What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 117 added, 224 removed, 229 unchanged (60% of the section changed)

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Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth below under Part II—Other Information—Item 1A.—Risk Factors, in Part I—Item IA.—Risk Factors of our 2022 Annual Report on Form 10-K as well as other factors described herein or in our annual, quarterly and other reports we file with the SEC (collectively, “cautionary statements”).

Based upon changing conditions, should any risk or uncertainty that has already materialized, such as, for example, the risks and uncertainties posed by the global COVID-19 pandemic, worsen in scope, impact or duration, or should one or more of the currently unrealized risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements.

Based upon changing conditions, should any risk or uncertainty that has already materialized, worsen in scope, impact or duration, or should one or more of the currently unrealized risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

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Executive Overview

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 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 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 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.

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 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.

For the second year in a row, the first quarter was a record start to the year for the Company with exceptional fan demand across all our markets.

Our overall revenue increased by 73% to $3.1 billion on a reported basis, or 76% growth on a constant currency basis as compared to the same period of the prior year.

All three of our reporting segments had at least 40% revenue growth in the quarter.

The most significant growth came from our Concerts segment as a result of increased shows, fans, and onsite spend and contributed to the success of our other divisions.

Our operating income for the quarter improved by $116 million, from $27 million in the first quarter of 2022 to $143 million in the first quarter of 2023 due to higher performance from all three of our major business segments.

The improvement in operating income was $121 million at constant currency.

All of our markets and venues are now fully open, including Asia Pacific which had one of its busiest and most successful quarters in the first quarter of 2023.

This, coupled with our event related deferred revenue balance of $4.4 billion as of March 31, 2023 and ongoing sales trends suggest continued strong demand for concerts, making us hopeful for continued success in the remainder of the year.

All of the segment financial comments to follow are based on reported foreign currency exchange rates.

Our Concerts segment revenue for the quarter increased by $1.1 billion, or 89%, from $1.2 billion in the first quarter of 2022 to $2.3 billion in the first quarter of 2023.

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

The number of events for the first quarter of 2023 was approximately 9,600 compared to approximately 6,700 in the first quarter of 2022, an increase of 2,900 events or 43%.

The number of fans for the quarter was 19.5 million compared to approximately 10.9 million last year, a growth of 8.6 million fans or 79%.

The growth was largely in our international markets – in particular in Asia Pacific, mainland Europe and Latin America.

Some of the larger acts touring in the first quarter included the Red Hot Chili Peppers, Harry Styles, BLACKPINK and RBD.

While most of our on-site spend occurs during the summer season when our festival and amphitheater shows occur, we did see an increase in on-site per fan spending at our United States and United Kingdom theaters and clubs as well as our European arenas in the first quarter of 2023 as compared to the first quarter of 2022.

Concerts operating loss for the quarter improved by $65 million, from a loss of $150 million in the first quarter of 2022 to $84 million in the first quarter of 2023.

Our Ticketing segment revenue for the quarter increased by $197 million, or 41%, from $480 million in the first quarter of 2022 to $678 million in the first quarter of 2023.

The improvement resulted from an increase in ticket sales, upward pricing momentum due to higher fan demand and higher non-service fee revenue.

We sold approximately 73 million fee-bearing tickets in the first quarter of 2023 compared to 52 million tickets in the same period of the prior year, an increase of 41%.

North America fee-bearing ticket volume increased by 38% in the quarter while International rose even more, by 48%.

With GTV, North America increased by 54% on fee-bearing ticket sales while International rose by 86% compared to the same period last year.

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

Our resale business also continued to expand, with secondary GTV growing double digits in the first quarter of 2023 compared to the same period of the prior year.

Ticketing operating income for the quarter improved by $66 million, from $155 million in the first quarter of 2022 to $221 million in the first quarter of 2023.

Our Sponsorship & Advertising segment revenue for the quarter increased by $54 million, or 47%, from $116 million in the first quarter of 2022 to $170 million in the first quarter of 2023.

The improvement was due to higher activations with our marketing partners driven by more high profile artists going on sale in more markets as well as re-opened venues in markets that were still shut-down in the first quarter of last year.

Operating income for the quarter increased by $18 million, from $59 million in the first quarter of 2022 to income of $77 million in the first quarter of 2023.

Serving artists remains at the center of our strategy and we work with them to continue improving the fan experience.

