Michael Rapino - Live Nation Entertainment, Inc. Joe Berchtold - Live Nation Entertainment, Inc. Kathy Willard - Live Nation Entertainment, Inc..

John Janedis - Jefferies LLC Amy Yong - Macquarie Capital (USA), Inc. David Karnovsky - JPMorgan Securities LLC Jason Boisvert Bazinet - Citigroup Global Markets, Inc. John Tinker - Gabelli & Company David Joyce - Evercore ISI John Healy - Northcoast Research Partners LLC Douglas M. Arthur - Huber Research Partners LLC Kyle Evans - Stephens, Inc.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc. Brandon Ross - BTIG LLC.

Good afternoon. My name is Christy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment Fourth Quarter 2016 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period.

Before we begin, the Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the company's anticipated financial performance, business prospects, new developments, and similar matters.

Please refer to the Live Nation's SEC filings, including the Risk Factors and cautionary statements, included in the company's most recent filings on Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call.

In accordance with the SEC Regulation G, Live Nation has provided a full reconciliation of the most comparable GAAP measure in the earnings release. The release reconciliations and other financial or statistical information to be discussed on this call can be found under the Investor Relations tab on investors.livenationentertainment.com.

It is now my pleasure to turn the call over to Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment..

Good afternoon and welcome to our fourth quarter and full year 2016 conference call. Live Nation delivered a sixth consecutive year of record results across revenue, AOI and free cash flow, with revenue up 17%, operating income 47% and AOI 12% at constant currency.

Our three core divisions, concerts, ticketing and advertising, each delivered their strongest AOI results in the history of the company. We continue to see tremendous power of the live event, with strong consumer demand and robust supply of new and established artists, hitting the road from clubs to stadiums.

Live is truly a unique entertainment form that cannot be duplicated and creates lifetime memories that fans today are craving more than ever in this experienced economy. We believe the live business will continue to have strong growth for years to come as fans drive demand, artists are motivated to tour, and technology drives conversion.

On the concert business, Live Nation continued to grow its global concert market share, adding 7 million fans in 2016 for a total of over 71 million fans, driving revenue up 20% and more than doubling concerts AOI.

We built our global leadership position in every part of our business with double-digit fan growth in both North America and international, and across all channels of stadiums, amphitheaters, festivals, theaters and clubs.

We continued expanding our global footprint in 2016, as we added promoting offices in Germany, South Africa and Israel, taking us to over 40 countries worldwide. Across all markets, we invested $4.4 billion to stage 26,000 shows, ranking Live Nation by far the largest financial supporter of artists in the music business.

Average ticket prices for our show increased by 5% in 2016. These increases were driven largely by higher pricing for the best tickets, as artists moved to more effectively capture the true value from their shows versus leaving billions outside the event P&L. Onsite, our average spend grows well.

Amphitheaters spending grew by 9% to over $22, as we added more high-end products, improved the quality of our offering and increased our point-of-sale. Our growth is continuing into 2017, a further sign of a tremendous fan demand for concerts and the success of our global platform.

Ticket sales are up double-digit year-on-year through February 2017, driven by sales for arena and stadium shows. And we are confident we will again see strong demand across the business this year. Our advertising unit continued with its strong consistent growth profile with revenue up 15% and AOI 10% in 2016.

71 million fans onsite provides a unique advertising platform for our sponsors to touch fans directly at scale. And as brand spend more on events, Live Nation is poised to capture these dollars, given the direct fan touch, its scale, data insights and digital footprint.

We saw this movement in 2016, with our top strategic sponsors, were a key driver for our growth. We now have over 50 plus brands who spend over $1 million per year with us, a collective spend of $245 million, up 20% from last year.

Sponsorship in our festival portfolio continued to be very attractive for brands with sponsorship growth of 18% across our festival portfolio. And at the same time, we continue to amplify our onsite events with online mobile reach.

In 2016, we generated over 4 billion views across Live Nation sites and platform partners including Snapchat, Facebook and YouTube, providing our brand partners with further scale and reach.

We expect continue advertising AOI growth at historic levels in 2017, with 70% of our budgeted advertising revenue for the year already contracted, and pacing double-digit ahead of last year at this time.

