What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-05 · 122 added, 125 removed, 422 unchanged (37% of the section changed)

16 unchanged sentences

Due to the global COVID-19 pandemic, we ceased all Live Nation tours and closed all our venues beginning in mid-March to support global efforts to mitigate the spread of the virus.

To ensure the safety of our artists, fans, and employees, we held no traditional events in the second quarter and had minimal ticket sales.

As a result, our overall revenue for the quarter decreased by 98%, from $3.2 billion to $74 million on a reported basis.

On a constant currency basis, our second quarter revenue was $80 million, which represents a 97% reduction compared to last year.

The revenue reduction was largely in our Concerts and Ticketing segments as a result of almost no shows occurring globally in the quarter and ticket sales for future shows sharply declining given the uncertainty around when live events will return.

To ensure the safety of our artists, fans, and employees, we held very few traditional events in the third quarter and had minimal ticket sales.

As a result, our overall revenue for the quarter decreased by 95%, from $3.8 billion to $184 million.

The revenue reduction was largely in our Concerts and Ticketing segments as a result of almost no shows occurring globally in the quarter and ticket sales for future shows sharply reduced given the uncertainty around when live events will return.

Our Ticketing revenue was also impacted by refunds for cancelled and postponed events.

The pandemic led to an operating loss for the quarter of $588 million compared to operating income of $172 million for the second quarter of last year.

For the first six months of 2020, our total revenue decreased by $3.4 billion, or 71%, on a reported basis as compared to last year.

The pandemic led to an operating loss for the quarter of $504 million compared to operating income of $260 million for the third quarter of last year.

For the first nine months of 2020, our total revenue decreased by $7.0 billion, or 81%, as compared to last year.

The change was the same without the impact of foreign exchange rates.

The revenue impact of the global COVID-19 pandemic for the first six months was partially offset by normal operations from January through mid-March, when it appeared we were on track for another record year.

Our year-to-date operating loss of $761 million was partially mitigated by the results for the first two and a half months of the year plus our cost savings initiatives, which began at the end of March and generated over $275 million of fixed cost savings for the second quarter compared to our plan just prior to the onset of the global COVID-19 pandemic.

The revenue impact of the global COVID-19 pandemic for the first nine months was partially offset by normal operations from January through mid-March, when it appeared we were on track for another record year.

Our year-to-date operating loss of $1.3 billion was partially mitigated by the results for the first two and a half months of the year plus our cost savings initiatives, which began at the end of March and generated $507 million of fixed cost savings for the second and third quarters compared to our plan just prior to the onset of the global COVID-19 pandemic.

While the unparalleled disruption of the pandemic has had a material impact on our business, as the leading global live event and ticketing company, we still firmly believe that we are well-positioned to provide the best service to artists, teams, fans and venues once business resumes.

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We are actively taking steps to ensure that when the time is right for us to do so, we will be ready to ramp back up and once again connect audiences to artists at the concerts they are looking forward to.

Our Concerts segment revenue for the quarter decreased by $2.5 billion, or 95%, on a reported and constant currency basis as compared to last year.

Our Concerts segment revenue for the quarter decreased by $3.0 billion, or 95%, as compared to last year.

The unfavorable results were almost entirely due to the impact of the global COVID-19 pandemic.

Show count for the quarter was down 99% compared to last year to 131 events, which included a few socially

distanced club shows in Europe and Asia and some drive-in concert events in Denmark.

Show count for the quarter was down 96% compared to last year to 367 events, which included a few socially distanced club shows in Europe, events in New Zealand (which has recently re-opened for shows), as well as drive-in concerts and some rentals to third parties in North

A total of 269 thousand fans attended these shows.

Concerts operating loss increased for the quarter largely due to lost business resulting from the global COVID-19 pandemic and from sunk costs, such as advertising expenses, associated with shows cancelled or rescheduled to 2021 due to the pandemic.

For the first six months, our Concerts segment revenue decreased by $2.8 billion, or 71%, on a reported and constant currency basis.

By the end of the second quarter of 2020, Concerts had cancelled nearly 3,900 concerts impacted by the stoppage of events starting in mid-March of this year, equating to approximately 12 million tickets, and have refunded or are in the process of refunding these tickets.

In addition, we had nearly 6,400 shows, equating to approximately 22 million tickets, that have been postponed and rescheduled into 2021 or were in the process of being rescheduled at the end of the second quarter.

Concerts had an operating loss for the quarter largely due to lost business resulting from the global COVID-19 pandemic and from sunk costs, such as advertising expenses, associated with shows cancelled or rescheduled to 2021 due to the pandemic.

For the first nine months, our Concerts segment revenue decreased by $5.8 billion, or 82%.

By the end of the third quarter of 2020, Concerts had cancelled over 5,000 concerts impacted by the stoppage of events starting in mid-March of this year, equating to approximately 15 million tickets.

In addition, we had nearly 6,000 shows, equating to approximately 22 million tickets, that have been postponed and rescheduled into 2021 or were in the process of being rescheduled at the end of the third quarter.

Our Ticketing segment revenue fell below zero for the quarter as a result of refunds being processed for tickets that were sold in previous quarters.

Second quarter revenue was $(87) million, compared to $371 million for the second quarter last year on a reported and constant currency basis.

Third quarter revenue was $(20) million, compared to $388 million for the third quarter last year.

Before refunds, our fee-bearing tickets were 6.5 million for the quarter, a reduction of 48.8 million tickets, or 88%, compared to last year.

