What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 169 added, 144 removed, 284 unchanged (52% of the section changed)

15 unchanged sentences

Executive Overview

The second quarter of 2022 saw a continuation of our record start to the year from the first quarter.

Fan demand strengthened in the second quarter versus the first quarter of 2022, as Canada and many of our major markets in mainland Europe re-opened, which led to a record second quarter for the Company, reinforcing the health of all three of our segments.

Even with inflationary pressures, supply chain delays, and the ongoing conflict in Ukraine, the supply and demand dynamic with artists and fans continues to strengthen.

This was our highest quarterly AOI ever, fueled by more fans attending our shows, selling more tickets on the Ticketmaster platform, and collaborating with world class sponsorship partners.

The second quarter of 2022 was also our highest quarter ever for both transacted and reported GTV and tickets, signaling the power of our flywheel to deliver results not just through the remainder of this year, but also heading into 2023.

Except for Asia-Pacific, all of our markets and venues were fully open in the second quarter of 2022 for the first time in over two years.

While there have been lingering impacts due to cases with tour crew members, these instances have been limited and not material to our operations.

As we have since the beginning of the COVID-19 pandemic, we will continue to adhere to local health authorities and monitor progress across all our divisions and markets.

For the quarter, consolidated revenue increased by $3.9 billion, from $576 million in 2021 to $4.4 billion this year.

The increase was $4.0 billion without the impact of changes in foreign exchange rates.

All three of our segments had revenue growth in the quarter with the largest increase coming from our Concerts segment.

We had consolidated operating income of $319 million in the second quarter of 2022, compared to an operating loss of $127 million in the second quarter of 2021, an improvement of $446 million, resulting from fans returning to our shows at levels unseen since prior to the pandemic.

Consolidated AOI for the second quarter increased by $470 million, from $10 million in 2021 to $480 million this year.

The increase was $493 million without the impact of changes in foreign exchange rates.

With the United States dollar notably strengthening over the past three months, it has impacted both our revenues and adjusted operating income from international operations.

The third quarter of 2022 continued our record year performance.

Fan demand showed no signs of weakening, as almost all our major markets played to our highest quarterly fan count and ticket sales, leading to a milestone third quarter for the Company, reinforcing the health of all three of our segments and live entertainment.

Even with inflationary pressures and other macroeconomic headwinds, the supply and demand dynamic with artists and fans continues to be strong.

This was our second consecutive record quarter for AOI fueled by more fans attending our shows, selling more tickets on the Ticketmaster platform, and collaborating with world class sponsorship partners.

Our show count, ticket sales, and sponsor contract pacing this year signals the power of our flywheel to deliver results not just through the remainder of this year, but also heading into 2023.

Almost all of our markets and venues were fully open in the third quarter of 2022 and we saw the continued easing of restrictions in our Asia Pacific markets and expect those territories to have a full touring schedule heading into 2023.

There were limited instances of tours being interrupted or rescheduled in the third quarter due to COVID-19.

We have seen our show cancellation rate return to near historical levels and our attendance rates have also bounced back to pre-pandemic levels, returning to more traditional attendance to tickets sold ratios.

For the three months ended September 30, 2022, consolidated revenue increased by $3.5 billion, from $2.7 billion in 2021 to $6.2 billion this year.

The increase as compared to the same period of the prior year was $3.7 billion without the impact of changes in foreign exchange rates.

All three of our segments had revenue growth in the quarter with the largest increase coming from our Concerts segment as discussed below.

We had consolidated operating income of $506 million in the third quarter of 2022, compared to $137 million in the third quarter of 2021, an improvement of $369 million, resulting from fans returning to our shows at levels far exceeding one year ago when show activity was largely limited to the United States.

Consolidated AOI for the third quarter increased by $315 million, from $306 million in 2021 to $621 million this year.

The increase as compared to the same period of the prior year was $339 million without the impact of changes in foreign exchange rates.

With the United States dollar notably strengthening over the past six months, it has adversely impacted both our revenues and adjusted operating income from international operations.

We expect this trend to continue through the remainder of the year.

For the first six months of 2022, our consolidated revenue grew $5.4 billion, from $867 million in 2021 to $6.2 billion this year.

The increase was $5.6 billion without the impact of changes in foreign currency exchange rates.

We had consolidated operating income of $346 million for the first six months of 2022, compared to an operating loss of $430 million for the first six months of 2021, an improvement of $776 million, resulting from the re-opening of all our major markets this year.

Consolidated AOI for the first six month increased by $831 million, from a loss of $142 million in 2021 to $689 million this year.

The increase was $854 million without the impact of changes in foreign exchange rates.

For the first nine months of 2022, our consolidated revenue grew $8.8 billion, from $3.6 billion in 2021 to $12.4 billion this year.

The increase as compared to the same period of the prior year was $9.3 billion without the impact of changes in foreign currency exchange rates.

We had consolidated operating income of $852 million for the first nine months of 2022, compared to an operating loss of $293 million for the first nine months of 2021, an improvement of $1.1 billion, resulting from the re-opening of all our major markets this year.

Consolidated AOI for the first nine months increased by $1.1 billion, from $164 million in 2021 to $1.3 billion this year.

The increase as compared to the same period of the prior year was $1.2 billion without the impact of changes in foreign exchange rates.

Having provided the foreign currency exchange impacts for the organization overall and in light of their relative materiality, all of the segment financial comments to follow are based on reported foreign currency exchange rates.