In 2016, Ticketmaster continued growing its global leadership in ticketing with fee-bearing GTV up 16% and overall GTV up 11% to $28 billion at constant currency, while delivering 480 million tickets to fans in 28 countries. Our secondary business continues to have robust growth with GTV up 26% in 2016.

Overall, the Ticketmaster platform continues to demonstrate its effectiveness at selling tickets to fans, with 6 of the top 10 sales months ever recurring in 2016 and conversion rates up across both online and mobile platforms.

Our recent investment in Ticketmaster's enterprise platform, an open API, now allow clients to sell tickets on partner sites, driving the sale of over 10 million tickets in 2016.

This has further deepened our relationship with teams and artists who are looking for enhanced reach with sites such as Spotify, Bandsintown, Facebook, Groupon, Costco and more to come.

With this combination of stronger than ever ticketing platform increased broad distribution, Ticketmaster is better positioned than ever to continue growing its global leadership position in ticketing. This success is continuing into 2017, as ticket sales are up 9% through February 17, positioning us for continued growth.

Overall our success in 2016 reconfirms that Live Nation has created an unparalleled live platform, bringing 550 million fans in 40 countries that's unrivaled two hours of live events.

The live business continues to have strong growth opportunity with artists touring as their primary source of income and fans showing up record levels across the globe for that lifetime experience. All of this creates tremendous runway for Live Nation to continue delivery, the level of growth we have demonstrated over the last several years.

As I've already indicated, the key leading indicators for each of our businesses on a year-on-year basis into February are pointing to another strong year in 2017. With that I'll turn over to Joe, who will take you through additional details on the deliverables on each division..

Thank, Michael. Looking at our business segments, first Concerts. For the full year, Live Nation Concerts revenue was up 20% and AOI was up 125% on constant currency. We grew our attendance by 12% to a record 71 million fans, once again promoting the vast majority of the top global tours including Beyoncé, Coldplay, and Guns N' Roses.

For the year, looking at markets in North America, attendance grew by 12%, 48 million fans with show count up 4% and attendance per show up 7%. And stadiums and amphitheaters were each up by about 2 million fans. Internationally, attendance was up 13% driven by a 2 million fan increase in stadium attendance.

Globally, we continued growing our festival portfolio, adding 11 festivals to give us a global portfolio of 85 festivals in 12 countries. As a result, we increased festival attendance by 15% to over 7 million fans, and now have 23 festivals that each attract over 100,000 fans.

Looking specifically at the fourth quarter, concert revenue was up 3% and AOI up 45%, both at constant currency. These results were driven by a favorable shift in show mix with more fans at higher priced arena and stadium shows, while overall attendance was flat year-over-year for the quarter.

As we move into 2017, as Michael said, ticket sales are up with over 28 million tickets already sold for shows this year. And our confirmed show pipeline for amphitheaters, arenas, and stadiums is up 11%, with three artists, Coldplay, U2 and Bruno Mars already selling over 1 million tickets each for tours this year.

At Artist Nation, revenue was down 2% at constant currency in 2016 and most importantly, our Artist Nation artists continue to be a key feeder to our concerts flywheel. And in 2016, these artists performed for over 7 million of our fans in almost 600 shows.

Turning to sponsorship & advertising, it delivered 15% revenue and 10% AOI growth for the year at constant currency and in the fourth quarter at constant currency, revenue was up 22% and AOI was up 11%.

Finally Ticketmaster, in 2016 ticketing revenue was up 13%, while AOI was up 6%, as we grew global GTV on fee-bearing tickets by 16%, all at constant currency. Primary ticket fee-bearing GTV was up 15% at constant currency for the year, with concerts leading this growth with over a $1 billion increase in GTV.

Secondary ticketing GTV was up 26% for the full year at constant currency, with concerts and the major sports leagues similarly contributing to this growth. Mobile ticketing continued growing rapidly, up 36% to over 45 million tickets sold in 2016 as we continued improving our mobile website and apps.

Ticketing margin declined 1.1% year-on-year as we continued growing our global platform, both geographically and with new products.

We entered four new countries in 2016 as we continued focusing on expanding our international business, substantially in markets that have a lower service fee structure and therefore lower margin profile than the traditional U.S. business.