Delivering on this priority includes our recently proposed Fair Ticketing Act, which is garnering industry support from talent agencies, brand managers and sports leagues.

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 with more shows and fans in existing and new markets as well as improving the on-site experience for our fans by enhancing food and beverage products and premium service offerings.

We will drive conversion of ticket sales through development of innovative products that support selling tickets to fans.

Our ticket marketplaces have reduced friction in the ticket purchase experience and created additional revenue opportunities.

In addition, we continue to grow our sponsorship and advertising partnerships and our clients are able to reach their customers via the powerful connection that live shows creates with ardent fans.

Consolidated Results of Operations

Three Months Ended September 30, % Change

Three Months Ended March 31, % Change

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

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Depreciation and amortization 115,185 (4,005) 111,180 100,469 15% 11%

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

Operating margin 8.2% 8.2% 5.1%

Interest expense 70,514 70,407

Interest income (25,809) (1,333)

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

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

Other expense, net 7,960 12,441

Income before income taxes 439,301 93,288

Income tax expense 41,898 6,421

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.

** Constant currency is a non-GAAP financial measure.

We calculate currency impacts as the difference between current period activity translated using the current period’s currency exchange rates and the comparable prior period’s currency exchange rates.

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

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.

Loss on disposal of operating assets 504 47 551 1,665 * *

Corporate expenses 63,015 12 63,027 32,410 94% 94%

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 142,776 $ 5,383 $ 148,159 27,060 * *

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

Nine Months Ended September 30, % Change

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

(in thousands)

Revenue $ 12,390,517 $ 437,042 $ 12,827,559 $ 3,565,277 * *

Operating expenses:

Direct operating expenses 9,045,893 341,617 9,387,510 2,346,998 * *

Selling, general and administrative expenses 2,048,305 52,811 2,101,116 1,098,676 86% 91%

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

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

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

Operating income (loss) 852,008 $ 36,053 $ 888,061 (293,312) * *

Operating margin 4.6% 4.7 % 1.5%

Interest expense 89,215 66,773

Loss on extinguishment of debt 18,366 —

Interest income (40,313) (7,564)

Equity in losses (earnings) of nonconsolidated affiliates 8,040 (4,608)

Gain from sale of investments in nonconsolidated affiliates (448) (83,580)

Equity in earnings of nonconsolidated affiliates (4,107) (4,288)

Other expense, net 11,583 9,399

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Net income attributable to noncontrolling interests 47,361 1,226

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

Net loss attributable to common stockholders of Live Nation $ (3,169) $ (50,182)

* 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 $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 $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 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.

Revenue increased $1.3 billion during the three months ended March 31, 2023 as compared to the same period of the prior year driven by increased revenue in our Concerts segment of $1.1 billion, Ticketing segment of $197.3 million and Sponsorship & Advertising of $54.4 million as further discussed within each segment’s operating results.

Operating income

Operating income increased $115.7 million during the three months ended March 31, 2023 as compared to the same period of the prior year primarily driven by increased operating income in our Concerts segment of $65.2 million, Ticketing segment of $66.1 million and Sponsorship & Advertising segment of $18.1 million as further discussed within each segment’s operating results, partially offset by higher Corporate expenses primarily due to lower compensation expense in the first quarter of 2022 due to the COVID-19 pandemic and headcount growth as a result of the increased operating opportunities in 2023.

Interest expense

Interest expense increased $22.4 million, or 34%, during the three months ended March 31, 2023 as compared to the same period of the prior year, primarily driven by the issuance of our 3.125% convertible senior notes due 2029 in January 2023.

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 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.

Interest income increased $32.7 million during the three months ended March 31, 2023 as compared to the same period of the prior year, primarily attributed to higher rate of return on our cash and cash equivalents in 2023 and increase in cash and cash equivalents.

Income tax expense

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.

For the three months ended March 31, 2023, we had a net tax expense of $23.8 million on income before income taxes of $68.0 million compared to a net tax expense of $11.7 million on a loss before income taxes of $37.3 million for the three months ended March 31, 2022.

For the three months ended March 31, 2023, the income tax expense consisted of $20.3 million related to foreign entities, $0.5 million related to United States federal taxes, and $3.0 million related to state and local income taxes.

The net increase in tax expense of $12.1 million was primarily due to profits in certain non-United States jurisdictions.

