Live Nation Entertainment, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations “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 2019 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 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 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 $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 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. Twenty years of global growth demonstrates the resilience of fan demand for the live entertainment experience. 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 $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 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 31 Table of Contents America. A total of 269 thousand fans attended these shows. 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. 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 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 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 $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 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 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. We believe our aggressive cost-savings and cash management programs, combined with a strong liquidity profile, position Live Nation to manage through the global COVID-19 pandemic and its impact on live events and provides us the flexibility to scale up quickly when our shows resume. Our History We were incorporated in Delaware on August 2, 2005 in preparation for the contribution and transfer by Clear Channel Communications, Inc. of substantially all of its entertainment assets and liabilities to us. We completed the separation on December 21, 2005, and became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV.” On January 25, 2010, we merged with Ticketmaster Entertainment LLC and it became a wholly-owned subsidiary of Live Nation. Effective with the merger, Live Nation, Inc. changed its name to Live Nation Entertainment, Inc. Segment Overview Our reportable segments are Concerts, Ticketing and Sponsorship & Advertising. Concerts 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 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 32 Table of Contents 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. Concerts direct operating expenses include artist fees, event production costs, show-related marketing and advertising expenses, along with other costs. To judge the health of our Concerts segment, we primarily monitor the number of confirmed events and fan attendance in our network of owned or operated and third-party venues, talent fees, average paid attendance, market ticket pricing, advance ticket sales and the number of major artist clients under management. In addition, at our owned or operated venues and festivals, we monitor ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates. Ticketing Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a portion of the service charges as our fee. Gross transaction value (“GTV”) represents the total amount of the transaction related to a ticket sale and includes the face value of the ticket as well as the service charge. Service charges are generally based on a percentage of the face value or a fixed fee. We sell tickets through websites, mobile apps, ticket outlets and telephone call centers. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. We also offer ticket resale services, sometimes referred to as secondary ticketing, principally through our integrated inventory platform, league/team platforms and other platforms internationally. Our Ticketing segment manages our online activities including enhancements to our ticketing websites and product offerings. Through our websites, we sell tickets to our own events as well as tickets for our clients and provide event information. Revenue related to ticketing service charges is recognized when the ticket is sold for our third-party clients. For our own events, where our concert promoters control ticketing, revenue is deferred and recognized when the event occurs. Ticketing direct operating expenses include call center costs and credit card fees, along with other costs. To judge the health of our Ticketing segment, we primarily review the GTV and the number of tickets sold through our ticketing operations, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, cost of customer acquisition, the purchase conversion rate, the overall number of customers in our database, the number and percentage of tickets sold via mobile and the number of app installs. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates. Sponsorship & Advertising Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concert, festival, venue and ticketing assets, including advertising on our websites. We drive increased advertising scale to further monetize our concerts platform through rich media offerings including advertising associated with live streaming and music-related content. We work with our corporate clients to help create marketing programs that support their business goals and connect their brands directly with fans and artists. We also develop, book and produce custom events or programs for our clients’ specific brands, which are typically experienced exclusively by the clients’ consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters, as a large portion of sponsorships are associated with 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. 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. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates. 33 Table of Contents Key Operating Metrics Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (in thousands except estimated events) Concerts (1) Events: North America 226 7,249 5,009 20,137 International 141 1,879 2,571 7,450 Total estimated events 367 9,128 7,580 27,587 Fans: North America 208 22,777 5,945 47,587 International 61 8,843 4,779 25,979 Total estimated fans 269 31,620 10,724 73,566 Ticketing (2) Fee-bearing tickets 1,323 55,348 28,801 158,558 Non-fee-bearing tickets 8,392 61,664 70,031 182,529 Total estimated tickets 9,715 117,012 98,832 341,087 _________ (1) Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins, but the number of fans is based on the days the fans were present at the festival and thus can be reported across multiple quarters. Events and fan attendance metrics are estimated each quarter. (2) The fee-bearing tickets estimated above include primary and secondary tickets that are sold using our Ticketmaster systems or that we issue through affiliates. This metric includes primary tickets sold during the period regardless of event timing, except for our own events where our concert promoters control ticketing which are reported when the events occur. The non-fee-bearing tickets estimated above include primary tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, along with tickets sold on our “do it yourself” platform. 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 5.2 million and 23.3 million for the three and nine months ended September 30, 2020, respectively. 34 Table of Contents Non-GAAP Measures The following table sets forth the reconciliation of AOI to operating income (loss): Operating income (loss) Stock- based compensation expense Loss (gain) on disposal of operating assets Depreciation and amortization Amortization of non-recoupable ticketing contract advances Acquisition expenses AOI (in thousands) Three Months Ended September 30, 2020 Concerts $ (281,625) $ 39,635 $ 208 $ 65,794 $ — $ 2,603 $ (173,385) Ticketing (197,407) 5,422 (1) 42,565 9,178 (1,693) (141,936) Sponsorship & Advertising 13,755 2,533 — 6,634 — — 22,922 Other and Eliminations (4,781) — 1 2,192 (2,471) — (5,059) Corporate (34,383) 9,105 — 2,753 — 746 (21,779) Total $ (504,441) $ 56,695 $ 208 $ 119,938 $ 6,707 $ 1,656 $ (319,237) Three Months Ended September 30, 2019 Concerts $ 111,374 $ 3,195 $ (320) $ 71,247 $ — $ 9,028 $ 194,524 Ticketing 64,168 1,570 15 39,562 21,783 228 127,326 Sponsorship & Advertising 133,243 718 — 11,332 — — 145,293 Other and Eliminations (58) — — 145 (1,930) — (1,843) Corporate (48,686) 6,515 — 4,020 — (1) (38,152) Total $ 260,041 $ 11,998 $ (305) $ 126,306 $ 19,853 $ 9,255 $ 427,148 Nine Months Ended September 30, 2020 Concerts $ (722,607) $ 66,376 $ 896 $ 202,352 $ — $ (19,269) $ (472,252) Ticketing (480,460) 11,219 — 125,054 44,122 (750) (300,815) Sponsorship & Advertising 40,764 5,207 — 21,766 — — 67,737 Other and Eliminations (13,034) — 1 6,630 (5,289) — (11,692) Corporate (89,841) 24,163 — 8,983 — 2,094 (54,601) Total $ (1,265,178) $ 106,965 $ 897 $ 364,785 $ 38,833 $ (17,925) $ (771,623) Nine Months Ended September 30, 2019 Concerts $ 112,942 $ 9,826 $ (675) $ 176,827 $ — $ 33,774 $ 332,694 Ticketing 170,914 4,675 122 116,465 58,680 678 351,534 Sponsorship & Advertising 256,787 2,027 — 24,780 — — 283,594 Other and Eliminations (402) — — 404 (4,560) — (4,558) Corporate (132,477) 20,396 — 10,568 — — (101,513) Total $ 407,764 $ 36,924 $ (553) $ 329,044 $ 54,120 $ 34,452 $ 861,751 Adjusted Operating Income (Loss) AOI is a non-GAAP financial measure that we define as operating income (loss) before certain stock-based compensation expense, loss (gain) on disposal of operating assets, depreciation and amortization (including goodwill impairment), amortization of non-recoupable ticketing contract advances and acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration obligations, and acquisition-related severance and compensation) . We use AOI to evaluate the performance of our operating segments. We believe that information about AOI assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. AOI is not calculated or presented in accordance with GAAP. A limitation of the use of AOI as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI as presented herein may not be comparable to similarly titled measures of other companies. 35 Table of Contents AOI Margin AOI margin is a non-GAAP financial measure that we calculate by dividing AOI by revenue. We use AOI margin to evaluate the performance of our operating segments. We believe that information about AOI margin assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. AOI margin is not calculated or presented in accordance with GAAP. A limitation of the use of AOI margin as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI margin should be considered in addition to, and not as a substitute for, operating income (loss) margin, and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI margin as presented herein may not be comparable to similarly titled measures of other companies. Constant Currency Constant currency is a non-GAAP financial measure. We calculate currency impacts as the difference between current period activity translated using the current period’s currency exchange rates and the comparable prior period’s currency exchange rates. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. 