Live Nation Entertainment, Inc. (LYV)

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Live Nation Entertainment (LYV)

Q2 2013 Earnings Call

August 06, 2013 5:00 pm ET

Executives

Michael Rapino - Chief Executive Officer, President, Director and Member of Executive Committee

Joe Berchtold - Chief Operating Officer

Elizabeth Katheleen Willard - Chief Financial Officer and Executive Vice President

Analysts

John Tinker - Maxim Group LLC, Research Division

Douglas M. Arthur - Evercore Partners Inc., Research Division

Martin Pyykkonen - Wedge Partners Corporation

Presentation

Operator

Good afternoon. My name is Carrie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment Second Quarter 2013 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions]

Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements relating to the company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings on Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results.

Live Nation will also refer to some non-GAAP measures on this call. In accordance with SEC Regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measures in their earnings release. The release, reconciliation and other financial or statistical information to be discussed on this call can be found on www.livenation.com/investors.

It is now my pleasure to turn the call over to Mr. Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment.

Michael Rapino

Good afternoon. Welcome to our second quarter conference call. We had great results for our second quarter with all our core businesses performing well, setting us up for what looks to be a record summer.

Starting with the top line, our revenue was up 8% for the quarter, driven by growth in our Concert position. Looking broadly at consumer demand for Concerts, we have seen double-digit growth in concerts at both Live Nation and Ticketmaster on a global basis, reconfirming the quality of live artist on the supply side and strong fan desire to attend live shows as a top entertainment option.

At the same time, we continue to build share, with ticket sales for our Concerts up 26% through June. We're also continuing to drive AOI growth at even faster rates than revenue. AOI was up 10% in the quarter, and free cash flow also up for the quarter, along with higher free cash on our balance sheet.

As I did last quarter, let me give you an update on the 5 strategic drivers that we believe will deliver our 2015 AOI and cash targets. First, growing market share in concerts and tickets up by 5 million tickets. If you can tell from my opening comments, this is shaping up to be our strongest concert season ever. We've already sold 2 million more fans at our shows this summer than last year at this time, with double-digit growth expected for this year across festivals, amphitheaters and arenas. We're seeing this growth from both the artist and fan side, with show count growth from clubs, amphitheaters and arenas, while also increasing the attendance per show at all of our venues.

As a result, I expect us to achieve our 5 million incremental fans by 2014. In addition to this organic growth, we also continue to look for strategic acquisitions and partnerships that could expand our platform. In this quarter, we closed on Insomniac, the world's largest electronic dance company and expanded into Hong Kong and Singapore, key markets for our Asian footprint.

Our second priority is to increase event awareness and ticket conversion, driven by shifting and tripling spend in social and digital channels by 2015 to over 35% of our ad budget. In the first half of this year, we've increased our attendance per show across arenas, stadiums and amphitheaters. And I believe these shows are benefiting as we shift from spending on broad media to increasing our spent on artist-specific social channels, targeted data-driven direct marketing. For 2013, we have increased the spend to 25% of our total ad spend and are on path to our 35% goal.

Third, deliver double-digit growth in our Sponsorship & Advertising business. This business continues to deliver consistent double-digit growth, fueled by the overall growth of our Concert platform, continued strong double-digit growth of our online advertising units and additional global strategic sponsors who are attracted to the scale and scope of our global platform.

Fourth, we are triple market share in our secondary business. As I have discussed in the past, we see secondary ticketing as one of our greatest growth opportunities. There's a $4 billion market in the U.S. alone, and we have a very low market share. We are highly confident that bringing primary and secondary together on one secure, transparent platform, done in collaboration with content owners and venues, we can build a product which will create great value for fans.

We launched TicketMaster-Plus in beta a few weeks back with a handful of shows and plan on spending much of the remainder of this year working with teams, venues and content owners to drive adoption. As a result, we expect to continue building share in secondary through this year and then accelerate our share growth in 2014 as TM-Plus is fully in place.

Read the rest of this transcript for free on seekingalpha.com