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

David Karnovsky - JPMorgan Securities LLC Brandon Ross - BTIG LLC Jaime Sue Morris - Jefferies LLC Amy Yong - Macquarie Capital (USA), Inc. Drew Borst - Goldman Sachs & Co. LLC Douglas Middleton Arthur - Huber Research Partners LLC Kyle Evans - Stephens, Inc. David Joyce - Evercore Group LLC.

Ladies and gentlemen, please standby, we're about to begin. Good afternoon. My name is Shannon and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the Live Nation Entertainment Second Quarter 2017 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, 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 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 SEC Regulation G, Live Nation has provided a full reconciliation of the most comparable GAAP measure in their 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 second quarter 2017 conference call. Live Nation continued growing its business in the second quarter with revenue up 31% and AOI up 23% at constant currency and free cash flow up 42%. All three segments grew as we continued demonstrating the strength of our business model.

Our concerts business is our flywheel, through July selling over 68 million tickets to shows this year, 12 million more tickets than at this point last year. This demonstrates that we have built the industry's most scalable and unparalleled live platform, bringing over 550 million fans in 40 countries to live events each year.

With key metrics in these concerts, sponsorship, and ticketing pacing double-digits ahead of last year, we are confident that 2017 will be another record year of results for Live Nation. Starting with the concerts business; in the second quarter, we promoted over 7,000 shows for 24 million fans, an increase of 5.5 million fans from Q2 last year.

As a result, for the quarter, we grew revenue by 36% and AOI by 52% both at constant currency. We extended our position as the leading promoter in the world as we delivered growth across all markets and venue types.

We increased attendance in North America and international by 2 million fans each; and arenas, amphitheaters, stadiums, festivals, and theaters increased attendance by double-digits. As we attract more fans to concerts, we continue to focus on maximizing the revenue and profitability of each show.

This starts with attracting more fans to each show and, during the quarter, we increased our average show attendance by 11%, with every venue type delivering higher attendance per show.

Additionally, our food and beverage initiative at our amphitheaters continued to improve the onsite experience, driving increased spend per fan with programs ranging from increasing the number of points-of-sale to improved product offering to optimize pricing.

As a result, we continue to expect to increase ancillary spend by approximately $2 per fan again this summer. Given the strong performance of our shows to-date and the pipeline of shows for the rest of the year, I expect us to grow our fan base to 80 million this year.

And this, with additional fans, I'm confident that we will deliver strong growth in our concerts results, providing the flywheel to grow our sponsorship and ticketing business. In the sponsorships and advertising business, we again delivered strong growth this quarter with revenue up 32% and AOI up 23% at constant currency.

Live Nation's ongoing success in growing its high margin sponsorship and advertising business is based on its unique scale and breadth in the live experience space.

No other advertising platform can match our 80 million onsite engaged fans, over 550 million direct connections with fans attending events each year, and over 2 billion touch points across our digital reach.

From festivals to branded content to exclusive access to tickets and events, the combined Live Nation Concerts and Ticketmaster platforms deliver an audience unmatched in music.

Our growth continues to be strongly driven by our strategic brand relationships, with over 50 sponsors that each spend more than $1 million with us each year across our onsite and online platforms to reach that highly-sought-after Millennial customer.

This group accounts for over 75% of our total sponsorship and, through the second quarter, their committed spend has grown by 25% to over $250 million. Festival sponsorship continues to provide the most attractive onsite platform. In the second quarter, we grew this category by 32% year-on-year.

And for the full year, we are tracking toward mid-teens growth across our 95 festivals with over 8 million fans. Based on this strong start to the year, and now with over 90% of our planned sponsorship for the year under contract, I expect double-digit AOI growth in the low-teens for the business this year.

Ticketmaster continues to demonstrate that it is the best marketplace for venues, teams, and artists to sell tickets to fans globally, with GTV growth on fee-bearing tickets up 8% for the quarter, at constant currency.

Year-to-date, fee-bearing GTV is up 13%, and the past three quarters have been the highest transacted GTV quarters in the company's history. As a result, Ticketmaster's revenue for the quarter was up 11% and AOI up 2% at constant currency.