A total of 10.7 million tickets were refunded in the quarter, amounting to just slightly over $1.1 billion of gross transaction value.

A total of 5.2 million tickets were refunded in the quarter, amounting to just slightly over $500 million of gross transaction value.

The decline in operating results for the quarter was largely driven by the lack of ticket sales as well as refunds processed for cancelled and rescheduled events.

For the first six months, our Ticketing segment revenue fell by $0.5 billion, or 72%, on a reported and constant currency basis.

Before refunds, we had sold 44.7 million fee-bearing tickets year-to-date, a reduction of 57% compared to the first half of 2019.

For the first nine months, our Ticketing segment revenue fell by $919 million, or 84%.

Before refunds, we had sold 52.1 million fee-bearing tickets year-to-date, a reduction of 67% compared to the first nine months of 2019.

A total of 23.3 million tickets have been refunded year-to-date, amounting to nearly $2.3 billion of gross transaction value.

Our Sponsorship & Advertising segment revenue for the quarter decreased by $133 million, or 88%, on a reported and constant currency basis as compared to last year.

For the first six months, our Sponsorship & Advertising segment revenue decreased by $118 million, or 52%, on a reported basis as compared to last year, or $116 million, a 51% decrease, on a constant currency basis.

Our Sponsorship & Advertising segment revenue for the quarter decreased by $167 million, or 78%, as compared to last year.

For the first nine months, our Sponsorship & Advertising segment revenue decreased by $285 million, or 65%, as compared to last year.

After a very strong performance for the first 10 weeks of the year, there has been a significant reduction to Sponsorship & Advertising revenue and operating results due to the lack of shows and ticket sales resulting from the global COVID-19 pandemic.

We are currently focused on the welfare of our employees and mitigating the financial impact of the shutdown.

We have undertaken cost-savings initiatives across the organization, including salary reductions, hiring freezes, furloughs, as well as eliminating costs for consultants, travel and entertainment and repairs and maintenance for our facilities.

We are also protecting our liquidity by tightly managing cash outflows associated with all of our major expenditures:

We are currently focused on mitigating the financial impact of the shutdown.

We have undertaken cost-savings initiatives across the organization, including salary reductions, hiring freezes, furloughs, termination of certain employees, as well as eliminating costs for consultants, travel and entertainment and repairs and maintenance for our facilities.

We are also protecting our liquidity by tightly managing cash outflows associated with all our major expenditures:

operating expenses, capital expenditures, acquisitions, and advances in both our ticketing and concert businesses.

The length and severity of the impact to live events and our related sponsorship and ticketing businesses is still uncertain.

Currently, we do not anticipate a significant change in activity levels through the remainder of the year.

The magnitude and pace of the recovery will depend on each market and their containment efforts, the nature of the events being held, and ongoing efforts to develop effective treatments and/or vaccines for COVID-19.

Currently, we do not anticipate a significant change in activity levels through next year.

The magnitude and pace of the recovery will depend on each market and their containment efforts, the nature of the events being held, and ongoing efforts to develop rapid testing technologies, effective treatments and/or vaccines for COVID-19.

We remain optimistic about the long-term potential of our company and the unique power of live shows to unite people.

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Our Concerts segment principally involves the global promotion of live music events in our owned or operated venues and in rented third-party venues, the operation and management of music venues, the production of music festivals across the world, the creation of associated content and the provision of management and other services to artists.

While our Concerts segment operates year-round traditionally, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur from May through October.

While our Concerts segment operates year-round traditionally, we typically experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur from May through October.

Due to the unprecedented stoppage of our concert events globally beginning in mid-March due to the global COVID-19 pandemic, we do not expect that any quarter in 2020 will follow our typical seasonality trend.

Revenue and related costs for events are

generally deferred and recognized when the event occurs.

All advertising costs incurred during the year for shows in future years are expensed at the end of the year.

Revenue and related costs for events are generally deferred and recognized when the event occurs.

All advertising costs incurred during the year for shows in future

years are expensed at the end of the year.

If a current year event is rescheduled into a future year, all advertising costs incurred to date are expensed in the period when the event is rescheduled.

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Sponsorship and Advertising direct operating expenses include fulfillment costs related to our sponsorship programs, along with other costs.

Sponsorship & Advertising direct operating expenses include fulfillment costs related to our sponsorship programs, along with other costs.

To judge the health of our Sponsorship & Advertising segment, we primarily review the revenue generated through sponsorship arrangements and online advertising, and the percentage of expected revenue under contract.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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These ticketing metrics are net of any refunds requested and any cancellations that occurred during the period and up to the time of reporting of these financial statements.

Fee-bearing tickets include refunds of 10.7 million and 17.2 million for the three and six months ended June 30, 2020, respectively.

Fee-bearing tickets include refunds of 5.2 million and 23.3 million for the three and nine months ended September 30, 2020, respectively.

Non-GAAP Measures

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(in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Concerts $ (281,625) $ 39,635 $ 208 $ 65,794 $ — $ 2,603 $ (173,385)

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Total $ (504,441) $ 56,695 $ 208 $ 119,938 $ 6,707 $ 1,656 $ (319,237)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Concerts $ 111,374 $ 3,195 $ (320) $ 71,247 $ — $ 9,028 $ 194,524

4 unchanged sentences

Total $ 260,041 $ 11,998 $ (305) $ 126,306 $ 19,853 $ 9,255 $ 427,148

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Concerts $ (722,607) $ 66,376 $ 896 $ 202,352 $ — $ (19,269) $ (472,252)

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Total $ (1,265,178) $ 106,965 $ 897 $ 364,785 $ 38,833 $ (17,925) $ (771,623)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Concerts $ 112,942 $ 9,826 $ (675) $ 176,827 $ — $ 33,774 $ 332,694

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Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2020 2019 2020 2019

11 unchanged sentences

** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin.

Concerts revenue decreased $2.5 billion during the three months ended June 30, 2020 as compared to the same period of the prior year primarily due to the continued unprecedented stoppage of our concert events globally throughout the second quarter of 2020.