Our Concerts segment revenue for the quarter grew by $3.3 billion, from $287 million in the second quarter of 2021 to $3.6 billion in the second quarter of 2022.

Our Concerts segment revenue grew by $3.1 billion, from $2.2 billion in the third quarter of 2021 to $5.3 billion in the third quarter of 2022.

The revenue growth was a result of more shows and fans coming back to venues to enjoy their favorite artists.

The number of events for the quarter was approximately 12,500 compared to approximately 1,720 in the second quarter of 2021.

The number of events for the quarter was approximately 11,200 compared to 5,579 in the third quarter of 2021.

The number of fans for the quarter was approximately 44.3 million compared to approximately 16.9 million last year.

This was our highest fan count for a quarter ever, powered by growth across our major divisions as well as the addition of the OCESA business in Mexico.

In particular, stadium fan count doubled in North America compared to the second quarter of 2019 while it increased by nearly 50% in Europe.

Some of the top acts in the quarter included Coldplay, Harry Styles and Dua Lipa.

EDC Vegas, Bonnaroo and Governors Ball played to an aggregate three quarters of a million fans in the United States while Download, Isle of Wight and Graspop got the European festival season off to a stellar start.

Concerts AOI for the quarter increased by $207 million, from a loss of $84 million in 2021 to an income of $123 million in 2022.

For the first six months of 2022, Concerts revenue grew $4.3 billion, from $526 million in 2021 to $4.8 billion in 2022.

Concerts AOI for the first six months increased by $232 million, from a loss of $159 million in 2021 to an income of $74 million in 2022.

Along with the increased number of fans, we are seeing very strong onsite spend across all of our venue types.

Since 2019, our last full year of operations prior to the global COVID-19 pandemic, per fan spend has increased by $9 at our owned and operated amphitheaters, representing strong double-digit percentage growth.

In our Theaters and Clubs across the United States and the United Kingdom, we are also seeing double-digit percentage growth.

Lastly, at our festivals, we have also seen growth in onsite spend, with concessions, camping, and, in particular, VIP sales up substantially at our marquee events.

From what we have seen so far this year, the increases to ancillary spend per fan, along with ticket price increases for those seats highest in demand, are outpacing higher labor and materials costs at our venues and festivals.

Our Ticketing segment revenue for the quarter grew by $331 million, from $244 million in the second quarter of 2021 to $575 million in the second quarter of 2022.

Ticketing AOI for the quarter increased by $131 million, from $99 million in 2021 to $231 million in 2022.

The improvement resulted from an increase in ticket sales, upward pricing momentum due to higher fan demand, and higher ancillary revenue streams.

Our fee-bearing ticket sales for the quarter were 72 million, 46 million higher than in the second quarter of last year.

This was a record quarter for reported ticket sales, exceeding our last record set in the fourth quarter of 2018 by 9 million tickets or 15%.

The increase was largely driven by sales in the United States, the United Kingdom, our mainland European markets, and the addition of OCESA.

Our resale business continued to excel, with nearly a billion dollars in GTV for the second quarter of 2022, more than doubling resale GTV in the second quarter of 2019.

It was our second highest resale quarter ever, powered by both Concerts and all the major sporting leagues.

For the first six months of 2022, our Ticketing revenue grew by $783 million, from $272 million in 2021 to $1.1 billion in 2022.

Ticketing AOI for the first six month increased by $400 million, from $37 million in 2021 to $437 million in 2022.

Through the end of June, our fee-bearing ticket sales are 124 million tickets, 91 million ahead of 2021 and, notably, 20 million ahead of 2019 when all markets were fully open.

Resale GTV through the end of June 2022 was over $1.8 billion which is 90% of our full-year resale GTV in 2019.

Overall pricing on our fee-bearing tickets for the first half of the year is up more than 15% compared to 2019.

Consumer demand for premium seats and VIP experiences has continued, with our Ticketmaster dynamic price sales and GTV growing by 2.5 times the volume in 2019.

Lastly, we have signed 13 million net new tickets so far this year, which gives us confidence that the Ticketmaster features and functionality will continue to fuel growth going forward.

Our Sponsorship & Advertising segment revenue for the quarter grew by $219 million, from $45 million in the second quarter of 2021 to $264 million in the second quarter of 2022.

The improvement was due to additional revenues from purchase path integration with various new partners, the restart of a full festival season and the addition of the Mexico market to our portfolio.

Our outdoor venue types had double-digit attendance growth this quarter compared to the third quarter of 2019.

In particular, stadium fan count more than tripled to nearly 9 million fans globally.

Some of the top acts in the quarter included Coldplay, The Weeknd, Bad Bunny and Red Hot Chili Peppers.

Lollapalooza in the United States, Reading in the United Kingdom, Rock Werchter in Belgium and Rock in Rio Brazil played to an aggregate of nearly two million fans, reaching passionate fans on a global scale.

Concerts AOI for the quarter increased by $221 million, from $60 million in 2021 to $281 million in 2022.

For the first nine months of 2022, Concerts revenue grew $7.4 billion, from $2.7 billion in 2021 to $10.1 billion in 2022.

Concerts AOI for the first nine months increased by $454 million, from a loss of $99 million in 2021 to an income of $355 million in 2022.

Along with the increased number of fans, we are seeing very strong APF across all of our venue types.

