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 Second Quarter 2020 Earnings Conference Call. Today’s conference is being recorded. Following management’s prepared remarks, we will open the call for Q&A. Instructions will be given at that time. 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 risk 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 the earnings release. The release reconciliation and other financial or statistical information could be discussed on this call can be found under the Financial Information section on Live Nation’s website at investor.livenationentertainment.com. It is now my pleasure to turn the conference 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. Over the past three months, our top priority has been strengthening our financial position to ensure that we have the liquidity and flexibility to get through an extended period with no live events. Our expectation that live events will return at scale is the summer of 2021, with ticket sales ramping up in the quarters leading up to these shows. And partly, we remain confident that fans will return to live events when it is safe to do so. Our strongest indicator of demand is that fans are holding onto their tickets even when given the option of a refund. Through the end of the second quarter, 86% of concert fans are keeping their tickets for rescheduled shows, demonstrating their continued desire to attend concerts in the future despite the current uncertainty. Our expectation for robust outdoor summer season in 2021 are also reinforced by the two-thirds of fans keeping their tickets for canceled festivals so they can go to next year’s show, along with a strong early ticket sales for the festivals in the UK next summer. For example, downloads in the Isle of Wight are pacing well ahead of last year. Between the tickets held by fans for the rescheduled shows and these festival on sales, we have already sold 19 million tickets to more than 4,000 concerts and festivals scheduled for 2021, creating a strong base load of demand that is taking well ahead of this point last year. At the same time, surveys continue to show that concerts remain fans’ highest priority social event when it is safe to gather, with almost 90% of fans globally planning on attending concerts again. Understanding that it’ll be some time before we put on concerts at scale, we are innovating to…

Thanks, Michael, and good afternoon, everyone. As Michael mentioned, our top property during this time has been strengthening our financial position. And we are confident 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. We have now reduced costs for this year by over $800 million and reduced our cash usage by $1.4 billion relative to our pre-COVID plans. With these reductions, we have lowered the estimate on operational cash burn rate to $125 million per month and our gross burn rate to $185 million per month on average for the second quarter through the end of the year. At the same time, we raised an additional $1.2 billion, providing us with a $1.8 billion of free cash at the end of the second quarter, along with over $950 million of available debt capacity, totaling over $2.7 billion in readily available liquidity. And last week we amended our credit agreement to suspend our maintenance covenant to a more favorable liquidity metric to Q4 of 2021, providing us with added flexibility until business returns. Turning to our Q2 results, starting with AOI. Our AOI for the quarter was a loss of $432 million, driven primarily by operational fixed costs of $334 million, inclusive of approximately $60 million in benefits from various government payroll funding programs. So with our cost initiatives we expect operational fixed costs to average approximate $125 million per month for the second quarter through the end of the year. We then had negative $98 million in contribution margin, largely driven by one-time events in Ticketmaster and are concerts business. For Ticketmaster, recording refunds for 11 million tickets across 42,000 shows generated a loss of approximately $79 million for our portion of…

Thanks, Joe, and good afternoon, everyone. I will review our second quarter and six months results and provide updates on our balance sheet. All of our results for this quarter and the first six months of the year have been significantly impacted by the shutdown of our shows since mid-March due to the COVID-19 pandemic which is driving all of the variances for both periods in total and across all segments. For the quarter, our revenue was $74 million, compared to $3.2 billion last year, down 98%. AOI was a loss of $432 million for the quarter compared to earnings of $319 million in 2019. Our operating loss was $588 million compared to $172 million in operating income last year. And net loss for the quarter was $568 million compared to net income of $103 million in 2019. For the first six months, we generated $1.4 billion in revenue compared to $4.9 billion last year, down 71%. Most of this revenue in 2020 was driven by our show activity in the first two-and-a-half months of the year prior to the shutdown. AOI was a loss of $452 million for the first six months compared to income of $435 million in 2019. Our operating loss was $761 million compared to $148 million in operating income last year and net loss for the first six months was $752 million compared to net income of $51 million in 2019. Now onto our balance sheet. As of June 30, we had total cash of $3.3 billion, which includes a free cash balance of $1.8 billion. Our total cash includes $941 million of current event-related deferred revenue as well as $486 million of long-term deferred revenue for events that have been rescheduled more than one year out as of June 30. This is part of…

And your first question comes from the line of Brandon Ross with LightShed Partners.

Good afternoon, guys. Thanks for the very detailed prepared remarks. A couple of questions. First, can you tell us how you’re approaching on sales for 2021? Should we expect a similar cadence to the typical years? Or are you guys going to take more of a wait-and-see approach, given everything that’s going on? And I assume in your cash burn guidance that you gave there is no top line in there at all and you’re assuming no on sales in 2021. Then I have a follow up.

This is Joe. I will start these. In terms of the on sales timing, as we indicated, we expect to be returning to scale with next summer particularly focused on the amphitheaters and the festivals first. So I think that we would expect the usual timing of those on sales, which would typically be for amphitheaters around the end of the year. So we don’t expect for the full year the same; we expect it to be more back half loaded. But we do expect the on sales to be somewhere around a few towards the end of the year and the bulk of them as we get into the first quarter of the year. Second question. In terms of the cash burn, the cash burn is with I’ll call it relatively limited inflows, more similar to what we have in Q2. So we did have some inflows but not, obviously, at scale or substantial. The cash burn numbers we gave you are assuming the status quo through Q4. And as we move further into it and we have better visibility on Q4, if there is some ramp ups and activity which would give us both increased contribution margin as well as increased costs, we’ll guide you to that as we get closer. But we thought the more prudent simple thing to do at this point is to give you the status quo. And then as we have more going on, we’ll increase both sides from there.

Got it. And then it was widely reported I guess in the rags that you tried to adjust artist terms for festivals and were met with pushback. Can you talk about what happened there and what was the outcome? And as you contract for 2021 shows, have you been able to share your risks with artists at all? And how have contracts been structured differently for 2021 shows and maybe going forward from there? Hello?

Sorry, Brandon, I had trouble with my mic. Yeah, the press got a hold of a work in progress, which was too bad, because it wasn’t meant to be that. We, for a living, are negotiating deals with agents and managers. That’s the business model. Their job is to look for competition, and our job is to bid on these shows in different terms for different artists in different times. So the process is always fluid. We’re obviously trying to do our side of the negotiation and the agents doing their side. This looked, I guess as it got reported, it was just a mid statement. It wasn’t meant to be anything more than that. But what we really wanted to accomplish was I would just step back and say the industry overall has been amazing dealing with restructuring 2020 into 2021. The agents, the managers and all the artists all have been very cooperative, that understand that if you had a show this year and you wanted to reschedule next year, some compromise in the terms would have to be met. And the biggest risk we all had on the promoting side that we wanted to make sure we could incorporate was the refunds. Now the refunds, as we’ve seen, have been surprisingly really strong on the concert side. And we didn’t know what we were going to head into an we started renegotiating. But we do know on festivals refund rates are much higher because it’s a bigger cash outlet, but it’s also just a bigger time commitment. They don’t tend to be as local as your average concert. So wanted to make sure going to 2021, if you are a headline artist that was going to play a certain festival this year and we wanted -- and…

What about for shows that are in 2021 that were not pushed from 2020? Are those contracts being structured differently than historical deals?

Well, I would say that what the industry did in general overall is every show you basically had you had the chance to cancel it. Right. Every show basically was canceled in some sense. Not to our doing. So everyone was in the same boat. You were all starting with a clean slate. So I would say to you if you had a tour that was on sale and it wasn’t doing well, you and the artist decided to pull it down and not go forward with it regardless of COVID. So any tour that you reschedule, you have the opportunity to look at that deal and at that show and at the number of dates, et cetera, and negotiate with the agent and manager and the artist on what was the best go-forward strategy. So anything -- we talk about 2021 is going to be a spectacular year in the sense of the stuff that did get pushed you can guarantee was all of the stuff that was selling well and high demand. So that stuff is all going to -- those shows will still be continuing next year. We didn’t have anything really on sale for 2021 ahead of our 2020 season of any substance. Ninety-five percent of what we are dealing with was 2020 reschedule to 2021 shows.

Got it. Thank you.

Your next question is from David Karnovsky with JPMorgan.

Hi. Thank you. When you look at planned 2021 concert season, can you talk about how it might look coming back in terms of venues? And you all mentioned before, focus on maybe the amphitheater footprint initially, so how much can you lean into your amphs? And can you book artists there that might otherwise played an arena or stadium?

I’ll start and then Joe will jump in. I mean, first, you think about our business. It’s 50% international, 50% America, so a lot of what we’re doing is what were going to happen outside of America versus here. The summer season in international is the heartbeat of their business festivals, from small outdoor shows to larger festivals. So Europe will already continue what they do well. Most of their business will be outdoors. The summer season here, we do have the advantage of our 50 amphitheaters and we think those are going to be high utilization next summer, as well as our boutique festivals. So, yes, we would be looking right now at the business as a strong amphitheater festival outdoor business in Europe and into America, and then most of your touring indoor stuff will start to ramp up in the fall into winter.

Yeah, I agree. The only thing I’d add is I think this is a place where our having, our managing a large number of buildings really is going to come to our advantage. So the fact that we have these 50 amphitheaters we can manage the process with the buildings and we have all of that activity outdoor, the same for the festivals where we have the leases on the land and we can operate them. And then even the hundred plus clubs and theaters that we have as one would expect that some of the lower volume number of people gathering will happen sooner than some of the large gathering indoor because we have those buildings, because we can manage the processes with them. I think that will let us ramp up faster than otherwise we would be able to.

Okay. Then I think earlier you did mention some international regions with concerts being done at limited capacity. I mean, are there other countries or markets where you operate where you think you can get to some level of scale prior to summer 2021 at this point?

Yeah, I mean, we definitely, we all see that news, the U.S. looks like the one that will be the longest but the other markets, whether it’s Australia, New Zealand, Denmark Germany, Finland, some of those markets, they all seem to be moving along on a good forward path. They’ve had a very structured plan in place and when small shows can start, they seem to be moving towards those timelines. So although we’re talking about a spring return to business outdoors we do actually operate in 40 different countries expect certain markets especially from theater up unto clubs and into arenas to be happening in some of those markets before the spring.

Okay. Thank you.

Your next question is from Ben Swinburne with Morgan Stanley.

Hey. Good evening or good afternoon. Michael, can you go a little bit more about artist appetite to get back on the road in this environment? I know a lot are either postponing releasing new music or at least some have. Others, I’m sure, are trying to be sensitive to the economic pressures that their fans are seeing. What are you hearing from artists that you have relations with around getting back on the road sooner rather than later? And maybe a similar question for you on their, decision process on canceling versus postponing, I think there been some who have decided to cancel in order to help their fans get their money back faster. I didn’t know if that was something that you thought would grow as the year progressed. And then I just had a follow up on the deferred revenue point.

Yeah, I think it was our last earnings call we were showing you some statistics to make sure that everyone understood that touring had not had a structural change. There was a debate back then whether fans would gather when they got out of this. I think if anything we learned in three months, we got to figure out how they don’t gather short-term so we can have better business faster. I would just say to you that we have been really, really, we’re going to play long on this one, so we have artists with lots of ideas on shows they could do now. We won’t be doing DJ sets in The Hamptons anytime soon. We’re going to play along and play safe. So the artist, you nailed it. I was talking to an artist this morning. I think as you read elsewhere, I think you’re going to see a creative boom. I saw the record label this week also down slightly because they need new releases and touring to happen to keep the machine moving. So yeah, I think 2021 you have artists that are all just keep calling me daily saying, when can I go? When’s it going to be safe? When are we going to go? I am dying to go. I got new music. I want to drop new music. So I think this is why we believe long-term regardless of what quarter we exactly scale at, the business will be stronger than ever with the creative push by all these artists who need to get on the road to drive their new music. So 2021, 2022, we can debate what quarter exactly ramps but we believe 2021 into 2022 will be record years with artists on the road who are pent-up. They need to…

Got it. That’s helpful. And then just deferred on the revenue. Thank you for all the detail. I may be confused. Deferred revenue for events, I think, at the end of the quarter was about $940 million. And I think you said you thought it would be $1.3 billion at the end of the year. It’s obviously the higher number, which is sort of counterintuitive, given there is some refund activity expected. I think, Joe, you said that did not include any benefit from on sales. So what’s the reconciling item? Or did I just maybe mishear you?

Yes. So you heard the numbers right, Ben. Two things. One is, as part of that $941 million, that includes $180 million of what we’ve modeled out as additional refunds that we expect to happen. Because we are able to model it, we needed to ship that out of deferred revenue. If our model were perfect, then that would’ve already been taken out. And the second is when we use the term deferred revenue, it is with regards to deferred revenue for events taking place over the next 12 months. That’s never been an important nuance in the past because deferred revenue for things over a year ago has tended to be pretty small. But in this case, because we deferred a lot of shows into the second half of 2021, we have about $400 million of long-term deferred revenue that will flip into deferred revenue over the next six months. So your 900 plus 400 equals the $1.3 billion rough numbers.

Got it. We’ll all be experts on this by the end of the year hopefully. Thanks for your help.

And then we’ll start selling more tickets to confuse you deferred. We look forward to that day.

Thanks.

And you do have a question in queue from Khoa Ngo with Jeffries.

Good afternoon, everyone. Thanks for taking my question. If you can just focus a little bit on M&A opportunities, and obviously, there’s a lot of distress out there. So I want to be sensitive and cognizant with the question. So I’m just wondering what you’re seeing in terms of opportunities to consolidate and what your general appetite is to pursue those opportunities.

Well, I think we mentioned it last time. I think we look on a global basis as we continue to look to build our global market share. And we believe that over the next 24 months there’ll be ongoing opportunities for us to expand our global footprints in foreign and international markets that we’ve have been looking to get into and build some businesses around. So, yes, we do think that over time this will provide us some opportunity in international markets.

Understood. And if I can just pivot a little bit towards your cost cuts. You’ve clearly made a lot of progress. I believe the numbers were around $500 million pre-1Q, and then 1Q was about $600 million and now you’re at $800 million. I’m just wondering of that $800 million how much of that you think is more structural, more permanent going forward.

Yeah, I don’t think we’re going to give you exact number. But there’s no question we’ve been going through this process, we’ve been looking at our fundamental cost structure and we do expect that we will come out of this with some different organizational structures, a bit leaner, bit tighter in terms of how we do some things. So we will have some savings. How much of that, right, you expect to see more of that in 2021 is a year that you’re ramping back up; and then as your continuing to grow getting into 2022 and beyond, you’re then reinvesting some portion of that. But over the next quarter or two, we’ll give more definitive numbers on that.

Understood. Thanks very much.

But to give you color, I would add the only gift to when you slow down to this level that you have not had since we launched this company 15 years ago is you build up your own bureaucracy and your own rust 15 years in. And we haven’t had the luxuries or opportunity to sit back division by division and look under every rock and challenge ourselves on how are we going to go to market differently? What are some new products we need to go to market with, and how are going to operate more efficiently on a global basis? So I would say the part that does motivate me daily is Joe and I and our teams probably have never felt so energized around what Live Nation 3.0 will look like heading into 2021. And that’s -- our main obsession isn’t just to sit still but to come out of this looking and feeling different.

Thanks very much for the color

Will hit -- which obviously will add efficiencies to our ongoing cost structure as well.

Your final question comes from Stephen Glagola with Cowen.

Hi. If we look at the phase 3 openings across the U.S. and internationally, concerts that are still being put on in various international countries and cities for the most part are at pretty reduced capacities. What gives you confidence that the governments will allow live events to return to scale in the summer of 2021? And can you maybe define like when you say back to scale, is that 75% capacity, 50% capacity in your amsen festivals or full capacity, if that’s the expectation. That would be great. And then you talk on the press release like the potential revenue opportunity or -- sorry -- streaming, excuse me -- as being an additional long-term component of the concert business. Could you maybe speak to that as a potential additional new revenue opportunity? And any other adjacent products or services you guys may be able to offer during this difficult time to bring in some incremental revenue? Thanks.

All right. Let me -- go ahead.

I will start on streaming then work backwards. Yeah. I think we have a natural advantage in the streaming business in the sense we have studios call these events. And 300 festivals and 10,000 theater and club shows alone, we’ve been great at the physical execution but they do provide incredible digital opportunities that we haven’t focused enough on. So I think we’re deep at work in biz devev department and I think you’ll see some new products from us in the new year that we think are complements to our core business. But great additions. We also have such a huge sponsorship base, when you have 900 sponsors. Adding Live from Home alone has been a big part of helping deliver some benchmarks as well as drive-in concerts and some of the reduced capacity, although not perfect on their own, they’ve been great tools to provide sponsors with some value. So I think you’re right. You’re going to see us launch some new products that we think will be a great complement to our core business. As far as the confidence on getting back to business, Joe, you and I were just discussing that so you could take the lead.

Sure. So first of all, to answer your question on what we mean by scale? To us, scale our normal business model in the summer, we’d be doing several thousand concerts a quarter for tens of millions of fans. So we’re not going to try to predict right now the exactness. Is it 70%? Is it 90%? What percent of last year is it? But it’s in that type of volume. So why do we think it’s going to happen? A couple of things. First of all, I think the efforts on the vaccine front are moving faster than anyone predicted three or four months ago if you listen to the experts. The Dr. Faucis of the world and what are they saying in terms of their expectations where you have multiple different vaccines with multiple different approaches and their belief that something is going to happen by the end of the year is one of the vectors that gives you some comfort. The other is the progress being made on the treatments. We’ve obviously as a medical community learned a huge amount over the past four months in terms of the basic treatment, in terms of perhaps the potential of antibody treatments, the use of other drugs, remdesivir and others, in terms of helping to reduce the mortality rate of it. So overall in terms of as we’ve talked bringing about the facts and the science lead us, we have been pleasantly surprised thus far on the progress of vaccines, probably some of the testing and tracing has been slower but still now is ramping up so between the testing, tracing, the treatment also providing opportunity. So amongst those I think we believe sitting here today that the facts would say that by the beginning of the year you’re able to put on the tickets. The tickets on sale we’ll be able to do the shows next summer. And then for the reasons that we have talked about, we have a high degree of comfort that demand is going to be there. 86% of the people keeping their tickets to the shows, two-thirds of the people keeping their tickets for festivals that were canceled this year, put out canceled but still saying they wanted to go to the show next year instead of getting their refund. So in total over 19 million tickets for 4,000 shows that have already been sold which that alone, well, we have already sold for 2021 would make us one of the largest promoters in the world. So all those factors together I think is what gives us the comfort.

Thanks, John and Michael, and pardon the long-winded questions, but if I could just slip one more and just on, could you discuss the viability of independent venue owners in this environment if then used to close down or go bankrupt? How do you anticipate that impacting the concerts business and also Ticketmaster you think will reopen?

I would just say on the Ticketmaster front, it’s a global business with a very, very diverse portfolio less on the small venue side on a macro level. So it would have limited effect there. Ticketmaster, at the end of the day has very large sports business on a global basis and big venues which is a big part of its business and then large concerts. So don’t think you’ll see it there, any effect there. I would say that looks like in most of the countries, maybe the U.S. now, this ongoing stimulus programs in effect and that seem to be coming to life for the live business in general, whether it’s the employees, whether it’s the venues, small or big. So I would assume some of them would have continued ongoing support through government programs to keep them afloat through this time. Listen, we are all in the same boat. We are all looking to figure out how to get through the downtime and reduce costs, and I think they are banding together, and hopefully, they will find their support systems also.

And there are no further questions in queue at this time.

Thank you.

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