Year-to-date, revenue was up 16% and AOI up 13% at constant currency, with quarterly timing impacted by the shift in concert on-sales as we discussed last quarter. Our success at Ticketmaster starts with providing fans with the best solutions to their ticketing needs.

Building on our integration of primary and secondary tickets, we have now expanded our listings to also include secondary tickets to shows for which Ticketmaster is not the primary ticketing, all purchased in the same checkout flow.

This has now increased the number of events we have listed by 35%, further leveraging the 120 million fans visiting our online sites per month. And as we expand our inventory, we continued improving the customer purchase process, helping us increase conversion by high single-digits on desktop and double-digit on mobile sites.

As we increase conversion on mobile sites, we continue to see a strong shift in purchase behavior to mobile, with these sites with our apps accounting for 31% of our sales in the quarter, up 27% year-on-year.

Along with the focus on fan experience, we're providing venues, teams, and artists with the additional tools and services to more effectively price and distribute their tickets. One of the services we uniquely provide is the range of distribution partners that can sell incremental tickets for our clients.

For the quarter, these off-platform sales are up 11% and year-to-date they are up 21% to almost 7 million tickets. On the new product roadmap, we're seeing great success with our Verified Fan product, which enables artists to prioritize the distribution of tickets to actual fans utilizing a proprietary Ticketmaster scoring algorithm of fan behavior.

Since launching the product earlier this year, we have worked with 50 artists in the United States and Europe to sell over 1 million tickets to true fans with dramatic reduction in these tickets than being sold on secondary sites.

Overall, our Ticketmaster results are validating our dual strategy of delivering a great marketplace for fans to buy tickets while providing a great software solution to venues, teams, and artists looking to maximize the value of their events.

By continuing to do so effectively, I expect us to deliver high-single-digit growth in ticketing AOI this year. In summary, 2017 is on track to be another year of growth and record results for the company.

All the key indicators for our business, concert tickets sold for shows this year, contracted sponsorships, fee-bearing ticketing GTVs are on pace double-digits ahead of last year. And as a result, we expect each of our businesses to deliver record revenue and AOI this year.

With that, I'll turn the call over to Joe to take you through additional details on divisional performance this quarter..

Thanks, Michael. Looking at our business segments, first, concerts. Live Nation Concerts' revenue in the second quarter was up 36% and AOI was up 52% both at constant currency. Our revenue growth was driven by a 29% increase in attendance for the quarter and in that North America was up 25% while international growth was 36%.

Arena attendance in the second quarter was up 36%, with over 6.5 million fans attending these shows. Amphitheater attendance was up 14%, as we saw higher than normal pacing of shows in the Q2 this year.

And following very strong stadium attendance last year, this quarter attendance was up another 29% with 4.5 million fans attending over 100 shows globally. Looking forward to the second half, as Michael said, we've already sold over 68 million tickets for shows this year through July, an increase of 22%.

Our pipeline of shows in the second half, particularly stadiums and arenas continues to be very strong and we expect to increase our show count to over 28,000 this year for 80 million fans. And from a timing standpoint, coming off this very strong Q2 activity, we expect the majority of remaining fan growth to come in Q4 this year.

AOI growth was also driven by our artist management business, now within our concert segment, as it had very strong quarter with increased terrain and other activity. With this momentum across the board, we expect continued strong growth in our concerts AOI for the year. Turning to our sponsorship and advertising business.

Our sponsorship business benefited from our concerts flywheel, helping drive revenue up 32% this quarter, while AOI was up 23% both at constant currency. The sponsorship part of our business was particularly strong this quarter, with revenue up 37%, while online revenue was up 16%, again at constant currency.

Our festival business played a large part in this growth and we're succeeding and expanding our sponsorship at festivals, as we increased sponsorship per fan by 6% through the first half of the year. Our mix shift also impacted sponsorship margins for the quarter, but we expect most of this to be just timing within the overall year.