Since 2019, our last full year of operations prior to the global COVID-19 pandemic, APF has increased by nearly 30% at our owned and operated amphitheaters, driven by higher food and beverage spending and the shift to cashless transactions.

In our Theaters and Clubs across the United States and the United Kingdom, we are also seeing double-digit percentage growth in APF.

Lastly, at our festivals, we have also seen growth in APF, with concessions, camping, and, in particular, VIP sales up substantially at our marquee events.

The increases to APF, along with ticket price increases for those seats highest in demand, have outpaced higher labor and materials costs at our venues and festivals this year.

Our Ticketing segment revenue grew by $157 million, from $374 million in the third quarter of 2021 to $532 million in the third quarter of 2022.

Ticketing AOI for the quarter decreased slightly by $9 million, from $172 million in 2021 to $163 million in 2022.

Along with an increase in ticket sales and upward pricing momentum due to higher fan demand, direct costs rose to support higher operations and enterprise growth.

Our fee-bearing ticket sales for the quarter were 73 million, 30 million higher than in the third quarter of last year.

This was a record quarter for reported ticket sales, exceeding our last record set just last quarter by over 1 million tickets.

Our resale business continued to grow, with over $1.1 billion dollars in GTV for the third quarter of 2022, more than doubling resale GTV in the third quarter of 2019.

It was our highest resale quarter ever, powered by both Concerts and all the major sporting leagues.

For the first nine months of 2022, our Ticketing revenue grew by $941 million, from $647 million in 2021 to $1.6 billion in 2022.

Ticketing AOI for the first nine months increased by $392 million, from $208 million in 2021 to $600 million in 2022.

Through the end of September, our fee-bearing ticket sales are 197 million tickets, 121 million ahead of 2021 and, notably, 38 million ahead of 2019 when all markets were fully open.

Resale GTV through the end of September 2022 was nearly $3.0 billion which is almost 150% of our full-year resale GTV in 2019.

Overall pricing on our fee-bearing tickets for the first nine months of the year is up 20% compared to 2019 as consumer demand for premium seats and VIP experiences has continued.

Lastly, we have signed nearly 19 million net new tickets so far this year, which gives us confidence that the Ticketmaster features and functionality will continue to fuel growth going forward.

Our Sponsorship & Advertising segment revenue grew by $169 million, from $174 million in the third quarter of 2021 to $343 million in the third quarter of 2022.

The improvement was due to additional revenues from purchase path integration with various new partners, our biggest ever festival season and the addition of the Mexico market to our portfolio.

Sponsorship & Advertising AOI for the quarter increased by $115 million, from $111 million in 2021 to $226 million in 2022.

For the first six months of 2022, our Sponsorship & Advertising revenue grew $312 million, from $67 million in 2021 to $379 million in 2022.

Sponsorship & Advertising AOI for the first six month increased by $231 million, from $17 million in 2021 to $248 million in 2022.

As ticket sales and events have scaled up in key markets, we have balanced our ramp-up with the cost-savings initiatives we implemented across the organization during the COVID-19 pandemic 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.

For the first nine months of 2022, our Sponsorship & Advertising revenue grew $481 million, from $242 million in 2021 to $723 million in 2022 for the same reasons as for the three months ended September 30, 2022.

Sponsorship & Advertising AOI for the first nine months increased by $346 million, from $128 million in 2021 to $474 million in 2022.

We are optimistic about the long-term potential of our Company and are focused on the key elements of our business model:

expanding our concerts platform and improving the on-site experience for our fans,

driving conversion of ticket sales through development of innovative products to sell more tickets, and developing unique marketing and content programs for top brands.

expanding our concerts platform and improving the on-site experience for our fans, driving conversion of ticket sales

through development of innovative products to sell more tickets, and developing unique marketing and content programs for top brands.

Consolidated Results of Operations

Three Months Ended June 30, % Change

Three Months Ended September 30, % Change

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

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Depreciation and amortization 102,093 3,249 105,342 101,235 1% 4%

Loss (gain) on disposal of operating assets 1,065 2 1,067 (28) * *

Gain on disposal of operating assets (35,285) 8 (35,277) (1,148) * *

Corporate expenses 66,720 31 66,751 44,649 49% 50%

Operating income (loss) 318,699 $ 19,963 $ 338,662 (127,285) * *

Operating income 506,249 $ 18,189 $ 524,438 137,145 * *

Operating margin 8.2% 8.2% 5.1%

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Equity in losses (earnings) of nonconsolidated affiliates 14,283 (7,025)

Loss (gain) from sale of investments in nonconsolidated affiliates (580) 993

Gain from sale of investments in nonconsolidated affiliates — (30,633)

Other expense, net 7,960 12,441

Income (loss) before income taxes 260,372 (208,175)

Income before income taxes 439,301 93,288

Income tax expense 41,898 6,421

Net income (loss) 228,377 (210,460)

Net income (loss) attributable to noncontrolling interests 40,577 (14,795)

Net income (loss) attributable to common stockholders of Live Nation $ 187,800 $ (195,665)

Net income 397,403 86,867

Net income attributable to noncontrolling interests 36,001 39,989

Net income attributable to common stockholders of Live Nation $ 361,402 $ 46,878

* Percentages are not meaningful.

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We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.

Revenue increased $3.9 billion during the three months ended June 30, 2022 as compared to the same period of the prior year due to increased revenue in our Concerts segment of $3.3 billion, Ticketing segment of $331.3 million and Sponsorship & Advertising of $219.2 million as further discussed within each segment’s operating results.

