What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-03-01 · 148 added, 135 removed, 410 unchanged (41% of the section changed)

7 unchanged sentences

Executive Overview

Due to the global COVID-19 pandemic, we ceased all Live Nation tours and closed all our venues beginning in mid-March 2020 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 year and had minimal ticket sales.

As a result, our overall revenue for 2020 decreased by 84%, from $11.5 billion in 2019 to $1.9 billion in 2020.

The revenue reduction was largely in our Concerts and Ticketing segments as a result of almost no shows occurring from mid-March through the end of the year 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 2020 of $1.7 billion compared to operating income of $325 million for 2019.

The impact of foreign exchange rates to both our revenue and operating income were minimal.

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.

Recent fan surveys indicate that the demand will be there when the shows return, with 95% of fans expecting to attend concerts again once government and/or health officials determine events can resume.

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

Our Concerts segment revenue for 2020 was $1.5 billion, compared to $9.4 billion for 2019, a reduction of 84%.

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

Of the 8,117 events we held this year, about 7,100 of those were in the first quarter of 2020, prior to our shutdown.

Overall, our show count went from 40,237 in 2019 down to 8,117 in 2020, a reduction of 80%.

In addition to normal show activity from January through mid-March, we were able to hold drive-in concert events as well as socially distanced shows in some markets during the pandemic.

Towards the end of the year, we saw a return to almost normal levels of activity in New Zealand which held our Rhythm and Vines festival in December with record levels of attendance.

Coinciding with the trend on show count, our total fan count for the year went from 97.7 million in 2019 down to 11.1 million in 2020, a reduction of 89%.

Concerts had an operating loss for the year 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.

Our Ticketing segment revenue for 2020 was $188 million, compared to $1.5 billion for 2019, a reduction of 88% driven by a lack of ticket sales for future events and refunds on 2020 shows that were cancelled or rescheduled.

Before refunds, our fee-bearing tickets sold for the year were 58.5 million, which compares to 219.8 million for 2019, a reduction of 73%.

A total of 27.4 million tickets were refunded in the year, equating to just slightly over $2.6 billion of gross transaction value.

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

Our Sponsorship & Advertising segment revenue for 2020 was $204 million, compared to $590 million for 2019, a reduction of 65%.

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

We continue to be 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:

In 2021, we saw a meaningful restart of our operations in the second half of the year which is reflected in our financials and key performance indicators.

After nearly a year and a half of very limited events and ticket sales, shows restarted in some key markets at scale during the third quarter.

In particular, we saw outdoor amphitheater events as well as festivals take place in the United States and United Kingdom with enthusiastic fan response.

Despite the operational challenges associated with ramping up our concerts in a compressed timeframe, increased health protocols, and a tighter labor market, we were able to hold most planned concerts, increase overall per fan profitability, and improve our operating income by over $1 billion compared to 2020.

Emerging from the pandemic, our organization has streamlined its operations, reduced costs and focused its cash management strategies for future flexibility.

Even in the face of new Covid variants and regional surges, our reopening is well underway in the United States and United Kingdom, while other parts of the world catch up as vaccination efforts gain momentum and government responses evolve.

A key leading indicator of the future health of our business is transacted ticket sales and we had a record Q4 with the largest number of tickets sold in a quarter and the highest gross ticket value, excluding refunded tickets.

Our resale business also hit an historic high for us in Q4.

Our total revenue increased by $4.4 billion for the full year, from $1.9 billion in 2020 to $6.3 billion in 2021.

All three of our segments reported revenue growth due to more events, higher ticket sales and increased sponsor fulfillment over the past twelve months.

As a result, our operating income improved by $1.2 billion, from a loss of $1.7 billion in 2020 to a loss of $418 million in 2021.

The improvement resulted from increased events, ticket sales and sponsor client activation partially offset by higher selling, general and administrative expenses as we brought employees back from furlough and began hiring new roles to execute 2021 events and prepare for 2022.

The impact of changes in foreign exchange rates did not materially impact our year-over-year variances.

Our Concerts segment revenue for the full year increased by $3.3 billion, from $1.5 billion in 2020 to $4.7 billion in 2021.

The revenue growth was a result of increased shows and fans during the year as well as higher ancillary spend per fan and pricing at our events.

The number of events for the full year was more than 17,200 compared to approximately 8,200 events in 2020.

The number of fans for the full year was 35.1 million compared to approximately 11.1 million last year.

The growth was largely in the United States and United Kingdom.

