Good day, everyone. My name is John, 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 2022 Earnings Conference Call. Today's conference is being recorded. Follow the management’s prepared remarks we will open the call for Q&A. [Operator Instructions] 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 and 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 the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in their earnings release or website supplement, which also contains other financial or statistical information to be discussed on this call. The release reconciliation and website supplement 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 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. In 2022, fans around the world continue to prioritize their spend on attending live events, particularly concerts. Our research consistently tells us that concerts are top priority for discretionary spending. And one of the last experiences fans will cut back on. And we're seeing this play out in both our 2022 results and early indicators for 2023. With the strong demand last year in the cancer business, we had 121 million fans attend our shows across 45 countries. While in ticketing, we helped connect 550 million fans with their favorite artists, teams and performers. In both cases, the majority of our growth came from international markets, further reinforcing the global nature of untapped fan demand and the opportunities we have for growth as we help artists reach more fans with their live music. Before getting into details on our division, just to note that 2019 is the best comparison for us in terms of understanding our results. Most of our metrics will be relative to full year 2019. In concerts, despite many markets still closed for part of last year, we grew attendance by 24% to 121 million fans at 44,000 events, which drove revenue up 43% to $13.5 billion. This growth came from all markets and venue types. Every venue type from clubs and theaters, to stadiums, to festivals, had double-digit attendance growth. We invested $9.6 billion in putting artist shows on in 2022, working with the largest superstars to artists just getting started and all those in between. This is up 45% and further reinforces our role as the largest contributor to our artist income. As part of this, we helped shift $700 million to artists with more market value ticket pricing, even as the entry price to a show…

Thanks, Michael, and good afternoon, everyone. Given the uniqueness with our seasonality in 2022 after emerging from the pandemic, I will largely focus on our annual results. And as with prior quarters, 2019 is the best comparison for us in terms of understanding our results so much of our discussion will be relative to the full year 2019. For the company, our reported revenue of $16.7 billion for the year was $5.1 billion better than 2019 or an increase of 44%. On a constant currency basis, our revenue was $17.3 billion for the year. So there was roughly a 4% unfavorable impact due to the strengthening of the U.S. dollar, primarily against the euro and the pound. Our reported AOI of $1.407 billion for the year was also a record for the company, $465 million better than 2019, up 49%, led by an improvement of $345 million in ticketing and $226 million in sponsorship. On a constant currency basis, our full year AOI was $1.464 billion. The FX impact was negative $57 million or 4%. And we have converted roughly 69% of this AOI to adjusted free cash flow of $967 million, leading to a year-end free cash balance of nearly $1.8 billion. Net income for the year was also a record at $296 million, $226 million better than 2019, resulting in earnings per share of $0.64. Let me give a bit more color on each division. First, in concerts, we had the most concert fans ever with 121 million fans attending our shows in 2022, up 24% compared to 2019 when we had close to 98 million fans. Show count was 43,600 events, up 8% compared to 2019, with more fans per show due to a heavier mix of stadium and festival events. As a result, our concerts revenue…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Brandon Ross with Lightshed Partners. Please proceed with your question.

Yes thanks for taking the question. You laid out your prescription for solving many of the structural issues in ticketing today. But there is a lot of elected officials and fans that think you're way too big despite the slipping share that you highlighted. And I want to know why are both your ticketing and promotion business is so dominant? And why wouldn't a more competitive industry solve any of these issues at hand with the ticket buying experience?

Thanks Brandon. It's Joe. I think when you look at our business, our business in both concerts and ticketing have been successful because they very effectively serve their constituents. So on the concert side, I mean if you go back to ten years, we and AG were roughly similar size. We've had a very focused strategy of super serving the artist, which has led to a lot of success in terms of continuing to work with more of the artists. In ticketing, we have the best product out there, full stop. Michael spoke to why it is, we've been effective continuing to work with a large number of venues because we have the best software platform for them, and we work with them to develop tools and products for artists who are their key constituents when figuring out where they're going to be touring. So, it's hard to answer your question with where would we be if we didn't have someone who developed such great tools for the venues and such, and serve the artists so well, I think, we would have a smaller industry. I think we have consistently grown the industry through our approaches to the business. And overall, the ecosystem is better for it.

Okay. And then you talked about the amount of junk that's in ticket fees, and it's a huge concern of, I think, fans and regulators. The amount of fees or the percentage of fees that go into each ticket sale. Can you get a little more granular on why ticket prices are so high? What percentage of the fees goes to you and what is “junk”? And then you have these growing junk fees, you're giving venues of bigger and bigger cut, and now there's the consumer and regulatory pressure, why should the investors be worried about the sustainability of the Ticketmaster and the Live Nation O&O venue ticket fees as we look to the future?

Yes. Just first, correction, these aren't junk fees. Junk fees are low-value hidden fees to show up later. This is our version of the markup of the base wholesale price of the product is shared by us and the venue. Amazon collects 50% of the retail price, Apple collects 30%. So this is a version of the amount of the money that goes the venue for the services they provide, Ticketmaster for the services they provide. So it's not junk fees. What we've said is that the majority of the fees go to the venue. And typically, when you renew with a venue because of the competitive nature of the bidding process, more of the fees goes to the venue. I don't think it makes much sense for us to give exact breakdowns because then, obviously, everybody below the average in the next discussion once they get to be above the average. And so it's not a very commercially wise move for us to give those specific numbers. But generally, that's been the trend, and that's what's been happening. The venue sets the fees and the venues costs have been going up, service fees have been going up. I think it would be a very unique situation where you would tell the building what their fees could be. I think it's more likely you got all-in pricing, where they see the total cost upfront quite transparently. And frankly, if you were to cap fees, what would end up happening is you then have increased rent and other costs for the artists would go up because the venue needs to recoup their costs as part of the ecosystem.

So you are saying if ticket prices or ticket fees were regulated, then ticket prices would just stay the same because they would just be passed on in another way?

Very possible that's what happened, yes.

Got it. Okay. Thank you.

Historically, Brandon, there was a division on what the artist was charging to the consumer and then what were the added revenue streams or fees that were going to be added on top of that. And it’s kind of in search state historically. But now, as you know, we've said it many times, the artist takes most of that ticket fee base. So the way that the venue, the promoter or the ticketing company earn their revenue fees is through that extra fee. You're right we would love to more just to make it all in pricing. So the consumer is very clear from the beginning that to go see the true cost to the show isn't $25, it's $50 because that's how all of the participants need to be participate for that show to happen. Now tomorrow, if someone said, you know what, those $25 fees, you shouldn't have them. Well, then the van you would say, okay, artist, the rent isn't $50,000 anymore, it's $100,000. And the fees would add up and then all of a sudden, that ticket price wouldn't be $25, it would be $50 on a value. So it is inefficient. That's why we're a big proponent of all-in pricing and all our pricing at the beginning of the process, which you don't see right now on most companies other than ours. So we believe that we all want to know what is the true cost to see the show when I start shopping. We wish that would be mandated tomorrow across the board that would relieve a lot of the stress, the consumer's perception that there's this magical extra fee added on that is not kind of part of the overall show cost.

Got it. Thanks for the explanation.

And to your point on Live Nation owned and operated, just to hammer the point home to your point is right. If tomorrow, someone said, you know you can't charge 20% service fees on your amphitheater, you have to be $10, well, then the $75,000 house not rent that we charge Argus, would be $100,000, right? So we couldn't – we wouldn't absorb the cost. We still have to pay staff capital, run the building so we have to find the revenue in the other means. So the true cost of going to a show and making the show happen isn't the full price all in. We just need to now market that upfront better.

And the next question comes from the line of David Karnovsky with J.P. Morgan.

Hi. Thank you. Michael, I think over the years we've become accustomed to seeing some level of criticism against Live Nation or Ticketmaster from politicians, trade press, social media that certainly elevated lately though. So I wanted to ask what actions were you thinking about taking to be more proactive in managing the public perception or your relationship with lawmakers that could maybe help limit what's become a periodic concern for investors.

Yes, it's a great question. First, I want to kind of look at where the drama that gets created, if you kind of zoom out, we did 550 million tickets last year, about 540 million of those were happy customers that were seamlessly delivered. About 10 million of those are five tours historically a year, have this incredible demand with supply demand is out of whack and it creates lots of tension and unhappy customers. And that's kind of always kind of been the historic challenge in the business. At Live Nation Ticketmaster, historically we've really been a B2B business. Our Ticketmaster job is to service the venue and our concert job is to service the artist. And we've done a fabulous job building those businesses and having very, very happy customers. And part of that proposition historically has been to take a bit of the heat at the front end. When the ticket prices are high, when the service fees are high, if the demand supplies out of whack, Ticketmaster has historically been the one that's taken the punch or the ticket seller in general, if you look at all ticket companies, all their NPL scores are all kind of the same. There's only two customers as Fred Rosen famously said, the one that got the ticket is happy and all the ones that didn't are pissed off, right? So you never always – you can never kind of make – this is an industry where there's just not enough inventory to make everyone happy. And we've lived that historically. But absolutely, we've got to now start adjusting on our B2C side. We've got to get much more lean forward on our government relations and our PR side. We've historically not had a big incentive to kind of shout…

Okay. And then for Joe, just on the quarter, the sponsorship AOI margin was a little lower than we normally see. I think there were some festivals and amp shows that had got scheduled later. So wondering if there was a mix factor there. And then just free cash flow conversion for the year, I think it was like 10% higher than you had expected? Wondering if you could just walk through the drivers of that and how sustainable that might be? Thanks.

Yes. I think, obviously we finished up a fantastic year. As I've told you guys in the past, I don't overly read too much in this quarter specific comparisons. You've got a lot of moving pieces. We obviously had some changes in the business with the addition of OCESA, a lot of impact last year. Timing of APAC closed most of the year. Europe only opened in the second half. So it was really just some timing shifts, nothing to read particularly into it or to read as a go-forward indication on the margin side. And then as you said, yes, our free cash flow came in very strong as the conversion to AOI. I think a little higher than expected, in part, just the overall AOI level, gave us some leverage on that. And then just some of the below the line pieces were a bit lower than what we expected. So I think we outperformed last year on that free cash flow conversion.

Thank you.

And our next question comes from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your question.

Hey. Great, thank you. Maybe on the demand front for Michael. Thanks for the commentary on ticket sales being up 20% year-over-year on a global basis so far this year. I was hoping you could maybe expand on that a little bit by talking more about what you're seeing in demand so far through February, particularly in markets that were opened this time last year, I think like the U.S., Canada and maybe parts of Europe? As consumer pricing trends remain stable versus what you saw last year as growth accelerated or decelerated, especially now lapping some of the reopening benefits that we saw in 2022?

So thanks Stephen.

I'll start.

Go ahead Joe.

I'll just start with some of the numbers and then Michael can fill in with some color. So as Michael said, we're up 20% this year relative to where we were at this point last year. That's even with last year having the benefit of all those rescheduled shows, which totaled around 20 million fans. About 20 million fans got rescheduled. We think half of those would have happened last year anyway, but that means that 20% growth comp is against an inflated number, if you will. So the actual growth even stronger than that. As we noted in the release – within that international is up around 25%, which would mean that North America is still up high teens. So very good growth. If you look just at the ticket sales sold in January through mid-February this year on a global basis, we've sold roughly twice the number of tickets as we sold last year. So even looking at the most recent activity continues to be very robust globally.

Yes. And my commentary is similar. We are just amazed at the resilience of the customer this year. I think we all lived the November air pocket thesis and everyone's view on was 2022 an exception to the rule. Could we keep growing? Where was the customer? Was it just a bubble? We see nothing but strong growth demand everywhere in the world right now. We're up right now with stadiums in Asia, South America, Eastern Europe, all of our festivals are outperforming last year around the world. Our clubs and theaters are doing well. Our on-site spend in most of those clubs and theaters we see tracking in the right direction. We'd always – in this business, you always worry about the first – the superstars are going to sell out, and then how is the rest of the business do? That's kind of the meeting the potatoes of our business. How the amphitheater shows? How is all the middle stuff going to do? And we're just seeing incredible strength right now across the board on our festivals, our big festivals or niche festivals, our theaters, clubs, we think this is going to be a continual buyer, consumers, as we said. Still look at concerts, let's zoom out again as we always do, let's forget about the 3% of shows that are going to consume political tweaks. 97% of that shows are very affordable for consumers. We're still incredibly affordable option for fans to go have a memorable night out, much more affordable than concerts. I said to Joe earlier, we absolutely have done a bad job on PR because the Super Bowl, it was a badge of honor that tickets were $5,000 or $6,000 each, and most people couldn't attain it. But concerts are still incredibly cheap overall experience versus a best ball game, a dinner, a night out or a theme park. So we think that plays in. We haven't seen any pullback. We've seen more demand top to bottom on a global basis. We think that will rise through this year.

Great. And then maybe one more on regulation for Joe. You recently made a pretty notable hire on the legal front. Could you talk a little bit about the rationale for that hire and maybe update us on where you stand in the process for any potential investigation with the DOJ?

So we're delighted. We hired Dan Wall, for those of you who didn't see it, joined us formally following his retirement from Latham at the end of January. This is actually a conversation Dan and I started in May of 2019 at BottleRock. So Dan was planning on retiring from Latham, found working with us to be an exciting, fun business. And we talked that in 2020, he was going to announced his retirement, retire at the end of 2020, come join us. Like so many other people's plans, those got upended. So he didn't end up retiring until January, but this has been something that's been in the works now for three years that Dan wanted to do. He'll be instrumental in terms of our ongoing discussion. He's been in non-stop dialogue with the DOJ. It seems like for the past 13 years. He understands exactly the questions they asked their motivations. He just put together an op-ed piece that everybody should certainly read that was in Polestar today laying out on a fact basis as opposed to so many analysts and pundits that people refer to making broad statements about the DOJ, their process, the consent decree, risks of us being broken up. I think he does a fantastic job of laying out in very specific detail why so many of those beliefs are unfounded and I think creates a little higher requirement for people that are going to talk that way to need to disprove what he lays out there as opposed to generally speculating.

Okay. Thank you for that.

And the next question comes from the line of Stephen Glagola with Cowen & Company. Please proceed with your question.

Yes. Thank you. Building off what you said earlier, Michael, about one of your main ticketing competitors testifying against you. Just in light of the Fair Ticketing Act, do you think there's any political will in United States to allow for primary ticketing players like Live Nation to help artists utilize their digital ticketing technology to impose controls on the resale of ticket?

Well, I believe that the artist has the best shot when they unite around their IP. I don't think – there is – the U.S. is probably about the only country in the world that doesn't have some level of regulation. I mean most other countries walk up and said, "Geez, if the artist wants to charge $300 an underpriced product for the fan to get a cheaper ticket why would a middleman be able to make $1,000. It doesn't seem logical, right? So most IP, if you look at the artist, you wouldn't be able to look, think about how much work Netflix is doing on password sharing just to save $7.99. So I think there's a lot of pent-up artists who are underpriced their product every day. I mean we're pretty much the only product in the world that's worth more of the second it's sold. I think they've done that for the betterment of their fan base. And like everyone else, they've seen now the sunlight online of the abuse that's been taken on their IP. So I like our position. I like stand up with the artist. I think the artists, Irving, you saw it yesterday with Garth. I do believe that the artist will have more control of their ticket like the PROJAM [ph] model they should. That doesn't mean that you are not going to transfer the tickets. We believe in tickets should have a fair exchange platform, and you should be able to exchange and sell tickets. And if an artist doesn't care about secondary then great, let the – the rush will then will move. If you do care and you want to limit it, you want to cap it at 30%, 20%. I just think that the artist since they're making…

Thanks Michael for that. And Joe, I just had one on your CapEx spend for 2023 to $450 million. So one-third of that on maintenance CapEx implies flat with 2019 and then two-thirds implies 50% growth, I think, above 2022 levels, 82% growth above 2019 levels. Can you just provide some more color here on what those investments are? Is this in the Venue Nation business? And then any color on the hurdle rate you guys factor into this capital spend would be appreciated? Thanks.

Yes. A lot of the growth is certainly in the Venue Nation side. As you can imagine in 2020 and 2021, we had a substantial amount of deferred CapEx that we then do that the building is needed. Then in 2022, we were faced with a lot of supply chain constraints had to prioritize where to use the scarce resources that we were able to get. So that was a limiting factor. So there's some catch-up on the maintenance side of it. The return is really more of a rev gen side than a maintenance side. Most of the maintenance is required for continuing operation, health and safety issues. On the growth side, we have return requirements that are well above our cost of capital, haven't given specific ones, differs a bit by project, whether it's a brand-new project or it's just a – you're adding a new bar at a venue. So those are opportunities that we just think are continuing to present themselves as we expand the global footprint.

Thank you.

And the next question comes from the line of Jason Bazinet with Citi. Please proceed with your question.

I just had a question on Concert's AOI per fan. I know you called out some of the headwinds, reopening costs, inflation for the venues you own and said it would get better. But can you just sort of frame what a reasonable AOI per fan is? I think it was $1.40 this year and maybe $2.50 or something back in 2019?

Yes. I don't think Concerts AOI per fan is a logical way to look at it, Jason. I think if you look at how we've talked about our business, we've talked about our business across the multiple pieces. So you have to look at it, what's the concerts plus sponsorship plus ticketing AOI per fan, which we've grown – and what we've said is that the concert business has been hit by some of these cost increases, supply chain constraints, increased costs on some of the inputs, but we've increased the overall profitability per fan both by executing on site with those fans coming to our venues, but then also by dramatically increasing our sponsorship per fan and by growing some of our ticketing revenue per fan, including the non-service fee side. So we look at it more holistically, recognizing there are going to be some puts and takes in a given year, certainly on the business.

Can I just follow up? Because it's...

But also just I want to give some color there. Just to remind everyone, when we sat here a year ago, we didn't think we were going to be open in the summer. We had no staff. We ran 100 miles an hour to get open for May, hire 20,000 staff, every tour, concert couldn't find trust double cost for generators. I mean, we were running hard last year. Overpaying staff, suppliers, getting the show back together was tough last year. We still obviously delivered incredible numbers, but we're now back to that 2019 level of staff in place, costs have all come down, suppliers are all back in line, generators are normal cost. So we do obviously expect 2023 to be in terms of a cost basis back to a continual normal business.

Can I just ask 1 follow-up? Do you think the right way to look at it is that there's some sort of permanent shift in profit pools towards sponsorship and advertising and ticketing and away from concerts? In other words...

I think it's premature to say that. I mean let me give you another just piece on what hit us last year with concerts was we had those. I talked about the 20 million fans for shows that got rescheduled. Those are shows that went on sale in 2019 or early 2020, and we're priced at the price level for those shows back then. Fast forward a couple of years later, nobody was repricing the rescheduled shows, and yet the market particularly for the best tickets and moved up substantially. So in 2022, you were operating a pretty good chunk of your business with a 2019, 2020 revenue stream against the 2022 cost structure. That's not going to replicate itself. That was a one-time unusual event. So I think you got to take a beat, let this year play out before you draw in a conclusion off of a single data point.

Okay. Perfect. Thank you.

And at this time, we have reached the end of the question-and-answer session. And I would like to turn the floor back over to the management team for closing remarks.

Thank you, everyone.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.