What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-07-27 · 134 added, 122 removed, 298 unchanged (46% of the section changed)

15 unchanged sentences

Executive Overview

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.

It was another strong quarter for the Company both financially and in our key performance indicators, setting records for revenues, operating income and AOI.

The Company generated more AOI in the third quarter of this year than we did five years ago for all of 2018.

We saw exceptional fan demand with double-digit growth in fans and ticket sales globally.

Our overall revenue increased by $2.0 billion, or 32%, to $8.2 billion as compared to last year.

Our operating income for the quarter improved by $112 million, or 22%, to $619 million in the third quarter of 2023 due to stronger performance from all three of our major business segments.

Consolidated AOI for the third quarter increased by $215 million, or 35%, to $836 million this year, outpacing revenue growth.

For the first nine months of 2023, our consolidated revenue increased by $4.5 billion, or 36%, to $16.9 billion as compared to last year.

Consolidated operating income and AOI for the first nine months increased by $296 million and $436 million, or 35% and 33%, to $1.1 billion and $1.75 billion, respectively, as compared to prior year.

Our event-related deferred revenue balance of $2.6 billion as of September 30, 2023 is up $730 million or over 39% growth compared to September 30, 2022.

This, coupled with current ticket sales, suggests continued strong demand for concerts, making us confident for continued success in the remainder of the year and looking ahead to 2024.

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

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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%.

Approximately 52 million fans attended our shows in the quarter, compared to approximately 44 million last year, a growth of over 8 million fans or 18%.

The growth was relatively evenly distributed across our global markets with notable strength in mainland Europe, Mexico and Canada.

Growth in amphitheater, stadium and arena fan count drove the majority of the increase in show attendance.

Some of the larger acts touring globally in the third quarter included Beyoncé, Morgan Wallen, Drake and Karol G, reflecting the global diversified base of our artists.

Our ancillary revenue spending at our United States amphitheater shows was nearly $41 per fan for the first

nine months of 2023, close to 10% growth over 2022 levels, driven by higher food and beverage spending as well as upsells.

Concerts AOI for the quarter increased by $60 million, or 21%, compared to the same period in 2022, from $281 million to $341 million.

For the first nine months of 2023, Concerts revenue grew $3.8 billion, or 38%, compared to the same period in 2022, from $10.1 billion to $13.9 billion.

Concerts AOI for the first nine months increased by $155 million, or 44%, compared to the same period in 2022, from $355 million to $510 million.

Through the end of September 2023, our approximately 108 million fans attended our shows compared to approximately 89 million last year, a growth of 19 million fans or 21%.

Our Ticketing segment revenue for the quarter increased by $301 million, or 57%, compared to the same period in 2022 from $532 million to $833 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 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.

We sold approximately 89 million fee-bearing tickets in the third quarter of 2023 compared to 73 million tickets in the same period of the prior year, an increase of 22% .

With respect to GTV, North America increased by 32% on fee-bearing ticket sales while International rose by 49% c ompared 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.

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.

Ticketing AOI for the quarter improved by $153 million compared to the same period in 2022, from $163 million to $316 million.

For the first nine months of 2023, our Ticketing revenue grew b y $632 million, or 40%, compared to the same period in 2022, from $1.6 billion to $2.2 billion.

Ticketing AOI for the first nine month s of 2023 increased by $280 million, or 47%, compared to the same period in 2022, from $600 million to $880 million .

Through the end of September 2023, our fee-bearing ticket sales were 240 million tickets, 44 million ahead of 2022, an increase of 22%.

Overall pricing on our fee-bearing tickets for the first nine months of 2023 increased 13% compared to 2022.

Lastly, we have signed 17 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 $24 million, or 7%, compared to the same period in 2022 from $343 million to $367 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.

The increase was largely driven by our United States business with new strategic deals, expanded deals across our venue, festival and digital assets, and the addition of the Moody Center arena in Austin.

We also added new marketing partners in Mexico, including a new banking client that sponsored an inaugural festival and other local events.

Sponsorship & Advertising AOI for the quarter increased by $24 million, or 11%, compared to the same period in 2022, from $226 million to $250 million.

For the first nine months of 2023, our Sponsorship & Advertising revenue grew $117 million, or 16%, compared to the same period in 2022, from $723 million to $840 million.