Concerts operating loss for the full year improved by $340 million, from a loss of $959 million in 2020 to $618 million in 2021.

The improvement was primarily due to more shows this year, an increase in net ancillary spend per fan at our amphitheater and festival events, and growth in pricing across all venue types.

Our amphitheater net ancillary spend per fan grew by double digits compared to 2019 as a result of higher consumption and our transition to cashless transactions.

At our major festivals that had over 100 thousand fans, we also saw growth in onsite spend with our ancillary per fan increasing by double-digits over 2019.

Compared to 2019, overall pricing on tickets also increased by double digits.

And while we have seen some adverse impacts in our operating expenses per show due to labor shortages and supply chain issues, our spend per fan metrics have outpaced the higher costs.

Our Ticketing segment revenue for the full year increased by $946 million, from $188 million in 2020 to $1.1 billion in 2021.

The improvement resulted from an increase in ticket sales, stronger pricing, and a reduction in ticket refunds this year.

Excluding refunds, we sold 153 million fee-bearing tickets this year compared to 58 million tickets last year.

The improvement was almost entirely driven by sales in the United States and the United Kingdom, largely for concert and sporting events.

Pricing on our fee-bearing tickets increased by double-digits, reflecting strong consumer demand, particularly for premium seats and VIP experiences.

Our resale business bounced back dramatically in the second half of the year and Q4 was our highest resale gross transaction value quarter ever, at over $1 billion.

Ticketing operating income for the year improved by $782 million, from a $612 million loss in 2020 to income of $170 million in 2021.

The improvement in operating results was largely driven by increased ticket sales, strong ticket pricing and higher ancillary revenue streams.

Our Sponsorship & Advertising segment revenue for the full year increased by $208 million, from $204 million in 2020 to $412 million in 2021.

The improvement was due to higher activations with our marketing partners driven by more events going on sale, venues re-opening and supplying more advertising content to our clients.

Even with a compressed sales window, we saw strong sales for many of our larger festivals.

Operating income for the year increased by $157 million, from $45 million in 2020 to $202 million in 2021.

The improvement was due to more sponsor and online advertising activations resulting from the restart of live events and rapidly increasing ticket sales, particularly in the United States.

As ticket sales and events scale up in key markets, we continue to focus on mitigating the financial impact of the pandemic.

We are balancing our ramp-up with the cost-savings initiatives we implemented across the organization and are also protecting our liquidity by 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.

The magnitude and pace of the recovery will depend on each market and their containment efforts, the nature of the events being held, ongoing efforts to develop rapid testing technologies and rollout of approved vaccines and treatments 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.

The progress and momentum over the last three quarters has made us even more optimistic about the long-term potential of our company and the unique power of live shows to unite people.

Impact of the Global COVID-19 Pandemic

The unprecedented and rapid spread of COVID-19 and the related government restrictions and social distancing measures implemented throughout the world significantly impacted our business from mid-March through the first half of this year.

Late in the second quarter, however, we began to see the positive impacts of successful vaccination rollouts in many of our key markets, mainly the United States and United Kingdom, with social distancing restrictions easing and live events resuming.

In the third quarter, we saw a meaningful restart of our operations with outdoor amphitheater events and festivals taking place in both the United States and United Kingdom.

The restart of our operations has been executed with careful consideration for the safety and health of our fans, artists and employees through a mix of masking, testing and vaccination protocols at our events, venues and offices around the world.

Operating Results

The impact of the global COVID-19 pandemic to our operating results are discussed in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 2—Impact of the Global COVID-19 Pandemic.

Cash and available liquidity

We currently have approximately $569.9 million available for future borrowings under our senior secured credit facility, net of outstanding letters of credit.

In January 2021, we issued $500 million principal amount of 3.75% senior secured notes due 2028 and in September 2021, we elected to draw down the $400 million term loan A under the amended senior secured credit facility and completed the public offering of 5,239,259 shares of common stock for $449.6 million of net proceeds.

We will continue to evaluate future financing opportunities to further expand liquidity at reasonable costs.

Additionally, our senior secured credit facility has reverted back to a net leverage covenant (as defined in the agreement) as of December 31, 2021.

We believe these additional debt and equity issuances allow us the flexibility to manage our business through the disruption that we continue to experience into 2022.

As of December 31, 2021, our total cash and cash equivalents balance was $4.9 billion, which included $1.3 billion of ticketing client cash.