With over $300 million in sponsorship and advertising net revenue now contracted for the year, we're confident we will deliver AOI growth in the low-teens for the full year. Finally, Ticketmaster. For the quarter, Ticketmaster revenue was up 11% and AOI up 2% both at constant currency.

Here too, we are seeing the impact of our concerts flywheel as Q1 revenue was up 22% and AOI up 26% from increased concert ticket sales. For the second quarter, as we indicated on the last earnings call, ticketing saw lower growth as the concerts played out.

That said, primary ticketing fee-bearing GTV was up 9% globally in the quarter, driven by international growth of 27% Secondary ticketing was down 2% for the quarter, coming off a very tough comp from being up 50% for the second quarter last year.

The reduction was driven by the sports side which saw a decline as we didn't have the same post-season activity levels as we have last year. Our secondary concerts business continued to grow in the quarter, even as we successfully deployed pricing initiatives in our Verified Fan product to shift money out of secondary and into primary.

This gives us confidence our integrated marketplace continues to be working and results through July support this, indicating we will deliver double-digit growth in the secondary GTV for the quarter. Finally, while ticketing margins were off a bit in the quarter from lower growth, for the full year, we still expect flat year-on-year margins.

So, given all this, we expect to deliver high single-digit AOI growth for the full year, with most of the remaining growth for the year coming in the fourth quarter's concerts for 2018 go on sale.

And in summary, more than half way through the year, we're confident that 2017 will be another year of record top line and bottom line results overall and for each of our businesses. We also expect record free cash flow of AOI conversion into free cash flow at historical rates.

From a timing perspective, we expect Q3 to be a similar percentage of full year activity as last year and FX is becoming less of an issue with overall Q2 revenue and AOI impact of about 1% and current forecast indicating that full year overall revenue and AOI impact will be negligible.

I'll now turn the call over to Kathy to go through more on our financial results..

Thanks, Joe, and good afternoon, everyone. Starting with our results for the second quarter, revenue was up 29% to $2.82 billion and AOI increased 22% to $221 million. On a constant currency basis, revenue was up 31% to $2.86 billion and AOI was $223 million, an increase of 23%.

As of June 30, our event related deferred revenue was $1.5 billion, up 31% from $1.2 billion last year. This level of deferred revenue is nearly double the amount we had in June of 2014 which is a great indication of how our flywheel has grown. Free cash flow for the quarter was $154 million, up 42% from 2016.

Revenue growth in the second quarter was driven by concerts with an increase of 34% from higher show count and fan attendance in arenas and stadiums globally. Sponsorship and advertising revenue was up 31% from new sponsorship programs and growth in our online advertising business.

And ticketing revenue was up 9% from higher primary volume, driven by concert ticket sales. AOI growth for the quarter was driven by a 51% increase in concerts AOI from higher show count and attendance in arenas as well as increased results in our amphitheater, theaters, and clubs.

We also had AOI growth from higher management commissions as artists touring income was up. Sponsorship and advertising AOI increased 21% from strong growth in our sponsorship business and higher online advertising. Operating income in the second quarter was $113 million, a 53% increase over last year driven by growth in concerts and sponsorship AOI.

Net income was $81 million, up from $38 million in the second quarter of last year. Interest expense for the quarter included $1 million of expense related to the refinancing of our $970 million term loan B facility.

We reduced the interest rate from LIBOR plus 2.5% to LIBOR plus 2.25%, which we expect will reduce annual interest expense by approximately $2.4 million. Lastly, other income in the second quarter included net foreign exchange rate gains from revaluation of $4 million compared to 2016, which included a loss of $7 million.

Moving to the results for the first half of the year. Revenue was up 25% to $4.23 billion and AOI increased 23% to $314 million. On a constant currency basis, revenue was up 27% to $4.29 billion. Free cash flow for the first six months was $180 million, up 36%.

All of our segments delivered double-digit growth in revenue, operating income, and AOI for the first six months. The majority of the revenue growth in the first half of the year was in the concert segment, largely from increased show count and attendance in arenas and stadiums.