Similarly, we delivered very strong growth in both our Front Gate festival platform and our Universe do-it-yourself business in 2016, with ticket sales up almost 30% and more than doubling respectively.

Continued expansion into these markets and product lines is core to our global ticketing strategy, one which has been successful in growing our customer base, ticketing volume and profitability over the past several years, and which we expect to continue being successful going forward.

For the fourth quarter, global fee-bearing GTV was up 15%, revenue was up 11% and AOI down 4% at constant currency. And secondary GTV grew by 13%, while primary GTV was up 15%, both at constant currency. In summary, in 2016 each of our core businesses grew revenue and AOI.

Looking forward in 2017, we expect to continue our growth based on our leading indicators. In concerts, show count and ticket sales for shows this year are both up double-digits. Sponsorship & advertising has sold over 70% of their budgeted activity for the year, pacing double-digits ahead of last year.

And ticketing sales volume is up 9% through mid-February. Together, this gives us confidence that we will continue growing our business at historical rates.

A few points of note, first from a phasing standpoint with our planned strong summer concert season, particularly with festivals and stadiums, we expect our AOI to be even more Q3 driven this year. As a result, we expect Q1 as a percentage of full year AOI to be lower than last year.

And on FX, we ended 2016 with a 2% impact on revenue and a 1% impact on AOI. At this point, we don't see a material impact on 2017 numbers. I will now turn the call over to Kathy to go through more on our financial results..

concerts, sponsorship & advertising, and ticketing. We believe combining our concerts and Artist Nation segments will more accurately reflect the activities of our concerts business by including the full range of services we provide to artists.

Moving to our balance sheet, as of December 31, we had total cash of $1.5 billion, including $591 million in ticketing client cash and $525 million in net concert event-related cash, leaving a free cash balance of $411 million. Cash flow provided by operations was $597 million in 2016, compared to $308 million in 2015.

This growth came from higher net income and an improvement in net working capital, driven by increased cash received for future events along with timing of payables. Free cash flow for the year was $352 million, up 5% over last year, driven by the growth in our AOI. Free cash flow as a percentage of AOI was 55%.

This percentage was impacted by higher distributions to non-controlling interests and non-consolidated affiliates in 2016. $26 million of this increase was driven by investing in new or increased equity interest along with a multi-year distribution that was paid in 2016.

Without this impact, our free cash flow as a percentage of AOI would have been 59% and we expect our free cash flow percentage to return to historical levels for 2017. For the full year, total capital expenditures were $187 million, essentially split between maintenance and revenue generating items.

The increase this year was primarily due to technology system enhancements and venue related projects. For 2017, we expect our total capital expenditures to be approximately $220 million, with about half of this towards revenue generating expenditures.

Following our debt refinancing in October, our total net debt as of December 2016 was $2.3 billion with a weighted average cost of 3.8%, down from 4.3% at the end of the third quarter.

As we look forward to 2017, our total deferred revenues for future shows, our key leading indicator, was $722 million at the end of 2016, up 30% over the $553 million last year, another factor pointing to the strength of our 2017 concert pipeline. Thank you for joining us today and we will now open the call for questions.

Operator?.

First, we'll take John Janedis from Jefferies. Your line is open..

Thank you. Michael, there has been a lot of focus on ticketing with the potential for new entrants from Amazon to much smaller players.

So as you look out for this year and beyond, do you anticipate much of a change in the competitive landscape or the profitability or fee structure of the industry more broadly?.

Yeah, we don't see that the core profitability of the business changing. Service fees are a pretty vital part of the client business. So the service fees are driven by the client, and majority of that go to the sports team or the venue or the artist, ultimately. So we don't see the economics change. It's – tickets always been a competitive industry.

I think the – some of the pivotal moves that we made over the last few years on our platform, predicting that eventually we would have to become more flexible for our clients and build a better platform that was more open than closed, TM+ when we put secondary on our platform with the start of opening up a historically closed platform.

And then the APIs that we've talked about over the last year, of really looking to figure out how to power that buy button and allocate tickets to other platforms that can increase conversion such as the Groupon's and the Facebook's, Spotify's and we're having conversations with Amazon and we'll look to allocate our API that way too if there is some incremental ticket sales that can occur.

So, we think the – the core value of Ticketmaster at the core is incredible system software that helps clients sell tickets.