We believe this cash, net of client cash, together with our available debt capacity of $569.9 million, gives us the liquidity to fund our operations during the pandemic.

Our total cash includes event-related deferred revenue for which the amount can fluctuate over the course of the year, but given the shift of shows into 2022, we expect this number to remain above seasonally normal levels throughout the first half of 2022.

Event-related deferred revenue consists of cash held by our Concerts business for future shows, with roughly one-third of the funds associated with upcoming shows in the United States and two-thirds for international shows as of December 31, 2021.

In the United States, the funds are largely associated with shows in our owned or operated venues, notably amphitheaters and theaters and clubs, as well as festivals.

Internationally, the funds held are from a combination of both shows in our owned or operated venues, as well as shows in third-party venues associated with our promoter share of tickets in allocation markets.

Cost and Cash Management Programs

In response to the impacts the COVID-19 pandemic has had, and continues to have, on our business globally, we have implemented a number of initiatives to reduce fixed costs and conserve cash while our business was shut down.

As part of these cost reduction efforts in 2020, we implemented salary reductions for most of our employees, with salaries for senior executives reduced by up to 60%.

Additional cost reduction efforts that began in 2020 included 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.

As of the end of 2021, salaries have been fully restored and furloughed employees have returned to work and, as our business scales back up, we are beginning to reinvest in our growth while continuing to closely monitor our cash flow and liquidity.

We continue to make use of government support programs globally.

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

Additionally, in the United States, we filed for payroll support under the Employee Retention Credit program established as part of the CARES Act, which ended in the third quarter of 2021.

Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

Based on these actions and assumptions regarding the impact of the global COVID-19 pandemic, we believe that we will remain in compliance with our debt covenants throughout 2022 and be able to generate sufficient liquidity and profitability to satisfy our obligations for the next twelve months, prior to giving effect to any additional financings that may occur.

Our forecasted expense management and liquidity measures may be modified as we get more clarity on the timing of events.

We cannot assure you that our assumptions used to estimate our leverage, liquidity and profitability requirements will be correct because the evolving nature of the pandemic makes its ultimate magnitude and duration unknown, and as a consequence, our ability to be predictive is uncertain.

Health and Safety and Planning and Executing a Return to Business

We are currently implementing steps for the health and safety of our employees as they return to work in our offices in the future, and for our artists and fans as they return to live events.

We are returning to work in local markets in appropriate numbers with expanded cleaning and in compliance with any social distancing or other regulations.

Similarly, we are resuming concerts when the time is right on a market by market basis.

We recognize that as concerts have started back up, the experience at our venues has changed, and are working with medical experts and public health officials to implement safety precautions and protocols necessary for fans to return to enjoy our shows.

The reopening of concerts is happening on a market by market basis, and given that we operate in 45 countries globally, the timelines will vary from now to not for several months or beyond and changing conditions may cause reopened markets to again close down in the future.

As the leading global live event and ticketing company, we believe that we are well-positioned to provide the best service to artists, teams, fans and venues as business resumes.

More than twenty years of ongoing global growth demonstrates the resilience of fan demand for the live entertainment experience.

Segment Overview

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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 consolidated financial statements.

Fee-bearing tickets sold above are net of refunds of 27.4 million tickets for the year ended December 31, 2020.

Fee-bearing tickets sold above are net of refunds of 21.0 million and 27.3 million tickets for the years ended December 31, 2021 and 2020, respectively.

Non-GAAP Measures

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Depreciation and amortization 243,439 266,255 239,682 (9)% 11%

Goodwill impairment — — 10,500 * *

Loss (gain) on disposal of operating assets (1,162) 505 (2,490) * *

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* Percentages are not meaningful.

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

Concerts revenue decreased $8.0 billion during the year ended December 31, 2020 as compared to the prior year primarily due to the unprecedented stoppage of our concert events globally during 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 $134.0 million during 2020 from acquisitions, primarily that of a merchandise business.

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

Concerts revenue increased $3.3 billion during the year ended December 31, 2021 as compared to the prior year primarily due to the resumption of shows and festivals in major markets including the United States and United Kingdom late in the second quarter of 2021 as compared to revenue generated in January through mid-March of 2020 when our business was fully open prior to the global COVID-19 pandemic.

Concerts had incremental revenue of $42.9 million during 2021 from acquisitions, primarily from OCESA.

Operating results

The decrease in Concerts operating results for the year ended December 31, 2020 was primarily driven by the reduction in revenue caused by 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.