Concerts revenue decreased $3.0 billion during the three months ended September 30, 2020 as compared to the same period of the prior year primarily due to the continued unprecedented stoppage of our concert events globally throughout the third quarter of 2020.

Due to the global COVID-19 pandemic, beginning in mid-March 2020 we ceased all of our tours, closed our venues and cancelled or postponed our festivals to support global efforts at social distancing and mitigating the virus, and to comply with restrictions put in place by various governmental entities.

Concerts had incremental revenue of $26.6 million from the acquisitions of concert promotion, venue management and merchandise businesses.

Concerts had incremental revenue of $26.8 million from acquisitions, primarily that of a merchandise business.

Operating results

The decrease in Concerts operating results for the three months ended June 30, 2020 was primarily driven by the reduction in revenue related to the global COVID-19 pandemic discussed above partially offset by cost reduction measures implemented during the second quarter of 2020 including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Concerts revenue decreased $2.8 billion during the six months ended June 30, 2020 as compared to the same period of the prior year.

Excluding the decrease of $17.8 million related to currency impacts, revenue decreased $2.8 billion, or 71%, primarily due to the reduction in revenue related to the global COVID-19 pandemic discussed above.

The decrease in Concerts operating results for the three months ended September 30, 2020 was primarily driven by the reduction in revenue related to the global COVID-19 pandemic discussed above partially offset by cost reduction measures implemented during 2020, which have included salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Concerts revenue decreased $5.8 billion during the nine months ended September 30, 2020 as compared to the same period of the prior year primarily due to the reduction in revenue caused by the global COVID-19 pandemic discussed above.

Concerts had incremental revenue of $123.3 million from the acquisitions of concert promotion, venue management and merchandise businesses.

Operating results

The decrease in Concerts operating results for the six months ended June 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above.

Included in selling, general and administrative expenses for the six months ended June 30, 2020 is $25.7 million of expenses related to new acquisitions and new venues in the Concerts segment.

In addition, we recorded $11.6 million in impairment charges in the first half of 2020 primarily associated with revenue-generating contract intangible assets as it was determined that the estimated undiscounted cash flows associated with the respective intangible assets were less than their carrying value as a result of the expected impacts from the global COVID-19 pandemic.

There were no impairments of intangible assets recorded for the six months ended June 30, 2019.

The decrease in Concerts operating results for the nine months ended September 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above.

Concerts operating results for the nine months ended September 30, 2020 include net operating losses of $44.6 million related to acquisitions and new venues.

Our Ticketing segment operating results were, and discussions of significant variances are, as follows:

Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2020 2019 2020 2019

11 unchanged sentences

** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin.

Ticketing revenue decreased $457.8 million during the three months ended June 30, 2020 as compared to the same period of the prior year primarily due to refunds for cancelled events for third-party clients and the lack of tickets available for sale to the public driven by the unprecedented stoppage of concerts, sports and other events globally during the second quarter of 2020 due to the global COVID-19 pandemic.

Ticketing revenue decreased $408.3 million during the three months ended September 30, 2020 as compared to the same period of the prior year primarily due to refunds for cancelled events for third-party clients and the lack of tickets available for sale to the public driven by the unprecedented stoppage of concerts, sports and other events globally during the third quarter of 2020 due to the global COVID-19 pandemic.

Operating results

The decrease in Ticketing operating results for the three months ended June 30, 2020 was primarily due to the reduction in revenue related to the global COVID-19 pandemic discussed above, without a proportionate reduction in direct operating expenses as credit card fees and other costs associated with processing refunds and responding to fan and ticketing client inquiries continued.

This decrease was partially offset by cost reduction measures implemented during the second quarter of 2020, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Ticketing revenue decreased $511.1 million during the six months ended June 30, 2020 as compared to the same period of the prior year primarily due to the reduction in revenue related to the global COVID-19 pandemic discussed above.

The decrease in Ticketing operating results for the three months ended September 30, 2020 was primarily due to the reduction in revenue caused by the global COVID-19 pandemic discussed above.

This decrease was partially offset by cost reduction measures implemented during 2020, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Ticketing revenue decreased $919.4 million during the nine months ended September 30, 2020 as compared to the same period of the prior year primarily due to the reduction in revenue caused by the global COVID-19 pandemic discussed above.

Operating results

The decrease in Ticketing operating results for the six months ended June 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above.

The decrease in Ticketing operating results for the nine months ended September 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above, without a proportionate reduction in direct operating expenses as credit card fees and other costs associated with processing refunds and responding to fan and ticketing client inquiries continued.

Sponsorship & Advertising

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Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2020 2019 2020 2019

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AOI margin ** 47.8 % 67.5 % 43.3 % 64.2 %

* Percentages are not meaningful.

** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin.

Sponsorship & Advertising revenue decreased $133.2 million during the three months ended June 30, 2020 as compared to the same period of the prior year primarily due to a reduction in sponsorship revenue associated with our venues, festivals and lack of online activity as ticket sales declined driven by the unprecedented stoppage of events beginning in mid-March of 2020 due to the global COVID-19 pandemic.