Revenue increased $3.5 billion during the three months ended September 30, 2022 as compared to the same period of the prior year due to increased revenue in our Concerts segment of $3.1 billion, Ticketing segment of $157.3 million and Sponsorship & Advertising of $168.6 million as further discussed within each segment’s operating results.

Gain on disposal of operating assets

Gain on disposal of operating assets increased $34.1 million during the three months ended September 30, 2022 as compared to the same period of the prior year primarily driven by sales of artist catalog rights in 2022.

Corporate expenses

Corporate expenses increased $31.6 million during the three months ended June 30, 2022 as compared to the same period of 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 2022.

Operating income (loss)

Operating income during the three months ended June 30, 2022 was $318.7 million as compared to an operating loss of $127.3 million for the same period of the prior year primarily driven by increased operating income in our Concerts segment of $184.1 million, Ticketing segment of $135.3 million and Sponsorship & Advertising of $163.6 million as further discussed within each segment’s operating results partially offset by higher Corporate expenses as discussed above.

Net income (loss) attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $40.6 million during the three months ended June 30, 2022 as compared to a net loss of $14.8 million for the same period of the prior year primarily due to higher operating results from certain concert and festival promotion businesses in North America during the second quarter of 2022 due to the resumption of events in the third quarter of 2021.

Corporate expenses increased $22.1 million during the three months ended September 30, 2022 as compared to the same period of the prior year primarily due to increased compensation expense driven by headcount growth and incentive compensation as a result of the increased operating results in 2022.

Operating income

Operating income increased $369.1 million during the three months ended September 30, 2022 as compared to the same period of the prior year primarily driven by increased operating income in our Concerts segment of $276.1 million, Ticketing segment of $2.1 million and Sponsorship & Advertising of $114.3 million as further discussed within each segment’s operating results partially offset by higher Corporate expenses as discussed above.

Interest income

Interest income increased $24.5 million during the three months ended September 30, 2022 as compared to the same period of the prior year primarily attributed to higher rate of return on our cash and cash equivalents in 2022.

Gain from sale of investments in nonconsolidated affiliates

Gain from sale of investments in nonconsolidated affiliates during the three months ended September 30, 2021 was $30.6 million due to the sale of certain investments in 2021 of which there were none in the current year.

Consolidated Results of Operations

Six Months Ended June 30, % Change

Nine Months Ended September 30, % Change

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

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Depreciation and amortization 318,489 6,482 324,971 313,758 2% 4%

Loss on disposal of operating assets 2,730 — 2,730 110 * *

Gain on disposal of operating assets (32,555) 8 (32,547) (1,038) * *

Corporate expenses 158,377 71 158,448 100,195 58% 58%

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Net income (loss) 576,824 (446,315)

Net income (loss) attributable to noncontrolling interests 41,803 (30,324)

Net income attributable to noncontrolling interests 77,804 9,665

Net income (loss) attributable to common stockholders of Live Nation $ 499,020 $ (455,980)

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We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.

Revenue increased $5.4 billion during the six months ended June 30, 2022 as compared to the same period of the prior year driven by increased revenue in our Concerts segment of $4.3 billion, Ticketing segment of $783.4 million and Sponsorship & Advertising of $312.3 million as further discussed within each segment’s operating results.

Revenue increased $8.8 billion during the nine months ended September 30, 2022 as compared to the same period of the prior year driven by increased revenue in our Concerts segment of $7.4 billion, Ticketing segment of $940.7 million and Sponsorship & Advertising of $480.8 million as further discussed within each segment’s operating results.

Gain on disposal of operating assets

Gain on disposal of operating assets increased $31.5 million during the nine months ended September 30, 2022 as compared to the same period of the prior year primarily driven by sales of artist catalog rights in 2022.

Corporate expenses

Corporate expenses increased $36.1 million during the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to increased compensation expense driven by headcount growth and incentive compensation as a result of the increased operating results 2022.

Corporate expenses increased $58.2 million during the nine months ended September 30, 2022 as compared to the same period of the prior year primarily due to increased compensation expense driven by headcount growth and incentive compensation as a result of the increased operating results in 2022.

Operating income (loss)

Operating income during the six months ended June 30, 2022 was $345.8 million as compared to an operating loss of $430.5 million for the same period of the prior year primarily driven by increased operating income in our Concerts segment of $179.9 million, Ticketing segment of $410.7 million and Sponsorship & Advertising of $229.0 million as further discussed within each segment’s operating results partially offset by higher Corporate expenses as discussed above.

Operating income during the nine months ended September 30, 2022 was $852.0 million as compared to an operating loss of $293.3 million for the same period of the prior year primarily driven by increased operating income in our Concerts segment of $456.0 million, Ticketing segment of $412.8 million and Sponsorship & Advertising of $343.3 million as further discussed within each segment’s operating results partially offset by higher Corporate expenses as discussed above.

Interest income

Interest income increased $42.6 million during the nine months ended September 30, 2022 as compared to the same period of the prior year primarily attributed to higher rate of return on our cash and cash equivalents in 2022.

Gain from sale of investments in nonconsolidated affiliates

Gain from sale of investments in nonconsolidated affiliates during the six months ended June 30, 2022 was $0.4 million as compared to a gain of $52.9 million during the same period of the prior year primarily due to the sale of certain cost basis investments during the first six months of 2021.