Depreciation and amortization during 2020 includes $23.2 million in impairment charges associated with revenue-generating contracts, venue management and leaseholds and client/vendor relationships intangible assets due to the impacts from the global COVID-19 pandemic.

Depreciation and amortization in 2019 includes $21.2 million in impairment charges primarily associated with revenue-generating contract intangible assets.

Concerts operating loss decreased $340.5 million during the year ended December 31, 2021 as compared to the prior year primarily driven by the resumption of shows and festivals during 2021 discussed above.

Included in depreciation and amortization in 2020 are $23.2 million in impairment charges of intangible assets due to the impacts from the global COVID-19 pandemic.

Included in depreciation and amortization in 2019 are $21.2 million in impairment charges primarily associated with revenue-generating contract intangible assets.

Concerts operating results for the year ended December 31, 2021 include net operating losses of $19.6 million related to acquisitions and new venues.

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* Percentages are not meaningful.

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

Ticketing revenue decreased $1.4 billion during the year ended December 31, 2020 as compared to the prior year primarily due to the lack of tickets available for sale to the public driven by the unprecedented stoppage of concerts, sports and other events globally during 2020 and refunds for cancelled or rescheduled events for third-party clients due to the global COVID-19 pandemic.

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

Ticketing revenue increased $945.9 million during the year ended December 31, 2021 as compared to the prior year primarily due to an increase in North America primary and secondary ticket fees driven by more events on sale due to the resumption of concerts and sporting events in the second quarter of 2021, strong ticket pricing and lower ticket refunds in 2021.

Operating results

The decrease in Ticketing operating results for the year ended December 31, 2020 was primarily driven by the reduction in revenue caused by 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 2020, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participating in government support programs globally.

Ticketing operating income for the year ended December 31, 2021 was $170.3 million as compared to an operating loss of $612.0 million for the prior year primarily driven by the increased ticketing activity discussed above along with cost reduction measures implemented in the second quarter of 2020 continuing into 2021, including salary reductions, hiring freezes, furloughs, and reduction or elimination of other discretionary spending along with participation in government support programs globally.

Sponsorship & Advertising

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Depreciation and amortization 27,942 30,617 33,084 (9)% (7)%

Loss on sale of operating assets — — 2 * *

Operating income $ 202,177 $ 44,873 $ 330,270 * (86)%

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* Percentages are not meaningful.

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

Sponsorship & Advertising revenue decreased $386.6 million during the year ended December 31, 2020 as compared to 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.

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

Sponsorship & Advertising revenue increased $208.2 million during the year ended December 31, 2021 as compared to the prior year primarily due to increased activity in national sponsorship programs, festival sponsorships and online advertising in North America due to the resumption of concert events and festivals in the second quarter of 2021.

Operating results

The decreased operating income for the year ended December 31, 2020 was primarily driven by the reduction in revenue discussed above along with higher fulfillment costs on certain sponsorship programs.

Sponsorship & Advertising operating income increased $157.3 million during the year ended December 31, 2021 as compared to the prior year primarily driven by the higher sponsorship activity discussed above.

Consolidated Results of Operations

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Direct operating expenses 4,355,989 (26,407) 4,329,582 1,402,400 8,467,182 * * (83)%

1,402,400 13,671 1,416,071 8,467,182 7,967,932 (83)% (83)% 6%

Selling, general and administrative expenses 1,754,822 (20,327) 1,734,495 1,524,342 2,145,486 15% 14% (29)%

1,524,342 733 1,525,075 2,145,486 1,997,028 (29)% (29)% 7%

Depreciation and amortization 416,277 (6,483) 409,794 485,025 443,991 (14)% (16)% 9%

485,025 345 485,370 443,991 386,529 9% 9% 15%

Loss (gain) on disposal of operating assets (1,211) 4 (1,207) 503 (2,373) * * *

503 (10) 493 (2,373) 10,369 * * *

Corporate expenses 160,428 (21) 160,407 102,100 168,839 57% 57% (40)%

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Equity in losses (earnings) of nonconsolidated affiliates (2,520) 5,458 (5,457)

5,458 (5,457) (2,747)

Loss (gain) from sale of investments in nonconsolidated affiliates (83,578) 1,727 (1,119)

Other expense (income), net 3,692 (18,807) 3,201

(17,080) 2,082 12,163

Income (loss) before income taxes (611,267) (1,856,665) 185,104

(1,856,665) 185,104 131,105

Income tax expense (benefit) (2,481) (28,875) 66,892

(28,875) 66,892 40,765

Net income (loss) (608,786) (1,827,790) 118,212

Net income (loss) attributable to noncontrolling interests 42,118 (103,255) 48,323

(103,255) 48,323 30,091

Net income (loss) attributable to common stockholders of Live Nation $ (650,904) $ (1,724,535) $ 69,889

$ (1,724,535) $ 69,889 $ 60,249

* Percentages are not meaningful.