Sponsorship & Advertising revenue decreased $167.3 million during the three months ended September 30, 2020 as compared to the same period of the prior year primarily due to a reduction in sponsorship revenue associated with our venues, festivals and lack of online activity as ticket sales declined driven by the unprecedented stoppage of events beginning in mid-March of 2020 due to the global COVID-19 pandemic.

Operating results

The decrease in Sponsorship & Advertising operating results for the three months ended June 30, 2020 was primarily driven by the reduction in revenue discussed above partially offset by lower fulfillment costs on certain sponsorship programs.

In addition, cost reduction measures were implemented during the second quarter of 2020, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Sponsorship & Advertising revenue decreased $118.0 million during the six months ended June 30, 2020 as compared to the same period of the prior year.

Excluding the decrease of $1.8 million related to currency impacts, revenue decreased $116.2 million, or 51%, primarily due to the reduction in revenue related to the global COVID-19 pandemic discussed above.

The decrease in Sponsorship & Advertising operating results for the three months ended September 30, 2020 was primarily driven by the reduction in revenue discussed above.

In addition, cost reduction measures were implemented during 2020, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Sponsorship & Advertising revenue decreased $285.3 million during the nine months ended September 30, 2020 as compared to the same period of the prior year primarily due to the reduction in revenue caused by the global COVID-19 pandemic discussed above.

Operating results

The decrease in Sponsorship & Advertising operating income for the six months ended June 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above.

The decrease in Sponsorship & Advertising operating income for the nine months ended September 30, 2020 was primarily driven by the impact of the global COVID-19 pandemic discussed above along with higher fulfillment costs on certain sponsorship programs.

Consolidated Results of Operations

Three Months Ended June 30, % Change

Three Months Ended September 30, % Change

As Reported Currency Impacts At Constant Currency** As Reported As Reported At Constant Currency**

11 unchanged sentences

Interest income (2,810) (5,863)

Equity in losses (earnings) of nonconsolidated affiliates 6,613 (5,828)

Other income, net (5,173) (430)

Equity in losses of nonconsolidated affiliates 2,615 2,681

Other expense (income), net (10,977) 5,384

Income (loss) before income taxes (559,362) 221,252

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Corporate Expenses

Corporate expenses decreased $19.9 million, or 49%, during the three months ended June 30, 2020 as compared to the same period of the prior year primarily due to cost reduction efforts implemented during the second quarter of 2020, including salary reductions, with salaries for senior executives reduced by up to 50% for the duration of the salary reduction program.

Corporate expenses decreased $13.0 million, or 29%, during the three months ended September 30, 2020 as compared to the same period of the prior year primarily due to cost reduction efforts implemented during 2020, including salary reductions, with salaries for senior executives reduced by up to 60%.

Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment and repairs and maintenance.

Interest Expense

Interest expense increased $15.9 million, or 43%, during the three months ended June 30, 2020 as compared to the same period of the prior year due to additional interest costs from the issuance of our 4.75% senior notes in October 2019, the issuance of our 2.0% convertible senior notes in February 2020 and the issuance of our 6.5% senior secured notes in May 2020.

Interest expense increased $29.5 million, or 81%, during the three months ended September 30, 2020 as compared to the same period of the prior year due to additional interest costs from the issuance of our 4.75% senior notes in October 2019, the issuance of our 2.0% convertible senior notes in February 2020 and the issuance of our 6.5% senior secured notes in May 2020.

These additional costs were partially offset by interest cost reductions realized from the October 2019 redemption of our 5.375% senior notes and amendment to our senior secured credit facility.

Equity in losses (earnings) of nonconsolidated affiliates

Equity in losses (earnings) of nonconsolidated affiliates decreased to a loss of $6.6 million for the three months ended June 30, 2020 as compared to earnings of $5.8 million for the comparable period of the prior year due to lower operating results from certain nonconsolidated affiliates driven by the impacts of the global COVID-19 pandemic.

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests decreased to a loss of $43.1 million during the three months ended June 30, 2020 as compared to income of $12.8 million for the same period of the prior year primarily due to lower worldwide operating results from certain concert and festival promotion businesses driven by postponed and cancelled events during the second quarter of 2020 due to the global COVID-19 pandemic.

Six Months Ended June 30, % Change

Net income (loss) attributable to noncontrolling interests was a loss of $13.6 million during the three months ended September 30, 2020 as compared to income of $15.0 million for the same period of the prior year primarily due to lower worldwide operating results from certain concert and festival promotion businesses driven by postponed and cancelled events during the third quarter of 2020 due to the global COVID-19 pandemic.

Nine Months Ended September 30, % Change

As Reported Currency Impacts At Constant Currency** As Reported As Reported At Constant Currency**

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Equity in losses (earnings) of nonconsolidated affiliates 6,656 (6,291)

Other income, net (545) (3,833)

Other expense (income), net (11,522) 1,551

Income (loss) before income taxes (1,413,381) 314,839

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Corporate Expenses

Corporate expenses decreased $28.0 million, or 36%, during the six months ended June 30, 2020 as compared to the same period of the prior year primarily due to cost reduction efforts implemented during the second quarter of 2020, including salary reductions, with salaries for senior executives reduced by up to 50% for the duration of the salary reduction program.

Corporate expenses decreased $41.1 million, or 34%, during the nine months ended September 30, 2020 as compared to the same period of the prior year primarily due to cost reduction efforts implemented during 2020, including salary reductions, with salaries for senior executives reduced by up to 60%.