We have an incredible great marketplace, one of the largest websites in the world that's growing stronger every year and we think we're also going to make sure that our clients and artists and fans through our new platform have the opportunity to enhance in their reach also through these platforms.

So, we think that, the fact we've embraced over the last couple of years, this idea that having multiple points of sale is good for our business, that increases sales, and ultimately in Live Nation core business, our 70 million plus fans, lots of shows are unsold, lots of fans don't know about shows still.

So, we're all supportive of having a wider distribution platform selling concert tickets to increase ultimately the sale..

All right. Thanks, Michael. And maybe separately, you know appreciating the comments on the segment at least historically.

Can you talk more about Artist Nation, obviously costs have ticked up over the past couple of years along with margin pressure and I was hoping you could speak to that, maybe the underlying health of that business and any secular headwinds that maybe emerging?.

Yeah. We've been very consistent on that segment. It's – we don't consider it a core segment in itself, we've always considered it a very important, strategic piece of the business to power our core business. So this year, we had some investments in certain of the management companies that brought down some of the margin.

But overall, we like that business, it's a very high margin business, it's a very accretive business when we bring in partners. And more importantly, it's great to be close to the talent, if you can feed your core businesses to drive your overall segment. So we like the business.

We're going to keep – we think being closer with artist managers and having over up to 300 artists in your portfolio, while decisions on what promoter and what sponsors to play with and what ticketing companies can help you are smart, strategic businesses to be in.

And we think 2017 will actually be a stronger year for that division as it's got a robust touring schedule ahead for them..

Thank you very much..

And next, we'll go to Amy Yong with Macquarie. Your line is open. Ms. Yong, your line is open..

Hi, can you hear me?.

Yes..

Now I can..

Hello?.

Yeah. Amy, we can hear....

Okay. Sorry about that.

So, first question is for Kathy, on the $220 million CapEx guidance, can you talk about where the revenue generating CapEx is being allocated to? And perhaps, where the growth is actually going to come from and where we should see that on the top line? And then as you start generating cash, can you just talk about priorities of cash, given some of the M&A activity that you've seen? Thank you..

Yeah. So basically the $220 million will be spent on ticketing, as it has in the past, generally. And then in concerts, we have some opportunities with venues for expansion of the overall footprint, there we're going to be putting the money into. So those are the main drivers for the change.

And, sorry, and then continuing on the onsite part, continued VIP as well as food and beverage changes as we've been doing in 2016. As far as where we're....

Great..

Sorry?.

No, I'm sorry..

And then as far as where we're putting the money, there's no change in what we've been saying. So we're continuing to invest in the business and that's revenue generating CapEx, that's acquisitions, that's advances to artists and clients. So I don't see any change in that direction in 2017..

Got it. And just on the onsite revenue which grew 9%, and I think a lot of people think there is a long runway for growth here and it's pretty achievable.

Where do you think that that can go?.

Well, Amy, this is Joe. I think we've said on a few occasions that we benchmark ourselves against sports teams in that regard. We're at about $22 for our amphitheaters right now. We think that over time that could be a $30 kind of number for our fans at the amphitheaters..

Great. Thank you..

And next we'll go to David Karnovsky with JPMorgan. Your line is open..

Hi. Just on concerts. I think this was the best Q4 in terms of AOI, at least since the merger with Ticketmaster. Was this entirely driven by mix or were there other factors at play here such as higher ancillary spending? Just trying to get a sense for the strong performance..

Yeah. I think, number one as we called out was the mix and just the volume of some of the bigger shows. Michael also talked about the higher ticket pricing that flowed through, particularly on the front of the house, which helps a lot in the concert business.

And then, yes, onsite, all of the BIF (27:33) that flowed through for festivals or amphitheaters into the early part of the fourth quarter..

Okay.

And then just with Lollapalooza expanding to another location in Paris this year, how much of an ongoing opportunity do you see to take some of your festival brands and bring them abroad?.

Well, we think Lolla's just got a real exceptional profile. It's one of the few brands that has been able to expand to South America, now into Europe successfully. So, we see that brand as very global with – we got a runway of growth planned for that brand around the world.