Gain from sale of investments in nonconsolidated affiliates during the nine months ended September 30, 2022 was $0.4 million as compared to $83.6 million during the same period of the prior year primarily due to the sale of certain investments during the first nine months of 2021.

Income tax expense

For the six months ended June 30, 2022, we had a net tax expense of $43.7 million on income before income taxes of $223.1 million compared to a net tax expense of $8.7 million on a loss before income taxes of $524.5 million for the six months ended June 30, 2021.

For the six months ended June 30, 2022, the income tax expense consisted of $37.9 million related to foreign entities, $3.7 million related to United States federal taxes, and $2.1 million related to state and local income taxes.

For the nine months ended September 30, 2022, we had a net tax expense of $85.6 million on income before income taxes of $662.4 million compared to a net tax expense of $15.1 million on a loss before income taxes of $431.2 million for the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, the income tax expense consisted of $76.0 million related to foreign entities, $6.1 million related to United States federal taxes, and $3.5 million related to state and local income taxes.

The net increase in tax expense of $70.5 million was primarily due to profits in certain non-United States jurisdictions.

Net income (loss) attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $41.8 million during the six months ended June 30, 2022 as compared to a net loss of $30.3 million during the same period of the prior year primarily due to higher operating results from certain concert and festival promotion businesses during the first six months of 2022 as compared to the resumption of events late in the second quarter of 2021.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests increased $68.1 million during the nine months ended September 30, 2022 as compared to the same period of the prior year primarily due to higher operating results from certain concert and festival promotion businesses during the first nine months of 2022 as compared to the resumption of events late in the second quarter of 2021.

Segment Overview

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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.

In addition, at our owned or operated venues and festivals, we monitor APF 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.

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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.

In addition, we review the number of visits to our websites, cost of customer acquisition, the purchase conversion rate, and the per ticket non-service fee revenue streams.

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.

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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.

To judge the health of our Sponsorship & Advertising segment, we primarily review the revenue generated through sponsorship arrangements and online advertising, the percentage of expected revenue under contract, and what portion of our sponsorship business is driven by large multi-element, multi-year relationships.

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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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These metrics are net of any refunds requested and any cancellations that occurred during the period, which may result in a negative number.

Fee-bearing tickets sold above are net of refunds of 5.2 million and 4.1 million tickets for the three months ended June 30, 2022 and 2021, respectively, and 10.4 million and 7.1 million for six months ended June 30, 2022 and 2021, respectively.

Fee-bearing tickets sold above are net of refunds of 4.6 million and 5.9 million tickets for the three months ended September 30, 2022 and 2021, respectively, and 15.0 million and 13.0 million for nine months ended September 30, 2022 and 2021, respectively.

Segment Operating Results

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Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

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Depreciation and amortization 61,770 59,541 4% 195,528 180,877 8%

Loss (gain) on disposal of operating assets 1,058 (28) * 2,926 110 *

Gain on disposal of operating assets (33,983) (1,098) * (31,057) (988) *

Operating income (loss) $ 243,377 $ (32,762) * $ 131,532 $ (324,458) *

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

Concerts revenue increased $3.3 billion during the three months ended June 30, 2022 as compared to the same period of the prior year primarily due to more shows and festivals in major markets including North America and Europe in 2022 as compared to the resumption of shows and festivals in certain major markets, including the United States and United Kingdom, late in the second quarter of 2021.

Concerts had incremental revenue of $143.2 million during the three months ended June 30, 2022 from acquisitions and new venues.

Concerts revenue increased $3.1 billion during the three months ended September 30, 2022 as compared to the same period of the prior year, primarily due to more shows and festivals in major markets including North America and Europe.

In addition, Concerts had incremental revenue of $136.6 million during the three months ended September 30, 2022 from acquisitions and new venues.

Operating results

Concerts operating income for the three months ended June 30, 2022 was $37.8 million as compared to an operating loss of $146.3 million and AOI was $122.9 million as compared to adjusted operating loss of $84.0 million for the same period of the prior year primarily driven by increases in revenues due to the higher number of shows and festivals discussed above.

This increase was partially offset by higher direct operating expenses to support these events, higher selling, general and administrative expenses related to increased headcount and compensation expenses, and increased depreciation and amortization of $14.1 million for additional capital expenditures.

Concerts revenue increased $4.3 billion during the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to more shows and festivals in major markets including North America and Europe in 2022 as compared to the resumption of shows and festivals in certain major markets, including the United States and United Kingdom, late in the second quarter of 2021.

Concerts had incremental revenue of $274.3 million during the six months ended June 30, 2022 from acquisitions and new venues.

Concerts AOI increased $221.2 million and operating income increased $276.1 million for the three months ended September 30, 2022 as compared to the same period of the prior year.

The increase in AOI was primarily driven by increases in revenue associated with the higher number of shows and festivals discussed above.

These increases were partially offset by related costs, including increased compensation expenses due to increased headcount.

The increase in operating income outside of AOI of $54.9 million is primarily associated to gains on disposals of operating assets of $32.9 million during the third quarter of 2022, lower acquisition expense of $13.5 million for costs incurred related to acquisitions and contingent considerations changes, and lower stock-based compensation of $10.7 million due to timing of grants.

Concerts revenue increased $7.4 billion during the nine months ended September 30, 2022 as compared to the same period of the prior year, primarily due to more shows and festivals in all of our major markets in 2022.

During the first nine months of 2021, shows did not meaningfully resume until pandemic restrictions were lifted late in Q2 and only then in the United States and the United Kingdom.