Interest Expense

Interest expense increased $23.4 million, or 32%, during the six months ended June 30, 2020 as compared to the same period of the prior year due to additional interest costs from the issuance of our 4.75% senior notes in October 2019, the issuance of our 2.0% convertible senior notes in February 2020 and the issuance of our 6.5% senior secured notes in May 2020.

Interest expense increased $52.9 million, or 48%, during the nine months ended September 30, 2020 as compared to the same period of the prior year due to additional interest costs from the issuance of our 4.75% senior notes in October 2019, the issuance of our 2.0% convertible senior notes in February 2020 and the issuance of our 6.5% senior secured notes in May 2020.

These additional costs were partially offset by interest cost reductions realized from the October 2019 redemption of our 5.375% senior notes and amendment to our senior secured credit facility.

Equity in losses (earnings) of nonconsolidated affiliates

Equity in losses (earnings) of nonconsolidated affiliates decreased to a loss of $4.0 million for the six months ended June 30, 2020 as compared to earnings of $9.0 million for the comparable period of the prior year due to lower operating results from certain nonconsolidated affiliates driven by the impacts of the global COVID-19 pandemic.

Equity in losses (earnings) of nonconsolidated affiliates was a loss of $6.7 million for the nine months ended September 30, 2020 as compared to earnings of $6.3 million for the comparable period of the prior year due to lower operating results from certain nonconsolidated affiliates driven by the impacts of the global COVID-19 pandemic.

Income tax expense (benefit)

For the six months ended June 30, 2020, we had a net tax benefit of $32.5 million on a loss before income taxes of $854.0 million compared to net tax expense of $32.7 million on income before income taxes of $93.6 million for the six months ended June 30, 2019.

For the six months ended June 30, 2020, the income tax benefit consisted of $21.8 million related to foreign entities and $10.9 million related to United States federal taxes, partially offset by tax expense of $0.2 million related to state and local income taxes.

For the nine months ended September 30, 2020, we had a net tax benefit of $49.4 million on a loss before income taxes of $1.4 billion compared to net tax expense of $60.0 million on income before income taxes of $314.8 million for the nine months ended September 30, 2019.

For the nine months ended September 30, 2020, the income tax benefit consisted of $30.6 million related to foreign entities and $18.7 million related to United States federal taxes, and $0.1 million related to state and local income taxes.

The net decrease in tax expense of $109.4 million was due primarily to a decrease in earnings in certain non-United States jurisdictions.

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests decreased to a loss of $69.2 million during the six months ended June 30, 2020 as compared to income of $10.0 million for the same period of the prior year primarily due to lower operating results from certain concert and festival promotion businesses driven by postponed and cancelled events during the first six months of 2020 due to the global COVID-19 pandemic.

Net income (loss) attributable to noncontrolling interests was a loss of $82.8 million during the nine months ended September 30, 2020 as compared to income of $25.0 million for the same period of the prior year primarily due to lower operating results from certain concert and festival promotion businesses driven by postponed and cancelled events during the first nine months of 2020 due to the global COVID-19 pandemic.

Liquidity and Capital Resources

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In April 2020, we amended our senior secured credit facility to provide an incremental $130 million revolving credit facility.

We further amended our senior secured credit facility in July 2020, which among other things, subsititutes our net leverage covenant with a $500 million liquidity covenant (as defined in the agreement) until the earlier of (a) December 31, 2021 and (b) at our election, any fiscal quarter prior to December 31, 2021.

We further amended our senior secured credit facility in July 2020, which among other things, substitutes our net leverage covenant with a $500 million liquidity covenant (as defined in the agreement) until the earlier of (a) December 31, 2021 and (b) at our election, any fiscal quarter prior to December 31, 2021.

In May 2020, we issued $1.2 billion principal amount of 6.5% senior secured notes due 2027.

As a result, we believe that these amendments and additional debt issuance will allow us the flexibility to manage our business through the disruption we will experience in 2020.

As a result, we believe that these amendments and additional debt issuance will allow us the flexibility to manage our business through the disruption we have experienced in 2020 and expect to experience in 2021.

We have also launched a number of initiatives to reduce fixed costs and conserve cash.

As part of these cost reduction efforts, we have implemented salary reductions, with salaries for senior executives reduced by up to 50% for the duration of the salary reduction program.

Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing.

We are also making use of government support programs globally.

As part of these cost reduction efforts, we have implemented salary reductions, with salaries for senior executives reduced by up to 60%.

Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, termination of certain employees and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing.

We are also making use of governmental support programs globally.

In most European and Asian markets, including the United Kingdom, Germany, Italy, France, Spain and Australia, there are robust payroll support programs to mitigate a substantial portion of employee costs.

Additionally, in the United States, we are receiving payroll support under the Employee Retention Credit for employers program established as part of the 2020 CARES Act.

Additionally, in the United States, we are receiving payroll support under the Employee Retention Credit program for employers established as part of the 2020 CARES Act.

Our cash is centrally managed on a worldwide basis.

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We may from time to time engage in open market purchases of our outstanding debt securities or redeem or otherwise repay such debt.

Our balance sheet reflects cash and cash equivalents of $3.3 billion at June 30, 2020 and $2.5 billion at December 31, 2019.

Included in the June 30, 2020 and December 31, 2019 cash and cash equivalents balances are $744.7 million and $837.7 million, respectively, of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges, which we refer to as client cash.