Sponsorship & Advertising AOI for the first nine month increased by $75 million, or 16%, compared to the same period in 2022, from $474 million to $549 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 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.

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.

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.

We will drive ticket sales through development of innovative products for fans, with a focus on reducing friction in the ticket purchase experience and creating additional revenue opportunities.

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

Consolidated Results of Operations

Three Months Ended June 30, % Change

Three Months Ended September 30, % Change

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

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Depreciation and amortization 130,653 (3,500) 127,153 102,093 28% 25%

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

Gain on disposal of operating assets (1,583) (1) (1,584) (35,285) (96)% (96)%

Corporate expenses 99,802 6 99,808 66,720 50% 50%

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Interest income (78,107) (25,809)

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

Equity in losses (earnings) of nonconsolidated affiliates (5,382) 14,283

Other expense, net 19,251 7,960

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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 $1.2 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.

Revenue increased $2.0 billion during the three months ended September 30, 2023 as compared to the same period of the prior year due to increased revenue in our Concerts segment of $1.7 billion, Ticketing segment of $301.0 million and Sponsorship & Advertising of $23.8 million as further discussed within each segment’s operating results.

Gain on disposal of operating assets

Gain on disposal of operating assets decreased $33.7 million during the three months ended September 30, 2023 as compared to the same period of the prior year primarily driven by nonrecurring sales of artist catalog rights in 2022.

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.

Operating income increased $112.3 million during the three months ended September 30, 2023 as compared to the same period of the prior year primarily driven by increased operating income in our Ticketing segment of $151.1 million and Sponsorship & Advertising segment of $14.9 million partially offset by a decrease in operating income in our Concerts segment of $18.4 million as further discussed within each segment’s operating results.

These increases were partially offset by higher acquisition transaction expenses due to more accretion expense in the third 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.

Interest income increased $52.3 million during the three months ended September 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 an increase in our cash and cash equivalents.

Equity in losses (earnings) of nonconsolidated affiliates

Equity in losses (earnings) of nonconsolidated affiliates was earnings of $5.4 million during the three months ended September 30, 2023 as compared to losses of $14.3 million for the comparable period of the prior year due to higher operating results from certain nonconsolidated affiliates.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests increased $21.2 million during the three months ended September 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.

Consolidated Results of Operations

Six Months Ended June 30, % Change

Nine Months Ended September 30, % Change

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

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Depreciation and amortization 382,352 (9,046) 373,306 318,489 20% 17%

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

Gain on disposal of operating assets (8,092) 15 (8,077) (32,555) (75)% (75)%

Corporate expenses 244,295 6 244,301 158,377 54% 54%

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Interest income (174,872) (46,565)

Equity in earnings of nonconsolidated affiliates (9,665) (6,243)

Equity in losses (earnings) of nonconsolidated affiliates (15,047) 8,040

Other expense, net 24,235 22,398

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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 $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.

Revenue increased $4.5 billion during the nine months ended September 30, 2023 as compared to the same period of the prior year driven by increased revenue in our Concerts segment of $3.8 billion, Ticketing segment of $632.4 million and Sponsorship & Advertising of $117.3 million as further discussed within each segment’s operating results.

Gain on disposal of operating assets

Gain on disposal of operating assets decreased $24.5 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily driven by sales of nonrecurring artist catalog rights in 2022.

Operating income

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.

Operating income increased $295.7 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily driven by increased operating income in our Concerts segment of $87.5 million, Ticketing segment of $276.8 million and Sponsorship & Advertising segment of $38.4 million, as further discussed within each segment’s operating results.

These increases were partially offset by higher Corporate expenses and greater accretion expense in 2023.

Interest expense

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 expense increased $51.7 million during the nine months ended September 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 $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.

Interest income increased $128.3 million during the nine months ended September 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 an increase in our cash and cash equivalents.

Equity in losses (earnings) of nonconsolidated affiliates

Equity in losses (earnings) of nonconsolidated affiliates was earnings of $15.0 million during the nine months ended September 30, 2023 as compared to losses of $8.0 million for the comparable period of the prior year due to higher operating results from certain nonconsolidated affiliates.

Income tax expense

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.