Sponsorship and advertising revenue was up 23% for the six months and ticketing revenue increased 15% from higher primary and resale volume of concerts tickets. AOI for the first six months was driven by our strong results across all three segments. Operating income was $92 million compared to $41 million last year, driven by the increase in AOI.

And net income for the first-half of the year was $48 million compared to a loss of $7 million last year. For the six months, other income included net foreign exchange rate gains is $7 million compared to $1 million in 2016.

For the full year, we currently estimate that the impact to earnings per share for the accretion of redeemable non-controlling interest will be approximately $65 million.

Moving to our balance sheet; as of June 30, we had total cash of $2.2 billion, including $704 million in ticketing client cash and $1 billion in net concert event-related cash, leaving a free cash balance of $464 million.

Cash flow from operations for the first six months was $804 million compared to $511 million in 2016, with the increase driven by our growth in AOI, higher deferred revenue, and the timing of the payment of liabilities. Our total capital expenditures were $116 million for the first six months, with 52% spent on revenue-generating items.

We currently expect total capital expenditures for 2017 to be approximately $220 million, with roughly half on revenue-generating CapEx. As of June 30, our total net debt was $2.3 billion and our weighted average cost of debt was 3.9%.

Thank you for joining us today and we will now open the call for questions, operator?.

Yes, ma'am. Thank you. We first go to David Karnovsky with JPMorgan..

Hi. Thank you. You mentioned a higher than normal phasing (19:24) of amphitheater shows in Q2, but also that you're seeing increased fans per show at all venues.

With that in mind, any sense what we can expect for amp attendance for the rest of the year, and then any guidance you can give around festival attendance also?.

Yeah. Sure. This is Joe. On the amp attendance, I think as we said last quarter, most of our – after we had a big growth in our amphitheater attendance last year, most of the growth that we were seeing across amphitheaters, arenas, and stadiums this year was coming on the arena and stadium front.

So we expect our overall, for the amphitheaters, to be fairly in line with last year on our attendance, which again has been big growth over the past few years. But what then we saw within that was a timing shift where we had more of our amphitheater shows in Q2 of this year relative to last year.

That said, as you indicated, and as we've talked about, we've got greater attendance per show across the board and so continue to see very strong demand. Overall, on the festival side, again continued growth in our festival attendance..

Okay. And then, we saw the announcement in July that you had launched the Ticketmaster Presence API on a limited basis. It appears to be a pretty significant move towards digital ticketing.

Can you talk a little bit about the product, potential applications and uses, including the ability for sports teams to substantially grow their fan database? Thanks..

Sure. So, Presence is a big step in digital ticketing which is that it allows for teams to have their tickets to be fully digital throughout, not use barcoded tickets.

This then allows the teams to know every individual who's coming, so rather than the usual I buy four season tickets and you only know me or if I buy tickets and take friends, it allows you, because the digital ticket is transferred much like an airline ticket that you have on your phone or even if it's paper, it's a personalized ticket that we can then start to know who all the people are.

That's critical as the teams and content in general is more and more focused on knowing who their fan base is, what's their activity, how do I market to them at the event, gives them all of the data that they need for that.

So, this is the first – not the first, this is one of the critical steps of having the access control that can tie into that digital ticketing..

Okay. Thanks a lot..

And our next question comes from Brandon Ross with BTIG..

Hi. Thanks for taking the questions. The NFL Exchange deal is up at the end of the year.

I was wondering what your strategy with regard to the renewal of that deal is and how important primary and secondary relationships with the NFL teams and sports are more broadly? And then what – just one on the numbers for secondary, I think you said to expect the reacceleration from the Q2 growth number.

Can you help us with where you expect to come in on secondary growth for the year? And if you still see this as a meaningful growth driver for you in the longer-term? Thank you..

Sure. Brandon....

Joe, I'll start and then I'll let you – I'll let you take the second part, Joe. Brandon, the NFL has been a long-term client and partner with Ticketmaster and we have two relationships you have to think about. We have a league relationship where we had an ongoing secondary partnership for the last 10 years with Ticketmaster NFL Exchange.

And then we have 32 – 31 actually, out of the 32 local venue team relationships with Ticketmaster. NFL doesn't control the local teams.