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.

Net income attributable to noncontrolling interests increased $46.1 million during the three months ended March 31, 2023 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 three months of 2023 as compared to the prior year.

Segment Overview

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Concerts direct operating expenses include artist fees, event production costs, show-related marketing and advertising expenses, along with other costs.

To judge the health of our Concerts segment, we primarily monitor the number of confirmed events and fan attendance in our network of owned or operated and third-party venues, talent fees, average paid attendance, market ticket pricing, advance ticket sales and the number of major artist clients under management.

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

To judge the health of our Concerts segment, we primarily monitor the number of confirmed events and fan attendance in our network of 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 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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GTV represents the total amount of the transaction related to a ticket sale and includes the face value of the ticket as well as the service charge.

We use GTV to evaluate changes in ticket fee revenue that are driven by the pricing of our service charges.

Ticketing direct operating expenses include call center costs and credit card fees, along with other costs.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands except estimated events)

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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 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

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

(in thousands) (in thousands)

(in thousands)

Revenue $ 2,281,212 $ 1,207,825 89%

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Depreciation and amortization 70,528 61,163 15%

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

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

Loss on disposal of operating assets 115 1,868 *

Operating loss $ (84,422) $ (149,601) 44%

Operating margin (3.7) % (12.4) %

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

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 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.

Concerts revenue increased $1.1 billion during the three months ended March 31, 2023 as compared to the same period of the prior year, primarily due to more shows and festivals in the Asia Pacific, Europe, and Latin America markets, which were largely closed during the first quarter of 2022.

In addition, there was increased activity in the United States during the first quarter of 2023.

Concerts had incremental revenue of $184.9 million during the three months ended March 31, 2023 from acquisitions and new venues.

Operating results

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.

Concerts AOI increased $50.0 million and operating loss decreased $65.2 million for the three months ended March 31, 2023 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.

These increases were partially offset by related costs, including increased compensation expenses due to increased headcount as more markets were reopened compared to the prior period.

The increase in operating income outside of AOI of $15.2 million is primarily associated to lower stock-based compensation of $22.0 million due to timing of grants partially offset by higher depreciation and amortization of $9.4 million for additional capital expenditures incurred to support the increased operations.

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

Three Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

(in thousands) (in thousands)

(in thousands)

Revenue $ 677,741 $ 480,399 41%

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Depreciation and amortization 25,084 28,052 (11)%

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

Loss (gain) on disposal of operating assets 374 (203) *

Operating income $ 220,931 $ 154,788 43%

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

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 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.

Ticketing revenue increased $197.3 million during the three months ended March 31, 2023 as compared to the same period of the prior year.

This increase is primarily due to higher primary and secondary sales volumes driven by more events on sale and upward pricing momentum due to more fan demand and artist mix in 2023 as compared to 2022.

Operating results

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.

Ticketing AOI increased by $64.8 million and operating income increased $66.1 million during the three months ended March 31, 2023 as compared to the same period of the prior year.

These increases was primarily driven by increased ticketing activity discussed above.

Sponsorship & Advertising

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Three Months Ended

September 30, %

Change Nine Months Ended

September 30, %

2022 2021 2022 2021

(in thousands) (in thousands)

(in thousands)

Revenue $ 170,118 $ 115,689 47%

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

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.

Sponsorship & Advertising revenue increased $54.4 million during the three months ended March 31, 2023 as compared to the same period of the prior year primarily driven by more client activations for artist onsales, new venue sponsorships, and activity in international markets that were not open in the first quarter of 2022.

Operating results

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.

Sponsorship & Advertising AOI increased $25.8 million and operating income increased $18.1 million for the three months ended March 31, 2023 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 $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 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.

The increases were partially offset by increases in direct operating expenses, including higher artist activation costs, and depreciation and amortization to support higher activity levels as compared to the prior year.

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 $5.0 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.

Our balance sheet reflects cash and cash equivalents of $7.0 billion at March 31, 2023 and $5.6 billion at December 31, 2022.

Included in the March 31, 2023 and December 31, 2022 cash and cash equivalents balances are $1.4 billion and $1.5 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.

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 $1.7 billion in cash and cash equivalents, excluding client cash, at September 30, 2022.

Our foreign subsidiaries held approximately $2.6 billion in cash and cash equivalents, excluding client cash, at March 31, 2023.