For the nine months ended September 30, 2023, we had a net tax expense of $121.4 million on income before income taxes of $1.0 billion compared to a net tax expense of $85.6 million on an income before income taxes of $662.4 million for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, the income tax expense consisted of $113.4 million related to foreign entities, $3.6 million related to United States federal taxes, and $4.4 million related to state and local income taxes.

The net increase in tax expense of $35.8 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 $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.

Net income attributable to noncontrolling interests increased $64.4 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily due to higher operating results from certain concert businesses during the first nine months of 2023 as compared to the prior year.

Segment Overview

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Change Nine Months Ended

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Depreciation and amortization 84,912 61,770 37% 228,353 195,528 17%

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%

Gain on disposal of operating assets (1,584) (33,983) (95)% (8,143) (31,057) (74)%

Operating income $ 224,948 $ 243,377 (8)% $ 219,007 $ 131,532 67%

Operating margin 3.2 % 4.6 % 1.6 % 1.3 %

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

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.

Concerts revenue increased $1.7 billion during the three months ended September 30, 2023 as compared to the same period of the prior year primarily due to higher revenues for increased shows and fans globally.

In the United States, the growth was driven by stadium, arena and amphitheater activity while in Europe, stadium shows drove the increase.

Concerts had incremental revenue of $118.4 million during the three months ended September 30, 2023 from acquisitions and new venues.

Operating results

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.

Concerts AOI increased $60.1 million and operating income decreased $18.4 million for the three months ended September 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 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 from more shows compared to the prior period.

The remaining change in operating income outside of AOI of $78.5 million is primarily associated to lower gains on disposals of operating assets of $32.4 million, higher depreciation and amortization of $23.1 million for additional capital expenditures incurred to support the increased operations, and higher acquisition expense of $19.0 million for costs incurred related to contingent considerations changes and legal matters.

Concerts revenue increased $3.8 billion during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily due to more shows in the United States and Europe as well as the Asia Pacific market, which was largely closed during the first six months of 2022.

Concerts had incremental revenue of $417.6 million during the nine months ended September 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.

Concerts AOI increased $155.2 million and operating income increased $87.5 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily driven by an increase in revenues from the number of shows 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 remaining change in operating income outside of AOI of $67.7 million is primarily related to higher depreciation and amortization of $32.8 million for additional capital expenditures incurred to support the increased operations, higher acquisition

expense of $25.3 million for costs incurred related to contingent considerations changes and legal matters, and lower gains on disposals of operating assets of $22.9 million.

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

Three Months Ended

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

Ticketing revenue increased $134.0 million during the three months ended June 30, 2023 as compared to the same period of the prior year.

Ticketing revenue increased $301.0 million during the three months ended September 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 $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.

Ticketing AOI increased $153.3 million and operating income increased $151.1 million during the three months ended September 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.

Ticketing revenue increased $632.4 million during the nine months ended September 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.

Ticketing AOI increased $280.0 million and operating income increased $276.8 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily driven by increased ticketing activity discussed above.

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Three Months Ended

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Change Nine Months Ended

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

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.

Sponsorship & Advertising revenue increased $23.8 million during the three months ended September 30, 2023 as compared to the same period of the prior year primarily driven by new and expanded sponsorships across all of our platforms as well as our expanded footprint.

Operating results

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.

Sponsorship & Advertising AOI increased $24.0 million and operating income increased $14.9 million for the three months ended September 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.

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.

Sponsorship & Advertising revenue increased $117.3 million during the nine months ended September 30, 2023 as compared to the same period of the prior year primarily due to new and expanded sponsorships across all of our platforms as well as our expanded footprint.

Sponsorship & Advertising had incremental revenue of $27.8 million during the nine months ended September 30, 2023 from acquisitions of new venues.

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.

Sponsorship & Advertising AOI increased $74.7 million and operating income increased $38.4 million during the nine months ended September 30, 2023 as compared to the same period of the prior year.

These increases were primarily due to higher sponsorship activity revenues discussed above.

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.

The remaining change in operating income outside of AOI of $36.3 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 $7.1 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.

Our balance sheet reflects cash and cash equivalents of $5.9 billion at September 30, 2023 and $5.6 billion at December 31, 2022.

Included in the September 30, 2023 and December 31, 2022 cash and cash equivalents balances are $1.3 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 June 30, 2023.

Our foreign subsidiaries held approximately $2.4 billion in cash and cash equivalents, excluding client cash, at September 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 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 balance sheet reflects total net debt of $6.6 billion and $5.9 billion at September 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 4.8% at September 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.

Cash held in non-interest-bearing and interest-bearing operating accounts in many cases exceeds the Federal Deposit Insurance Corporation insurance limits.

The invested cash is in interest-bearing funds consisting primarily of bank deposits and money market funds.

The invested cash is in interest-bearing funds consisting primarily of bank deposits and money market funds for which we earn interest based on prevailing market rates which is recorded in interest income in our consolidated financial statements.

For the three and nine months ended September 30, 2023, the amount of interest income we earned rose more than interest expense for the same period.

While we monitor cash and cash equivalents balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail.

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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, with any remaining proceeds 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 our 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

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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 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.

As of September 30, 2023, the outstanding principal amount of our term loan A facility is $367.5 million and term loan B facility is $839.1 million.

There were no borrowings under the revolving credit facilities as of September 30, 2023.

Based on our outstanding letters of credit of $46.1 million, $583.9 million was available for future borrowings from revolving credit facilities.

Debt Covenants

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.

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

During the nine months ended September 30, 2023, we completed various acquisitions that resulted in cash acquired, net of cash paid, of $29.2 million.

This includes acquisition of businesses for which we assumed debt of $271.3 million.

Capital Expenditures

Venue and ticketing operations are capital intensive businesses, requiring continual investment in our existing venues and ticketing systems in order to address fan and artist expectations, technological industry advances and various federal, state and/or local regulations.

Venue and ticketing operations require ongoing investment in our existing venues and ticketing systems to address fan and artist expectations, technological industry advances and various federal, state and/or local regulations.

We categorize capital outlays between maintenance capital expenditures and revenue generating capital expenditures.

Maintenance capital expenditures are associated with the renewal and improvement of existing venues and technology systems, web development and administrative offices.

Revenue generating capital expenditures generally relate to the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements.

Revenue generating capital expenditures generally relate to the construction of new venues to expand our global footprint, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements.

Revenue generating capital expenditures can also include smaller projects whose purpose is to increase revenue and/or improve operating income.

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

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Total capital expenditures $ 257,694 $ 176,375

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.

Revenue generating capital expenditures during the first nine 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.

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Operating Activities

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.

Cash provided by operating activities decreased $165.9 million for the nine months ended September 30, 2023 as compared to the same period of the prior year primarily due to lower accounts payable, accrued expenses and other liabilities from the timing of payments and higher prepaid expenses and other assets due to timing of shows.

This was partially offset by

an increase in 2023 operating results as discussed within each segment’s operating results as well as higher deferred revenue from timing of events on sale.

Investing Activities

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.

Cash used in investing activities increased $104.2 million for the nine months ended September 30, 2023 as compared to the prior year primarily due to an increase of $98.9 million in purchases of property, plant and equipment in 2023 for revenue generating and maintenance capital expenditures and $71.2 million in higher advances of notes receivable.

This was partially offset by cash acquired from acquisitions, net of cash paid of $29.2 million during the current year whereas the prior year was cash paid for acquisitions, net of cash acquired of $38.8 million.

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Financing Activities

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.

Cash provided by financing activities was $44.9 million for the nine months ended September 30, 2023 as compared to cash used in financing activities of $175.2 million for the same period of the prior year primarily due to proceeds in 2023 from the issuance of our 3.125% convertible senior notes partially offset by the repurchase of our 2.5% convertible senior notes and capped call transactions in connection with such issuance, as well as higher distributions to noncontrolling interests.

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.

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.

Our foreign operations reported an operating income of $443.0 million for the nine months ended September 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 nine months ended September 30, 2023 by $44.3 million.

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

At September 30, 2023, we had forward currency contracts outstanding with an aggregate notional amount of $159.6 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 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 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.

We had $6.7 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of September 30, 2023.

Of the total amount, we had $5.8 billion of fixed-rate debt and $835.0 million of floating-rate debt.

Based on the amount of our floating-rate debt as of September 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 September 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.

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

The agreement was amended in February 2023 for 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 six months ended June 30, 2023.

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