Yes, Live Nation Entertainment (NYSE: LYV) – an entertainment company engaged in ticketing, concert promotions, artist representation, and production can survive the Coronavirus, despite the fact that the company’s business has largely come to a standstill from late March onward amid a cancellation of live events. A Covid recession will impact the company’s revenues, profitability, and cash flows as live events, festivals, and concerts are canceled with people feeling unsafe gathering in groups.
Trefis analyzes the potential Impact Of The Covid-19 Disruption Recession On Live Nation with a focus on the company’s liquidity reserves and concludes that Live Nation has adequate liquidity and a Covid-19 recession will not have a major impact on the company’s cash reserves in the near term.
Impact On Live Nation’s Revenues
Covid-19 has significantly impacted the demand for live events and Live Nation has been particularly badly impacted as about 70% of the company’s events are conducted in North America. This is a concern as the U.S. has become the epicenter of sorts – recording the largest numbers of Covid-19 cases across the globe. The imposition of stay-at-home orders throughout the world during the last weeks of March meant that Live Nation’s Q1 revenues contracted by 21% year-over-year (y-o-y), driven by declines in its concerts category. Over Q2, Revenue declined by a whopping -98% as the cases continued to mount. For the full year 2020, Revenues are likely to decline by about 80% year-over-year.
Impact On Live Nation’s Cash Flows
LYV’s cash flows from operations are likely to fall in FY’20 due to the sharp decline in Revenues and reduced profitability. While the company is expected to cut costs by $800 million, it should still remain deeply in the red. Despite these measures, we estimate that Free cash flow from operations (FCFO) will go from $470 million in 2019 to a cash burn of -$900 million in 2020. Also, with expected capital expenditures of $200 million for the year, FCFO-CapEx will be -$1.1 billion in 2020. This will lead to a 2020 cash balance of $2.6 billion, after factoring in the roughly $1.2 billion it debt it raised during Q2. This is roughly in line with the cash the company had in 2019.
While the situation is likely to remain tough through early 2021, it should get better as a safe and effective vaccine is developed and administered or as herd immunity is built up against the novel Coronavirus. Live Nation expects to resume relatively normal operations around the Summer of 2021, with the company indicating that ticket sales should be scaling-up over the quarters leading up to these shows. The company also previously indicated that 86% of its customers who reserved prior to the pandemic were opting to keep tickets for rescheduled shows rather than opting for refunds. The possible recovery and relatively comfortable cash cushion should help the company tide over the current crisis.
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