Our balance sheet reflects cash and cash equivalents of $2.6 billion at September 30, 2020 and $2.5 billion at December 31, 2019.

Included in the September 30, 2020 and December 31, 2019 cash and cash equivalents balances are $614.4 million and $837.7 million, respectively, of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges, which we refer to as client cash.

We generally do not utilize client cash for our own financing or investing activities as the amounts are payable to clients on a regular basis.

Our foreign subsidiaries held approximately $1.1 billion in cash and cash equivalents, excluding client cash, at June 30, 2020.

Our foreign subsidiaries held approximately $784.6 million in cash and cash equivalents, excluding client cash, at September 30, 2020.

We generally do not repatriate these funds, but if we did, we would need to accrue and pay United States state income taxes as well as any applicable foreign withholding or transaction taxes on future repatriations.

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If the original maturity of these borrowings is 90 days or less, we present the borrowings and subsequent repayments on a net basis in the statement of cash flows to better represent our financing activities.

Our balance sheet reflects total net debt of $4.9 billion and $3.3 billion at June 30, 2020 and December 31, 2019, respectively.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.4% at June 30, 2020.

Our balance sheet reflects total net debt of $4.9 billion and $3.3 billion at September 30, 2020 and December 31, 2019, respectively.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.4% at September 30, 2020.

Our cash and cash equivalents are held in accounts managed by third-party financial institutions and consist of cash in our operating accounts and invested cash.

Cash held in non-interest-bearing and interest-bearing operating accounts in many cases exceeds the Federal Deposit Insurance Corporation insurance limits.

Cash held in non-interest-bearing and interest-bearing operating accounts in many cases

exceeds the Federal Deposit Insurance Corporation insurance limits.

The invested cash is in interest-bearing funds consisting primarily of bank deposits and money market funds.

While we monitor cash and cash equivalents balances in our operating

accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail.

While we monitor cash and cash equivalents balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail.

To date, we have experienced no loss or lack of access to our cash and cash equivalents;

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In the United States, most venues traditionally hold all the cash, and internationally either the venue holds all the cash or holds the portion of the cash associated with their ticket allocation.

With the exception of some upfront costs and artist deposits, which are recorded in prepaid expenses until the event occurs, we pay the majority of event-related expenses at or after the event.

Artists are paid when the event occurs under one of several different formulas, which may include fixed guarantees and/or a percentage of tickets sales or event profits, net of any advance they have received.

With the exception of some upfront costs and artist advances, which are recorded in prepaid expenses until the event occurs, we pay the majority of event-related expenses at or after the event.

Artists are paid when the event occurs under one of several different formulas, which may include fixed guarantees and/or a percentage of ticket sales or event profits, net of any advance they have received.

When an event is cancelled, any cash held in deferred revenue is reclassified to accrued expenses as those funds are typically refunded to the fan within 30 days of event cancellation.

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Sources of Cash

During the first six months of 2020, we amended our senior secured credit facility, issued $1.2 billion principal amount of 6.5% senior secured notes due 2027 and issued $400 million principal amount of 2.0% convertible senior notes due 2025.

A portion of the proceeds were used to pay fees of approximately $33.9 million, leaving approximately $1.6 billion for general corporate purposes.

Our senior secured credit facility was further amended in July 2020 to, among other things, provide additional flexibility with our debt covenants.

During the first nine months of 2020, we amended our senior secured credit facility, issued $1.2 billion principal amount of 6.5% senior secured notes due 2027 and issued $400 million principal amount of 2.0% convertible senior notes due 2025.

A portion of the proceeds were used to pay transaction fees of approximately $35.5 million, leaving approximately $1.6 billion for general corporate purposes.

The amendments to our senior secured credit facility, among other things, provide for (i) a new incremental revolving credit facility, (ii) substitution of the consolidated net leverage ratio covenant with a $500.0 million liquidity covenant (as defined in the agreement) until the earlier of (a) December 31, 2021 and (b) at our election, any fiscal quarter ending prior to December 31, 2021, (iii) annualization of consolidated EBITDA for the first three fiscal quarters in which the consolidated net leverage ratio covenant applies (as defined in the agreement), (iv) the reset of the consolidated net leverage ratio upon its resumption to 6.75x with step downs to 6.25x after four quarters, 5.75x after eight quarters, 5.50x after twelve quarters and 5.25x after fourteen quarters through maturity, (v) adjustment of the applicable interest rate on the undrawn portion of the delayed draw term loan A and existing revolving credit facility, (vi) adjustment of the delayed draw term loan A and existing revolving credit facility commitment fees, (vii) temporary limits on our ability to make certain investments and incur additional indebtedness and liens during the Restricted Period and (viii) temporary suspension of our ability to make certain voluntary restricted payments through the date on which we deliver a compliance certificate reflecting our compliance with the consolidated net leverage ratio (calculated without annualizing consolidated EBITDA).

Amended Senior Secured Credit Facility

In April 2020, we amended our senior secured credit facility and now have (i) a $400 million delayed draw term loan A facility, (ii) a $950 million term loan B facility, (iii) a $500 million revolving credit facility and (iv) a $130 million incremental revolving credit facility.

In April 2020 and July 2020, we amended our senior secured credit facility and now have (i) a $400 million delayed draw term loan A facility, (ii) a $950 million term loan B facility, (iii) a $500 million revolving credit facility and (iv) a $130 million incremental revolving credit facility.

The delayed draw term loan A facility is available to be drawn until October 2021.