** See “—Non-GAAP Measures” above for definition of constant currency.

Corporate expenses decreased $66.7 million, or 40%, during the year ended December 31, 2020 as compared to 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.

Corporate expenses increased $58.3 million, or 57%, during the year ended December 31, 2021 as compared to the prior year primarily due to increased compensation expense driven by headcount growth and incentive compensation as a result of the increased operating results during 2021.

During 2020, cost reduction efforts due to the COVID-19 pandemic included salary reductions, 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 $69.3 million, or 44%, during the year ended December 31, 2020 as compared to 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.

Interest expense increased $55.6 million, or 25%, during the year ended December 31, 2021 as compared to the prior year due to additional interest costs from the issuance of our 2.0% convertible senior notes in February 2020, the issuance of our 6.5% senior secured notes in May 2020, the issuance of our 3.75% senior secured notes in January 2021 and the draw down of our term loan A under the amended senior secured credit facility.

Our debt balances, excluding unamortized debt discounts and issuance costs, were $5.8 billion and $5.0 billion as of December 31, 2021 and 2020, respectively.

For the year ended December 31, 2020, we had a net tax benefit of $28.9 million on losses before income taxes of $1.9 billion compared to a net tax expense of $66.9 million on income before income taxes of $185.1 million for 2019.

In 2020, the net income tax benefit consisted of $16.4 million related to United States federal income taxes, $12.8 million related to foreign entities partially offset by $0.3 million tax expense related to state and local income taxes.

The net decrease in tax expense of $95.8 million is due primarily to lower pre-tax income or higher pre-tax losses in taxable jurisdictions.

Loss (Gain) from sale of investments in nonconsolidated affiliates

Gain from sale of investments in nonconsolidated affiliates was $83.6 million during the year ended December 31, 2021 as compared to a loss of $1.7 million in the prior year primarily due to the sale of certain cost basis investments during 2021.

Other expense (income), net

Other expense (income), net was a net loss of $3.7 million during the year ended December 31, 2021 and includes net foreign exchange rate losses of $20.6 million offset by $15.4 million in mark to market adjustments for certain investments.

Other expense (income), net was a net income of $18.8 million during the year ended December 31, 2020 and includes net foreign exchange rate gains of $9.0 million.

The net foreign exchange rate gains and losses result primarily from revaluation of certain foreign currency denominated net assets held internationally.

For the year ended December 31, 2021, we had a net tax benefit of $2.5 million on losses before income taxes of $611.3 million compared to a net tax benefit of $28.9 million on losses before income taxes of $1.9 billion for 2020.

In 2021, the net income tax benefit consisted of $7.5 million tax expense related to United States federal income taxes, offset by $8.8 million tax benefit related to foreign entities and $1.2 million tax benefit related to state and local income taxes.

The net increase in tax expense of $26.4 million is due primarily to higher pre-tax income or lower pre-tax losses in taxable jurisdictions.

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests was a loss of $103.3 million during the year ended December 31, 2020 as compared to income of $48.3 million in the prior year primarily due to lower operating results from certain concert and festival promotion businesses driven by postponed and cancelled events during 2020 due to the global COVID-19 pandemic.

Net income (loss) attributable to noncontrolling interests was an income of $42.1 million during the year ended December 31, 2021 as compared to loss of $103.3 million in the prior year primarily due to higher operating results from certain concert and festival promotion businesses in North America during 2021 due to the resumption of events in 2021.

Liquidity and Capital Resources

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In February 2020, we issued $400 million principal amount of 2.0% convertible senior notes due 2025 and in May 2020 we issued $1.2 billion principal amount of 6.5% senior secured notes due 2027.

In January 2021, we issued $500 million principal amount of 3.75% senior secured notes due 2028.

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

As a result, we believe these amendments and additional debt and equity issuances will allow us the flexibility to manage our business through the disruption we continue to experience into 2022.

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.

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 $2.5 billion for both December 31, 2020 and 2019.