36 Table of Contents Segment Operating Results Concerts Our Concerts segment operating results were, and discussions of significant variances are, as follows: Three Months Ended September 30, % Change Nine Months Ended September 30, % Change 2020 2019 2020 2019 (in thousands) (in thousands) Revenue $ 154,791 $ 3,173,843 (95)% $ 1,290,007 $ 7,131,491 (82)% Direct operating expenses 113,283 2,636,344 (96)% 1,046,405 5,853,380 (82)% Selling, general and administrative expenses 257,131 355,198 (28)% 762,961 989,017 (23)% Depreciation and amortization 65,794 71,247 (8)% 202,352 176,827 14% Loss (gain) on disposal of operating assets 208 (320) * 896 (675) * Operating income (loss) $ (281,625) $ 111,374 * $ (722,607) $ 112,942 * Operating margin * 3.5 % (56.0 %) 1.6 % AOI ** $ (173,385) $ 194,524 * $ (472,252) $ 332,694 * AOI margin ** * 6.1 % (36.6 %) 4.7 % _______ * Percentages are not meaningful. ** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin. Three Months Revenue 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 $26.8 million from acquisitions, primarily that of a merchandise business. Operating results 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. Nine Months Revenue 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 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. 37 Table of Contents Ticketing Our Ticketing segment operating results were, and discussions of significant variances are, as follows: Three Months Ended September 30, % Change Nine Months Ended September 30, % Change 2020 2019 2020 2019 (in thousands) (in thousands) Revenue $ (19,822) $ 388,458 * $ 177,436 $ 1,096,865 (84)% Direct operating expenses 8,503 127,123 (93)% 120,967 359,502 (66)% Selling, general and administrative expenses 126,518 157,590 (20)% 411,875 449,862 (8)% Depreciation and amortization 42,565 39,562 8% 125,054 116,465 7% Loss (gain) on disposal of operating assets (1) 15 * — 122 * Operating income (loss) $ (197,407) $ 64,168 * $ (480,460) $ 170,914 * Operating margin * 16.5 % * 15.6 % AOI ** $ (141,936) $ 127,326 * $ (300,815) $ 351,534 * AOI margin ** * 32.8 % * 32.0 % _______ * Percentages are not meaningful. ** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin. Three Months Revenue 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 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. Nine Months Revenue 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 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. 38 Table of Contents Sponsorship & Advertising Our Sponsorship & Advertising segment operating results were, and discussions of significant variances are, as follows: Three Months Ended September 30, % Change Nine Months Ended September 30, % Change 2020 2019 2020 2019 (in thousands) (in thousands) Revenue $ 47,927 $ 215,247 (78)% $ 156,560 $ 441,862 (65)% Direct operating expenses 8,647 41,617 (79)% 34,369 80,634 (57)% Selling, general and administrative expenses 18,891 29,055 (35)% 59,661 79,661 (25)% Depreciation and amortization 6,634 11,332 (41)% 21,766 24,780 (12)% Operating income (loss) $ 13,755 $ 133,243 (90)% $ 40,764 $ 256,787 (84)% Operating margin 28.7 % 61.9 % 26.0 % 58.1 % AOI ** $ 22,922 $ 145,293 (84)% $ 67,737 $ 283,594 (76)% AOI margin ** 47.8 % 67.5 % 43.3 % 64.2 % _______ ** See “—Non-GAAP Measures” above for the definition and reconciliation of AOI and AOI margin. Three Months Revenue 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 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. Nine Months Revenue 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 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. 39 Table of Contents Consolidated Results of Operations Three Months Three Months Ended September 30, % Change 2020 2019 As Reported Currency Impacts At Constant Currency** As Reported As Reported At Constant Currency** (in thousands) Revenue $ 184,018 $ (5,004) $ 179,014 $ 3,773,684 (95)% (95)% Operating expenses: Direct operating expenses 130,749 (1,411) 129,338 2,800,429 (95)% (95)% Selling, general and administrative expenses 405,934 (4,519) 401,415 542,547 (25)% (26)% Depreciation and amortization 119,938 253 120,191 126,306 (5)% (5)% Loss (gain) on disposal of operating assets 208 — 208 (305) * * Corporate expenses 31,630 (12) 31,618 44,666 (29)% (29)% Operating income (loss) (504,441) $ 685 $ (503,756) 260,041 * * Operating margin * * 6.9 % Interest expense 66,093 36,587 Interest income (2,810) (5,863) 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 Income tax expense (benefit) (16,904) 27,280 Net income (loss) (542,458) 193,972 Net income (loss) attributable to noncontrolling interests (13,556) 15,047 Net income (loss) attributable to common stockholders of Live Nation $ (528,902) $ 178,925 _______ * Percentages are not meaningful. ** See “—Non-GAAP Measures” above for the definition of constant currency. Corporate Expenses 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 $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. Net income (loss) attributable to noncontrolling interests 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. 