01—Abstract
Summary
Summary of the 10-K filed February 26, 2015. Cited figures are marked; the original filing is the authoritative source.
Live Nation Entertainment, Inc. (NYSE: LYV) reported revenue of $6.87 billiona for 2014, up 6% from $6.48 billion in 2013, marking its fourth consecutive year of overall revenue growth.
Growth came from all four segments: Concerts revenue rose 5%b on more North American stadium and amphitheater shows and festival activity, Ticketing revenue rose 11% on primary and resale growth, Artist Nation rose 10% on higher artist management commissions, and Sponsorship & Advertising rose 5%. Concerts accounted for approximately 68.8% of total revenue and Ticketing for 22.7%. Profitability weakened sharply.
Consolidated operating income fell to $7.2 millionc from $139.7 million, largely because of goodwill impairments of $135.0 million, recorded for the International Concerts and Artist Services (non-management) reporting units. Concerts posted an operating loss of $190.5 million, including a $117.0 million impairment. Net loss attributable to common stockholders of Live Nation was $90.8 million, or $0.49 per share, compared with a loss of $43.4 million in 2013.
Ticketing operating income rose 15% to $117.3 milliond, and Sponsorship & Advertising operating income rose 8% to $207.7 million. The balance sheet carries substantial leverage. Total indebtedness was $2.1 billion at December 31, 2014, against cash and cash equivalents of $1.4 billion, of which $533.8 million was client cash.
The company reported a weighted-average cost of debt of 4.3% and was in compliance with its debt covenants. It issued $250 million of 5.375% senior notes and $275 million of 2.5% convertible senior notes in 2014 and redeemed its 2.875% convertible notes. Management does not plan to pay dividends and expects 2015 capital expenditures of approximately $145 million.
02—Key points
Key Highlights
- Revenue reached $6.87 billion in 2014, up 6% from $6.48 billion, with all four segments contributing to growth.
- Operating income fell to $7.2 million from $139.7 million, driven by $135.0 million of goodwill impairments in the International Concerts and Artist Services (non-management) reporting units.
- Net loss attributable to common stockholders of Live Nation was $90.8 million, or $0.49 per share, versus a $43.4 million loss in 2013.
- Ticketing revenue rose 11% to $1.56 billion and operating income rose 15% to $117.3 million; resale gross transaction value increased 55% to over $900 million, driven by the TM+ product.
- Concerts operated at an operating loss of $190.5 million, while the segment's revenue increased 5%; North American fans rose 6%, but global concert attendance fell 2%.
- Total indebtedness was $2.1 billion at year-end, with a weighted-average cost of debt of 4.3%; the revolver had $273.0 million available.
- The company reported cash and cash equivalents of $1.4 billion, including $533.8 million of client cash, and has no plans to pay common dividends.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 26, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $6.87B$6.48B | +6.0% |
| SG&A Expenses | $1.34B$1.23B | +9.0% |
| Operating Income | $7.16M$139.66M | −94.9% |
| Interest Expense | $106.31M$111.66M | −4.8% |
| Net Income | -$90.81M-$43.38M | −109.3% |
| EPS (Basic) | $-0.49$-0.23 | −113.0% |
| Shares Outstanding (Basic) | 198.87M193.89M | +2.6% |
05—Questions
Frequently Asked Questions
Why did operating income fall so sharply in 2014 despite revenue growth?
The decline was mainly due to $135.0 million of goodwill impairments recorded in the fourth quarter, $117.0 million for International Concerts and $17.9 million for Artist Services (non-management). Concerts also had lower gains on disposals, higher SG&A, and weaker international results. Excluding the goodwill impairment, operating income and net income both improved, according to management.
How is Live Nation's debt structured and when does it mature?
Total indebtedness was $2.1 billion at December 31, 2014. It includes term loans and a revolver under the senior secured credit facility, 7% senior notes due 2020 ($425 million principal), 5.375% senior notes due 2022 ($250 million), and 2.5% convertible senior notes due 2019 ($275 million). Of total indebtedness, $47.5 million is due in 2015 and $1.6 billion is due thereafter.
What drove growth in the Ticketing segment?
Ticketing revenue rose 11%, largely from primary and resale growth in North America. Total tickets sold increased 3%, and resale gross transaction value increased 55% to over $900 million, reflecting the success of the TM+ resale product. Mobile and tablet sales were 18% of total tickets, up from 14% the prior year.
What risks does the company highlight related to its ticketing business and regulation?
The company cites intense competition from self-ticketing systems and other ticketing providers, and restrictions on its secondary ticket business under agreements with the FTC and the attorneys general of New Jersey, Maryland and Illinois, which competitors are not bound by. It also notes that its ticketing re-platforming project may not be completed on time or on budget, and that legislative proposals could restrict ticketing methods.
06—Continue