Michael Rapino - President and CEO Joe Berchtold - COO Kathy Willard - CFO

Amy Yong - Macquarie Capital John Janedis - Jefferies John Tinker - Maxim Group David Joyce - Evercore ISI Ben Mogil - Stifel Rich Tullo - Albert Fried & Company

Good afternoon. My name is Terry Steeling [ph] and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment First Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements relating to the company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings on Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with SEC Regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measures in their earnings release. The release, reconciliations and other financial or statistical information to be discussed on this call can be found under the Investor Relations tab on investors.livenationentertainment.com. It is now my pleasure to turn the call over to Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment.

Thank you and welcome to our call. Live Nation has continued growing its business in 2015, with first quarter revenue up 4% on a constant currency basis, led by strong growth in our Ticketing business. More importantly, four months into the year, we now have enough data from leading indicators to be confident that we remain on track to deliver our 2015 plan, with continued top and bottom line growth, as we build global market share in our core Concerts, Advertising and Ticketing businesses. We have built the industry's most scalable and unparalleled live platform, bringing 400 million fans together to that magical two-hour event. Concerts remain a strong flywheel for our high-margin on-site, Advertising and Ticketing business. And this year, we expect to deliver record operating results by growing each of these businesses. Starting with our concerts business, we have now sold approximately half of our projected tickets for the year, and through April we are pacing 4% ahead of last year’s ticket sales. We continue to be the world’s leading promoter with approximately 20 of the top 25 global tours, including U2, Maroon 5, Luke Bryan and Ariana Grande. Along with attendance growth, we are also expecting to grow on-site revenue this year, as our sales initiatives focusing on the high-end fans continue to pay off. At the same time, we are expanding our global footprint, most recently, with the acquisition of the Bonnaroo Music Festival, which advances our position in the North American festival market. In 2012, we had none of the top five festivals, we now have four of the top five. Overall now, we have 68 festivals, with 5 million fans, making Live Nation the largest global festival producer. Given their strong appeal with fans and artists, we see festivals as an important high-margin growth channel on a global basis, providing the most cost effective platform for monetizing fans across advertising, on-site and Ticketing. And our Artist Nation division continues to attract new clients and continues to be a strong feeder to our core Concerts business. In Sponsorship & Advertising business, we again grew at a double-digit pace, with over 20% growth in both revenue and AOI this quarter on a constant currency basis. Contracted net revenue is up 17% at the end of the first quarter, and we have now sold over 70% of our planned advertising for the year, putting us ahead of schedule. This gives us confidence that we will continue growing our AOI in advertising at double-digit rates. Through the first part of the year, we have made great progress building our advertising scale and for the first time, comScore has ranked us as the third largest music focused advertiser network in the United States with over 60 million unique visitors a month. This firmly establishes Live Nation as one of the advertising platforms of choice in music, which we believe will now help accelerate our ad sales growth. Our content strategy is also advancing with the renewal of our Live Nation Channel on Yahoo! Live and also expanding into streaming of festivals on the channel. And we are on schedule to launch our Live Nation television channel with VICE later this summer. We also refer to building our base of major advertising clients with a 10% increase in the number of companies that pay us over $1 million a year and a corresponding 18% expected increase in revenue from these clients. With all these pieces coming together, Live Nation is better positioned than ever to continue building its advertising business. Ticketmaster continued to build on its global leadership as a ticket marketplace this quarter, benefiting from product improvements and increased conversion rates as we increased our global share with a 14% growth in site visits, driving an 8% increase in combined primary and secondary Gross Transaction Value. As a result, during the quarter we had three of the top ticket sales base in Ticketmaster's history. We have deployed a number of mobile product enhancements during the quarter, improving the mobile responsiveness of our websites, increasing the functionality to buy, transfer, and resell tickets and enter venues with our apps. As a result, we are rapidly growing our mobile business, with a 20% increase in mobile visits and a 35% increase in mobile ticket sales. We are seeing rapid adoption of our mobile apps, up 43% from the first quarter over 2014 to over 17 million installs at the end of the first quarter this year. Looking ahead, we are optimistic that these trends will continue and accelerate as we improve our online mobile and API products to continue increasing the inventory of Ticketmaster's marketplace. In summary, 2015 is shaping up to be another year of growth and record results for the company, and we remain confident we will deliver the final year of our three-year plan. With strong leading indicators in Concerts, Advertising, and Ticketing, operationally we expect revenue and AOI growth in each of these businesses and overall for Live Nation this year. And more fundamentally, we continue to see a wide set of both organic and acquisition opportunities to continue growing each of our businesses beyond 2015, directly building on the success we achieved to date. With that, I'll pass it over to my COO, Joe Berchtold, who will take you through some of the divisional details.