40 Table of Contents Nine Months Nine Months Ended September 30, % Change 2020 2019 As Reported Currency Impacts At Constant Currency** As Reported As Reported At Constant Currency** (in thousands) Revenue $ 1,623,795 $ 15,391 $ 1,639,186 $ 8,658,521 (81)% (81)% Operating expenses: Direct operating expenses 1,199,126 15,298 1,214,424 6,279,447 (81)% (81)% Selling, general and administrative expenses 1,243,307 3,901 1,247,208 1,520,910 (18)% (18)% Depreciation and amortization 364,785 1,995 366,780 329,044 11% 11% Loss (gain) on disposal of operating assets 897 — 897 (553) * * Corporate expenses 80,858 3 80,861 121,909 (34)% (34)% Operating income (loss) (1,265,178) $ (5,806) $ (1,270,984) 407,764 * * Operating margin (77.9 %) (77.5 %) 4.7 % Interest expense 162,781 109,894 Interest income (9,712) (12,229) Equity in losses (earnings) of nonconsolidated affiliates 6,656 (6,291) Other expense (income), net (11,522) 1,551 Income (loss) before income taxes (1,413,381) 314,839 Income tax expense (benefit) (49,417) 59,988 Net income (loss) (1,363,964) 254,851 Net income (loss) attributable to noncontrolling interests (82,761) 25,015 Net income (loss) attributable to common stockholders of Live Nation $ (1,281,203) $ 229,836 ____________ * Percentages are not meaningful. ** See “—Non-GAAP Measures” above for the definition of constant currency. Corporate Expenses 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%. 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 $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 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. 41 Table of Contents Income tax expense (benefit) 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 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 In response to the impact that the global COVID-19 pandemic is having on our business, and the uncertainty of the duration of current conditions globally, we are taking certain actions to strengthen our liquidity position and preserve our capital resources. 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, 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 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 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 program for employers established as part of the 2020 CARES Act. Our cash is centrally managed on a worldwide basis. Our primary short-term liquidity needs are to fund general working capital requirements, capital expenditures and debt service requirements while our long-term liquidity needs are primarily related to acquisitions and debt repayment. Our primary sources of funds for our short-term liquidity needs will be cash flows from operations and borrowings under our amended senior secured credit facility, while our long-term sources of funds will be from cash flows from operations, long-term bank borrowings and other debt or equity financings. 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 $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 $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. We may from time to time enter into borrowings under our revolving credit facility. 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 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 42 Table of Contents 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. To date, we have experienced no loss or lack of access to our cash and cash equivalents; however, we can provide no assurances that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets, including those resulting from the global COVID-19 pandemic. For our Concerts segment, we often receive cash related to ticket revenue in advance of the event, which is recorded in deferred revenue until the event occurs. In the United States, this cash is largely associated with events in our owned or operated venues, notably amphitheaters, festivals, theaters and clubs. Internationally, this cash is from a combination of both events in our owned or operated venues, as well as events in third-party venues associated with our promoter’s share of tickets in allocation markets. We do not otherwise generally hold cash for events being held in third-party venues. 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 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. In certain markets, we are offering fans an incentive to receive a voucher for a future ticket purchase to one of our events in lieu of receiving a refund for a cancelled event. Where a fan has elected to receive the incentive voucher, the cash from the original ticket purchase remains in deferred revenue. When a show is rescheduled, fans have the ability to request a refund if they do not want to attend the event on the new date, although historically we have had low levels of refund requests for rescheduled events. We view our available cash as cash and cash equivalents, less ticketing-related client cash, less event-related deferred revenue, less accrued expenses due to artists and cash collected on behalf of others, plus event-related prepaid expenses. This is essentially our cash available to, among other things, repay debt balances, make acquisitions, pay artist advances and finance capital expenditures. Our intra-year cash fluctuations are impacted by the seasonality of our various businesses. Examples of seasonal effects include our Concerts segment, which reports the majority of its revenue in the second and third quarters. Cash inflows and outflows depend on the timing of event-related payments but the majority of the inflows generally occur prior to the event. 