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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
Form 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
or | | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-32601
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LIVE NATION ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
____________________________________ | | | | | | | | |
Delaware | | 20-3247759 |
(State of Incorporation) | | (I.R.S. Employer Identification No.) |
9348 Civic Center Drive
Beverly Hills, CA 90210
(Address of principal executive offices, including zip code)
(310) 867-7000
(Registrant’s telephone number, including area code)
______________________________________________________________ | | | | | | | | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, $.01 Par Value Per Share | | LYV | | New York Stock Exchange |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | |
Large Accelerated Filer | x | | Accelerated Filer | | ¨ |
| | | | | |
Non-accelerated Filer | ¨ | | Smaller Reporting Company | | ☐ |
| | | Emerging Growth Company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
On July 28, 2022, there were 229,971,823 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 4,445,332 shares of unvested restricted and deferred stock awards and excluding 408,024 shares held in treasury.
LIVE NATION ENTERTAINMENT, INC.
INDEX TO FORM 10-Q
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PART I—FINANCIAL INFORMATION | |
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PART II—OTHER INFORMATION | |
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GLOSSARY OF KEY TERMS |
AOCI | Accumulated other comprehensive income (loss) |
AOI | Adjusted operating income (loss) |
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FASB | Financial Accounting Standards Board |
GAAP | United States Generally Accepted Accounting Principles |
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GTV | Gross transaction value |
Live Nation | Live Nation Entertainment, Inc. and subsidiaries |
LNE | Live Nation Entertainment, Inc. |
OCESA | OCESA Entretenimiento, S.A. de C.V. and certain other related subsidiaries of Corporación Interamericana de Entretenimiento, S.A.B. de C.V. |
SEC | United States Securities and Exchange Commission |
Ticketmaster | Our ticketing business |
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| (in thousands) |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 5,860,435 | | | $ | 4,884,729 | |
Accounts receivable, less allowance of $55,150 and $50,491, respectively | 1,456,198 | | | 1,066,573 | |
Prepaid expenses | 1,153,522 | | | 654,894 | |
Restricted cash | 5,721 | | | 3,063 | |
Other current assets | 74,906 | | | 74,834 | |
Total current assets | 8,550,782 | | | 6,684,093 | |
Property, plant and equipment, net | 1,089,421 | | | 1,091,929 | |
Operating lease assets | 1,596,511 | | | 1,538,911 | |
Intangible assets | | | |
Definite-lived intangible assets, net | 964,406 | | | 1,026,338 | |
Indefinite-lived intangible assets, net | 414,700 | | | 369,028 | |
Goodwill | 2,563,119 | | | 2,590,869 | |
Long-term advances | 611,899 | | | 552,697 | |
Other long-term assets | 630,190 | | | 548,453 | |
Total assets | $ | 16,421,028 | | | $ | 14,402,318 | |
LIABILITIES AND EQUITY | | | |
Current liabilities | | | |
Accounts payable, client accounts | $ | 1,615,787 | | | $ | 1,532,345 | |
Accounts payable | 219,744 | | | 110,623 | |
Accrued expenses | 2,192,883 | | | 1,645,906 | |
Deferred revenue | 3,766,387 | | | 2,774,792 | |
Current portion of long-term debt, net | 607,190 | | | 585,254 | |
Current portion of operating lease liabilities | 153,023 | | | 123,715 | |
Other current liabilities | 77,029 | | | 83,087 | |
Total current liabilities | 8,632,043 | | | 6,855,722 | |
Long-term debt, net | 5,140,155 | | | 5,145,484 | |
Long-term operating lease liabilities | 1,650,052 | | | 1,606,064 | |
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Other long-term liabilities | 398,756 | | | 431,581 | |
Commitments and contingent liabilities | | | |
Redeemable noncontrolling interests | 565,024 | | | 551,921 | |
Stockholders' equity | | | |
Common stock | 2,256 | | | 2,220 | |
Additional paid-in capital | 2,853,613 | | | 2,897,695 | |
Accumulated deficit | (3,129,597) | | | (3,327,737) | |
Cost of shares held in treasury | (6,865) | | | (6,865) | |
Accumulated other comprehensive loss | (129,571) | | | (147,964) | |
Total Live Nation stockholders' equity | (410,164) | | | (582,651) | |
Noncontrolling interests | 445,162 | | | 394,197 | |
Total equity | 34,998 | | | (188,454) | |
Total liabilities and equity | $ | 16,421,028 | | | $ | 14,402,318 | |
See Notes to Consolidated Financial Statements
2
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
| | | | | | | | |
| (in thousands except share and per share data) | |
Revenue | $ | 4,434,174 | | | $ | 575,946 | | | $ | 6,236,982 | | | $ | 866,555 | | |
Operating expenses: | | | | | | | | |
Direct operating expenses | 3,267,023 | | | 243,120 | | | 4,338,045 | | | 377,086 | | |
Selling, general and administrative expenses | 672,213 | | | 328,894 | | | 1,242,395 | | | 651,747 | | |
Depreciation and amortization | 115,927 | | | 103,647 | | | 216,396 | | | 212,523 | | |
Loss (gain) on disposal of operating assets | 1,065 | | | (28) | | | 2,730 | | | 110 | | |
Corporate expenses | 59,247 | | | 27,598 | | | 91,657 | | | 55,546 | | |
Operating income (loss) | 318,699 | | | (127,285) | | | 345,759 | | | (430,457) | | |
Interest expense | 68,435 | | | 68,909 | | | 135,208 | | | 139,739 | | |
| | | | | | | | |
Interest income | (13,192) | | | (1,471) | | | (20,756) | | | (2,620) | | |
Equity in losses (earnings) of nonconsolidated affiliates | (1,955) | | | 2,998 | | | (6,243) | | | 2,417 | | |
Loss (gain) from sale of investments in nonconsolidated affiliates | (580) | | | 993 | | | (448) | | | (52,947) | | |
Other expense, net | 5,619 | | | 9,461 | | | 14,886 | | | 7,462 | | |
Income (loss) before income taxes | 260,372 | | | (208,175) | | | 223,112 | | | (524,508) | | |
Income tax expense | 31,995 | | | 2,285 | | | 43,691 | | | 8,674 | | |
Net income (loss) | 228,377 | | | (210,460) | | | 179,421 | | | (533,182) | | |
Net income (loss) attributable to noncontrolling interests | 40,577 | | | (14,795) | | | 41,803 | | | (30,324) | | |
Net income (loss) attributable to common stockholders of Live Nation | $ | 187,800 | | | $ | (195,665) | | | $ | 137,618 | | | $ | (502,858) | | |
| | | | | | | | |
Basic net income (loss) per common share available to common stockholders of Live Nation | $ | 0.69 | | | $ | (0.90) | | | $ | 0.31 | | | $ | (2.34) | | |
Diluted net income (loss) per common share available to common stockholders of Live Nation | $ | 0.66 | | | $ | (0.90) | | | $ | 0.30 | | | $ | (2.34) | | |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic | 224,674,447 | | | 215,702,508 | | | 223,290,226 | | | 215,120,467 | | |
Diluted | 243,634,764 | | | 215,702,508 | | | 231,367,674 | | | 215,120,467 | | |
| | | | | | | | |
| | | | | | | | |
Reconciliation to net income (loss) available to common stockholders of Live Nation: | | | |
Net income (loss) attributable to common stockholders of Live Nation | $ | 187,800 | | | $ | (195,665) | | | $ | 137,618 | | | $ | (502,858) | | |
Accretion of redeemable noncontrolling interests | (32,560) | | | 951 | | | (68,274) | | | 35 | | |
Net income (loss) available to common stockholders of Live Nation—basic | $ | 155,240 | | | $ | (194,714) | | | $ | 69,344 | | | $ | (502,823) | | |
Convertible debt interest, net of tax | 6,365 | | | — | | | — | | | — | | |
Net income (loss) available to common stockholders of Live Nation—diluted | $ | 161,605 | | | $ | (194,714) | | | $ | 69,344 | | | $ | (502,823) | | |
| | | | | | | | |
See Notes to Consolidated Financial Statements
3
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in thousands) |
Net income (loss) | $ | 228,377 | | | $ | (210,460) | | | $ | 179,421 | | | $ | (533,182) | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Unrealized gain (loss) on cash flow hedge | 7,687 | | | (5,788) | | | 31,656 | | | 9,308 | |
Realized loss on cash flow hedge | 1,247 | | | 1,946 | | | 3,149 | | | 3,862 | |
Foreign currency translation adjustments | (54,164) | | | 15,226 | | | (16,412) | | | 2,007 | |
Comprehensive income (loss) | 183,147 | | | (199,076) | | | 197,814 | | | (518,005) | |
Comprehensive income (loss) attributable to noncontrolling interests | 40,577 | | | (14,795) | | | 41,803 | | | (30,324) | |
Comprehensive income (loss) attributable to common stockholders of Live Nation | $ | 142,570 | | | $ | (184,281) | | | $ | 156,011 | | | $ | (487,681) | |
See Notes to Consolidated Financial Statements
4
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balances at March 31, 2022 | | 223,531,301 | | | $ | 2,235 | | | $ | 2,888,551 | | | $ | (3,317,397) | | | $ | (6,865) | | | $ | (84,341) | | | $ | 372,200 | | | $ | (145,617) | | | $ | 581,652 | |
| | | | | | | | | | | | | | | | | | |
Non-cash and stock-based compensation | | — | | | — | | | 13,221 | | | — | | | — | | | — | | | — | | | 13,221 | | | — | |
Common stock issued under stock plans, net of shares withheld for employee taxes | | 544,593 | | | 6 | | | (5,169) | | | — | | | — | | | — | | | — | | | (5,163) | | | — | |
Exercise of stock options | | 1,505,385 | | | 15 | | | 13,287 | | | — | | | — | | | — | | | — | | | 13,302 | | | — | |
| | | | | | | | | | | | | | | | | | |
Acquisitions | | — | | | — | | | — | | | — | | | — | | | — | | | 4,782 | | | 4,782 | | | 3,023 | |
| | | | | | | | | | | | | | | | | | |
Purchases of noncontrolling interests | | — | | | — | | | (20,846) | | | — | | | — | | | — | | | (4,774) | | | (25,620) | | | (1,457) | |
| | | | | | | | | | | | | | | | | | |
Redeemable noncontrolling interests fair value adjustments | | — | | | — | | | (33,020) | | | — | | | — | | | — | | | — | | | (33,020) | | | 32,560 | |
Contributions received | | — | | | — | | | — | | | — | | | — | | | — | | | 9,190 | | | 9,190 | | | — | |
Cash distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (18,162) | | | (18,162) | | | (8,986) | |
Other | | — | | | — | | | (2,411) | | | — | | | — | | | — | | | 46,449 | | | 44,038 | | | (46,868) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — | | | — | | | — | | | 187,800 | | | — | | | — | | | 35,477 | | | 223,277 | | | 5,100 | |
Unrealized gain on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 7,687 | | | — | | | 7,687 | | | — | |
Realized loss on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 1,247 | | | — | | | 1,247 | | | — | |
Foreign currency translation adjustments | | — | | | — | | | — | | | — | | | — | | | (54,164) | | | — | | | (54,164) | | | — | |
Balances at June 30, 2022 | | 225,581,279 | | | $ | 2,256 | | | $ | 2,853,613 | | | $ | (3,129,597) | | | $ | (6,865) | | | $ | (129,571) | | | $ | 445,162 | | | $ | 34,998 | | | $ | 565,024 | |
See Notes to Consolidated Financial Statements
5
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balances at December 31, 2021 | | 221,964,734 | | | $ | 2,220 | | | $ | 2,897,695 | | | $ | (3,327,737) | | | $ | (6,865) | | | $ | (147,964) | | | $ | 394,197 | | | $ | (188,454) | | | $ | 551,921 | |
Cumulative effect of change in accounting principle | | — | | | — | | | (95,986) | | | 60,522 | | | — | | | — | | | — | | | (35,464) | | | — | |
Non-cash and stock-based compensation | | — | | | — | | | 174,811 | | | — | | | — | | | — | | | — | | | 174,811 | | | — | |
Common stock issued under stock plans, net of shares withheld for employee taxes | | 1,097,262 | | | 11 | | | (41,742) | | | — | | | — | | | — | | | — | | | (41,731) | | | — | |
Exercise of stock options | | 2,519,283 | | | 25 | | | 26,026 | | | — | | | — | | | — | | | — | | | 26,051 | | | — | |
| | | | | | | | | | | | | | | | | | |
Acquisitions | | — | | | — | | | — | | | — | | | — | | | — | | | 5,181 | | | 5,181 | | | 8,677 | |
| | | | | | | | | | | | | | | | | | |
Purchases of noncontrolling interests | | — | | | — | | | (36,087) | | | — | | | — | | | — | | | (7,672) | | | (43,759) | | | (1,457) | |
Sales of noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | (336) | | | (336) | | | — | |
Redeemable noncontrolling interests fair value adjustments | | — | | | — | | | (68,734) | | | — | | | — | | | — | | | — | | | (68,734) | | | 68,274 | |
Contributions received | | — | | | — | | | — | | | — | | | — | | | — | | | 15,402 | | | 15,402 | | | 25 | |
Cash distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (49,970) | | | (49,970) | | | (16,144) | |
Other | | — | | | — | | | (2,370) | | | — | | | — | | | — | | | 48,232 | | | 45,862 | | | (47,947) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — | | | — | | | — | | | 137,618 | | | — | | | — | | | 40,128 | | | 177,746 | | | 1,675 | |
Unrealized gain on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 31,656 | | | — | | | 31,656 | | | — | |
Realized loss on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 3,149 | | | — | | | 3,149 | | | — | |
Foreign currency translation adjustments | | — | | | — | | | — | | | — | | | — | | | (16,412) | | | — | | | (16,412) | | | — | |
Balances at June 30, 2022 | | 225,581,279 | | | $ | 2,256 | | | $ | 2,853,613 | | | $ | (3,129,597) | | | $ | (6,865) | | | $ | (129,571) | | | $ | 445,162 | | | $ | 34,998 | | | $ | 565,024 | |
See Notes to Consolidated Financial Statements
6
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balances at March 31, 2021 | | 216,027,546 | | | $ | 2,160 | | | $ | 2,431,387 | | | $ | (2,984,026) | | | $ | (6,865) | | | $ | (173,216) | | | $ | 336,446 | | | $ | (394,114) | | | $ | 264,384 | |
Non-cash and stock-based compensation | | — | | | — | | | 12,830 | | | — | | | — | | | — | | | — | | | 12,830 | | | — | |
Common stock issued under stock plans, net of shares withheld for employee taxes | | 95,264 | | | 2 | | | (121) | | | — | | | — | | | — | | | — | | | (119) | | | — | |
Exercise of stock options, net of shares withheld for option cost and employee taxes | | 265,667 | | | 2 | | | (15,860) | | | — | | | — | | | — | | | — | | | (15,858) | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Acquisitions | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 598 | |
| | | | | | | | | | | | | | | | | | |
Purchases of noncontrolling interests | | — | | | — | | | 4,275 | | | — | | | — | | | — | | | (2,577) | | | 1,698 | | | (1,698) | |
Redeemable noncontrolling interests fair value adjustments | | — | | | — | | | 951 | | | — | | | — | | | — | | | — | | | 951 | | | (951) | |
Contributions received | | — | | | — | | | — | | | — | | | — | | | — | | | 13,471 | | | 13,471 | | | 95 | |
Cash distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (8,034) | | | (8,034) | | | (892) | |
Other | | — | | | — | | | — | | | — | | | — | | | — | | | (2,121) | | | (2,121) | | | — | |
Comprehensive loss: | | | | | | | | | | | | | | | | | | |
Net loss | | — | | | — | | | — | | | (195,665) | | | — | | | — | | | (4,026) | | | (199,691) | | | (10,769) | |
Unrealized loss on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | (5,788) | | | — | | | (5,788) | | | — | |
Realized loss on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 1,946 | | | — | | | 1,946 | | | — | |
Foreign currency translation adjustments | | — | | | — | | | — | | | — | | | — | | | 15,226 | | | — | | | 15,226 | | | — | |
Balances at June 30, 2021 | | 216,388,477 | | | $ | 2,164 | | | $ | 2,433,462 | | | $ | (3,179,691) | | | $ | (6,865) | | | $ | (161,832) | | | $ | 333,159 | | | $ | (579,603) | | | $ | 250,767 | |
See Notes to Consolidated Financial Statements
7
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | | | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests | | | | | | | |
| | (in thousands, except share data) | | (in thousands) | | | | | | | |
Balances at December 31, 2020 | | 214,466,988 | | | $ | 2,145 | | | $ | 2,386,790 | | | $ | (2,676,833) | | | $ | (6,865) | | | $ | (177,009) | | | $ | 338,020 | | | $ | (133,752) | | | $ | 272,449 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash and stock-based compensation | | — | | | — | | | 52,847 | | | — | | | — | | | — | | | — | | | 52,847 | | | — | | | | | | | | |
Common stock issued under stock plans, net of shares withheld for employee taxes | | 661,549 | | | 7 | | | (20,070) | | | — | | | — | | | — | | | — | | | (20,063) | | | — | | | | | | | | |
Exercise of stock options, net of shares withheld for employee taxes | | 1,259,940 | | | 12 | | | 9,924 | | | — | | | — | | | — | | | — | | | 9,936 | | | — | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Acquisitions | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 598 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Purchases of noncontrolling interests | | — | | | — | | | 3,775 | | | — | | | — | | | — | | | (2,577) | | | 1,198 | | | (1,698) | | | | | | | | |
Sales of noncontrolling interests | | — | | | — | | | 161 | | | — | | | — | | | — | | | 8,868 | | | 9,029 | | | — | | | | | | | | |
Redeemable noncontrolling interests fair value adjustments | | — | | | — | | | 35 | | | — | | | — | | | — | | | — | | | 35 | | | (35) | | | | | | | | |
Contributions received | | — | | | — | | | — | | | — | | | — | | | — | | | 15,193 | | | 15,193 | | | 95 | | | | | | | | |
Cash distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (12,511) | | | (12,511) | | | (2,031) | | | | | | | | |
Other | | — | | | — | | | — | | | — | | | — | | | — | | | (2,121) | | | (2,121) | | | — | | | | | | | | |
Comprehensive loss: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | — | | | — | | | — | | | (502,858) | | | — | | | — | | | (11,713) | | | (514,571) | | | (18,611) | | | | | | | | |
Unrealized gain on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 9,308 | | | — | | | 9,308 | | | — | | | | | | | | |
Realized loss on cash flow hedge | | — | | | — | | | — | | | — | | | — | | | 3,862 | | | — | | | 3,862 | | | | | | | | | | |
Foreign currency translation adjustments | | — | | | — | | | — | | | — | | | — | | | 2,007 | | | — | | | 2,007 | | | — | | | | | | | | |
Balances at June 30, 2021 | | 216,388,477 | | | $ | 2,164 | | | $ | 2,433,462 | | | $ | (3,179,691) | | | $ | (6,865) | | | $ | (161,832) | | | $ | 333,159 | | | $ | (579,603) | | | $ | 250,767 | | | | | | | | |
See Notes to Consolidated Financial Statements
8
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| (in thousands) |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income (loss) | $ | 179,421 | | | $ | (533,182) | |
Reconciling items: | | | |
Depreciation | 114,119 | | | 111,864 | |
Amortization | 102,277 | | | 100,457 | |
Amortization of non-recoupable ticketing contract advances | 40,392 | | | 28,728 | |
| | | |
Amortization of debt issuance costs and discounts | 8,224 | | | 18,373 | |
| | | |
Stock-based compensation expense | 61,741 | | | 52,847 | |
Unrealized changes in fair value of contingent consideration | 18,010 | | | (8,040) | |
| | | |
Equity in losses (earnings) of nonconsolidated affiliates, net of distributions | 10,112 | | | 10,002 | |
Provision for uncollectible accounts receivable | 25,702 | | | (16,563) | |
Gain on sale of investments in nonconsolidated affiliates | (448) | | | (52,947) | |
Other, net | 10,033 | | | 9,847 | |
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | |
Increase in accounts receivable | (440,290) | | | (143,343) | |
Increase in prepaid expenses and other assets | (607,939) | | | (102,554) | |
| | | |
Increase in accounts payable, accrued expenses and other liabilities | 972,906 | | | 518,810 | |
Increase in deferred revenue | 1,053,178 | | | 1,175,690 | |
Net cash provided by operating activities | 1,547,438 | | | 1,169,989 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Advances of notes receivable | (30,558) | | | (12,830) | |
Collections of notes receivable | 11,074 | | | 10,618 | |
| | | |
Investments made in nonconsolidated affiliates | (46,699) | | | (33,729) | |
Purchases of property, plant and equipment | (130,278) | | | (58,066) | |
| | | |
Cash paid for acquisitions, net of cash acquired | (39,854) | | | (7,627) | |
Purchases of intangible assets | (6,129) | | | (11,191) | |
Proceeds from sale of investments in nonconsolidated affiliates | 1,204 | | | 61,618 | |
Other, net | (3,496) | | | 912 | |
Net cash used in investing activities | (244,736) | | | (50,295) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Proceeds from long-term debt, net of debt issuance costs | 4,009 | | | 511,068 | |
Payments on long-term debt | (22,638) | | | (85,125) | |
Contributions from noncontrolling interests | 13,448 | | | 15,288 | |
Distributions to noncontrolling interests | (66,114) | | | (14,542) | |
Purchases and sales of noncontrolling interests, net | (27,138) | | | (3,273) | |
| | | |
Proceeds from exercise of stock options | 26,051 | | | 28,083 | |
Taxes paid for net share settlement of equity awards | (41,731) | | | (38,209) | |
Payments for deferred and contingent consideration | (22,508) | | | (11,926) | |
Other, net | (1,014) | | | 105 | |
Net cash provided by (used in) financing activities | (137,635) | | | 401,469 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (186,703) | | | (19,965) | |
Net increase in cash, cash equivalents, and restricted cash | 978,364 | | | 1,501,198 | |
Cash, cash equivalents and restricted cash at beginning of period | 4,887,792 | | | 2,546,439 | |
Cash, cash equivalents and restricted cash at end of period | $ | 5,866,156 | | | $ | 4,047,637 | |
See Notes to Consolidated Financial Statements
9
LIVE NATION ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
Preparation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, they include all normal and recurring accruals and adjustments necessary to present fairly the results of the interim periods shown. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on February 23, 2022.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals, acquisition accounting and impairments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Seasonality
Our Concerts and Sponsorship & Advertising segments typically experience higher revenue and operating income in the second and third quarters as our outdoor venue concerts and festivals primarily occur from May through October in most major markets. In addition, the timing of when tickets are sold and the tours of top-grossing acts can impact comparability of quarterly results year over year, although annual results may not be impacted. Our Ticketing segment revenue is impacted by fluctuations in the availability and timing of events for sale to the public, which vary depending upon scheduling by our clients.
Cash flows from our Concerts segment typically have a slightly different seasonality as payments are often made for artist performance fees and production costs for tours in advance of the date the related event tickets go on sale. These artist fees and production costs are expensed when the event occurs. Once tickets for an event go on sale, we generally begin to receive payments from ticket sales in advance of when the event occurs. In the United States, this cash is largely associated with events in our owned or operated venues, notably amphitheaters, festivals, theaters and clubs. Internationally, this cash is from a combination of both events in our owned or operated venues, as well as events in third-party venues associated with our promoter’s share of tickets in allocation markets. We record these ticket sales as revenue when the event occurs. Our seasonality also results in higher balances in cash and cash equivalents, accounts receivable, prepaid expenses, accrued expenses and deferred revenue at different times in the year.
We expect our seasonality trends to return to normal in 2022 as events in our major markets resumed late in the second quarter of 2021.
Cash and Cash Equivalents
Included in the June 30, 2022 and December 31, 2021 cash and cash equivalents balance is $1.4 billion and $1.3 billion, respectively, of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges (“client cash”), which amounts are to be remitted to these clients. We generally do not utilize client cash for our own financing or investing activities as the amounts are payable to our clients on a regular basis. These amounts due to our clients are included in accounts payable, client accounts.
Income Taxes
Each reporting period, we evaluate the realizability of our deferred tax assets in each tax jurisdiction. As of June 30, 2022, we continued to maintain a full valuation allowance against our net deferred tax assets in certain jurisdictions due to cumulative pre-tax losses. As a result of the valuation allowances, no tax benefits have been recognized for losses incurred, if any, in those tax jurisdictions for the first six months of 2022.
Accounting Pronouncements - Adopted
In August 2020, the FASB issued guidance that simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity. The new guidance reduces the number of accounting models that require separating embedded conversion features from convertible instruments. As a result, only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately. For contracts in an entity’s own equity, the new guidance eliminates some of the current requirements for equity classification. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. We adopted this guidance on January 1, 2022, using the modified retrospective method and recorded a cumulative-effect adjustment of $60.5 million as a reduction to accumulated deficit in the consolidated balance sheets. The impact of adoption also resulted in a reduction of additional paid-in capital of $96.0 million and increased our current portion of long-term debt, net and long-term debt, net by $14.7 million and $20.8 million, respectively, as a result of reversal of the separation of the convertible debt between debt and equity. The adoption did not have a material effect on our consolidated statements of operations or consolidated statements of cash flows.
NOTE 2—BUSINESS ACQUISITIONS
During December 2021, we completed the acquisition of an aggregate 51% interest in OCESA. This acquisition was accounted for as a business combination under the acquisition method of accounting. With the exception of OCESA, all other acquisitions were not material on an individual basis or in the aggregate.
OCESA Acquisition
Description of Transaction
On December 6, 2021, we completed our acquisition of an aggregate 51% of the capital stock of OCESA (the “Acquisition”) for $431.9 million, subject to certain adjustments. Upon closing of the Acquisition, we and Corporación Interamericana de Entretenimiento, S.A.B. de C.V. terminated the then pending International Chamber of Commerce arbitration in connection with the earlier termination of the purchase agreements, and any related litigation was also dismissed.
OCESA is one of the most prominent live event businesses globally with a robust business portfolio in ticketing, sponsorship, concession, merchandise, and venue operation across Mexico and Latin America. We expect the Acquisition to add value and growth to all of our reporting segments.
Recording of Assets Acquired and Liabilities Assumed
The following table summarizes the preliminary acquisition-date fair value of the identifiable assets acquired, liabilities assumed and noncontrolling interests including goodwill:
| | | | | |
| Initial Allocation |
| (in thousands) |
Fair value of consideration transferred | $ | 431,943 | |
Adjustments for working capital | 2,269 | |
Fair value of redeemable noncontrolling interests | 280,000 | |
Fair value of noncontrolling interests | 7,000 | |
Fair value of pre-existing investment in nonconsolidated affiliates | 50,000 | |
|