Good day, everyone. My name is Erica, and I will be your conference operator on today's call. At this time, I would like to welcome everyone to Live Nation Entertainment's Fourth Quarter and Full Year 2020 Earnings Conference Call. Today's conference is being recorded.

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 Form 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 to the most comparable GAAP measures in their earnings release.

The release, reconciliation and other financial and statistical information to be discussed on this call can be found under the Financial Information section on Live Nation's website at investors.livenationentertainment.com.

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

Good afternoon and thank you for joining us. As we look back on 2020, it is clearly not the year anyone predicted, but I'm very proud of how Live Nation has dug in and focused on turning this challenge into an opportunity to improve our business.

I want to take a moment to thank our employees for their resilience and creativity and acknowledge all of those affected by COVID and the shutdown of live events. Over the last year, leaders across all of our business lines, Concerts, Ticketing and Sponsorship, have been analyzing ways to improve their business.

Some of the key initiatives include reorganizing to become more nimble while also reducing our cost structure by $200 million; building concert streaming and direct-to-consumer businesses to expand our revenue streams; advancing our technology initiatives globally while accelerating the shift to digital tickets to meet changing needs of fans, venues and artists; and reinforcing our balance sheet to endure this period while maintaining a strong position to build our business for the future and act on opportunities as we identify them such as our recent acquisition of the streaming platform, Veeps; and continued pipeline bolt-on acquisitions throughout the globe.

So, while this past year has been challenging for the company, our employees, fans, artists, and so many others globally impacted by COVID, I've never been more excited about the opportunities in front of us. We continue to have a substantial tailwind in the live event industry as consumers, more than ever, are looking to spend on experiences.

The supply-demand fundamentals of the concert business remained strong with artists ready to get back on the road and fans eager to reconnect at events. All our data continues to show that there is substantial pent-up demand for concerts on the consumer demand side. The $2.4 trillion projected surplus in savings in the U.S.

alone by June is a key indicator of consumer spending potential. At the same time, surveys demonstrate the high demand for concerts globally with 95% of fans likely to attend a show when restrictions are lifted. This is proving out in fan behavior as well with 83% of fans continuing to hold on to their tickets with rescheduled shows.

On the artist side, there's a broad desire to get back on stage to connect with their fans and provide economic support to their bands, crew, and hundreds of others employed each night putting on the show.

Given the limited touring activity in 2020 and '21, the pipeline for 2022 is much stronger than usual with almost twice as many major touring artists on cycle in 2022 in a typical year, about 45 artists versus the usual 25, and there remains plenty of scheduling availability at arenas, amphitheaters, and stadiums to accommodate these additional tours with over 2/3 of these venue nights unused by sporting events or major concerts in a typical year.

It appears that the timing to release the pent-up supply and demand is now approaching. Vaccine distribution is accelerating and declines in COVID cases throughout most of the world gives us even more confidence that a safe and meaningful return to shows will soon be possible. For both the U.S.

and U.K., projections indicate that everyone who wants a vaccine will be able to get one by May or June in Europe and most other markets following a few months later.

Given the mass social and economic toll the lockdown has put on the public, we believe there will be strong momentum to reopen society swiftly as soon as vaccines are readily available, and we believe outdoor activity will be the first to happen.

So, while the timing of return to live will continue to vary across global markets, every sign points to beginning safely in many countries sometime this summer and scaling further from there. With that, I will turn the call over to Joe for more detail on our financial results. .

Thanks, Michael, and good afternoon, everyone. As we did for Q3, we've added some additional tables at the back of our earnings release that reconcile in more detail some of the numbers I will refer to on the call. For the fourth quarter, all the key costs and cash numbers are in line with or better than what we forecasted last quarter.

As a result, we are confident that our actions taken to cut costs and increase liquidity will provide us with the runway we need until the time is right to bring shows back. As part of this, we further reduced discretionary spending by another $50 million and closed 2020 with over $950 million in lower costs.

We also reduced our cash usage by $1.65 billion relative to our pre-COVID plans, $150 million more than we were projecting last quarter.

Looking at our Q4 AOI results, our AOI loss for the quarter was $244 million, which consisted of $290 million in operational fixed costs and $46 million of contribution margin, which included $96 million contribution from operations along with various one-time items.

As we pointed out last quarter, this contribution margin from operations includes our sponsorship business where we've been able to maintain close to 90% of the commitments that were in place at the end of February last year.

Half of this sponsorship moved into 2021 while the portion we retained in 2020 was repurposed into other assets, including streaming concerts. Our artist management and merchandise businesses also generated positive contribution margin in the quarter.

Looking at free cash and liquidity, we ended the fourth quarter with $643 million in free cash, which increased to $1.1 billion in early January with our debt raise. This, along with over $950 million of available debt capacity gives us $2 billion in readily available liquidity.

Our total free cash usage in the quarter was $308 million or $103 million per month. We had $97 million per month average in operational burn plus another $44 million per month of nonoperational cash costs to get us to $142 million average per month in gross burn.

And then we had $39 million per month in cash contribution margin and ended up with a total effective cash burn of $103 million per month. Now ticket refunds. The global refund rate for Live Nation concerts that are rescheduled and are in or have gone through a refund window or windows was unchanged from the prior quarter at 17% through the end of Q4.

For the tours that have gone through a second refund window, the refund levels were generally much lower for the second window as the casual fans requested their refunds during the first window. Festivals generally canceled their 2020 events. But for festivals where fans could retain their tickets for next year's show, 63% of fans are doing so.

On deferred revenue, at the end of the fourth quarter, deferred revenue for events in the next 12 months was $1.5 billion versus the $1.4 billion we projected at the end of Q3, higher due to $100 million in ticket sales during the quarter. Finally, our 2021 outlook.

We won't be giving a multi-quarter outlook given the uncertainty on specific timing and likely varied timing for different markets around the world.

For Q1, we will remain focused on our cash burn rate and particularly managing our total effective burn rate to ensure cash contribution margin growth outstrips any increases in our cost structure as we start to ramp back up. With that, let's open up the call for any questions for Michael, Kathy or me.

Operator?.

Your first question is from David Karnovsky with JPMorgan..

Michael, for the U.S. and U.K.

markets, can you expand a bit on what you think we'll see this summer in terms of concerts? Can you get back the whole tours and some major festivals or do you sort of envision operating in a more kind of smaller regional basis? And then as a follow-up, I'd be interested to understand how artists are approaching the decision on when the right time to get back on the road is..

Yes. I think this summer, we're going to see a bit of a regional model -- a module model. Every day, we seem to have a new state or country talking about when they'll open up. So we're feeling more optimistic than we were a month ago. Lots of artists are calling and looking at how we start up in July, August, September, maybe move things a month.

So for right now, we still believe that we'll have enough open throughout the U.K., Australia, Canada, U.S., to keep what we have on the books and the amphitheater booked for now.

We might have some certain states that might not be ready, but we have enough states, we think, and enough artists willing to play the open slots if we get to that level in the right markets. So right now, we think we have enough artists. And as long as these states open up to the right capacities, we can start mid-summer into Southern U.S.

We could go all the way to November..

And then -- this is Joe. The only thing I would add is, if you look at the U.K. as a model, I think what they've laid out is a series of thresholds and timelines to reopen and really get almost fully June has been very helpful and has really created a big burst of consumer demand over this week. And as a result, if you look at our U.K.

festivals in August, Creamfields has already sold out. Reading & Leeds saw a huge jump in consumer demand, and those are both likely to be sold out this weekend. So, we do see that in the U.K. with the help of we're going to be able to get those festivals to happen certainly in August..

Okay. And then maybe just a follow-up on that point, assuming kind of conditions start to normalize faster than expected.

Can you maybe just say how much lead time you need to ramp-up activities at your various venue types? And are there kind of acts that you can lean on to fill supply in short notice?.

Yes. We're running about a 3-month lead time. So, we've been talking to our global employees about that kind of timeline, when we kind of have the first show at scale that we think is going to happen beyond 50%. three months back from that is when we can start bringing back marketing production, all of the key venue functions.

So, everyone is eager, employees to get back out, and we can wrap up in between the on sale or the announcement and the actual show with no challenges..

Our next question is from Stephen Glagola with Cowen..

Earlier this month, Ticketmaster rolled out its new live stream product and you purchased the Veeps platform as well a month ago. The online live market appears to be a more nascent market.

Could you discuss how you expect this business to impact the P&L in '21? Maybe high level, just the economics of ticketing virtual events, how that compares to sort of ticketing a regular live show? And how Ticketmaster is positioned in this market relative to the competition?.

Right. We look at it -- obviously, we have to solve two different problems. Live Nation looks to be in this space because we think, as I've said before, it's a great complement to our core physical product. We're still not sure if this is a business or a feature, but we think we've been streaming our live shows from Yahoo! Live to Twitter.

We stream most of our festivals for many years on YouTube and other platforms. So, streaming a festival or streaming a live show for a sponsor or for other platforms, we've been doing that a long time.

This is just now an opportunity with Veeps to do some of that direct-to-consumer on the club shows, amphitheater, festival shows that we think will have that added capacity and demand that will help increase some of the revenue for the artist. So, we think it's kind of like a T-shirt and merchandise in a VIP platform.

It's another incremental revenue stream to the current physical show. We think we have a unique advantage because we have the sort of 30,000 physical shows.

So, when we're putting those on sale, just like today, we try to sell you an upgrade, VIP package or a T-shirt, for those that can't come to the show -- but possibly even if you come to the show and you want some -- to look at some other camera angles on your phone, we think it's a good complement or an add-on to our physical show.

Ticketmaster just wanted to make sure this is a new product. Whether it's like festivals or clubs, we wanted to make sure that they had the capability to service events and clients coming to them saying, "Hey, I have a virtual show going on sale.

Can you ticket it for me since you have such a large database and the -- then the scale and competency?" So we're proud that, that team in COVID was able to take some existing software and quickly ramp up and has been able to service many shows around the globe because that's kind of instantly a global product when you're putting a virtual show on sale.

So, we think Ticketmaster will probably be one of the leaders in that space. Most of the platforms or most of the live shows you've seen have come to Ticketmaster and said, "We'd love you to ticket it. You have the capability, and you have the marketing reach that we don't." So that's been successful to date.

Same business model, it's a service fee model. Most of the platforms you see out there are charging a service fee on the ticket, and that's what Ticketmaster is also doing, and that seems to be the accepted model to date. So, we think it's another product in the channel or their portfolio that Ticketmaster can effectively deliver for the customer.

How big of this segment, this ultimately is in the end. I think it continues or will be -- -- once like it's been on YouTube, it's always been an interesting way for a customer to see some of the live show. History says that live show though, thanks to Tiktok and Instagram, is not consumed in mass.

Most people don't want to watch two hours of their favorite band. They want to find that one great shot on Tiktok. So, we're still not sure how big of a business a live show is, but it's something that is incremental to our course. So, we'll be on it, same with Ticketmaster..

Michael, that was really helpful. And maybe one more for just Joe and Kathy. On your -- you guided total CapEx to $150 million in '21. It's down 30% or so from '20 levels. Down, I think, over 40% from 2017 to '19 levels. The '17 and '19 was a really significant CapEx ramp period for the business.

Is the '21 CapEx moderation or deceleration is something we should expect going forward as we look out to some of the outer years, '22 and beyond?.

This is Joe. I'll start. I think 2021 CapEx is more a reflection of the fact that we're continuing to be prudent in our cash management this year. I think as we get back to '22, we spend CapEx based on the opportunities we see.

We continue to see great opportunities on the concert side in terms of going into new markets, adding new venues, continuing to build out that business. So you'll see that accelerate, ramp back up in '22 along with continuing to find ways to invest in the venues that we have to get a fan throughout that portfolio..

Your next question is from Brandon Ross with LightShed Partners..

A couple of questions. First, I wanted to ask a follow-up on David's question, leading off about reopening. And Michael, you tweeted out earlier an article about the Reading & Leeds Festivals being set to take place this summer. They're large-scale events.

Can you describe some of the safety plans that are being contemplated for those? And whether they're meaningful in terms of cost? And kind of how you see the fan experience looking when we open festivals like that?.

I'm going to let Joe handle the safety part. I'm going to come back to the sales on that one, though..

Just in terms of the -- in terms of the protocols, number one, obviously, we have some additional cleaning protocols that are in place. Those are not a -- those are not a huge cost. And then one of the big changes is the shift to much more contactless.

So as we get the digital ticket really fully implemented and out there, the ability to have contactless interest -- entry, contactless purchase of food and beverage, contactless purchase of merch, all of that is going to improve the fan experience, provide some safety and comfort to the fans, and I think only be a better overall experience..

And Brandon, just because you brought it up, just to show you when we keep talking about pent-up demand. Reading & Leeds went on sale, thanks to the government-outlined new plan for the summer, and sold 100,000 tickets in 72 hours. Creamfields went on sale and sold out in 48 hours, over 70,000.

So we are seeing the fan and what we've been talking about, they are excited to get back to the show as soon as we get the green lights in these markets to open up..

Great. And you gave some details around the Ticketmaster globalization initiative a few months back at the Liberty Day. I wanted to unpack that a little further.

Can you maybe describe the overall margin opportunity for ticketing? Is it a business that as this globalization effort is implemented, can make Ticketmaster have a more typical marketplace margin structure? And then maybe describe how long the process will take and whether we're going to see continuous benefits as it plays out..

This is Joe, Brandon. I'll start that by getting into some of the numbers. I think part of this is in that -- the $200 million cost reduction that we told you was going to take place. Ticketmaster is a large portion of that. Ticketmaster's cost or, I guess, their revenue was about $1.5 billion in 2019.

So if you apply a good chunk of the cost savings to that, you get mid-single-digit margin expansion from that cost savings off the bat. We expect that, over time, as we get even more efficient, more globalized than the Ticketmaster platform, there will be some additional savings. But as importantly, it will let us go into new markets faster.

And also, when we add new capabilities in the U.S., those can be instantly rolled out worldwide. So we'll be able to drive revenue along with the reduced cost..

Cool. And then just finally, as things reopen and you come out of the pandemic fairly levered, I wanted to ask your early thinking on capital allocation.

If there are international assets at attractive prices out there, would that take precedent over delevering? And how do you balance the opportunities that may present themselves abroad as you continue that international roll-up versus sort of a leverage target?.

This is Joe. I'll start. I think that we're very comfortable with the leverage that we're at now. We are not in a rush to delever. We think it will naturally happen over time given the performance levels that we think are going to be happening starting in 2022.

So we remain, as we said, in a very liquid state, around $2 billion of total liquidity, including untapped debt right now. We don't think the vast majority of that will be necessary this year. So it gives us a lot of dry powder as we look at our global set of opportunities and bolt-on acquisitions..

And Brandon, to pick up on that. As you've seen us over the last 10 years, this space, on a global basis, tends to be a lot of small bolt-ons. So we've been ramping up our 100-plus million customers, doubled it over the last few years, and we'll continue to grow those numbers.

But we don't have to make $1 billion acquisitions to make any of that come to life. We were talking the $20 million range is a lot of where we pick up a festival, a venue, a promoter that's accretive and in a key market for us.

So we'll continue to be acquisitive on our theater, club, global business, any markets we think there's opportunities that arise given where the world sits today. So we will be aggressive on a bolt-on, continued consolidation path while we are able to.

We think '22 is a peak year, which lets us start taking a lot of free cash flow and start working towards delevering also. So we think we can accomplish both as we have over the years..

We do have a question from Paul Golding with Macquarie Capital..

So Michael, you talked about the 3-month lead time on possibly a 50% capacity show.

I guess when we think about the recent news in New York around the 10% arena capacity limit now being allowed, how should we think about how artists are sort of phasing back in? You've had peers say that, that just isn't enough for financial reasons to justify an event.

How should we think about sort of that breakeven where artists may decide to get out there early if states start opening up even earlier?.

Well, I think you look at the U.K. and Australia as kind of the key markets, right, where they went from -- once COVID and they had the right game plan. They have now set a clear date when 100% capacity can happen outdoor, then it's kind of business as usual. So we have not, as to date, done a lot of work in the 0 to 50% capacity business.

We don't see that as a viable model to ramp back up fixed cost. So we think we're close enough though where we are with COVID and with all the governors in the states we're talking to, that there will be a clear outline to a 75% to 100% outdoor green light in '21.

So we think we're better off waiting for a high bar capacity moment in most of the states to ramp up and talk to the artists about getting paid properly. So we think that's within sight and is better -- is closer than having to dabble in the 10% and 20s, but those are great steps forward..

Great.

And then with the downtime, have you seen maybe a broader set of venues more aggressively roll out components of the SafeTix or Presence platform in venue?.

This is Joe. Obviously, during the shutdown, most of the venues have been shut down as well. So there hasn't been a lot of specific rollout during the time as much as there is a massive sign-up of venues that are looking to shift to a paperless digital ticketing going forward.

And for those that have already adopted digital ticketing to some extent, looking to expand it and really having it be the way that entry takes place..

So maybe some pent-up rollout demand when things reopen so that you can roll out quickly?.

Yes. Yes..

And there are no further questions in queue at this time. Management, I'll turn the call back over to you for closing or additional remarks..

All right. Thank you, everyone. Stay safe, and we'll talk to you on our next earnings call..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..