Included in the December 31, 2020 and 2019 cash and cash equivalents balances are $673.5 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 $4.9 billion at December 31, 2021 and $2.5 billion at December 31, 2020.

Included in the December 31, 2021 and 2020 cash and cash equivalents balances are $1.3 billion and $673.5 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 $836.2 million in cash and cash equivalents, excluding client cash, at December 31, 2020.

Our foreign subsidiaries held approximately $1.5 billion in cash and cash equivalents, excluding client cash, at December 31, 2021.

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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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.

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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 did not experience our typical seasonality trends in 2020.

See “—Seasonality” below.

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In January 2021, we issued $500 million principal amount of 3.75% senior secured notes due 2028.

Interest on the notes is payable semi-annually in cash in arrears on January 15 and July 15 of each year beginning on July 15, 2021, and will mature on January 15, 2028.

The proceeds were used to pay estimated fees of $8.0 million and repay $75.0 million aggregate principal amount of our senior secured term loan B facility, leaving approximately $417.0 million for general corporate purposes, including acquisitions and organic investment opportunities.

The proceeds were used to pay fees of $7.7 million and repay $75.0 million aggregate principal amount of our senior secured term loan B facility, leaving approximately $417.3 million for general corporate purposes, including acquisitions and organic investment opportunities.

In September 2021, we elected to draw down the $400 million term loan A under the amended senior secured credit facility prior to expiration of the drawdown period on October 17, 2021.

We intend to use the proceeds from the drawdown for general corporate purposes.

We also completed the public offering of 5,239,259 shares of common stock.

A portion of the gross proceeds of $455.3 million were used to pay fees of $5.7 million, leaving $449.6 million of net proceeds.

We used the net proceeds to fund the acquisition of 51% of the capital stock of OCESA and any remaining proceeds for general corporate purposes.

Amended Senior Secured Credit Facility

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Information regarding our 6.5% senior secured notes due 2027 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 6 —Long-Term Debt.

3.75% Senior Secured Notes Due 2028

Information regarding our 3.75% senior secured notes due 2028 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 6—Long-Term Debt.

4.75% Senior Notes Due 2027

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3.75% Senior Secured Notes Due 2028

Information regarding our 3.75% senior secured notes due 2028 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 16—Subsequent Events.

Information regarding our 3.75% senior secured notes due 2028 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 6—Long-Term Debt.

2.5% Convertible Senior Notes Due 2023

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Extinguishment of Debt

Information regarding extinguishment of our debt in October 2019 and March 2018 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 5—Long-Term Debt.

Information regarding extinguishment of our debt in October 2019 can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 6—Long-Term Debt.

Debt Covenants

Information regarding our debt covenants can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 6—Long-Term Debt.

When we make acquisitions, the acquired entity may have cash at the time of acquisition.

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 2021, we used $384.3 million of cash primarily for the acquisition of OCESA.

Information regarding our acquisitions can be found in Part II —Financial Information —Item 8.—Financial Statements and Supplementary Data—Note 3—Business Acquisitions.

During 2020, we used $41.1 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 $77.4 million of cash on their balance sheets, primarily related to deferred revenue for future events.

During 2019, we used $235.1 million of cash primarily for the acquisitions of venue management and concert promotion businesses located in Canada, Belgium and the United States.

As of the date of acquisition, the acquired businesses had a total of $77.4 million of cash on th eir balance sheets, primarily related to deferred revenue for future events.

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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.

Venue and ticketing operations are capital intensive businesses, requiring 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.

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Total capital expenditures $ 170,566 $ 191,556 $ 315,604

Maintenance capital expenditures for 2020 decreased from the prior year primarily due to a reduction in leasehold improvements of certain office facilities, 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 for 2021 increased from the same period of the prior year primarily due to leasehold improvements of certain venue-related projects.

Revenue generating capital expenditures for 2021 decreased from the prior year primarily due to lower spending in our amphitheater venues and a reduction in technology-related projects as part of our cash savings initiatives implemented in connection with the global COVID-19 pandemic.

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Firm Commitments

In addition to the scheduled maturities on our debt and operating lease liabilities, we have future cash obligations under various types of contracts.

We have future cash obligations for our debt obligations and operating lease liabilities.

We lease office space, certain equipment and many of the venues used in our concert operations under long-term operating leases.

Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.

Information regarding our scheduled maturities of our outstanding debt obligations (excluding unamortized debt discounts and issuance costs) and operating lease liabilities can be found in Part II—Financial Information—Item 8.—Financial Statements and Supplementary Data—Note 6—Long-Term Debt and —Note 5—Leases, respectively.

