ago and the fact that many of our markets remained closed for at least some portion of the quarter. Despite some disruption caused by COVID-19 variants, the general trend has been towards re-opening business and re-starting shows as the prevalence of COVID-19 shifts from pandemic to endemic in our larger markets. Fan demand has never been stronger, which led to a record first quarter for our Ticketing segment and sets us up for a strong year across all three of our segments.

Even with the challenges associated with the pandemic, the conflict in Eastern Europe, supply chain issues, labor shortages and inflationary pressures, the supply and demand dynamic with artists and fans continues to strengthen. Live shows offer a unique and uplifting experience for people of all ages – perhaps even more powerful in these times than ever before. The appeal of live concerts and sporting events is evidenced by the ticket sales we have seen so far this year. The first quarter of 2022 was our second highest quarter ever for transacted GTV and two of our top three transacted volume months occurred in the first quarter.

Our overall revenue increased by nearly $1.5 billion for the quarter. All three of our segments had revenue growth in the quarter with the largest increase coming from our Concerts segment as a result of major markets re-opening for shows, most notably the United States and the United Kingdom. We had operating income of $27 million in the first quarter of 2022 compared to an operating loss of $303 million in the first quarter of 2021, an improvement of $330 million, resulting from shows and sponsorship restarting leading to notably improved ticketing sales. The impact of changes in foreign exchange rates did not materially impact our year-over-year variances.

Our Concerts segment revenue for the quarter increased by $968 million, from $239 million in the first quarter of 2021 to $1.2 billion in the first quarter of 2022. The revenue growth was a result of more shows and fans coming back to venues to enjoy their favorite artists. The number of events for the quarter was approximately 6,600 compared to approximately 670 in the first quarter of 2021. The number of fans for the quarter was 10.8 million compared to approximately 0.5 million last year. The growth was largely in the United States and United Kingdom. Concerts operating loss for the quarter increased by $4

million, from a loss of $145 million in the first quarter of 2021 to a loss of $150 million in the first quarter of 2022. While there were more shows and fans in the quarter, this activity was more than offset by the increase in expenses as we ramped up our staffing and infrastructure to prepare for what we expect will be our busiest summer ever. The first quarter is typically our lightest with respect to show count and fans, but even based on the limited activity we have, we saw improvements to profit per show in the arena, theater and club events in the quarter. So while we are seeing increases to some of our expenses such as labor and fuel, the ticket pricing and spend per fan has more than offset these cost increases.

Our Ticketing segment revenue for the quarter increased by $452 million, from $28 million in the first quarter of 2021 to $480 million in the first quarter of 2022. The improvement resulted from an increase in ticket sales, upward pricing momentum due to higher fan demand, and higher ancillary revenue streams. Excluding refunds, we sold 57 million fee-bearing tickets in the first quarter compared to 10 million tickets in the same period of the prior year. The increase was largely driven by sales in the United States, the United Kingdom and the addition of OCESA. We also started to see sales pick up in some of our other major European markets. Pricing on our fee-bearing tickets increased by double-digits, reflecting strong consumer demand, particularly for premium seats and VIP experiences. Platinum sales volumes and GTV have more than doubled compared to the first quarter of 2019 this quarter. Our resale business continued its pronounced rebound in the first quarter, with our second highest resale quarter ever, and double our sales from the first quarter of 2019. Ticketing operating income for the quarter improved by $275 million, from a $121 million loss in the first quarter of 2021 to income of $155 million in the first quarter of 2022. The growth in operating results was largely driven by increased t

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Required information is within Part I — Financial Information—Item 2.—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk.

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to our company, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and our board of directors.

Based on their evaluation as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective to ensure that (1) the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) the information we are required to disclose in such reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal controls will prevent all possible errors and fraud. Our disclosure controls and procedures are, however, designed to provide reasonable assurance of achieving their objectives, and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at that reasonable assurance level.

Changes in Internal Control Over Financial Reporting

We are in the process of integrating OCESA, which was acquired in December 2021, into our overall internal control over financial reporting process. Other than this integration, there have been no changes in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting resulting from the fact that employees are working remotely due to the global COVID-19 pandemic. We are continually monitoring and assessing the impact of the global COVID-19 pandemic on our internal controls to minimize the affects on their design and operating effectiveness.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding our legal proceedings can be found in Part I—Financial Information—Item 1. Financial Statements—Note 6—Commitments and Contingent Liabilities.

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Part I—Item 1A.—Risk Factors of our 2021 Annual Report on Form 10-K filed with the SEC on February 23, 2022, describes some of the risks and uncertainties associated with our business which could materially and adversely affect our business, financial condition, cash flows and results of operations, and the trading price of our common stock could decline as a result. We do not believe that there have been any material changes to the risk factors previously disclosed in our 2021 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities

The following table provides information regarding repurchases of our common stock during the three months ended March 31, 2022:

Item 3. Defaults Upon Senior Securities

None.

(a) On May 5, 2022, Live Nation entered into an employment agreement with Brian Capo effective as of January 1, 2022 (the “Capo Agreement”) to serve as Live Nation’s Chief Accounting Officer. The term of the Capo Agreement ends on December 31, 2026. After that date, unless earlier terminated, Mr. Capo’s employment with Live Nation will be on an at-will basis. Mr. Capo’s existing employment agreement was extinguished upon execution of the Capo Agreement.

Under the Capo Agreement, Mr. Capo will receive a base salary of $425,000 per year, and will be eligible to receive annual salary increases at the discretion of the Compensation Committee. Mr. Capo is eligible to receive an annual cash performance bonus with a target equal to 50% of his base salary, with such bonus based 50% on Live Nation achieving its adjusted operating income target for the applicable year, and 50% on the achievement of specific performance targets to be established annually.

If Mr. Capo is terminated by Live Nation without cause or Mr. Capo terminates his employment for good reason, subject to Mr. Capo’s execution of a general release of claims, he will receive a cash payment equal to nine months of his base salary.

The Capo Agreement also contains customary non-disclosure, non-solicitation and non-disparagement provisions. The description of the Capo Agreement set forth above is qualified in its entirety by the Capo Agreement attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

§ Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 5, 2022.