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. See “—Seasonality” below. We believe that we have sufficient financial flexibility to fund these fluctuations and to access the global capital markets on satisfactory terms and in adequate amounts, although there can be no assurance that this will be the case, and capital could be less accessible and/or more costly given current economic conditions, including those resulting from the global COVID-19 pandemic. We expect cash flows from operations and borrowings under our amended senior secured credit facility, along with other financing alternatives, to satisfy working capital requirements, capital expenditures and debt service requirements for at least the succeeding year. We may need to incur additional debt or issue equity to make other strategic acquisitions or investments. There can be no assurance that such financing will be available to us on acceptable terms or at all. We may make significant acquisitions in the near term, subject to limitations imposed by our financing agreements and market conditions. The lenders under our revolving loans and counterparty to our interest rate hedge agreement consists of banks and other third-party financial institutions. While we currently have no indications or expectations that such lenders will be unable to fund their commitments as required, we can provide no assurances that future funding availability will not be impacted by adverse conditions in the financial markets, including those resulting from the global COVID-19 pandemic. Should an individual lender default on its obligations, the remaining lenders would not be required to fund the shortfall, resulting in a reduction in the total amount available to us for future borrowings, but would remain obligated to fund their own commitments. Should the counterparty to our interest rate hedge agreement default on its obligation, we could experience higher interest rate volatility during the period of any such default. 43 Table of Contents Sources of Cash 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 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. In addition, subject to certain conditions, we have the right to increase such facilities by an amount equal to the sum of (x) $425 million during the Restricted Period and $855 million after the Restricted Period, (y) the aggregate principal amount of voluntary prepayments of the delayed draw term loan A and term loan B and permanent reductions of the revolving credit facility commitments, in each case, other than from proceeds of long-term indebtedness, and (z) except during the Restricted Period, additional amounts so long as the senior secured leverage ratio calculated on a pro-forma basis (as defined in the agreement) is no greater than 3.75x. The combined revolving credit facilities provide for borrowings up to $630 million with sublimits of up to (i) $150 million for the issuance of letters of credit, (ii) $50 million for swingline loans, (iii) $300 million for borrowings in Dollars, Euros or British Pounds and (iv) $100 million for borrowings in those or one or more other approved currencies. The amended senior secured credit facility is secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions. The interest rates per annum applicable to revolving credit facility loans and the delayed draw term loan A under the amended senior secured credit facility are, at our option, equal to either Eurodollar plus 2.25% or a base rate plus 1.25%. The interest rates per annum applicable to the term loan B are, at our option, equal to either Eurodollar plus 1.75% or a base rate plus 0.75%. The interest rates per annum applicable to the incremental revolving credit facility are, at our option, equal to either Eurodollar plus 2.5% or a base rate plus 1.5%. We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility and delayed draw term loan A, 1.75% per year on the undrawn portion available under the incremental revolving credit facility and variable fees on outstanding letters of credit. For the delayed draw term loan A, we are required to make quarterly payments at a rate ranging from 0.625% of the original principal amount during the first three years to 1.25% during the last two years, with the balance due at maturity in October 2024. For the term loan B, we are required to make quarterly payments of $2.4 million with the balance due at maturity in October 2026. Both the existing and incremental revolving credit facilities mature in October 2024. 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 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. 44 Table of Contents 6.5% Senior Secured Notes Due 2027 In May 2020, we issued $1.2 billion principal amount of 6.5% senior secured notes due 2027. Interest on the notes is payable semi-annually in cash in arrears on May 15 and November 15 of each year beginning on November 15, 2020, and will mature on May 15, 2027. We may redeem some or all of the notes, at any time prior to May 15, 2023, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a “make-whole” premium. We may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to May 15, 2023, at a price equal to 106.5% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after May 15, 2023 we may redeem some or all of the notes at any time at redemption prices starting at 104.875% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control. The notes are secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions. 2.0% Convertible Senior Notes Due 2025 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, at a rate of 2.0% per annum. The notes will mature on February 15, 2025. The notes will be convertible, under certain circumstances, until November 15, 2024, and on or after such date without condition, at an initial conversion rate of 9.4469 shares of our common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 50.0% conversion premium based on the last reported sale price for our common stock of $70.57 on January 29, 2020 prior to issuing the notes. Upon conversion, the notes may be settled in shares of common stock or, at our election, cash or a combination of cash and shares of common stock. Assuming we fully settled the notes in shares, the maximum number of shares that could be issued