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 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 balance sheet reflects total net debt of $6.6 billion and $5.9 billion, respectively, at March 31, 2023 and December 31, 2022.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.7% at March 31, 2023, with approximately 87% of our debt at fixed rates.

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

however, we can provide no assurances that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets, including those resulting from the global COVID-19 pandemic.

however, we can provide no assurances that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

For our Concerts segment, we often receive cash related to ticket revenue in advance of the event, which is recorded in deferred revenue until the event occurs.

In the United States, this cash is largely associated with events in our owned or operated venues, notably amphitheaters, festivals, theaters and clubs.

Internationally, this cash is from a combination of both events in our owned or operated venues, as well as events in third-party venues associated with our promoter’s share of tickets in allocation markets.

In the United States, this cash is largely associated with events in our operated venues, notably amphitheaters, festivals, theaters and clubs.

Internationally, this cash is from a combination of both events in our operated venues, as well as events in third-party venues associated with our promoter’s share of tickets in allocation markets.

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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See “—Seasonality” below.

We believe that we have sufficient financial flexibility to fund these fluctuations and to access the global capital markets on satisfactory terms and in adequate amounts, although there can be no assurance that this will be the case, and capital could be less accessible and/or more costly given current economic conditions, including those resulting from the global COVID-19 pandemic.

We expect cash flows from operations and borrowings under our amended senior secured credit facility, along with other financing alternatives, to satisfy working capital requirements, capital expenditures and debt service requirements for at least the succeeding year.

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We may make significant acquisitions in the near term, subject to limitations imposed by our financing agreements and market conditions.

The lenders under our revolving loans and counterparty to our interest rate hedge agreement consists of banks and other third-party financial institutions.

While we currently have no indications or expectations that such lenders will be unable to fund their commitments as required, we can provide no assurances that future funding availability will not be impacted by adverse conditions in the financial markets, including those resulting from the global COVID-19 pandemic.

The lenders under our revolving loans and counterparties to our interest rate hedge agreements consists of banks and other third-party financial institutions.

Should an individual lender default on its obligations, the remaining lenders would not be required to fund the shortfall, resulting in a reduction in the total amount available to us for future borrowings, but would remain obligated to fund their own commitments.

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Sources of Cash

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

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 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.

In January 2023, we issued $1.0 billion principal amount of 3.125% convertible senior notes due 2029.

In conjunction with this issuance, we used approximately $485.8 million of the net proceeds to repurchase $440.0 million aggregate principal amount of the 2.5% convertible senior notes due 2023, entered into capped call transactions at a cost of $75.5 million, paid debt issuance costs of $15.0 million and any remaining proceeds are available for general corporate purposes.

Amended Senior Secured Credit Facility

In February 2023, we amended our senior secured credit facility.

The amendments provides for, among other things:

(i) replacement of the benchmark reference rate of the Eurodollar Rate (as defined in the Credit Agreement) with the Term SOFR Rate for borrowings denominated in Dollars and for each Alternative Currency (as defined in the Credit Agreement), a corresponding reference rate, as set forth in the Amended Credit Agreement, (ii) deletion of the provisions regarding Canadian bankers’ acceptances, and (iii) the addition of the Company’s ability to draw letters of credit in Canadian Dollars.

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.

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The amended senior secured credit facility is secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions.

The interest rates per annum applicable to revolving credit facility loans and term loan A under the amended senior secured credit facility are, at our option, equal to either Eurodollar plus 2.25% or a base rate plus 1.25%.

The interest rates per annum applicable to the term loan B are, at our option, equal to either Eurodollar plus 1.75% or a base rate plus 0.75%.

The interest rates per annum applicable to revolving credit facility loans and term loan A under the amended senior secured credit facility are, at our option, equal to either Term Benchmark Loans or RFR Loans (as defined in the Credit Agreement) plus 2.25% or a base rate plus 1.25%.

The interest rates per annum applicable to the term loan B are, at our option, equal to either Term Benchmark Loans or RFR Loans plus 1.75% or a base rate plus 0.75%.

We have an interest rate swap agreement that ensures the interest rate on $500.0 million principal amount of our outstanding term loan B does not exceed 3.445% through October 2026.