And our Electric Daisy brand in Vegas, the largest dance festival in the world, now in Mexico this week – next week, we will sell 200,000 tickets to that EDC Mexico edition that we started a couple of years ago. So we see that EDC now in Europe and in Brazil and Mexico and Japan.

So, we think, out of our 80 plus brands, we have a very central strategy around what brands can move or what best practices can move. So we think there's a few others that have some potential..

Okay. Thanks..

And next, we'll take Jason Bazinet with Citi. Your line is open..

Thanks. I always get a smidgen nervous when things get reclassified or combined. But I recognize Artist Nation is pretty small. Is there any reason to believe that the revenues or adjusted operating income at Artist Nation will change from sort of the historic levels once we mash this together with concerts? Thanks..

No..

It is purely, I mean if you've listened to us earnings after earnings, we have three core businesses, and the management business is obviously paramountly strategic to our concert business, that's why we're in it. And it's where all of the material value is driven. So, we want to make sure that we just align that kind of activity around the outcome.

We wake up every day talking to artist managers about what our market share is in the concert business, not whether they made $3 million or $4 million that year. So our core goal of all of that is to provide a great value to those artists and win over their touring business and drive it.

So you don't get – when you separate it slightly and you get questions like the other one on what's the growth profile? To look at the growth profile, you have to say how many shows did you promote last year and what was that success rate.

So we want to just align those activities against what the core mission is, just to drive our global touring business, and we use that as an investment strategy to do that..

Thank you very much..

And next, we'll take John Tinker with Gabelli. Your line is open..

Thank you. A more general question. Well, two questions.

One is, your largest shareholder's now actually Formula 1, and could you perhaps discuss where you think you fit into that? And secondly, what might the opportunities be given that Chase has said he really wants to turn each one of the races into a Super Bowl, and you can certainly look at the fact that Taylor Swift saved the event in Austin, and would that be material or is it just a small add-on?.

Yeah. I mean where Maffei and Malone decide to park their investment in us or what they call it, they're much smarter at that than I am. They've been incredible shareholders, they're long-term players as you know. So, we're aligned to the same principles. We want to grow long-term shareholder value and they've been great shareholders.

So, I don't spend much time worrying about where they're housing their investment, it doesn't affect our day-to-day business. Greg is our Chairman, we talk strategy, not what ticker it will be under. As far as Formula 1, I've met Chase, big fan of his, his history, obviously, I don't know a lot about Formula 1.

From what I've seen under the covers, it certainly looks like it's got a real untapped potential, little bit unique – a little bit relevant to our business in the sense that it's a global business with different local promoters, but they'll have to figure out how to centralize some strategies to extract some value.

We don't think it's an overriding huge opportunity to the bottom-line, but we're absolutely talking of them as we would be talking always to the NFL. We've done it with the Indianapolis 500 in the past, NASCAR. If you got a race track, a lot of people and a check book, we're willing to figure out how to enhance your event through entertainment.

And, I think, they're very motivated to reinvent the experience, and we'll – we're going to see if we can help them on a few of those..

Just one more quick question.

What's your NOL now and at what point would you anticipate beginning to pay more tax?.

Hold on while I pull up the total, not really much change and we still have several years, John, before we think that we'll be a U.S. taxpayer. As you know, we pay state and we pay some Federal, but we're several years out from hitting that..

Thank you..

And next, we'll take David Joyce with Evercore ISI..

Thank you. I wanted to touch on the ticketing margins. Again, Joe you had mentioned how you entered four more countries in the past year, and that impacted the margins a little bit. You also more recently entered Israel and Eastern Europe.

Could you help us think about the margins for 2017 in terms of how far along you are in integrating the acquisitions from last year as well as the new additions to the footprint? Thank you..

Yeah. I mean, the acquisitions are integrated. I don't think that's the issue. The issue is, as when you enter a new market, you're going to be at a lower scale and most of these markets are also lower service fee as a percentage of your ticket price often times and some of them you're also a lower ticket price.

So, your margin profile is just going to be structurally lower in those markets. So, as we've talked, our overriding focus at Ticketmaster is to continue to drive the global sales of that business.

On our platform, as Michael talked through the open APIs, off of our platform, we've served the teams and the artists by selling their tickets more effectively and selling more of them. That means more countries, it means more other platforms like the Front Gate and do-it-yourself platform that I talked about.

