01—Abstract
Summary
Summary of the 10-K filed February 23, 2017. Cited figures are marked; the original filing is the authoritative source.
Live Nation Entertainment, Inc. (NYSE: LYV) reported record 2016 revenue of $8.35 billiona, its eleventh consecutive year of revenue growth, up from $7.25 billion in 2015 (15% as reported, 17% excluding the impact of changes in foreign exchange rates).
Concerts generated $5.87 billionb, or 70.3% of total revenue, and was the largest driver of growth, with more shows, higher ticket prices, festival growth and onsite spending at amphitheaters. Operating income rose to $194.9 million from $131.4 million. Concerts remained at an operating loss of $12.1 million, while Ticketing reported operating income of $174.5 million.
Net income attributable to common stockholders was $2.9 millionc, or a basic and diluted net loss of $0.23 per share after accretion of redeemable noncontrolling interests, compared with a net loss of $0.33 per share in 2015. Interest expense of $106.5 million, a $14.0 million loss on debt extinguishment, $17.8 million of equity losses from nonconsolidated affiliates and $28.0 million of income tax expense weighed on bottom-line results. At December 31, 2016, cash and cash equivalents were $1.5 billion, including $591.0 million of client cash, and total principal debt was $2.4 billion.
In October 2016 the company issued $575 milliond of 4.875% senior notes due 2024, amended its senior secured credit facility, and used proceeds to repay its 7% senior notes due 2020. Operating cash flow was $597.5 million, and capital expenditures were $186.8 million, with 2017 capital expenditures expected to be approximately $220 million. The company reported no revolver borrowings and $279.7 million of available revolving capacity, and stated it was in compliance with its debt covenants.
The filing also notes several risks: dependence on popular artists and touring, intense competition in ticketing and promotion, restrictions on its secondary ticketing business under FTC and state agreements, data security and privacy regulation including the GDPR, foreign exchange exposure, and uncertainty from Brexit. Beginning in 2017, the company will combine its Artist Nation and Concerts segments into three reportable segments: Concerts, Sponsorship & Advertising, and Ticketing.
02—Key points
Key Highlights
- Record revenue of $8.35 billion in 2016, up from $7.25 billion in 2015, with Concerts contributing $5.87 billion (70.3% of total revenue) and Ticketing $1.83 billion.
- Operating income increased to $194.9 million from $131.4 million, but Concerts still posted an operating loss of $12.1 million, versus a $105.3 million loss in 2015.
- Net income attributable to common stockholders was $2.9 million, or a basic and diluted net loss of $0.23 per share, compared with a net loss of $0.33 per share in 2015.
- The company connected an estimated 71.1 million fans to 26,262 events and sold 483.7 million tickets in total, including 185.5 million fee-bearing tickets.
- Debt refinancing in October 2016 included $575 million of 4.875% senior notes due 2024 and an amended senior secured credit facility; total principal debt was $2.4 billion at year-end, with $53.3 million due in 2017.
- Operating cash flow rose to $597.5 million from $307.9 million, while capital expenditures totaled $186.8 million.
- Beginning in 2017, Artist Nation will be combined into the Concerts segment, resulting in three reportable segments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 23, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $7.83B$7.25B | +8.0% |
| SG&A Expenses | $1.55B$1.41B | +9.7% |
| Operating Income | $194.94M$131.37M | +48.4% |
| Interest Expense | $106.51M$102.88M | +3.5% |
| Net Income | $2.94M-$32.51M | +109.1% |
| EPS (Basic) | $-0.23$-0.33 | +30.3% |
| Shares Outstanding (Basic) | 202.08M200.97M | +0.5% |
05—Questions
Frequently Asked Questions
What drove the revenue increase in 2016?
Consolidated revenue increased $1.1 billion as reported, or 17% excluding currency impacts. Concerts revenue rose $909.1 million (18% as reported) on more shows and higher average ticket prices, festival growth and higher onsite spending at amphitheaters. Ticketing revenue rose $188.4 million (11% as reported), driven by primary ticket volume and resale growth, while Sponsorship & Advertising revenue rose $43.9 million (13% as reported).
Why did operating income improve so much while net income stayed near breakeven?
Operating income rose to $194.9 million, but below the operating line the company recorded $106.5 million of interest expense, a $14.0 million loss on extinguishment of debt, $17.8 million of equity losses from nonconsolidated affiliates, $10.8 million of other expense, and $28.0 million of income tax expense. Net income attributable to noncontrolling interests was $17.4 million, which left $2.9 million attributable to common stockholders.
How strong is the company's liquidity and debt position?
Cash and cash equivalents were $1.5 billion at December 31, 2016, including $591.0 million of client cash that the company generally does not use for its own financing. Total principal debt was $2.4 billion with a weighted-average cost of debt of 3.8%. The revolving credit facility had no borrowings outstanding and $279.7 million available. The senior secured credit facility includes a total leverage covenant of 5.50x through September 30, 2017, which steps down over time, and the company stated it was in compliance with all debt covenants.
What are the most significant risks highlighted in the filing?
Key risks include dependence on popular artists and touring schedules, intense competition in promotion, venue operations and ticketing, and restrictions on the company's secondary ticketing business under FTC and state agreements that competitors do not face. The filing also cites international and currency exposure, including the post-Brexit decline of the British pound, data security and privacy obligations including the GDPR, government regulation, labor relations at unionized venues, and the seasonality of results.
What changes are expected in reporting and accounting in the coming years?
Beginning in 2017, the company will combine its Artist Nation and Concerts segments, leaving three reportable segments: Concerts, Sponsorship & Advertising, and Ticketing. The company will adopt the new revenue recognition standard on January 1, 2018. It stated that it has not identified changes to the revenue streams representing the majority of reported revenue and expects the bulk of Concerts revenue, which represents 70% of total revenue, to remain deferred until the event date.
06—Continue