Jerry Jones gets to pick whoever he wants to use for ticketing in his venue and we've been very successful over the years having close relationships with the stadiums, because we have a great product and also especially even after year like 2017, where we're delivering massive tours and content to those stadiums in the off season.

So, we tend to be very good partners with the NFL stadium owners and we expect those relationship and our renewal to continue there. On the NFL secondary negotiation, we're feeling good that we're going to continue to be partners with the NFL and driving some of their secondary business.

For us, overall, Joe is going to jump in on the exact number, but I think primary is over 80% of the volume if you added the two together when you look at the local teams versus the secondary league deal.

So, continued very important that we renewed team-by-team, venue-by-venue using our great software upgrade as well as our content which helps on the venue front. So, we expect continued being within business with the NFL owners and we'll continue on our negotiation with the league for our secondary business.

And Joe will take the second piece of that question..

Sure.

Brandon, as we said, when we looked at the second quarter, what we saw was, what we believe to be a market decline notably in sports, just because of comp year-on-year activity around some of the play-offs, some of the teams involved and some of the other big events, but concerts continue to grow in the second quarter, and as we are now almost half way into Q3 looking at the secondary performance, what we see is there's continued strong growth in the concert side in particular.

And that is giving us confidence that we will return to double-digit growth in the secondary GTV in the third quarter..

Thanks very much, guys..

Next question comes from John Janedis with Jefferies..

Hi. It's Jaime Morris for John. There were a couple of high profile issues with festivals last quarter, Fyre and Pemberton. The outcomes probably suggest they're a little more complicated than some people think in order to be successful.

Can you talk about, to what extent, you see any benefit or fallout for Live Nation and have you seen any impact, more broadly, on your attendance from this part of your business?.

It's Michael. We've seen no attendance affect at all. In the broad picture, we have over 95 festivals, globally. The business has been very strong on a global basis. Festivals continue to be a very strong high margin business for us.

We see continued growth in festivals on a global basis, some cities have more festivals than others, but on global basis, there is tons of opportunity to keep growing whether it's country, EDM, indie, pop, et cetera. So we think huge opportunity in festivals continually for long time. We saw no consumer effect by the two festivals that went down.

I mean, you are right, we do like highlighting those to the agents' managers of the world that there is a big difference when you work with Live Nation on the quality of the product, the guaranteed cash flow to the artist, the levels of a festival we're going to produce versus a rich kid with a plot of land wants to be a festival producer for the week.

You're going to run into a few of those Pembertons and others that go down. But those are really, in the big picture, percent of nothing on an overall fan, nor artist, nor agent kind of effect. But overall, we continue to see. If you're well financed and you have the infrastructure, festivals can continue to be high margin.

Good business, if you're in the one-off business with no scale or you have one or two of them, tough business to be in without scale..

Thank you very much.

Just one other, you've made some acquisitions on the ticketing side of the business over the past couple of years, can you give us an update on the integration or the rebranding to Ticketmaster and how they are performing relative to plan?.

Sure. This is Joe. I'm happy to. So, you're right, we've acquired a handful – a lot of what we've acquired, frankly, has not been necessarily to integrated it into Ticketmaster as a master brand. As we've talked on the call and elsewhere before, when we acquired Ticketmaster in 2010, it had followed a master brand, everything through one point strategy.

In our view, as of in today's world, you had different needs of different segments and you have to super serve each of those segments.

So whether that segment is our festival segment that needs to have camping and do-it-yourself, whether it's your club and theater segment, whether it's your do-it-yourself segment, remember the acquisitions we made have been to target each of those verticals and grow those businesses.

And as we've talked in over a variety of calls, those businesses continue to grow and perform well as we add new customers and as we bring them into the Live Nation fold and then they provide services for Live Nation which has, obviously, been growing across all of our different venue-types globally. So those are working well.

The other handful of acquisitions we've made have been more on the acqui-hire front, continuing to build our technology capability, helping us accelerate a number of things we've been doing that we've talked about such as the Presence, the Verified Fan, and a range of other programs that we've been able to launch much more rapidly in recent times than ever could have historically..

