Live Nation Entertainment (LYV) Q4 2006 earnings summary

Executive summary

• FY06 revenue was $3.692B, up 26% YoY; operating income was $30.3M versus a $13.2M loss, while net loss narrowed to $31.4M from $130.6M.

• Events reached 16,299, up 13%; attendance totaled 59.9M versus 58.7M in FY05.

• Strategy shifted toward core live music and related services, combining non-core asset sales with acquisitions in touring, venues, merchandise and digital fan services.

Financial highlights

• Revenue increased $754.7M YoY; segment increases were Events $666.5M, Venues and Sponsorship $99.9M and Digital Distribution $26.4M, partly offset by a $40.0M decline in Other.

• Direct operating expenses rose 29% to $2.982B, faster than revenue; SG&A increased 2% to $529.1M and depreciation and amortization rose 98% to $128.2M.

• Cash from operations was $16.7M versus $3.9M used in FY05; investing activities used $375.2M, primarily reflecting acquisitions.

• Interest expense reached $37.2M, up $31.2M, mainly from term loans, revolver borrowings and preferred stock introduced after the separation.

Outlook and guidance

• Expected 2007 maintenance capex to be consistent with FY06; revenue-generating capex expected to increase for venue construction and renovation.

• Cash from operations, credit-facility borrowings and potential financing alternatives were expected to fund working capital, capex and debt service for at least the succeeding year.

• Expected to remain in compliance with debt and preferred-stock covenants through 2007; annual capex covenant limit falls to $110M after 2006.