And in a lot of those cases, those tickets that we sell, the incremental ticket maybe at a lower margin then some of the other tickets, but it continues to build the business, serve our customers and drive the overall cash profitability of the business.

So that playbook has worked pretty well for the past five years, and we expect to continue doing that over the next few years. I don't think we're at a point that we're going to declare what the margins are for 2017 in that business right now, but you can expect us to overall continue to do everything we can to grow the business..

All right. Thank you..

And next, we'll take John Healy with Northcoast Research..

Thank you. Joe, I want to ask a little bit about the Ticketmaster business. On secondary (35:36) I think you said gross ticket value grew 26%.

Is there a way that you can help us think about maybe which units of ticket are growing on that platform? And as you study that business and how it's evolving, how you feel your share kind of shook out within the industry in 2016 and maybe how you're thinking compared to a year ago?.

Yeah. So, again, I think stepping back, John, the first thing that we always look at when we talk about the secondary business is that it's $8 billion value that is sitting outside the P&L of the artists and the teams that are driving the content. And so, we then have a two-part strategy.

One is, how do we through the concert side and through the ticketing side work with the artists in particular to remove as much of that price arbitrage as we can. And how do we work with the team to make sure they've got both the data as well as the marketing capability to remove their arbitrage.

And we will always be most successful, the more that we can drive that arbitrage back into the primary side of the house.

And again, Michael talked earlier about the price increases that we were seeing as artists are becoming – this is becoming very transparent and artists are seeing it and understanding it and therefore, they are going after that money. So item number one is, we're attacking it that way.

Item number two has been, yes, as long as there is price inefficiency, we are going to be focused on building the best secondary offer out there for fans to transparently easily get their tickets, have them verified and have a great experience with it.

So we had a lot of success in growth of our market share and of our overall business in 2016, I expect that continued in 2017. But we also don't – we just don't obsess over which column is it in. Frankly, we'd rather have more in column A than column B. But that's going to depend as we work with every artist and every team on what agenda they want..

Fair enough. I'd want to ask just about capital allocation going forward. If I think about the evolution of the company you guys have grown AOI at record levels for a number of years, and the free cash flow has been great and you guys have kind of grown it to the leverage of the business.

As I think about that, is there any kind of changing thought process in terms of how you think about allocating capital? Does returning capital to shareholders in the form of buybacks start to become more of a priority for the company than it has been historically?.

No. And we absolutely believe that every opportunity that we've seen over the last five years exists more today than at any other point. As we go into more markets, that gives us the scale and infrastructure to continue going into more markets.

As we build our management teams, our technology platforms, very focused on delivering the fans and our clients on a global basis, we just think we're better at it and we're better able to go into markets than either build or acquire additional assets, keep doing exactly what we've been doing..

Thank you..

Next, we have Doug Arthur with Huber Research..

Yeah. Thanks. One of the numbers that really jumped out all year long was the average attendance per event. I think it was up globally about 9% for the year.

How much of that was just the mix this year, because you had a lot of big stadium tours and how much of it was sort of this long-term strategy of trying to better sell out the house? Then I've got a follow-up..

Yeah. Doug, it was obviously both, and we haven't given the exact breakdown, but we're benefited by the large increase in stadiums that I called out, 2 million increase in each North America and international.

But even when you back that out, absolutely in 2016 across the board, we did continue to see that we were growing attendance per show at our amphitheaters, at our arenas, stadiums as we were continually better at marketing and pricing the product, distributing the ticket sale to hit every fan everywhere that we could, and that continues to be a priority in 2017..

Okay. And then a follow-up. You talked a lot about the momentum in sponsorship.

Where are you at from a progress point of view, in terms of monetizing your digital audience, in terms of digital advertising?.

I think monetizing our digital audience the way we think about it, Michael alluded to a bit is, our truly unique positioning starts with our 70 million fans. These other people have online assets as well.

And so, what we're really seeing with the online business is that when you're talking to a sponsor about a large strategic platform for their brand and their brand strategy for reaching out, touching a target customer, that the online is an enhancement and augmentation that gives us an additional set of ad units, gives us additional reach against the core of our onsite interaction, activation that we can deliver..

Okay. Thank you..