In addition, Concerts had incremental revenue of $410.9 million during the nine months ended September 30, 2022 from acquisitions and new venues.

Operating results

Concerts operating loss decreased $179.9 million and AOI increased $232.4 million during the six months ended June 30, 2022 as compared to the same period of the prior year primarily driven by an increase in revenues from the number of shows and festivals discussed above partially offset by increased direct operating expenses to support these events, including acquisitions and new venues, of $36.4 million, and increased selling general and administrative expenses primarily related to increased headcount and compensation expenses.

Costs incurred outside of AOI increased by $52.5 million primarily related to higher acquisition expense of $28.3 million for costs incurred related to acquisitions and contingent considerations changes, depreciation and amortization of $12.4 million for additional capital expenditures incurred to support the increased operations, and stock-based compensation of $8.9 million attributable to increased headcount.

Concerts AOI increased $453.6 million and operating income increased $456.0 million for the nine months ended September 30, 2022 as compared to the same period of the prior year.

The increase in AOI was primarily driven by increases in revenue associated with the higher number of shows and festivals discussed above.

These increases were partially offset by higher compensation expenses due to increased headcount in our existing business along with acquisitions and new venues of $34.3 million.

The increase in operating income outside of AOI of $2.4 million is attributable to gains on disposals of operating assets of $30.1 million during 2022, which was partially offset by higher accretion of contingent payments due to improved results of $14.9 million and depreciation and amortization expenses of $14.7 million due to recent acquisitions for the nine months ended September 30, 2022.

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

Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

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Depreciation and amortization 25,900 32,040 (19)% 82,557 103,406 (20)%

Loss (gain) on disposal of operating assets 7 — * (196) — *

Operating income (loss) $ 179,075 $ 43,825 * $ 333,863 $ (76,831) *

Gain on disposal of operating assets — (66) * (196) (66) *

Operating income $ 116,393 $ 114,270 2% $ 450,256 $ 37,439 *

Operating margin 21.9 % 30.5 % 28.4 % 5.8 %

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

Ticketing revenue increased $331.3 million during the three months ended June 30, 2022 as compared to the same period of the prior year primarily due to an increase in North America primary and secondary ticket fees driven by more events on sale and upward pricing momentum due to higher fan demand in 2022 as compared to the resumption of concerts and sporting events starting late in the second quarter of 2021.

Ticketing had incremental revenue of $26.1 million during three months ended June 30, 2022 due to acquisitions.

Ticketing revenue increased $157.3 million during the three months ended September 30, 2022 as compared to the same period of the prior year.

This increase is primarily due to an increase in North America primary and secondary ticket fees driven by more events on sale and upward pricing momentum due to higher fan demand in 2022 as compared to 2021.

In addition, Ticketing had incremental revenue of $23.9 million during three months ended September 30, 2022 due to acquisitions.

Operating results

Ticketing operating income increased $135.3 million and AOI increased by $131.3 million during the three months ended June 30, 2022 as compared to the same period of the prior year.

These increases were primarily driven by increased revenues from higher ticketing activity discussed above partially offset by the associated increases in direct costs to support higher operations, and higher selling, general and administrative expenses attributable to increased compensation expenses from increased headcount for resumed operations during the quarter.

Ticketing revenue increased $783.4 million during the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to an increase in North America primary and secondary ticket fees driven by more events on sale and upward pricing momentum due to higher fan demand in 2022 as compared to the resumption of concerts and sporting events starting late in the second quarter of 2021.

Ticketing had incremental revenue of $53.7 million during six months ended June 30, 2022 due to acquisitions.

Ticketing AOI decreased by $8.6 million and operating income increased $2.1 million during the three months ended September 30, 2022 as compared to the same period of the prior year.

The decrease in AOI was primarily driven by the associated increases in direct costs to support higher operations and enterprise growth, as well as higher selling, general and administrative expenses attributable to increased compensation expenses from increased headcount for resumed operations.

Operating income outside of AOI increased $10.7 million as a result of a decrease in depreciation and amortization expense of $6.1 million primarily due to the retirement of certain office locations during the third quarter of 2021.

Ticketing revenue increased $940.7 million during the nine months ended September 30, 2022 as compared to the same period of the prior year, primarily due to an increase in North America primary and secondary ticket fees driven by more events on sale and upward pricing momentum due to higher fan demand in 2022 as compared to the resumption of concerts and sporting events starting late in the second quarter of 2021.

Ticketing had incremental revenue of $77.6 million during nine months ended September 30, 2022 due to acquisitions.

Operating results

Ticketing operating income for the six months ended June 30, 2022 was $333.9 million as compared to an operating loss of $76.8 million for the same period of the prior year and AOI increased $400.3 million as compared to the same period prior year primarily driven by increased ticketing activity discussed above and incremental operating income from acquisitions of $23.9 million.

These increases were partially offset by higher direct operating expenses to support the increased operations and higher selling, general and administrative expenses attributable to increased compensation expenses from increased headcount as operations have resumed.

Ticketing AOI increased $391.7 million and operating income increased $412.8 million during the nine months ended September 30, 2022 as compared to the same period of the prior year.

The increase in AOI was primarily driven by increased ticketing activity discussed above as well as incremental operating income from acquisitions of $37.7 million.

These increases were partially offset by higher direct operating expenses to support the increased operations and enterprise growth as well as higher selling, general and administrative expenses attributable to increased compensation expenses from increased headcount as operations have resumed.