We also have minimum payments associated with non-cancelable contracts related to our operations, such as artist guarantees and client ticketing agreements.

As part of our ongoing capital projects, we will enter into construction-related commitments for future capital expenditure work.

The scheduled maturities discussed below represent contractual obligations as of December 31, 2020 and thus do not represent all expected expenditures for those periods.

The scheduled maturities of our outstanding long-term debt (excluding unamortized debt discounts and issuance costs), scheduled maturities of operating lease liabilities, minimum payments under other non-cancelable contracts, capital expenditure commitments and expected payments of contingent and deferred consideration liabilities as of December 31, 2020 are as follows:

Information regarding our minimum payments for non-cancelable contracts and capital expenditures commitments can be found in Part II—Financial Information—Item 8.—Financial Statements and Supplementary Data—Note 9—Commitments and Contingent Liabilities as of December 31, 2021 and thus do not represent all expected expenditures for those periods.

The estimated interest payments, expected payments of contingent and deferred consideration liabilities as of December 31, 2021 are as follows:

Payments Due by Period

2021 2022-2023 2024-2025 2026 and thereafter

2022 2023 2024 2025 2026 Thereafter

(in thousands)

Long-term debt obligations, including current maturities:

Term loans and revolving credit facility $ 938,125 $ 9,500 $ 19,000 $ 19,000 $ 890,625

6.5% senior secured notes due 2027 1,200,000 — — — 1,200,000

4.75% senior notes due 2027 950,000 — — — 950,000

4.875% senior notes due 2024 575,000 — — 575,000 —

5.625% senior notes due 2026 300,000 — — — 300,000

2.5% convertible senior notes due 2023 (2)

550,000 — 550,000 — —

2.0% convertible senior notes due 2025 (3)

400,000 — — 400,000 —

Other long-term debt 125,226 43,915 43,501 32,183 5,627

Estimated interest payments (1)

$ 1,142,345 $ 248,419 $ 233,015 $ 223,879 $ 185,460 $ 165,834 $ 85,738

Operating lease liabilities

2,400,679 192,413 396,427 354,870 1,456,969

Non-cancelable contracts

2,407,265 1,456,136 672,501 128,454 150,174

Capital expenditures 42,214 11,005 2,057 2,048 27,104

Contingent and deferred consideration 63,191 49,765 2,552 814 4,593 303 5,164

Uncertain income tax positions (2)

— — — — — — —

Total $ 1,205,536 $ 298,184 $ 235,567 $ 224,693 $ 190,053 $ 166,137 $ 90,902

_____________

Does not include $500 million principal amount of 3.75% senior secured notes due 2028 issued in January 2021.

On or after December 15, 2022, holders may convert their 2.5% convertible senior notes.

On or after November 15, 2024, holders may convert their 2.0% convertible senior notes.

Does not include interest on the delayed draw term loan A or revolving credit facility as the balances were zero as of December 31, 2020.

Does not include interest on the revolving credit facility as the balance was zero as of December 31, 2021.

Does not include $0.1 million of uncertain tax positions due to the unpredictable timing of the future payments.

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Operating Activities

Cash provided by operating activities decreased $1.6 billion for the year ended December 31, 2020 as compared to the prior year primarily due to lower cash-related income during 2020 resulting from the cessation of our concert events, and the related rescheduling of shows to 2021, beginning in mid-March in response to the global COVID-19 pandemic.

Cash provided by operating activities was $1.8 billion for the year ended December 31, 2021 as compared to cash used in operating activities of $1.1 billion for the prior year primarily due to increases in accounts payable, client accounts and accrued expenses resulting from the resumption of events in certain markets late in the second quarter of 2021 along with a reduction of net loss year over year partially offset by increases in accounts receivable.

Investing Activities

Cash used in investing activities decreased $466.9 million for the year ended December 31, 2020 as compared to the prior year primarily due to fewer acquisitions, less cash paid for capital expenditures and an increase in collections of notes receivable.

Cash used in investing activities increased $342.9 million for the year ended December 31, 2021 as compared to the prior year primarily due to the OCESA acquisition.

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

Financing Activities

Cash provided by financing activities increased $1.0 billion for the year ended December 31, 2020 as compared to the prior year primarily due to higher net proceeds in 2020 from debt issuances.

