What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-05-04 · 165 added, 91 removed, 255 unchanged (50% of the section changed)

15 unchanged sentences

Executive Overview

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.

It was a record setting quarter for the Company both financially and in our key performance indicators.

We saw exceptional fan demand globally and growth most notably in our international markets.

Our overall revenue increased by 27% to $5.6 billion on a reported basis and on a constant currency basis as compared to the second quarter of 2022.

All three of our reporting segments had double-digit percentage revenue growth in the quarter.

For the second quarter in a row, the most significant growth came from our Concerts segment as a result of increased shows, fans, and onsite spend which contributed to the success of our other divisions.

Our operating income for the quarter improved by $68 million, from $319 million in the second quarter of 2022 to $386 million in the second quarter of 2023 due to higher performance from all three of our major business segments.

The improvement in operating income was $62 million on a constant currency.

Consolidated AOI for the second quarter increased by $110 million, from $480 million in 2022 to $590 million this year.

The increase was $103 million on a constant currency.

For the first six months of 2023, our consolidated revenue increased by $2.5 billion compared to the same period in 2022, from $6.2 billion to $8.8 billion.

The increase was $2.6 billion on a constant currency.

We had consolidated operating income of $529 million for the first six months of 2023, compared to operating income of $346 million for the first six months of 2022, an improvement of $183 million.

Consolidated AOI for the first six month increased by $221 million compared to the same period in 2022, from $689 million to $909 million.

The increase was $216 million on a constant currency.

Our international markets performed strongly in the quarter and it was our largest quarter ever outside the United States, powered by the strength of our high-demand, multi-country tours and ticket sales from Latin America to the United Kingdom.

Our event related deferred revenue balance of $4.3 billion as of June 30, 2023 is up $1.2 billion or over 35% growth compared to June 30, 2022.

This, coupled with current ticket sales suggest continued strong demand for concerts, making us confident 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.

Our Concerts segment revenue for the quarter compared to the same period in 2022 increased by $1.0 billion, or 29%, from $3.6 billion to $4.6 billion.

The revenue growth was the result of more fans enjoying their favorite artists and spending more money at the events to maximize their unique live experiences.

The number of fans for the quarter was 37 million compared to approximately 34 million last year, for growth of 3 million fans or 10%.

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

Growth in stadium and arena fan count drove the majority of the increase.

Some of the larger acts touring globally in the second quarter included Coldplay, Beyoncé, and Harry Styles.

Our ancillary revenue spending at our United States amphitheater shows was over $40 per fan for the first six months of 2023, double-digit growth over 2022 levels, driven by higher food and beverage spending as well as upsells.

Concerts operating income for the quarter improved by $41 million compared to the same period in 2022, from $38 million to $78 million.

For the first six months of 2023, Concerts revenue grew $2.1 billion compared to the same period in 2022, from $4.8 billion to $6.9 billion.

Concerts AOI for the first six months increased by $95 million compared to the same period in 2022, from $74 million to $169 million.

Through the end of June 2023, our fan count was 56 million compared to 45 million last year, an improvement of 11 million fans or 25%.

Our Ticketing segment revenue for the quarter increased by $134 million, or 23%, compared to the same period in 2022 from $575 million to $709 million.

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.

We sold approximately 79 million fee-bearing tickets in the second quarter of 2023 compared to 72 million tickets in the same period of the prior year, an increase of 10%.

In regards to GTV, North America increased by 22% on fee-bearing ticket sales while International rose by 34% 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.

Ticketing operating income for the quarter improved by $60 million compared to the same period in 2022, from $179 million to $239 million.

For the first six months of 2023, our Ticketing revenue grew by $331 million compared to the same period in 2022, from $1.1 billion to $1.4 billion.

Ticketing AOI for the first six months of 2023 increased by $127 million compared to the same period in 2022, from $437 million to $564 million.

Through the end of June 2023, our fee-bearing ticket sales were 151 million tickets, 28 million ahead of 2022.

Overall pricing on our fee-bearing tickets for the first half of the year is up more than 13% compared to 2022.

Lastly, we have signed 14 million net new tickets so far this year, which gives us confidence our ticketing platforms’ features and functionalities will continue to fuel growth going forward.

Our Sponsorship & Advertising segment revenue for the quarter increased by $39 million, or 15%, compared to the same period in 2022 from $264 million to $303 million.

The increase was driven in part by our United States business with new or expanded deals for our owned and operated amphitheaters, the addition of the new Moody Center arena in Austin, and Ticketmaster’s new global relationship with PayPal, our preferred payment partner moving forward.

Operating income for the quarter increased by $5 million compared to the same period in 2022, from $169 million to $174 million.

For the first six months of 2023, our Sponsorship & Advertising revenue grew $94 million compared to the same period in 2022, from $379 million to $473 million.

Sponsorship & Advertising AOI for the first six month increased by $51 million compared to the same period in 2022, from $248 million to $299 million.

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 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.

expanding our concerts platform with more shows and fans in both 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.

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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.

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

We joined with more than 20 of the industry’s top artist coalitions, management groups, music labels, and agencies to propose the FAIR Ticketing Act which focuses on reforms that will protect fans, artists, and venues.

As part of this, we joined with President Biden to champion all-in pricing at the venues we operate and pushed for increased transparency to consumers, outlawing speculative tickets, greater enforcement of the BOTS Act and elimination of other deceptive practices.

We believe these are positive first steps to a broader reform that is needed in the industry.

Consolidated Results of Operations

Three Months Ended March 31, % Change

Three Months Ended June 30, % Change

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

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Depreciation and amortization 136,514 (1,541) 134,973 115,927 18% 16%

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

Loss (gain) on disposal of operating assets (7,013) (31) (7,044) 1,065 * *

Corporate expenses 81,478 (12) 81,466 59,247 38% 38%

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Interest expense 81,995 68,435

Interest income (56,452) (13,192)

Equity in earnings of nonconsolidated affiliates (5,558) (1,955)

Other expense, net (6,599) 5,039

Income before income taxes 372,985 260,372

Income tax expense 41,648 31,995

Net income 331,337 228,377

Net income attributable to noncontrolling interests 37,655 40,577

Net income attributable to common stockholders of Live Nation $ 293,682 $ 187,800

* 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 $1.2 billion during the three months ended June 30, 2023 as compared to the same period of the prior year due to increased revenue in our Concerts segment of $1.0 billion, Ticketing segment of $134.0 million and Sponsorship & Advertising of $39.1 million as further discussed within each segment’s operating results.

Operating income

Operating income increased $67.7 million during the three months ended June 30, 2023 as compared to the same period of the prior year primarily driven by increased operating income in our Concerts segment of $40.7 million, Ticketing segment of $59.5 million and Sponsorship & Advertising of $5.3 million as further discussed within each segment’s operating results.

These increases were partially offset by higher expenses primarily due to higher stock-based compensation expense due to timing of grants made in 2022 as well as higher acquisition transaction expenses due to more acquisitions in the second quarter of 2023.

Interest income

Interest income increased $43.3 million during the three months ended June 30, 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.

Consolidated Results of Operations

Six Months Ended June 30, % Change

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

(in thousands)

Revenue $ 8,758,113 $ 35,814 $ 8,793,927 $ 6,236,982 40% 41%

Operating expenses:

Direct operating expenses 6,280,367 30,012 6,310,379 4,338,045 45% 45%

Selling, general and administrative expenses 1,558,916 11,357 1,570,273 1,242,395 25% 26%

Depreciation and amortization 251,699 (5,546) 246,153 216,396 16% 14%

Loss (gain) on disposal of operating assets (6,509) 16 (6,493) 2,730 * *

Corporate expenses 144,493 — 144,493 91,657 58% 58%

Operating income 529,147 $ (25) $ 529,122 345,759 53% 53%

Operating margin 6.0% 6.0 % 5.5%

Interest expense 171,210 135,208

Loss on extinguishment of debt 18,366 —

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Other expense, net 4,984 14,438

Income (loss) before income taxes 68,032 (37,260)

Income before income taxes 441,017 223,112

Income tax expense 65,488 43,691

Net income (loss) 44,192 (48,956)

Net income 375,529 179,421

Net income attributable to noncontrolling interests 85,016 41,803

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

Net income attributable to common stockholders of Live Nation $ 290,513 $ 137,618

* 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 $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.

Revenue increased $2.5 billion during the six months ended June 30, 2023 as compared to the same period of the prior year driven by increased revenue in our Concerts segment of $2.1 billion, Ticketing segment of $331.4 million and Sponsorship & Advertising of $93.5 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.

Operating income increased $183.4 million during the six months ended June 30, 2023 as compared to the same period of the prior year primarily driven by increased operating income in our Concerts segment of $105.9 million, Ticketing segment of $125.6 million and Sponsorship & Advertising segment of $23.5 million as further discussed within each segment’s operating results.

These increases were partially offset by higher Corporate expenses primarily due to higher compensation expense in 2023 due to headcount growth as a result of 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 expense increased $36.0 million, or 27%, during the six months ended June 30, 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 $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.

Interest income increased $76.0 million during the six months ended June 30, 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 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.

For the six months ended June 30, 2023, we had a net tax expense of $65.5 million on income before income taxes of $441.0 million compared to a net tax expense of $43.7 million on an income before income taxes of $223.1 million for the six months ended June 30, 2022.

For the six months ended June 30, 2023, the income tax expense consisted of $54.8 million related to foreign entities, $2.4 million related to United States federal taxes, and $8.3 million related to state and local income taxes.

The net increase in tax expense of $21.8 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 $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.

Net income attributable to noncontrolling interests increased $43.2 million during the six months ended June 30, 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 six months of 2023 as compared to the prior year.

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 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.

In addition, at our operated venues and festivals, we monitor ancillary revenue per fan and premium ticket sales.

For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands except estimated events)

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Three Months Ended

(in thousands)

Change Six Months Ended

2023 2022 2023 2022

(in thousands) (in thousands)

Revenue $ 4,633,291 $ 3,597,761 29% $ 6,914,503 $ 4,805,586 44%

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Depreciation and amortization 72,913 72,595 —% 143,441 133,758 7%

Loss on disposal of operating assets 115 1,868 *

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

Loss (gain) on disposal of operating assets (6,674) 1,058 * (6,559) 2,926 *

Operating income (loss) $ 78,481 $ 37,756 * $ (5,941) $ (111,845) 95%

Operating margin 1.7 % 1.0 % (0.1) % (2.3) %

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

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.

Concerts revenue increased $1.0 billion during the three months ended June 30, 2023 as compared to the same period of the prior year, primarily due to more stadium shows in Europe and increased activity in the Asia Pacific market, which was largely closed during the second quarter of 2022.

In addition, there were higher revenues for shows in arenas and theaters and clubs in the United States during the second quarter of 2023 as compared to 2022.

Concerts had incremental revenue of $114.2 million during the three months ended June 30, 2023 from acquisitions and new venues.

Operating results

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 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.

Concerts AOI increased $45.1 million and operating income increased $40.7 million for the three months ended June 30, 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 as well as higher ancillary sales including on-site food and beverage and upsell spend.

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

Concerts revenue increased $2.1 billion during the six months ended June 30, 2023 as compared to the same period of the prior year primarily due to more shows and festivals in Europe and the United States as well as the Asia Pacific market, which was largely closed during the first six months of 2022.

Concerts had incremental revenue of $299.1 million during the six months ended June 30, 2023 from acquisitions and new venues.

Operating results

Concerts AOI increased $95.1 million and operating income increased $105.9 million during the six months ended June 30, 2023 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 and increased selling general and administrative expenses primarily related to increased headcount and compensation expenses.

The increase in operating income outside of AOI of $10.8 million is primarily related to lower stock-based compensation of $17.2 million attributable to timing of grants partially offset by higher depreciation and amortization of $9.7 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

(in thousands)

Change Six Months Ended

2023 2022 2023 2022

(in thousands) (in thousands)

Revenue $ 709,342 $ 575,305 23% $ 1,387,083 $ 1,055,704 31%

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

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

Ticketing revenue increased $134.0 million during the three months ended June 30, 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 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.

Ticketing AOI increased $61.9 million and operating income increased $59.5 million during the three months ended June 30, 2023 as compared to the same period of the prior year primarily driven by increased ticketing activity discussed above.

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 compared to the prior year.

Ticketing revenue increased $331.4 million during the six months ended June 30, 2023 as compared to the same period of the prior year.

Operating results

Ticketing AOI increased $126.8 million and operating income increased $125.6 million during the six months ended June 30, 2023 as compared to the same period of the prior year primarily driven by increased ticketing activity discussed above.

Sponsorship & Advertising

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Three Months Ended

(in thousands)

Change Six Months Ended

2023 2022 2023 2022

(in thousands) (in thousands)

Revenue $ 302,859 $ 263,786 15% $ 472,977 $ 379,475 25%

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AOI margin * 67.1 % 67.6 % 63.1 % 65.4 %

* Percentages are not meaningful.

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

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.

Sponsorship & Advertising revenue increased $39.1 million during the three months ended June 30, 2023 as compared to the same period of the prior year primarily driven by new and expanded domestic venue sponsorships as well as incremental revenue from acquisitions.

Operating results

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.

Sponsorship & Advertising AOI increased $24.8 million and operating income increased $5.3 million for the three months ended June 30, 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, including higher artist activation costs, and depreciation and amortization to support higher activity levels as compared to the prior year.

The increases were partially offset by increases in selling, general and administrative expenses.

The decrease in operating income outside of AOI of $19.5 million was primarily due to depreciation and amortization related to assets utilized to support higher activity levels as compared to the prior year.

Sponsorship & Advertising revenue increased $93.5 million during the six months ended June 30, 2023 as compared to the same period of the prior year primarily due to new venue sponsorships and increased activity in international markets.

Operating results

Sponsorship & Advertising AOI increased $50.7 million and operating income increased $23.5 million during the six months ended June 30, 2023 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 from acquisitions.

The increases were partially offset by increases in direct operating expenses, including higher artist activation costs.

The decrease in operating income outside of AOI of $27.2 million was primarily due to depreciation and amortization related to assets utilized 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 $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.

Our balance sheet reflects cash and cash equivalents of $7.1 billion at June 30, 2023 and $5.6 billion at December 31, 2022.

Included in the June 30, 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 $2.6 billion in cash and cash equivalents, excluding client cash, at March 31, 2023.

Our foreign subsidiaries held approximately $2.6 billion in cash and cash equivalents, excluding client cash, at June 30, 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 $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 balance sheet reflects total net debt of $6.6 billion and $5.9 billion at June 30, 2023 and December 31, 2022, respectively.

Our weighted-average cost of debt, excluding unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.7% at June 30, 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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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.

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, with any remaining proceeds 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.

The amendments provide 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 United States 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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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.

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

For the term loan B, we are required to make quarterly payments of $2.4 million with the balance due at maturity in October 2026.

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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 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.

As of June 30, 2023, the outstanding principal amount of our term loan A facility is $372.5 million and term loan B facility is $841.3 million.

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

As of June 30, 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.

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.

During the six months ended June 30, 2023, we completed various acquisitions that resulted in cash acquired, net of cash paid of $69.4 million.

This includes acquisition of businesses for which we assumed debt of $270.9 million.

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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:

Three Months Ended

Six Months Ended

(in thousands)

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Total capital expenditures $ 157,646 $ 102,204

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.

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

Six Months Ended

(in thousands)

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Operating Activities

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.

Cash provided by operating activities increased $99.4 million for the six months ended June 30, 2023 as compared to the same period of the prior year primarily due to higher deferred revenue from more events on sale during the current year and an increase in 2023 operating results as discussed within each segment’s operating results.

This was partially offset by higher

prepaid expenses and other assets due to timing of receipts as well as lower accounts payable, accrued expenses and other liabilities from the timing of payments.

Investing Activities

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.

Cash used in investing activities increased $54.5 million for the six months ended June 30, 2023 as compared to the prior year primarily due to an increase of $88.4 million in advances of notes receivable and $72.3 million in higher purchases of property, plant and equipment in 2023 for revenue generating and maintenance capital expenditures.

This was partially offset by cash acquired from acquisitions, net of cash paid of $69.4 million during the current year whereas the prior year was cash paid for acquisitions, net of cash acquired of $39.9 million.

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

Financing Activities

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.

Cash provided by financing activities was $73.5 million for the six months ended June 30, 2023 as compared to cash used in financing activities of $137.6 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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As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations.

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

Our foreign operations reported an operating 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.

We operate in certain countries that are hyper-inflationary, for example Argentina, however the impact of these currencies did not have a material impact on our statement of operations for the three and six months ended June 30, 2023 and 2022.

Our foreign operations reported an operating income of $232.8 million for the six months ended June 30, 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 six months ended June 30, 2023 by $23.3 million.

As of June 30, 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 March 31, 2023, we had forward currency contracts outstanding with an aggregate notional amount of $354.3 million.

At June 30, 2023, we had forward currency contracts outstanding with an aggregate notional amount of $292.3 million.

Interest Rate Risk

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

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

We had $6.7 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of June 30, 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 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.

Based on the amount of our floating-rate debt as of June 30, 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 June 30, 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.

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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 three months ended March 31, 2023.

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