And next we have Kyle Evans from Stephens..

Hi. Thanks for taking my questions. You talked a little bit about the dynamics in the secondary market and how much money is outside the artists P&L. We saw the expected slowdown at StubHub, as they annualized some of their process changes.

Could you give us an updated view on the competitive landscapes specifically as it relates to StubHub? And then I have some follow-ups..

Yeah. I mean I think as we've said all along that our view is we're focused on the business as StubHub has gotten refocused and on the business as well and as a few others, Vivid here, Viagogo internationally, that we all have the capability to invest a lot of dollars on brand, on customer acquisition.

You probably see some concentration amongst some of the larger players that are now fighting out for the volume and the share..

Okay. And you....

And also just to add to that, we always kind of get a little U.S. centric here, but we've been very effective on a global basis of moving faster than the historic Ticketmaster that we inherited did here. So in the UK, Australia, all across Europe where we have launched a secondary platform, we are number one, close to number one.

I mean StubHub really is only strong in America. They are obviously expanding, but we wanted – global basis, we're seeing great success as we're either a leader or an early entrant into a lot of the markets. So we see on a global basis, we'll continue to have market share growth on that segment..

Great. I know it's early, but you've given us this February 17 show pipeline number in the supplemental. If attendance stays strong and you've got – you are at 11% on show growth in amphitheaters, arenas, and stadiums.

Aside from an economic slowdown, are there any other scenarios where you would expect that metric to tick down over the course of the year into the single-digits?.

Hey, I think we are seeing artists confirming and putting on their shows earlier and earlier, which is great, because it gives us more clarity on the volume of activity we're going to have.

I think if you looked over time, that number probably ticks down modestly and we weren't giving it to give a specific, this is exactly how much many more shows we're going to give. We gave it to indicate we believe the business will continue to grow in 2017..

Okay.

We're deep into the call, maybe this is a little nitpicky, but your overseas cash jumped up by a couple hundred million to $712 million and in the case, as you don't plan to repatriate, how should we be thinking about that cash number?.

A lot of that is part of the deferred revenue at year end, so they've sold tickets for future shows as well, so the reason why we say we don't repatriate, it will be used for their events and pay artists, et cetera..

Okay.

How much of that's not deferred?.

I'm sorry?.

You said a lot of that is from deferred?.

Yeah. It's going to be primarily deferred, sponsorship, all kinds of things. We don't have more granularity to give you on that, but generally, our cash is going to tick up with the deferred revenue..

Okay. Thank you..

And next we'll take Ben Mogil from Stifel..

Hi. So good afternoon. Thanks for letting me on. So just wanted to go back, I guess to Kyle's question around the secondary market. Are the numbers that I think you were talking about around $8 billion market size, and I think you talked about it in 2015 being like in the $5 billion or the $6 billion range.

Are these estimates still relatively loose, just given that there is a large part of the market which is kind of non-institutional if you will?.

Yes..

And are you finding that in general the two of you, you and StubHub collectively, are kind of gaining share not only as the market grows, but gaining share from independents or are the independents in collective sort of holding their own as well?.

I would say we – I think StubHub has always had market leadership in the U.S. I think we've obviously grown strong and taken market share from the independents in the U.S. Outside of America, Viagogo and others have been out there and we would be the one taking market share from most of the independents in different countries..

And I apologize, because I got on the call late. I'm not sure if you talked much about – from the European, I know it's very early in terms of festival dates in Europe and particularly in the UK.

Are you seeing any kind of weakness just given some of the economic sort of turmoil over there, if you will? Turmoil's my word, just the economic comments?.

Yeah, no, we haven't seen – we had a strong 2016 in Europe obviously and international, and we're off in February to a strong on-sale right now across Europe. We don't see any slowdown in any countries right now. We see a very robust planned and on-sale so far..

Okay. That's great. Thanks, Michael..

Thanks, Ben..

And next, we'll take Brandon Ross with BTIG..

Hi. Thanks for taking the questions. I actually just want to follow up on some of the earlier questions from the call. The first question is a follow-up on John Janedis' question. Michael, to be clear, do you view Amazon as a competitor or as a partner? And do you think the U.S.

exclusivity model could be in jeopardy with Amazon and StubHub looking to be primary retailers? Then a follow-up on Amy's question on the CapEx. On ticketing CapEx, can you just help us decipher how you divide between revenue generating and maintenance CapEx there? It could be very kind of hard to unpack that.