Cash provided by financing activities decreased $178.8 million for the year ended December 31, 2021 as compared to the prior year primarily due to higher net proceeds in 2020 from debt issuances partially offset by proceeds from the sale of common stock and lower purchases of noncontrolling interests in 2021.

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

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We estimate that a 10% change in the value of the United States dollar relative to foreign currencies would change our operating income for the year ended December 31, 2021 by $17.7 million.

As of December 31, 2020, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar and Canadian Dollar.

As of December 31, 2021, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar, Canadian Dollar and Mexican Peso.

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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If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

We currently have seven reporting units with goodwill balances:

We currently have six 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.

and Global Ticketing.

We test goodwill for impairment in any period when 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 have a material impact on our cash flows during the suspension of operations, we performed qualitative and sensitivity reviews in all three interim quarters of 2020 to assess whether we believed these actions caused the fair value of any of our reporting units to fall below its carrying value.

The result of these interim assessments was a conclusion that 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 that we did not believe that our goodwill was impaired.

We review goodwill for impairment annually, as of October 1, using a two-step process.

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Examples of such events and circumstances include 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.

We also considered changes in discount rates, market multiples, carrying value and forecast since the last quantitative test.

If any reporting units are concluded to be more likely than not impaired, or if that conclusion cannot be determined qualitatively, a second step is performed for that reporting unit.

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In both steps, discount rates, market multiples and sensitivity tests are derived and/or computed with the assistance of external valuation consultants.

In addition, we perform sensitivity analyses for all reporting units either during the first or the second step of the process to assist in the evaluation.

Generally, we test for sensitivities to discount rates, revenue and terminal growth rates, and market multiples, which are the most significant assumptions.

Generally, we test for sensitivity to changes in discount rates, revenue and terminal growth rates, and market multiples.

In developing fair values for our reporting units, we may employ a discounted cash flow or a market multiple methodology, or a combination thereof.

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A market participant acquisition premium represents the additional value a buyer would pay to obtain control of the respective reporting unit because having control would lead to higher cash flows, lower cost of capital or both.

In 2020, both in the interim qualitative reviews and as part of the October 1 annual review, market multiples were not incorporated into our assessments as our current financial metrics do not support use of the market approach as a corroborating approach.

When our business resumes and stabilizes, we will reincorporate the market approach into our fair value methodology.

In 2020 as part of our annual impairment test, four of our reporting units with goodwill were assessed under the first qualitative step.

Three of these four of the reporting units did not advance to the second step.

These reporting units had no increases in discount rate and considerable excess of fair value over their carrying value in the most recent quantitative tests.

Further review of these reporting units with sensitivity tests did not change our first step conclusions.

The North American Concerts reporting unit advanced to the second step because it was unclear whether its fair value would exceed its carrying value primarily due to the loss of revenue resulting from the current cessation of concerts and an increase in its carrying value.

The excess of fair value over carrying value for this reporting unit was approximately 35%.

Therefore, we concluded goodwill for this reporting unit was not impaired.

Sensitivity tests showed that a 150-basis point change in the discount rate, or a 66% decline in the long-term revenue growth rate, or a 13% decline in the margin was needed to change the conclusion.

The three remaining reporting units went straight to the second step as part of our policy to perform a quantitative test at least every five years to support future first step qualitative reviews.

The results of these quantitative tests continued to support a healthy amount of excess fair value over carrying value.

Further, we performed an October 1, 2020 market capitalization reconciliation at a stock price of $53.74 which yielded implied premiums of 4.0% and 6.0% for business enterprise value and equity, respectively, which suggests conservative internal forecasts versus the market.

In 2021, as part of the October 1 annual review, market multiples were not incorporated into our assessments for some reporting units where its current financial metrics do not support use of the market approach as a corroborating approach.

When these businesses stabilize, we will reincorporate the market approach into their fair value methodology.

In 2021 as part of our annual impairment test, all of our reporting units with goodwill were assessed under the initial qualitative evaluation and did not advance to the second step.

Considerations included (a) excess of fair values over carrying values in the most recent quantitative analysis performed, (b) discount rates, (c) financial results and (d) sensitivity analyses.

We also considered changes in discount rates, market multiples if applicable, carrying value and forecasts since the last time a quantitative test was performed.

Given the results of the tests performed, although we cannot predict future performance or market conditions, we do not currently believe any of our reporting units are at risk of failing the second step in the near future.

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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-K

Item 7. Management’s Discussion and Analysis