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We are also required to make mandatory prepayments of the loans under the amended credit agreement, subject to specified exceptions, from excess cash flow and with the proceeds of asset sales, debt issuances and specified other events.

There were no borrowings under the revolving credit facilities as of June 30, 2020 and we have not drawn down on the delayed draw term loan A.

There were no borrowings under the revolving credit facilities as of September 30, 2020 and we have not drawn down on the delayed draw term loan A.

Based on our outstanding letters of credit of $67.4 million, $962.6 million was available for future borrowings from our delayed draw term loan A and revolving credit facilities.

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In February 2020, we issued $400 million principal amount of 2.0% convertible senior notes due 2025.

Interest on the notes is payable semiannually in arrears on February 15 and August 15, beginning August 15, 2020, at a rate of 2.0% per annum.

Interest on the notes is payable semiannually in arrears on February 15 and August 15, at a rate of 2.0% per annum.

The notes will mature on February 15, 2025.

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They also have financial covenants including minimum consolidated EBITDA to consolidated net interest payable, minimum consolidated cash flow to consolidated debt service and maximum consolidated debt to consolidated EBITDA, all as defined in the applicable debt agreements.

As of June 30, 2020, we believe we were in compliance with all of our debt covenants related to our senior secured credit facility and our corporate senior secured notes, senior notes and convertible senior notes.

As of September 30, 2020, we believe we were in compliance with all of our debt covenants related to our senior secured credit facility and our corporate senior secured notes, senior notes and convertible senior notes.

We expect to remain in compliance with all of these debt covenants throughout 2020.

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All amounts related to the use of cash for acquisitions discussed in this section are presented net of any cash acquired.

During the six months ended June 30, 2020, we used $37.5 million of cash primarily for the acquisitions of a festival promotion business and a venue management business, both located in the United States.

During the nine months ended September 30, 2020, we used $37.3 million of cash primarily for the acquisitions of a festival promotion business and a venue management business, both located in the United States.

As of the date of acquisition, the acquired businesses had a total of $71.1 million of cash on their balance sheets, primarily related to deferred revenue for future events.

During the six months ended June 30, 2019, we used $87.6 million of cash primarily for the acquisitions of a venue management business located in Belgium, a festival promotion business and a venue management business, both located in the United States.

During the nine months ended September 30, 2019, we used $108.1 million of cash primarily for the acquisitions of a venue management business located in Belgium, a festival promotion business and a venue management business, both located in the United States.

As of the date of acquisition, the acquired businesses had a total of $67.3 million of cash on their balance sheets, primarily related to deferred revenue for future events.

Purchases and Sales of Noncontrolling Interests

During the six months ended June 30, 2020, we used $88.2 million of cash primarily for the acquisition of the remaining interest in two festival promotion businesses located in the United States.

During the nine months ended September 30, 2020, we used $107.0 million of cash primarily for the acquisitions of the remaining or additional interest in festival promotion businesses located in the United States and Brazil.

Capital Expenditures

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Our capital expenditures, including accruals for amounts incurred but not yet paid for, but net of expenditures funded by outside parties such as landlords or replacements funded by insurance proceeds, consisted of the following:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Total capital expenditures $ 162,783 $ 225,156

Maintenance capital expenditures during the first six months of 2020 decreased from the same period of the prior year primarily due to a reduction in venue-related projects and technology enhancements as part of our cash savings initiatives implemented in connection with the global COVID-19 pandemic.

Maintenance capital expenditures during the first nine months of 2020 decreased from the same period of the prior year primarily due to a reduction in venue-related projects and technology enhancements as part of our cash savings initiatives implemented in connection with the global COVID-19 pandemic.

We currently expect capital expenditures to be approximately $210 million for the full year of 2020.

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Operating Activities

Cash used in operating activities was $390.4 million for the six months ended June 30, 2020 as compared to cash provided by operations of $293.3 million in the same period of the prior year.

During the first six months of 2020, we had lower net cash-related income and a lower increase in prepaid expenses due to the impacts of the global COVID-19 pandemic.

In addition, our accounts payable and accrued expenses, and accounts receivable decreased due to the cessation of our concert events beginning in mid-March in response to the global COVID-19 pandemic when compared to the same period of the prior year.

Cash used in operating activities was $956.9 million for the nine months ended September 30, 2020 as compared to cash provided by operating activities of $32.9 million in the same period of the prior year.

During the first nine months of 2020, we had lower cash-related income and a decrease in our accounts payable and accrued expenses as compared to an increase in the same period of the prior year due to the impacts of the global COVID-19 pandemic.

In addition, we had an increase in deferred revenue as compared to a decrease in the same period of the prior year as well as decreases in accounts receivable and prepaid expenses as compared to increases in the same period of the the prior year, all due to the cessation of our concert events beginning in mid-March in response to the global COVID-19 pandemic .

Investing Activities

Cash used in investing activities decreased $91.0 million for the six months ended June 30, 2020 as compared to the same period of the prior year primarily due to fewer acquisitions.

Cash used in investing activities decreased $178.8 million for the nine months ended September 30, 2020 as compared to the same period of the prior year primarily due to fewer acquisitions and less cash paid for capital expenditures, intangible assets, and investments in nonconsolidated affiliates.

See “—Uses of Cash” above for further discussion.

Financing Activities

Cash provided by financing activities was $1.5 billion for the six months ended June 30, 2020 as compared to cash used in financing activities of $97.9 million in the same period of the prior year primarily due to higher net proceeds in 2020 from debt issuances.

Cash provided by financing activities was $1.4 billion for the nine months ended September 30, 2020 as compared to cash used in financing activities of $139.6 million in the same period of the prior year primarily due to higher net proceeds in 2020 from debt issuances.

See “—Sources of Cash” above for further discussion.

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Our Ticketing segment revenue is impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by our clients.

Due to the unprecedented stoppage of our concert and other events globally beginning in mid-March due to the global COVID-19 pandemic, we do not expect that any quarter in 2020 will follow our typical seasonality trend.

Due to the unprecedented stoppage of our concert and other events globally beginning in mid-March resulting from the global COVID-19 pandemic, we do not expect that any quarter in 2020 will follow our typical seasonality trend.

Cash flows from our Concerts segment typically have a slightly different seasonality as payments are often made for artist performance fees and production costs for tours in advance of the date the related event tickets go on sale.

These artist fees and production costs are expensed when the event occurs.

Once tickets for an event go on sale, we generally begin to receive

payments from ticket sales at our owned or operated venues and festivals in advance of when the event occurs.

Once tickets for an event go on sale, we generally begin to receive payments from ticket sales at our owned or operated venues and festivals in advance of when the event occurs.

We record these ticket sales as revenue when the event occurs.

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Currently, we do not have significant operations in hyper-inflationary countries.

Our foreign operations reported an operating loss of $162.8 million for the six months ended June 30, 2020.

We estimate that a 10% change in the value of the United States dollar relative to foreign currencies would change our operating loss for the six months ended June 30, 2020 by $16.3 million.

As of June 30, 2020, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar and Canadian Dollar.

Our foreign operations reported an operating loss of $274.1 million for the nine months ended September 30, 2020.

We estimate that a 10% change in the value of the United States dollar relative to foreign currencies would change our operating loss for the nine months ended September 30, 2020 by $27.4 million.

As of September 30, 2020, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar and Canadian Dollar.

This analysis does not consider the implication such currency fluctuations could have on the overall economic conditions of the United States or other foreign countries in which we operate or on the results of operations of our foreign entities.

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We also may enter into forward currency contracts to minimize the risks and/or costs associated with changes in foreign currency rates on forecasted operating income.

At June 30, 2020, we had forward currency contracts outstanding with a notional amount of $74.7 million.

At September 30, 2020, we had forward currency contracts outstanding with a notional amount of $21.3 million.

Interest Rate Risk

Our market risk is also affected by changes in interest rates.

We had $5.0 billion of total debt, excluding debt discounts and issuance costs, outstanding as of June 30, 2020, of which $4.5 billion was fixed-rate debt and $0.5 billion was floating-rate debt.

Based on the amount of our floating-rate debt as of June 30, 2020, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $1.2 million.

This potential increase or decrease is based on the simplified assumption that the level of floating-rate debt remains constant with an immediate across-the-board increase or decrease as of June 30, 2020 with no subsequent change in rates for the remainder of the period.

We had $5.0 billion of total debt, excluding debt discounts and issuance costs, outstanding as of September 30, 2020, of which $4.5 billion was fixed-rate debt and $0.5 billion was floating-rate debt.

Based on the amount of our floating-rate debt as of September 30, 2020, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $1.2 million.

This potential increase or decrease is based on the simplified assumption that the level of floating-rate debt remains constant with an immediate across-the-board increase or decrease as of September 30, 2020 with no subsequent change in rates for the remainder of the period.

In January 2020, we entered into an interest rate swap agreement that is designated as a cash flow hedge for accounting purposes to effectively convert a portion of our floating-rate debt to a fixed-rate basis.

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Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material.

reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Management believes that the accounting estimates involved in business combinations, impairment of long-lived assets and goodwill, revenue recognition, and income taxes are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

These critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions are described in Part II Financial Information — Item 7.

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The rapid and severe impacts of the global COVID-19 pandemic, and more specifically the need to support global social distancing efforts, mitigate the spread of the virus, and comply with restrictions put in place by various governmental entities, led to our decision to stop all tours and close our venues beginning in mid-March.

As such actions are having a material impact on our cash flows during the suspension of operations, we performed qualitative and sensitivity reviews in both quarters of this year to assess whether we believed these actions caused the fair value of any of our reporting units to fall below its carrying value.

As such actions are having a material impact on our cash flows during the suspension of operations, we performed qualitative and sensitivity reviews in all quarters of this year to assess whether we believed these actions caused the fair value of any of our reporting units to fall below its carrying value.

These qualitative and sensitivity reviews considered relevant events and circumstances such as recent historical financial performance, industry and market conditions, macroeconomic conditions, reporting unit-specific events, historical results of goodwill impairment testing, and the timing of the last performance of a quantitative assessment.

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Specifically, these reviews included updating recent quantitative tests for current discount rates and financial results and forecasts, performing tests of model sensitivities to changes in discount rates, revenue and terminal growth rates and market multiples, or a consideration of the impact from changes in financial forecasts, discount rates and carrying values.

As a result of these interim assessments, we concluded that, during the six months ended June 30, 2020, no conditions existed that would more likely than not reduce the fair value of any of our reporting units below its carrying amount and therefore we do not believe that our goodwill is impaired.

As a result of these interim assessments, we concluded that, during the nine months ended September 30, 2020, no conditions existed that would more likely than not reduce the fair value of any of our reporting units below its carrying amount and therefore we do not believe that our goodwill is impaired.

Our Artist Management and Artist Services reporting units continue to be more sensitive than our other reporting units.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis