SFXE

SFX Entertainment, Inc. (SFXE)

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SFX Entertainment, Inc. (SFXE)

Q1 2014 Earnings Conference Call

May 15, 2014 10:00 AM ET

Executives

Joe Jaffoni – IR

Robert Sillerman – Chairman and CEO

Richard Rosenstein – CFO and EVP, Corporate Strategy and Development

Joseph Rascoff – COO

Howard Tytel – General Counsel

Analysts

Rich Tullo – Albert Fried & Co

Robert Schiff - UBS

Brian Pitz – Jefferies

Kevin Lee - Stifel Nicolaus

Presentation

Operator

Greetings and welcome to SFX Entertainment 2014 First Quarter Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder this conference is being recorded. I will now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Joe Jaffoni

Thank you, operator, and good morning, everyone. In a moment SFX Chairman and CEO, Robert F.X. Sillerman and CFO, Rich Rosenstein as well as other members of senior management will review recent operating and financial developments. We’ll get to management’s presentation and comments momentarily as well as your questions and answers. But first I’ll review the Safe Harbor disclosure.

This morning SFX issued a press release announcing its first quarter financial results for the period ended March 31, 2014. The release is available in the Investor Relations section of the company’s website at sfxii.com. Before we get started, I’d like to remind everyone that this call is being recorded and a webcast replay will be available for 90 days, the details of which are included in our press release this morning.

During our call we may make certain forward-looking statements about the company’s performance. Such forward-looking statements are not guarantees of future performance and therefore one should not place undue reliance upon them. Forward-looking statements are also subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release, as well as the risk factors contained in the company’s filings with the Securities and Exchange Commission.

Also during today’s call the company may discuss non-GAAP financial measures as defined by SEC regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company’s website at www.sfxii.com by selecting the press release regarding the company’s 2014 first quarter financial results.

With that I’d like to turn the call over to Bob. Bob?

Robert Sillerman

Thank you, Joe. It is indeed a pleasure to be back addressing all of you in this what I think is the demonstrable and most determinant quarter in the company’s evolution.

We began this company under two years ago. We’ve completed almost 25 acquisitions, we spent well over $500 million, we span six continents, and we have invested a tremendous amount of time and money not only in figuring out that which we own but much more [thankfully] [ph] ways to make what we [own] [ph] better and the best possible way to activate this audience to brand partners while remaining authentic to our fans.

Some statistics that are not included in the release, that you should note and the numbers are genuinely outstanding.

For instance, our audience growth visually month-over-month is 39%. We now have over 3 billion impressions per month on Facebook, and almost 5 billion on Twitter. The active engaged audience which so far we have done nothing to monetize directly has grown to over 30 million, up from 25 million in the [previous] [ph] quarter. This growth along with the almost 50% growth in number of festivals that will take place this year are the reasons that I am as confident as ever in [that] [ph] which we’ve established.

In the quarter versus last year, we authorized an investment in people to develop this platform that perhaps and more aggressive accounting stats might have sought to capitalize that but you’ll notice a very significant increase in “corporate overhead”; Rich will quantify that for you and [natural development mark] [ph].

In the quarter, we also invoiced and [inaudible] payment on approximately $10 million of marketing partnerships, none of which – none of which we’ve chosen to include in either revenue or pro forma EBITDA. We’ve taken this ultraconservative approach because for instance the first visible output of this for Clear Channel Radio Show or Corona Sunset, which will be in June and July. I do suspect that that revenue along with revenue from the four other revolutionary partners as we call them will begin to add in the second quarter.

The excitement that we’re feeling is tampered by the following. For reasons that I bear full responsibility for, I did something that I have never done in any of the nine other public companies I founded for their many quarters of work. And that is, I let our reporting strategy be dictated by people who want us to fail. And as I said at the Jefferies conference, that was a terrible mistake and I will not do that again. The marketing partnerships as you’re beginning to see are both more complicated but more [expansive] [ph] than we imagined. And just as, for instance, the Corona program where we signed the initial agreement in December, and where we even invoiced and been paid money already we have chosen, I believe correctly, not to include that revenue now because to do so would require us making an estimate of potential future expenses if any against that, and I’m not an [inaudible] we’re going to [report] [ph] facts and only facts, and the facts we would [report] [ph] will be growth in events, growth in attendance, growth in per capita expenditure, substantial investments from people like T-Mobile, the Syco deal, the Corona deal, the Clear Channel deal, and the others, and we’ll be as specific and [report it] [ph] when we know the facts definitively and when the best possible reason for presenting that information exists, it will not be stock market driven.

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