If you re-platform or move infrastructure to the cloud, do you consider that revenue generating or do you consider that maintenance? And then a follow-up on David's question, about margins. You mentioned international growth and the mix kind of there.

But on the Q2 call, when we asked about down margins, you guys kind of reiterated that margins would end up flat for the year, despite the mix pressures in the middle of the year. What happened there that you did not anticipate in prior guidance that you gave? Thanks..

That's all, Brandon?.

Well, I actually have one more, but I'll save it..

Yeah. We've been talking the last couple of years about an API open allocated market. We've been very clear that the rest of the world has always been allocation, and Ticketmaster does very well in those markets. We got a strong market leadership, generally at a lower cost per ticket.

We've seen over the years that eventually – we always had kind of stated that we thought that more distribution points were going to be a reality in the business for clients.

Why we were very aggressive over the last few years in building an API to help clients and artists, et cetera, have opportunity, like StubHub – Spotify and Bandsintown, and Groupon, and others.

So, yeah, we believe that the smartest strategy for Ticketmaster as a software platform has always been to solve the client's needs, to create – to provide great platform software, provide a great marketplace and provide the flexibility to use partner sites to help augmented sales.

Because as you know when you have as many customers as we do, you're the hottest team in the NBA, you're not that worried about partner sites. You're not really worried about Amazon if you're U2, which sold 1 million tickets in an hour.

But if you are a team or an artist that like most of the business needs to sell a few extra tickets, you're always going to be looking for incremental distribution points.

So we've always believed that being open API driven, letting our clients have opportunity to power other retail sites is a smart strategy for Ticketmaster, and we've been doing that over the last couple of years now, finding partner sites to augment sales..

So you see Amazon as a partner then?.

Yeah. We see them as a retail partner, absolutely..

Okay..

On the CapEx question, think about it from new tools or new clients versus other things. So if we are adding technology to our mobile product or adding functionality to TM+, those things would be revenue generating. If we get a new client where we have to add hardware or make some changes, that's going to be revenue generating.

Other things like your question on CapEx related to cloud, moving to the cloud or just replacing hardware, et cetera, would generally be maintenance..

Right.

So, if you work on your mobile app, that would be considered revenue generating CapEx, you said?.

Yeah. For adding new technology and new tools to it, absolutely..

So we sold 45 million tickets on mobile this year versus zero a few years back. So that obviously helps generate additional revenue..

Right..

On the TM margin, you're right, six months ago we had a slightly different forecast for what the margin was going to be, and as you could imagine, a lot of things happened over the – a hundred (51:06) things happened over the six months as we unpacked it. It's really – a lot of it is what I called out.

One is we had tremendous performance by our Front Gate ticketing business. That little festival focused ticketing business up 30% in terms of the volume of tickets that it sold. It's a fantastic product. It's been very successful with a lot of festivals, and if it has a little lower margin, okay.

The same with the do-it-yourself at Universe more than doubling in terms of their ticket volume. So in some cases, you're a victim of your own success, driving the overall profitability of the business at the impact of some of the margin. But there is nothing dramatic, different. It was just all the pieces and how they came together.

And as we said, we're happy as long as we're continuing to grow the cash profitability of the business..

Okay. And just one more on secondary. I think it was up 13% in Q3, then again 13% in Q4, even though it had reaccelerated I think early in Q4.

What happened the rest of the quarter there? And do you foresee a reacceleration in secondary GTV in 2017 or do you think this is sort of a new normal that we should model off of?.

I mean it's – as I talked through Brandon, we have two columns, the bringing it into the primary and building the secondary in. We're way too early to have a view on what's the mix of that that we think will be most successful in.

We'd love to move that entire $8 million, shrink the secondary and bring it all into the primary, but a lot of that depends on our conversations with the artists and with the teams and exactly what they want to do and how they want to do it.

So, we're not worried about again the forecast of that split as much as continuing to offer a great product on both and building the overall business..

Thank you for the questions..

Sure..

We have no further questions. That does conclude our call for today. Thank you for your participation. You may now disconnect..