Thank you very much..

Next question comes from Amy Yong with Macquarie..

Thanks and good afternoon. So, two questions.

I guess, Joe, following up on the ticketing side, can you remind us the margin mix between or the margin differential between international ticketing and North America, and should we expect that the majority of growth on a primary side is going to come from the international segments going forward? And my second questions is, Live Nation signed a pretty high profile deal with Samsung today.

Wondering how much or how big you think this market could be? You have a couple of VR deals now. And obviously, it could lead to pretty big numbers. Can you help us think through how you're monetizing this, either through advertising or maybe a rev share? Thank you..

Sure. I'll take the first one. On the ticketing margin, so, generally speaking, international margins in ticketing are lower than North America margins, be it the service fees are lower, and so there's fewer dollars through the system and, ultimately, a lower margin.

I wouldn't say that most of our growth is going to be coming from international though.

The growth in ticketing, to a pretty good extent, follows a lot of our growth on the concert side and we've talked many times just at how much as we continue to get hyper local and continue to breakdown the pieces and go into every market that North America has continued to unlock a lot of growth over recent years and we expect that to continue as we continue our obsession on that hyper local that we've been pursuing.

So, I wouldn't necessarily say it's going to be international. I think, this quarter, for all the reasons that we've talked about in terms of timing of concert on-sales and so on, you just have a bit lower growth and when you have lower growth, that's probably going to be, relatively speaking, lower margin as you look at the overall numbers.

But, as Michael said and as we've indicated in the past, we think this year it will probably be right about in line on margins and ticketing for the full year as it was last year..

Amy, I'll jump in on the second question. We're very proud of this new focus over the last, I guess, two years called our Live Nation Studios, whether it's the documentary of Puff that we had on Apple TV, a documentary on Eagles of Death on HBO.

We're going to continue to look for ways to amplify our live events, through documentaries, through streaming live – Zac Brown on Twitter, or Coldplay with Samsung in virtual reality. So, we think – there's two main reasons we're doing this.

The first is always the more we amplify the event, the better we know it becomes in marketing – so, getting Zac Brown on Twitter, lots of the Facebook stuff live we've been doing, festivals.

We know that if you can't make it to the event or there's 100 dates in this tour and you're looking at the first five or six online, we know that's a great way to drive conversion and purchase.

So, obviously, live video, any version of that, getting to fans to either pre-sell future tours or get them really excited about next year's Lollapalooza, we think it's the way you need now to market your product. And then the second is, it's all around our sponsorship, Samsung and all of our other high margin sponsors.

In order to service 900 sponsors, we always say, our proposition is about onsite to online. So, we've got to figure out ways to continually excite our customers and sponsors about not only the 80 million customers that we touch directly, but that we have ways to reach them outside of the venue and amplify that.

And virtual reality in itself, we think, is an exciting tool for sponsors and artists. I don't know, Amy, at what point in time that on its own is a monetizable business, I don't know if people are going to charge to see Drake from their living room in a virtual reality setting.

But as the leaders in the business, we want to stay ahead of it and continue to be the leaders in innovating around that. And, for now, we're more than thrilled to monetize it through Samsung and our advertising business and incremental ticket sales..

Thank you..

Next question comes from Drew Borst with Goldman Sachs..

Thanks for taking the questions. I wanted to ask a question about ticketing growth in the quarter, maybe you could – sorry if this is kind of rudimentary, but could you just elaborate on – you had constant currency revenue growth of 11% in the quarter, but it only translated into 2% growth in AOI.

Can you just describe sort of the dynamics that cause that to happen? And I certainly appreciate, maybe it's timing, the half year numbers look pretty good. But I just want to better understand the dynamics that drive that sort of discrepancy..

Yeah, it absolutely is, there is a chunk of it that is revenue recognition and just timing within quarters. So we talked a lot about the fact that we, in the first quarter, sold a tremendous number of arena stadium tickets which really drove up our level of recognized activity.