The interest rates per annum applicable to the incremental revolving credit facility are, at our option, equal to either Eurodollar plus 2.5% or a base rate plus 1.5%.

We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility and delayed draw term loan A, 1.75% per year on the undrawn portion available under the incremental revolving credit facility and variable fees on outstanding letters of credit.

The agreement was amended in February 2023 along with the transition from LIBOR to SOFR.

The interest rates per annum applicable to the incremental revolving credit facility are, at our option, equal to either Term Benchmark Loans or RFR Loans plus 2.5% or a base rate plus 1.5%.

We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility, 1.75% per year on the undrawn portion available under the incremental revolving credit facility and variable fees on outstanding letters of credit.

For the term loan A, we are required to make quarterly payments increasing over time from $2.5 million to $5.0 million with the balance due at maturity in October 2024.

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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.

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.

As of March 31, 2023, the outstanding principal amount of our term loan A facility is $377.5 million and term loan B facility is $843.5 million.

There were no borrowings under the revolving credit facilities as of March 31, 2023.

Based on our outstanding letters of credit of $50.3 million, $579.7 million was available for future borrowings from revolving credit facilities.

Debt Covenants

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.

As of March 31, 2023, 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 2023.

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

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

During the nine months ended September 30, 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.

During the three months ended March 31, 2023, we completed various acquisitions that resulted in cash acquired, net of cash paid of $96.4 million.

This includes acquisition of businesses for which we assumed debt of $271.2 million.

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:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Total capital expenditures $ 66,068 $ 46,888

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.

Nine Months Ended

September 30,

Revenue generating capital expenditures during the first three months of 2023 increased from the same period of the prior year primarily due to enhancements at our theaters and amphitheaters in North America.

We currently expect capital expenditures to be approximately $450 million for the full year of 2023 as we continue catching up on projects delayed due to supply chain constraints and further expand our global platform, with approximately two-thirds of this capital expenditure to be for revenue generating projects.

Three Months Ended

(in thousands)

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Operating Activities

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.

Cash provided by operating activities decreased $42.5 million for the three months ended March 31, 2023 as compared to the same period of the prior year primarily due to decreases in accounts payable, accrued expenses and other liabilities from the timing of payments.

This was partially offset by higher deferred revenue from more events on sale during the current year and

an increase in first quarter of 2023 operating results compared to the first quarter of 2022 due to certain markets largely closed during the first quarter of 2022 due to the COVID-19 pandemic.

Investing Activities

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.

Cash used in investing activities decreased $55.2 million for the three months ended March 31, 2023 as compared to the prior year primarily due to cash acquired from acquisitions, net of cash paid of $96.4 million during the current year whereas the prior year was cash paid for acquisitions, net of cash acquired of $14.0 million.

This was partially offset by $54.4 million in higher purchases of property, plant and equipment in 2023 for revenue generating and maintenance capital expenditures.

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

Financing Activities

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.

Cash provided by financing activities was $225.7 million for the three months ended March 31, 2023 as compared to cash used in financing activities of $75.0 million for the same period of the prior year primarily due to proceeds in 2023 from the issuance of the 3.125% convertible senior notes partially offset by the repurchase of the 2.5% convertible senior notes and capped call transactions in connection with the issuance of the 3.125% convertible senior notes.

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 $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.

Our foreign operations reported an operating income of $25.7 million for the three months ended March 31, 2023.

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 three months ended March 31, 2023 by $2.6 million.

As of March 31, 2023, 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 September 30, 2022, we had forward currency contracts outstanding with a notional amount of $65.9 million.

At March 31, 2023, we had forward currency contracts outstanding with an aggregate notional amount of $354.3 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 September 30, 2022.

We had $6.7 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of March 31, 2023.

Of the total amount, we had $5.8 billion of fixed-rate debt and $0.9 billion of floating-rate debt.

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.

Based on the amount of our floating-rate debt as of March 31, 2023, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $2.1 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 March 31, 2023 with no subsequent change in rates for the remainder of the period.

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

The agreement was amended in February 2023 along with the transition from LIBOR to SOFR.

The swap agreement expires in October 2026, has a notional amount of $500.0 million and ensures that a portion of our floating-rate debt does not exceed 3.445%.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Annual Report on Form 10-K filed with the SEC on February 23, 2023.

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

There have been no changes to our critical accounting policies during the three months ended March 31, 2023.

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