Thanks, Michael. Looking at our business segments, first, Concerts. Revenue for the quarter was flat on a constant currency basis and AOI was down due to a decline in attendance, which was expected coming off a high level of Q1 arena activity last year. Given Q1 is traditionally our slowest quarter in Concerts, what matters most at this point of the year is our pipeline shows and ticket sold to date for shows occurring this year. Our show count for the full year is tracking towards mid-single-digit growth rate, led by double-digit growth in our arena shows. And as Michael said, ticket sales for shows occurring this year are up 4% through last Friday, setting us up for lower to mid single-digit growth in attendance this year. And based on these indicators, we expect to deliver double-digit AOI growth in Concerts for the year. At Artist Nation AOI fell in Q1, but this swing reflects the fluctuations and timing inherence in the business and we continue to expect solid performance through the rest of the year, keeping us largely in line with last year's results. Turning to our Sponsorship & Advertising business, revenue of constant currency grew by 22% and AOI grew by 20% for the quarter. Online activity in North America was particularly strong, growing AOI 35% with major clients, including Pepsi, Hilton, Pennzoil, and Paramount Pictures. In our emerging markets, AOI more than doubled in the quarter, led by Thailand, Korea and Australia. And with this start to the year along with the growth in contracted net revenue, we are confident we will grow Sponsorship & Advertising AOI by double-digits this year. Finally, Ticketmaster, for the quarter Ticketmaster revenue at constant currency was up 11% and AOI was up 16%. Primary ticketing GTV was up 4% for the quarter led by strong concert ticket sales which drove double-digit growth in March. In secondary ticketing, we are now active in 13 countries. We increase the number of events activated on TM+ by 150% and as a result drove secondary GTV up by 75% for the quarter. Along with this ticketing growth, we continue to make progress on our cost reduction program and remain confident on our operating costs for North America ticket in 2015 will be at least $0.35 lower than it was in 2012. So based on ticket sales at this point in the year, we expect to have low single-digit growth in primary ticketing and double-digit growth in secondary ticketing in 2015. And with this ticketing volume, along with our cost reductions, we expect to deliver high single-digit AOI growth in Ticketing for the year. So, in summary, four months into the year, we feel very good about delivering 2015 on plan with regards to timing. Looking at Q2, we expect AOI performance as a percentage of full year AOI to be largely in line with 2014, which puts our overall AOI a bit more into the second half this year relative to last year. And finally, on FX impact during the first quarter, we saw revenue impacted by about 5% and AOI impacted by roughly 6%. I will now turn the call over to Kathy Willard to go through more on our financial results.

Thanks, Joe and good afternoon, everyone. Let me begin by summarizing our key financial highlights for the quarter. Revenue at constant currency is up 4% to $1.2 billion and flat as recorded at $1.1 billion. AOI is $73.9 million at constant currency and $69.6 million as recorded and free cash flow is $24 million. One of our most important leading financial indicators is our Concerts related deferred revenue, which is the monies we've received to date on tickets sold for events in feature at owned or operated venue. At the end of the first quarter, this deferred revenue was $919 million, an increase of 4% over the balance in March of last year of $885 million. Overall, revenue for the first quarter was driven by growth in Ticketing with both primary and secondary delivering strong results year-over-year. Concerts revenue was impacted in the quarter with the shift in arena activity as compared to last year as we discussed at year-end. The timing of concerts arena activity is also the main driver of our adjusted operating income results overall for the first quarter of 2015. As Concerts AOI for the quarter was a loss of $12 million compared to a $3 million loss for the same period last year. And as Joe noted, both our Ticketing and Sponsorship & Advertising businesses delivered higher AOI this quarter. During the first quarter of 2015, we reported an operating loss of $24 million compared to $12 million loss last year from our AOI results including the $4 million impact to foreign exchange rates declined this year. Net loss for the quarter was $58 million versus loss of $32 million last year, driven by a $21 million non-cash adjustment to certain working capital accounts, based on changes in the exchange rate. Free cash flow was $24 million this quarter compared to $35 million in the first quarter of 2014. This is due to our AOI results along with the $7 million increase in maintenance capital expenditures associated with point-of-sale enhancements to our venues and timing of other spend this year. Cash flow from operations was $343 million through March and was impacted by higher payments for event related expenses for shows later in the year as compared to last year. As of March 31, we had total cash of $1.6 billion, this includes $608 million in Ticketing client cash and $638 million in net concert event related cash, driven by our higher deferred revenue. Our free cash was $360 million. Our total capital expenditures for the first quarter were $26 million compared to $21 million last year. We spent $60 million on maintenance items and $10 million on revenue generating additions. We expect that our total capital expenditures for 2015 will be in line with the guidance we have previously given at approximately 2% of revenue. As of March 31st, our total current and long-term debt, including capital leases, was $2 billion. Our weighted average cost of debt is 4.3%. And our debt covenant currently requires a maximum leverage ratio of five times, and we're comfortably in compliance at below four times as of March. For the full year, we expect to drive growth operationally across each of our businesses in both revenue and AOI, while continuing to invest in our long-term growth strategies. In summary, we currently expect AOI for the second quarter to be consistent with last year as a percentage of full year AOI with more growth in 2015 coming in the second half of the year as Joe noted. We expect to deliver double-digit growth in Concerts AOI. The growth trend in Sponsorship & Advertising AOI is expected to continue and to deliver double-digit growth again in 2015. In Ticketing, we expect high single-digit AOI growth overall for the year. And Artist Nation AOI is anticipated to be in line with last year. Thank you for joining us today, and we will now open the call for questions. Operator?

The question-and-answer session will be conducted electronically. [Operator Instructions] And we will take our first question from Amy Yong with Macquarie Capital.

Thanks. Congratulations. I have a really quick question just on the acquisitions that you've been making, and perhaps how we should think about their accretion going forward. So just thinking about C3 and Bonnaroo, and -- how should we think about the top and bottom line synergies on these two acquisitions alone? And I guess now that you have four of the five top brands in the U.S., should we expect more acquisitions internationally or perhaps other areas? If you could just help us think through kind of geographic expansion, that would be great.

Thank you. This is Michael. Hi, Amy. In our investor presentations in the Liberty once in the fall time, I think now at least for the three years, we've always put up this kind of this global festival slide where we've shown the top 20 festivals in the European market and in America. And we've been pretty clear that festivals are a high margin, great channel to be in. We currently have always had a very strong presence in Europe, been the leader in festivals, T in the Park and Reading and Leeds and Lowlands of Holland and the list goes on. We're a little underdeveloped in America, probably because we focused a little too long on our amphitheaters. So, we over the last three years had a mission to make sure that we could fill that hole in an area where we have undeveloped market share. So, Insomniac, C3, a bunch of organic festivals in the country we started and now Bonnaroo. So, we look at the festivals from an acquisition perspective. They are a tough business to kind of organically get from zero to 80,000 people like Bonnaroo. You can waste a lot of money and fail a few times trying to get that magic in a bottle. So, we really look at the -- on a global basis, there is about 25, 30 festivals where they just become kind of iconic. Rock in Rio in Brazil, Fuji Festival in Fuji, and some of the ones we've acquired. So, we're always on the look on any of these marquee global festivals. If we think that buying that festival is a better return on capital, we've been trying to start two or three of them and making our way to that level. We know that buying these ones tend to be a better and shorter return on capital been trying to build them. Now for us we take an asset like Bonnaroo or Electric Daisy, once we plug that into our Ticketing platform, plug it into our Yahoo! platform like we just did with one of the C3 festivals and plug it into with our Advertising business, we've had great success taking those business and making them very accretive very fast and increasing AOI in those businesses by kind of bringing some scale and professional management and advertising to them and growing them at double-digit rates kind of another first couple years. So, we think we have a strong global portfolio. We will be opportunistic if we think there's other ones available that we can add to our platform. And if we think we can buy them and effectively add our synergies and make them instantly accretive acquisitions, we think those are good opportunities we will continue to pursue. But we would not be as kind of desperate as we were three years ago when we were sitting here with a very underdeveloped U.S. platform the sponsors and our Ticketmaster business were kind of yelling that we needed to get into. So, we're proud and happy with our current portfolio. And we find these very accretive acquisitions given that we get to scale them across our synergistic platforms.

Perfect. And then Joe, just thinking about Ticketmaster a little bit more, as you start gaining share on the secondary side and start reaping some of the cost savings, how do we think about longer term margins for that business?

Amy, sure. I mean, as we talked structurally and fundamentally, the secondary business has economics that are pretty consistent with the primary business. Obviously, when it's been a lower scale, it's been working its way back up toward primary. But in that same range, I would say is how you should think about the secondary business as it gets to a level of scale.

Got it. And on the cost savings side?

Sure. On a cost savings side, that's largely associated with our primary ticketing platform. So it's really those ticketing -- those tickets that the operating costs come out of.

Great. Thank you.

And we will take our next question from John Janedis with Jefferies.

Thank you. Can you guys talk a little bit more about sponsorships? Is the driver of growth digital, or is it much broader? And are you anywhere near having any kind of capacity issues?

Thanks, John. Our businesses, at the end of the day has been an ad business that we continue to look at elevating our ad units. Originally, we were just an on-site kind of sponsorship business. If you were a major advertiser and you wanted to touch consumers on-site, we were kind of your best slot. Then we turned and built as our scale delivered outside of amphitheaters and more globally, we started to develop a commerce and digital business. So, at this current state, when we’re talking to Madison Avenue, it’s couple combinations. First and foremost, we’re just a great now digital network to make an advertising buy-on, if you want to reach this demo with our scale. We have lots of inventory available still. We look at all of our assets and what is still available. And we have great runway ahead of us to continue to monetize a lot of unused ad units. A lot of the ad units are also a combination of on-site and digital, where most of our bigger deals our holistic programs where an advertiser is looking to launch a program, have a kind of a global or a large reach to our platform, but then really make it come to life like American Express does by delivering absolute direct value to access to concerts to their customer. So, we sell local, we sell regional, and we sell digital. We’re seeing -- as everyone else is, we’re very, very excited that our business is moving to mobile. We’re keeping that audience and like everyone else, are looking at all ways that mobile advertising will continue to be a big part of our next new ad unit. So we see lots of inventory available. We have now the reach on-site of over the 60 million customers that advertisers want to be associated with. And now with the 60 million plus on a digital basis, we are able to sale local sponsorship, national access and digital reach programs with capacity left on all of those.

Thanks. And maybe separately, you touched on mobile. I was hoping to dig a little deeper in terms of the mobile app. How many more shows do app users attend compared to non-app users? And over time, can we see much of a margin benefit as a result?

So, John, this is Joe. We haven’t released any details on the specific segments for folks that we have in terms of how they do their purchasing. So I can’t get into that right now. On the economics -- our economics are the same whether somebody buys online or via app, both of those are obviously lower cost than more direct methods of sale. But our economics are the same, service fees are the same, margins are the same.

Okay. Thank you.

And we will take our next question comes from John Tinker with Maxim Group.

Thanks. Two brief questions. One, could you just touch on Artist Nation and the increase in SG&A? So that was the negative comp, and talk about that a little. And, secondly, in the fast moving world of music streaming, can you just give us your views on where that’s going and how you’re involved because you still have a relationship with Jay Z, but he’s buying Tidal, and exactly how you fit into that?

You’re good, Tinker. Yeah, we will stick to our knitting right now. We support Jay and all of our artists and any of their endeavors. And we will do everything we can to help Jay succeed and those artists. But we think we have a great runway ahead of us just doing exactly what our core business is. On a global basis, we have lots of opportunities to scale and continue to grow our concert business, new ticket markets, new ticket products, and then later on the advertising on top of that. So we think that our best strategy is to use our resources to keep right down the fairway, continue to consolidate and organically grow our core business. And we will leave the streaming hardware to others right now, and we'll worry about selling concert tickets. One of the advantages of Ticketmaster and our new platform we've been working on, obviously, Ticketmaster Plus was the first new product that we were able to introduce having a more robust platform. But we do also look at a lot of these opportunities with Apple and others that we now have a platform with an API and an ability to distribute a buy button. So we look at some of these streaming sites just as great distribution outlets that we currently will either have an affiliate or a buy button strategy to increase our reach and increase our conversion, but not a core business that we would be looking to tackle at this point. A – Kathy Willard: And John, on your first question on Artist Nation SG&A, that's really driven by the fact that we've been adding some key managers to the business, and so it's just timing of those costs coming in versus when the artist -- the activity is coming in from the artist in terms of commission. Q – John Tinker: Thank you.

And we will take our next question from David Joyce with Evercore ISI. Q – David Joyce: Thank you. I was wondering on the sponsorship front, what portion is strategic at this point, meaning revenue that’s likely straight line versus event correlated, and how should we think about that trending as you expand your platform globally? A – Joe Berchtold: So, David, this is Joe. We talked at the end of year that roughly $200 million in revenue was coming from our largest relationships, which meant over $1 million per year in revenue from those relationships. Those relationships generally now withstand the gamut. As Michael was talking, as we take the combination of the 60 million fans that go to our shows and the 60 million unique, so most of those folks are doing a combination of digital and traditional sponsorship. I think you can take from the magnitude of those relationships. There is some steadiness to them, but, certainly, it's not all contracted revenue with those folks. Q – David Joyce: Thanks. And on the Ticketing front, how much of -- the margins were better than we thought this quarter, how much of that is due to the replatforming expense saving may be happening a little sooner than your year-end plan versus just your volumes increasing, so some of good operational leverage. A – Joe Berchtold: Yes, it was exactly both of those things, David. As I alluded to, we had a very good March, a little better than we were sitting here talking to you at the end of February than we knew it was going to be. So there was some volume pick up their relative to expectation, and, yes, we are doing great on getting the cost savings and that's in part why we are confident. We'll have it fully in place this year. Q – David Joyce: Great. Thank you very much.

And we will take our next question from Ben Mogil with Stifel. Q – Benjamin Mogil: Hi, good afternoon. Thanks for taking my question. I want to follow up on Amy's question, and Michael, you were talking about the festival business, and your comment that you can burn through a lot of money trying to get a festival started, and we've certainly seen that. When you look at festivals you've bought and when you look at festival business, in general, there's been some high-profile expansions where people went to a second weekend and that didn't work out or people took a festival that was in city A and moved it to city B and that didn't work out. Generally speaking, are you finding that people are too ambitious about their festival expansion? Are you finding that some festivals are one weekend is good enough? Curious your views on how scalable some festivals are? A – Michael Rapino: There is no one right answer here. I mean, Festivals range small city one up to big ones and they may look easy to replicate and grow, but it's not that simple. We look at Festivals at the end of the day, there are hundreds of little Festivals happening at all times that are generally a labor of love, not generally much of a real business. Our business at the end of the day on a global basis is we like those Festivals with scale, 30,000 plus. Obviously, because then they become truly advertising units and also most of where the talent leverage we have is on that end. So, you know, I think if anything, lots of people out there as Festival producers, very few make it to the top of the Bonnaroo, C3, Coachella, Insomniac level. And we think those are the ones that we want to be participating in and provide us the best return on our capital. And we generally don't look to launch and take a lot of risk every year on launching a lot of them. We organically launched three or four every year in a very structure risk adverse manner. Seeing if we can self brew some of them. But at this point, it's an expensive game to scale from scratch. And given we already own 60 for many years in our European platform, adding on a few quality high-profile ones in our U.S. platform was just kind of a continuation of a long strategy we started in Europe. I would not want to be sitting here today trying to figure out how to buy and/or build 60 festivals with over 5 million customers. That would be a very expensive proposition. Q – Benjamin Mogil: And going through the C3 deal and the Bonnaroo deal, do you see the M&A environment, because of the changes with AEG and what SFX is going through, its privatization, do you see the environment as a buyer, better, if you will? A – Michael Rapino: You know, I think with built a fairly unique global business at this point. We tend not to chase deals. We tend whether it's a management company or in the case of Superfly and I think their comments they mentioned this week to the press. We tend to believe we are a place where an entrepreneur who maybe has already had some success. When looking at the scale that we can bring to their resources can take Bonnaroo, C3 or Insomniac to new levels, we kind of think we're in a unique class in that point. So whether it was Insomniac or C-3 or Bonnaroo, I would I don’t think in any case if there was much of a bidding war. I think others were interested, but I think those founders believe that we probably could provide the best opportunity to grow their businesses and using our assets. Q – Benjamin Mogil: That's great, Michael. Thanks for the color.

And we’ll take our final question today from Rich Tullo with Albert Fried & Company. Q – Rich Tullo: Hey, guys. Thank you for taking my question. Nice quarter. My question is, what percentage or if you could provide a little color on the ads and sponsorships, is derived from the website and content deals versus what we would call traditional, if that exists, sponsorship in the concert business? And just a little follow-up on the VICE TV, is that a YouTube channel or a traditional cable TV channel? A – Joe Berchtold: So, Rich, this is Joe. On the sponsorship versus online, we talked at the end of last year on those numbers, it was roughly two-thirds, call it, sponsorship, traditional delivery, and about one-third of it was online, to give you the general mix. And in terms of the VICE Channel, we have not -- we haven't announced exactly how that Channel will be distributed, so those announcements will be coming up over the next month or so and it will be launched this summer. Q – Rich Tullo: And is there any way to provide a little color on the growth of the online product versus anything else, because I would suspect that, that is growing, excluding the lift from sponsorships, is growing quite fast? A – Joe Berchtold: Yeah. No, I gave you my numbers that North America online was up about 35% AOI. So, yes, online is growing strongly. As Michael said, we've also built a network of over 60 million unique, and that brings us into a whole another class with Madison Avenue and top three music related sites. So we absolutely expect some good portion of our growth will be driven by the online this year. Q – Rich Tullo: Thank you.

And ladies and gentlemen, this concludes the Live Nation Entertainment first quarter 2015 earnings conference call. You may now disconnect.