Our amphitheater tickets which don't get recognized in Q1 then flow into Q2. So, there's just some math around the revenue recognition, expense recognition that's going to impact it. And then secondly, as we just grow the business and we add more verticals and we add more markets and we add more everything, your fixed cost is going to grow.

Right? So, your fixed cost is going to grow, and then I think that what you see is, over the course of the year you kind of even out that fixed cost on a pretty stable basis against fluctuations in your revenue.

So, I just think you have to look at it on a longer-term basis in the quarter, and we don't try to obsess over what we're managing the numbers for the quarter..

Okay. I appreciate that. Thank you. I guess – second question, you mentioned that you're pacing to add another $2 per fan on the sort of per cap spending.

Could you help me understand, like, how the attendance at your owned and operated venues how that's sort of pacing, like, what sort of the absolute number you're looking for this year and maybe what's the kind of the growth rate pacing?.

Yeah. As I've said, I think on the earlier message, our pacing in total for the year on amphitheaters is pretty much in line with last year, in terms of our total attendance. And again this is just the year-to-year.

Last year, it was our amps that drove a lot of our fan growth and this year it's arenas and stadiums that are growing lot of our fan growth. So, no different than some of the quarterly fluctuations you see. You see some difference in terms of just where the growth is coming from on it.

So, we're seeing though strong per cap growth against that, and again the per cap growth is coming as we continue to add more points-of-sale, focus on optimizing pricing, product selection, a whole range of initiatives that we have on the amphitheaters to continue to provide a greater experience, better service for our fans, generally translates into them spending more..

Okay. Thank you..

Next question comes from Doug Arthur with Huber Research..

Yeah. Thanks. Joe, I thought you, if I heard you correctly, threw out a reference to Artist Nation having a strong quarter. Last year, I think when you were still breaking Artist Nation out, did about $87 million in revenues. Is it fair to conclude, if I heard you correctly, that it was up double-digit this quarter.

I'm just trying to (38:04) back out for kind of the true concert number..

Well, it is all concert number. It is – but, yeah, I think, it's fair to assume it is up double-digits and that we mentioned it because as we think about the overall growth of the concert business in Q2, that was a material component of it..

Okay. And then, I mean, you had kind of suggested earlier in the year that timing was going to help the second quarter. But your – but it doesn't seem to be distracting at all from your big seasonal third quarter.

I would assume that the mix of shows, obviously, given the summer amp and heavier festivals, will be different in terms of less impact from arena and stadium shows overall in the third quarter. So that may change some of the metrics in terms of attendance per event, et cetera.

Is that a fair way to look at it?.

Well, I think, what we said is, certainly not going to, we don't believe, detract from Q3. We said that we think that the majority of the remaining fan growth was coming in more Q4, so Q3 expected to be, in aggregate, kind of in line with last year in terms of the overall AOI as the portion of the year.

So continue to show some growth overall, but again the majority of the fan growth now in Q4, in part because you have that shift of amp attendance from Q3 into Q2 that's then has, obviously, been fully made up for by arena and stadium activity in Q3..

Okay. All right. Thanks..

So, maybe more detail than you want to try to model, but to give you the flavor..

I'll get there somehow. Thanks..

Next question comes from Kyle Evans with Stephens..

Hi. Thanks. Your release alludes to expanding listings to include secondary tickets there that were not primarily sold by Ticketmaster. Could you help us think about how that might change the long-term competitive dynamic that you've got with StubHub and help us think about how that affects ticketing just longer-term? Thank you..

Yeah. I think – I'll give you the strategy not so much the guidance, obviously, there were some key strategies. When we took over Ticketmaster, we had some fundamentals that we wanted to change from a historic closed platform, and those three strategies that we're bringing to life.

The first strategy was to truly enter the secondary business, we weren't in it, enter it and stock it on the shelves at ticketmaster.com, so fans could solve their problem at 10:01 (40:56) and that's been working well. Second was to build an API so we could start talking to the world, both outside and in.

So to make the actual secondary business work, we needed to develop the API so you could list your product at our site. And now we talk a lot about distributed commerce and how we can link up to Spotify and Bandsintown, and other places where we can sell incremental tickets.

And the third strategy was always about what that API is let the outside world post to Ticketmaster, get more inventory on the shelf whether you're a Ticketmaster customer or not. And again fundamentally, at Ticketmaster, when we started to reshape Ticketmaster, we really broke the business in two places.

One was about the marketplace and what's right for the customer, and then, separate, what's the software that's servicing the client in the venue. And we've been rebuilding both of those with separate teams, so if you ran my marketplace, your number one objective would be to solve the customers' problem.

They need a Justin Timberlake ticket at the STAPLES Center, it might not be the Ticketmaster venue, but we want to sell you that ticket, obviously because the more problems we can solve at our site, the better our traffic, our conversion remain.

So with over 100 million unique users a month coming to our site looking for tickets, we now are able to list a substantial more amount of events and tickets and every time we now sell or convert one of those, that's incremental business to us. And we're at the beginning stages of that.

We have – Joe can maybe jump in on some of the numbers in terms of the percentage of the shows or tickets that will be going up this year, but substantial increase in our inventory and continues to make tm.com a leading [technical difficulty] (42:46 – 42:58)..

Operator? Sorry, guys. Michael's line had a little problem there. So, as Michael was saying, this – by doing this, we got about a 35% increase in terms of number of shows that we're able to list. So that, to us, continues to both have a platform to attract more fans and also leverage the 120 million fans... (43:21 – 43:35).

Thank you. I notice that Amazon keeps hiring people in the music business, particularly on the international side.

So, far they've only put on a couple of sort of sponsor-type shows, but how do you see that presence emerging?.

Yeah, yeah. I don't know..

Over to you, Joe..

I think that they've obviously, there has been a lot of discussion, a lot probably in the press about what they're doing. We've seen the activity that everybody else has in the U.K. with testing some different things and we continue to be very consistent and simple in our view that our job is to sell every possible ticket.

Michael talked about the continued growth of our open platform, selling nearly 7 million tickets in the first half alone. And we will, absolutely, work with anybody that we believe can sell incremental tickets for our concerts or for our sporting clients or others. So, we haven't announced anything.

So, we're not there in terms of having any arrangements, but we continue to look for all ways that we can sell those incremental tickets..

Thanks..

Next question comes from David Joyce with Evercore ISI..

Thank you.

I was hoping you could provide some more color on where the sponsorship growth was coming from, are these some tack-ons to current contracts that are either adding some new regions or are these more regional sponsors that are coming on to these events? Are you getting more strategic deals? What the makeup of the growth that you're seeing?.

Yeah. So, we talked about two main areas that are really driving the growth. The first is festivals, as we continue to add more festivals, but also more categories within our festivals, so we're driving rapid double-digit growth overall in our festivals, but also growing our festival – sorry – our per fan sponsorship at festivals.

So it's a combination of including that – just continuing to grow the number of major festivals we have, but also more sponsors, more clients, more categories at those festivals. And then secondly is our strategic phase, which, we said, we continue to add a few customers, but really they're more than anything driving just a lot more spend.

They're spending up 25% as we add a few more of them, so the big relationships that we have are continuing to see the effectiveness of our platform and looking for additional ways to use the myriad of our assets to reach their potential customers..

Okay.

And then if I could ask a second question on the M&A front, you sometimes have some deals that kind of fly beneath the radar, but have you been doing anything in the regions you've talked about in the past where you had interest like Latin America, was there anything that's been going on, on the M&A front?.

No. I mean nothing that of substance. Sometimes we do a small bolt-on promoter or a small venue or acquisition in our current markets. But no, nothing of substance we've acquired in this year, continuing to look at Latin America and Europe and Asia.

And we look at 100 major cities where live entertainment is growing and dynamic and we have lots of room to expand either ticketing concerts or festivals in those markets. So we think we have lots of runway for acquisitions that's accretive and will grow the flywheel. We're just patiently continuing to look for them around the globe..

All right. Thank you..

And thank you, ladies and gentlemen. With no further questions in queue, that does conclude today's conference. We thank you for your participation and you may now disconnect..

All right. Thank you..