Operating income outside of AOI increased $21.1 million as a result of a decrease in depreciation and amortization expense of $20.8 million primarily due to the retirement of certain office locations during 2021.

Sponsorship & Advertising

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Three Months Ended

Change Six Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

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Depreciation and amortization 8,505 7,166 19% 25,442 21,837 17%

Operating income (loss) $ 168,914 $ 5,326 * $ 227,921 $ (1,115) *

Operating income $ 217,006 $ 102,755 * $ 444,927 $ 101,640 *

Operating margin 63.3 % 58.9 % 61.6 % 42.1 %

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

Sponsorship & Advertising revenue increased $219.2 million during the three months ended June 30, 2022 as compared to the same period of the prior year primarily driven by increased activity in national and local sponsorship programs, festival sponsorships and online advertising in the United States and Europe due to the resumption of concert events and festivals starting late in the second quarter of 2021.

Sponsorship & Advertising had incremental revenue of $28.5 million during three months ended June 30, 2022 from acquisitions.

Sponsorship & Advertising revenue increased $168.6 million during the three months ended September 30, 2022 as compared to the same period of the prior year primarily driven by increased activity in national and local sponsorship programs, festival sponsorships and purchase path integration largely in the United States.

Sponsorship & Advertising had incremental revenue of $21.0 million during three months ended September 30, 2022 from acquisitions.

Operating results

Sponsorship & Advertising operating income increased $163.6 million and AOI increased $165.3 million for the three months ended June 30, 2022 as compared to the same period of the prior year.

Sponsorship & Advertising AOI increased $115.0 million and operating income increased $114.3 million for the three months ended September 30, 2022 as compared to the same period of the prior year.

These increases were primarily due to increased revenues from higher sponsorship activity discussed above and incremental operating income from acquisitions.

The increases were partially offset by increases in direct operating expenses to support higher activity levels as operations resumed during the period.

Sponsorship & Advertising revenue increased $312.3 million during the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to increased activity in national and local sponsorship programs, festival sponsorships and online advertising in the United States and Europe due to the resumption of concert events and festivals starting late in the second quarter of 2021.

Sponsorship & Advertising had incremental revenue of $52.6 million during six months ended June 30, 2022 from acquisitions.

Sponsorship & Advertising revenue increased $480.8 million during the nine months ended September 30, 2022 as compared to the same period of the prior year, primarily due to increased activity in national and local sponsorship programs, festival sponsorships and purchase path integration largely in the United States as a result of the resumption of concert events and festivals starting late in the second quarter of 2021.

Sponsorship & Advertising had incremental revenue of $73.6 million during nine months ended September 30, 2022 from acquisitions.

Operating results

Sponsorship & Advertising operating income for the six months ended June 30, 2022 was $227.9 million as compared to an operating loss of $1.1 million for the same period of the prior year and AOI increased $231.5 million as compared to the same period of the prior year.

These increases were primarily due to higher sponsorship activity revenues discussed above and incremental operating income of $22.0 million from acquisitions, and were offset by increases in direct costs and selling, general and administrative expenses to support higher activity levels as operations resumed during the period.

Sponsorship & Advertising AOI increased $346.5 million and operating income increased $343.3 million for the nine months ended September 30, 2022 as compared to the same period of the prior year.

These increases were primarily due to higher sponsorship activity revenues discussed above as well as incremental operating income of $28.4 million from acquisitions, and were offset by increases in direct costs and selling, general and administrative expenses to support higher activity levels as operations resumed during the period.

Liquidity and Capital Resources

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

Our balance sheet reflects cash and cash equivalents of $5.9 billion at June 30, 2022 and $4.9 billion at December 31, 2021.

Included in the June 30, 2022 and December 31, 2021 cash and cash equivalents balances are $1.4 billion and $1.3 billion, 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 $5.0 billion at September 30, 2022 and $4.9 billion at December 31, 2021.

Included in the September 30, 2022 and December 31, 2021 cash and cash equivalents balances are $1.3 billion of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges, which we refer to as client cash.

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

Our foreign subsidiaries held approximately $1.8 billion in cash and cash equivalents, excluding client cash, at June 30, 2022.

Our foreign subsidiaries held approximately $1.7 billion in cash and cash equivalents, excluding client cash, at September 30, 2022.

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

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

Our balance sheet reflects total net debt of $5.7 billion and $5.7 billion at June 30, 2022 and December 31, 2021, respectively.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.3% at June 30, 2022, with approximately 85% of our debt at a fixed rate.

Our balance sheet reflects total net debt of $5.7 billion at September 30, 2022 and December 31, 2021.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.5% at September 30, 2022, with approximately 87% of our debt at a fixed rate.

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.

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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.

This is essentially our cash available to, among other things, repay debt balances, make acquisitions, and finance capital expenditures.

Our intra-year cash fluctuations are impacted by the seasonality of our various businesses.

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Amended Senior Secured Credit Facility

At June 30, 2022, our senior secured credit facility consists of (i) a $400 million 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.

Our senior secured credit facility consists of (i) a $400 million term loan A facility, (ii) a $950 million term loan B facility, (iii) a $500 million revolving credit facility and (iv) a $130 million incremental revolving credit facility.

In addition, subject to certain conditions, we have the right to increase such facilities by an amount equal to the sum of (x) $855 million, (y) the aggregate principal amount of voluntary prepayments of the 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) 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.

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

There were no borrowings under the revolving credit facilities as of June 30, 2022.

As of September 30, 2022, the outstanding principal amount of our term loan A facility is $387.5 million and term loan B facility is $847.8 million.

There were no borrowings under the revolving credit facilities as of September 30, 2022.

Based on our outstanding letters of credit of $64.1 million, $565.9 million was available for future borrowings from revolving credit facilities.

Debt Covenants

As of June 30, 2022, we believe we were in compliance with all of our debt covenants related to our senior secured credit facility and our corporate senior secured notes, senior notes and convertible senior notes.

As of September 30, 2022, 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 covenants throughout 2022.

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

During the six months ended June 30, 2022, we used $39.9 million of cash primarily for the acquisition of a sports management business and a venue management business, both located in the United States.

During the six months ended June 30, 2021, we used $7.6 million of cash primarily for the acquisition of a venue in the United Kingdom.

During the nine months ended September 30, 2022, we used $38.8 million of cash primarily for the acquisition of a concert promotion business located in Germany, a ticketing business located in Thailand as well as a sports management business and a venue management business, both located in the United States.

During the nine months ended September 30, 2021, we used $19.6 million of cash primarily for the acquisition of a venue in the United Kingdom and an artist management business in the United States.

Capital Expenditures

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

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

Maintenance $ 35,135 $ 14,286

Revenue generating $ 119,620 $ 67,417

Maintenance 56,755 37,181

Total capital expenditures $ 176,375 $ 104,598

Maintenance capital expenditures during the first six months of 2022 increased from the same period of the prior year primarily due to venue-related and technology-related projects.

Revenue generating capital expenditures during the first six months of 2022 increased from the same period of the prior year primarily due to enhancements at our venues and higher investments in technology-related projects.

Revenue generating capital expenditures during the first nine months of 2022 increased from the same period of the prior year primarily due to enhancements at our venues and higher investments in technology-related projects.

Maintenance capital expenditures during the first nine months of 2022 increased from the same period of the prior year primarily due to venue-related and technology-related projects.

We currently expect capital expenditures to be approximately $300 million for the full year of 2022.

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Operating Activities

Cash provided by operating activities increased by $377.4 million for the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to an overall increase in operating results, offset by changes in working capital, resulting from the resumption of events in certain markets starting late in the second quarter of 2021 and continuing into the first six months of 2022.

Cash provided by operating activities decreased by $96.3 million for the nine months ended September 30, 2022 as compared to the same period of the prior year primarily due to a decrease in deferred revenue during 2022 from the timing of events compared to the buildup of events in 2021 due to the COVID-19 pandemic as well as increase in accounts receivable and prepaid expenses due to the timing of collections and payment of event-related costs.

These changes in working capital were partially offset by an increase in operating results, resulting from the resumption of events in certain markets starting late in the second quarter of 2021 and continuing into the first nine months of 2022.

Investing Activities

Cash used in investing activities increased by $194.4 million for the six months ended June 30, 2022 as compared to the same period of the prior year primarily due to more cash paid for capital expenditures and acquisitions during the current period, and the same period prior year being impacted by higher proceeds from the sale of investments in nonconsolidated affiliates.

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

Cash used in investing activities increased by $248.0 million for the nine months ended September 30, 2022 as compared to the same period of the prior year primarily due to more cash paid for capital expenditures during the current period, and the same period prior year being impacted by higher proceeds from the sale of investments in nonconsolidated affiliates.

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

Financing Activities

Cash used in financing activities was $137.6 million for the six months ended June 30, 2022 as compared to cash provided by financing activities of $401.5 million for the same period of the prior year primarily due to higher net proceeds in 2021 from debt issuances.

Cash used in financing activities was $175.2 million for the nine months ended September 30, 2022 as compared to cash provided by financing activities of $1.2 billion for the same period of the prior year primarily due to higher net proceeds in 2021 from debt and equity issuances.

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

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

Our foreign operations reported an operating income of $106.2 million for the six months ended June 30, 2022.

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 six months ended June 30, 2022 by $10.6 million.

As of June 30, 2022, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar, Canadian Dollar and Mexican Peso.

Our foreign operations reported an operating income of $277.2 million for the nine months ended September 30, 2022.

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 nine months ended September 30, 2022 by $27.7 million.

As of September 30, 2022, 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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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.

At June 30, 2022, we had forward currency contracts outstanding with a notional amount of $63.8 million.

At September 30, 2022, we had forward currency contracts outstanding with a notional amount of $65.9 million.

Interest Rate Risk

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

We had $5.8 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of June 30, 2022.

We had $5.8 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of September 30, 2022.

Of the total amount, we had $5.0 billion of fixed-rate debt and $0.8 billion of floating-rate debt.

Based on the amount of our floating-rate debt as of June 30, 2022, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $1.9 million.

This potential increase or decrease is based on the simplified assumption that the level of floating-rate debt remains constant with an immediate across-the-board increase or decrease as of June 30, 2022 with no subsequent change in rates for the remainder of the period.

Based on the amount of our floating-rate debt as of September 30, 2022, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $1.9 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, 2022 with no subsequent change in rates for the remainder of the period.

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

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Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Annual Report on Form 10-K filed with the SEC on February 23, 2022.

There have been no changes to our critical accounting policies during the six months ended June 30, 2022.

There have been no changes to our critical accounting policies during the nine months ended September 30, 2022.

Quantitative and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis