01—Abstract
Summary
Summary of the 10-K filed February 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Live Nation Entertainment, Inc. reported total 2017 revenue of $10.34 billiona, up from $8.35 billion in 2016 and the company's twelfth consecutive year of revenue growth.
Operating income fell to $91.4 millionb from $194.9 million, largely because of a $110.0 million legal accrual for a settlement entered into in January 2018 (the Songkick litigation) and a $20.0 million goodwill impairment on the Artist Services (non-management) reporting unit. Net loss attributable to common stockholders of Live Nation was $6.0 million, or $0.48 per share, compared with net income of $2.9 million in 2016; the result was helped by a $55.7 million income tax benefit from the Tax Cuts and Jobs Act, which the company recorded as provisional. The Concerts segment generated $7.89 billion of revenue (76.3% of total) and grew its estimated fans to 85.9 million from 70.9 million, while Ticketing revenue rose to $2.14 billion, with 205.7 million fee-bearing tickets sold.
Sponsorship & Advertising revenue was $445.1 millionc. Cash and cash equivalents were $1.83 billion at year-end, including $769.4 million of client cash, and total debt principal was $2.34 billion. The company also disclosed that it will adopt the new revenue recognition standard on January 1, 2018, which would reduce 2017 consolidated revenue by $650.2 million on a restated basis without changing operating income.
The filing describes significant business risks, including reliance on popular artists, intense competition in ticketing, ongoing ticket-resale restrictions under agreements with the FTC and several states, exposure to foreign currency and Brexit, and a $2.3 billiond debt load. The company does not pay dividends.
02—Key points
Key Highlights
- Total revenue of $10.34 billion in 2017, up from $8.35 billion in 2016, the twelfth consecutive year of revenue growth.
- Operating income fell to $91.4 million from $194.9 million, reflecting a $110.0 million legal settlement accrual and a $20.0 million goodwill impairment.
- Net loss attributable to common stockholders of Live Nation was $(6.0) million, or $(0.48) per share, versus net income of $2.9 million in 2016, aided by a $55.7 million income tax benefit from U.S. tax reform.
- Concerts segment revenue was $7.89 billion (76.3% of total), with estimated fans rising to 85.9 million from 70.9 million.
- Ticketing segment revenue reached $2.14 billion, with 205.7 million fee-bearing tickets sold, and mobile accounted for 33% of total tickets sold.
- Total debt principal was $2.34 billion at December 31, 2017, and cash and cash equivalents were $1.83 billion, including $769.4 million of client cash.
- Beginning January 1, 2018, the company will adopt the new revenue standard, which will reduce 2017 consolidated revenue by $650.2 million on a restated basis with no overall impact on operating income.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 27, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $9.69B$7.83B | +23.8% |
| SG&A Expenses | $1.91B$1.55B | +23.2% |
| Operating Income | $91.40M$194.94M | −53.1% |
| Interest Expense | $107.77M$106.51M | +1.2% |
| Net Income | -$6.01M$2.94M | −304.5% |
| EPS (Basic) | $-0.48$-0.23 | −108.7% |
| Shares Outstanding (Basic) | 204.92M202.08M | +1.4% |
05—Questions
Frequently Asked Questions
Why did operating income decline in 2017 despite revenue growth?
Operating income fell to $91.4 million from $194.9 million mainly because of a $110.0 million accrual for a legal settlement entered into in January 2018, which was recorded in the Ticketing segment's SG&A, and a $20.0 million goodwill impairment for the Artist Services (non-management) reporting unit within Concerts.
What was the legal settlement and how is it reflected in the financials?
The company settled the Songkick antitrust lawsuit in January 2018 with a $110.0 million lump-sum payment. The amount was accrued at December 31, 2017. The filing also notes that Live Nation purchased certain assets from Songkick, including its anti-scalping algorithm, API applications and patent portfolio, in a concurrent transaction.
How much debt does the company carry and when does it come due?
Total indebtedness excluding discounts and issuance costs was $2.3 billion at December 31, 2017. Of this, $353.7 million is due in 2018, $113.9 million in 2019 and 2020 combined, $374.6 million in 2021 and 2022 combined, and $1.5 billion thereafter. The company was in compliance with its debt covenants, including a total leverage covenant of 5.25x through September 30, 2018.
Does the company pay dividends?
No. The company has not declared or paid any dividends since inception and does not expect to pay cash dividends in the foreseeable future. It intends to retain earnings for growth and debt repayment, and the senior secured credit facility limits dividend payments.
What regulatory constraints affect the ticketing business?
The company is subject to agreements with the States of New Jersey, Maryland and Illinois and the FTC that govern and in some cases limit its ticket resale practices. Competitors in the secondary ticket market are not, to the company's knowledge, bound by similar limits. A court-imposed final judgment and a Canadian consent agreement also restrict certain business practices.
06—Continue