to satisfy the conversion is currently 3.8 million. We may redeem for cash all or a portion of the notes, at our option, on or after February 21, 2023 and before the 41st scheduled trading day before the maturity date, if the sales price of our common stock reaches specified targets as defined in the indenture. The redemption price will equal 100% of the principal amount of the notes plus accrued interest, if any. If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the 2.0% convertible senior notes due 2025 may require us to purchase for cash all or a portion of their notes, subject to specified exceptions, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any. Debt Covenants Our amended senior secured credit facility contains a number of restrictions that, among other things, (i) require us to satisfy a liquidity covenant until the earlier of (a) December 31, 2021 and (b) at our election, any fiscal quarter ending prior to December 31, 2021 so long as such election is made during the last month of such fiscal quarter or within 30 days following the end of such fiscal quarter (such time, the “Liquidity Covenant End Date”) and a consolidated net leverage ratio covenant after such time and (ii) restrict our and our subsidiaries’ ability to incur additional debt, make certain investments and acquisitions, repurchase our stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback transactions, transfer and sell material assets, merge or consolidate, and pay dividends and make distributions (with the exception of subsidiary dividends or distributions to the parent company or other subsidiaries on at least a pro-rata basis with any noncontrolling interest partners). Certain of these restrictions are further limited temporarily by the July 2020 amendment. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the credit facility becoming immediately due and payable. The amended senior secured credit facility agreement has one covenant, measured quarterly, that relates to net leverage. The July 2020 amendment substitutes the consolidated net leverage ratio covenant with a liquidity covenant (as defined in the agreement) that requires our consolidated liquidity be at least $500 million until the Liquidity Covenant End Date. For fiscal quarters after resumption of the consolidated net leverage covenant, we will be required to maintain a ratio of consolidated total net debt to consolidated EBITDA (both as defined in the amended credit agreement) for the trailing four consecutive quarters of 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, except that calculations of consolidated EBITDA (as defined in the agreement) for the first three fiscal quarters after resumption of the covenant will be substituted with an annualized consolidated EBITDA (as defined in the agreement). 45 Table of Contents The indentures governing our 6.5% senior secured notes, 4.75% senior notes, 4.875% senior notes and 5.625% senior notes contain covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to incur certain additional indebtedness and issue preferred stock, make certain distributions, investments and other restricted payments, sell certain assets, agree to any restrictions on the ability of restricted subsidiaries to make payments to us, merge, consolidate or sell all of our assets, create certain liens, and engage in transactions with affiliates on terms that are not on an arms-length basis. Certain covenants, including those pertaining to incurrence of indebtedness, restricted payments, asset sales, mergers, and transactions with affiliates will be suspended during any period in which the notes are rated investment grade by both rating agencies and no default or event of default under the indenture has occurred and is continuing. All of these notes contain two incurrence-based financial covenants, as defined, requiring a minimum fixed charge coverage ratio of 2.0x and a maximum secured indebtedness leverage ratio of 3.5x. Some of our other subsidiary indebtedness includes restrictions on entering into various transactions, such as acquisitions and disposals, and prohibits payment of ordinary dividends. 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 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. Uses of Cash Acquisitions When we make acquisitions, the acquired entity may have cash on its balance sheet at the time of acquisition. All amounts related to the use of cash for acquisitions discussed in this section are presented net of any cash acquired. 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 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 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 Venue and ticketing operations are capital intensive businesses, requiring continual investment in our existing venues and ticketing systems in order to address fan and artist expectations, technological industry advances and various federal, state and/or local regulations. We categorize capital outlays between maintenance capital expenditures and revenue generating capital expenditures. Maintenance capital expenditures are associated with the renewal and improvement of existing venues and technology systems, web development and administrative offices. Revenue generating capital expenditures generally relate to the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements. Revenue generating capital expenditures can also include smaller projects whose purpose is to increase revenue and/or improve operating income. Capital expenditures typically increase during periods when our venues are not in operation since that is the time that such improvements can be completed. 46 Table of Contents 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: Nine Months Ended September 30, 2020 2019 (in thousands) Maintenance capital expenditures $ 55,999 $ 105,431 Revenue generating capital expenditures 106,784 119,725 Total capital expenditures $ 162,783 $ 225,156 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. Cash Flows Nine Months Ended September 30, 2020 2019 (in thousands) Cash provided by (used in): Operating activities $ (956,903) $ 32,922 Investing activities $ (224,532) $ (403,357) Financing activities $ 1,361,636 $ (139,610) Operating Activities 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 $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 $1.4 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. . Seasonality Our Concerts and Sponsorship & Advertising segments typically experience higher operating income in the second and third quarters as our outdoor venues and festivals are primarily used in or occur from May through October. In addition, the timing of when tickets are sold and the tours of top-grossing acts can impact comparability of quarterly results year-over-year, although annual results may not be impacted. 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 resulting from the global COVID-19 pandemic, we do not expect that any quarter in 2020 will follow our typical seasonality trend. 47 Table of Contents 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. We record these ticket sales as revenue when the event occurs. Market Risk We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates and interest rates. Foreign Currency Risk We have operations in countries throughout the world. The financial results of our foreign operations are measured in their local currencies. Our foreign subsidiaries also carry certain net assets or liabilities that are denominated in a currency other than that subsidiary’s functional currency. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. Currently, we do not have significant operations in hyper-inflationary countries. 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. In addition, the reported carrying value of our assets and liabilities, including the total cash and cash equivalents held by our foreign operations, will also be affected by changes in foreign currency exchange rates. We primarily use forward currency contracts, in addition to options, to reduce our exposure to foreign currency risk associated with short-term artist fee commitments. 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 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 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. The swap agreement expires in October 2026, has a notional amount of $500.0 million and ensures that a portion of our floating-rate debt does not exceed 3.397%. Accounting Pronouncements Information regarding recently issued and adopted accounting pronouncements can be found in Item 1.—Financial Statements—Note 1—Basis of Presentation and Other Information. 48 Table of Contents Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenue and expenses that are not readily apparent from other sources. 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. 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2019 Annual Report on Form 10-K filed with the SEC on February 27, 2020. Impacts to our critical accounting policies and estimates are discussed below and in Part I—Financial Information—Item 1. Financial Statements—Note 3—Long-Lived Assets. Goodwill We currently have seven reporting units with goodwill balances: International Concerts, North America Concerts, Artist Management and Artist Services (non-management) within the Concerts segment; Sponsorship & Advertising; and International Ticketing and North America Ticketing within the Ticketing segment. We review goodwill for impairment annually, as of October 1, using a two-step process. As such, we completed our annual review in the fourth quarter of 2019 and, as reported in our December 31, 2019 Form 10-K, no impairments were recorded as the fair value of each reporting unit was determined to be in excess of its carrying value for all reporting units. We also test goodwill for impairment in other periods if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount or when we change our reporting units. 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 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. Inherent in such assessments are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market influences and valuations, and assumptions about our near-term and strategic plans with regard to our operations. This included our expectations of the timing for resuming operations, including the differences in that timing worldwide and the rescheduling efforts for our events, as well as our current aggressive cost-savings and cash management programs. Due to the uncertainties associated with such estimates, actual results could differ from such estimates. 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 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. We are unable to predict how long the impacts from the global COVID-19 pandemic will impact our operations or what additional restrictions may be imposed by governments. Significant variations from current expectations could impact future assessments. 49 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk Required information is within Item 2.—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk.