Live Nation Entertainment - Q2 2023

Transcript

Operator (participant)

Good afternoon. My name is John, I will be your conference operator today. At this time, I would like to welcome everyone to Live Nation's Q2 2023 earnings call. Joining us today from Live Nation are the President and CEO, Michael Rapino; the President and CFO, Joe Berchtold; and the Head of Investor Relations, Amy Yong. I would now like to turn the call over to Mr. Berchtold. Thank you, Mr. Berchtold. You may begin your conference.

Joe Berchtold (President and CFO)

Thanks, everyone, for joining us. As I think you noticed from our earnings release this time, based on some feedback that we've gotten on our release and the materials in general, we've switched it up this time to get a little more comprehensive and data-driven, in terms of numbers and facts. You'll see an earnings release that we reduced the narrative and increased, tried to give you on a more structured basis, all the key numbers, and then also put a trending schedule that, I think there was a link to it. You can get as a PDF or an Excel file, so you can track this quarter's numbers relative to history to make some of it easier.

I'll turn it over to Amy to give you a quick reminder, and then Michael and I will go straight into taking questions that folks have. Amy?

Amy Yong (Head of Investor Relations)

Thanks, Joe. We would like 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 our SEC filings, including the risk factors and cautionary statements included in our 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. We will also refer to some non-GAAP measures on this call. In accordance with the SEC Regulation G, we have provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in our earnings release issued earlier today. The release reconciliation can be found under the Financial Information section on our website.

With that, we are now ready to take questions. Operator?

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Brandon Ross with LightShed Partners. Please proceed with your question.

Brandon Ross (Partner and Media and Technology Analyst)

Hey, thanks for taking the question. I think investor concern now, if you were to poll the buy side, is that with the past few years coming out of COVID being so strong, you're going to have trouble growing next year. I think the street's only at mid to high single-digit growth. I guess this is a good problem to have, but you said there are positive indications for 2024 and wanted to see if you can kind of break that down into domestic and international. On the domestic side, what are the positive indications that you're seeing besides this very early pipeline? Will supply match what we've seen the past couple of years? On international, obviously, LatAm has been a huge tailwind post-acquisition. You've seen some other green shoots in Asia and parts of Europe.

Should we expect continued growth in those markets or just more M&A on top?

Joe Berchtold (President and CFO)

Brandon, thanks. This is Joe. For starters, as I think you probably noticed, we put in the release that at this point, our confirmed shows and shows that we have offers in on our arenas, amphitheater, stadium shows is up relative to where we are at this point last year, coming into 2023. We're seeing continued growth in the show count, which should lead to continued growth in attendance. As you know, our formula is to drive that growth in attendance and from there, accelerate the AOI levels even higher, with increasing per fan profitability on site, increasing sponsorship, increasing our ticketing business. I think we're set up for a very strong continued growth into 2024 across the board. Now, a lot of that activity, these are these are going to be the shows you have the longest lead time on.

A lot of these are going to be global in nature, cutting across both North America and international. As you noted, and as I think much of the release lays out, this has been a tremendous quarter for growth in international markets, up, I think it was 46% fan growth so far this year, which, given that we were closed part of last year, we expected to see very strong growth, but we still think we're in the early innings. If you take Latin America, we're up about 35% this year, so far, year-to-date, with roughly 10 million fans, but we think we're still in the early innings in, in South America.

We launched The Town, already sold 400,000 tickets on our way to probably 500,000 tickets, which is unheard of for a festival in its first year. As we continue to layer on our, our promoting business, bringing in our sponsorship, bringing business, bringing in our ticketing business throughout Latin America, that just continues to drive it forward. In North America, again, a very good year this year, and we're seeing the sort of growth that we think is possible ongoing. Year-to-date, up 8% North America with the fan count. Expect that to be double-digit fan growth in Q3, probably verging on double-digit fan growth for the full year in North America. As we're seeing top to bottom, we're seeing strong growth in theaters and clubs.

Our amphitheaters are doing great, substantially up in number of fans attending per show, and the high-end stadiums are doing very well. There is no, I've seen some things talking about is the middle, how is the low end? Demand across all of those continues to be very strong.

Michael Rapino (President and CEO)

I'll just jump in just, and Brandon Ross, just to reiterate the pipe, right. The most important thing for us is just how does the pipe look for next year? As you know, a year ago, we sat here, and I think everyone thought 2022 was the record year, and we were headed into an air pocket, and we've blown the doors off it in 2023. You know, I would just step back. We believe for the next multiple years that this industry, in general, is gonna have a growth surge on a global basis. We've talked to all these factors before, international, global artists, consumers. There's a whole bunch of great articles written on why there's a boom happening in the live business on a long-term basis.

We don't think this is just any COVID catch-up. We think that this is gonna be the time when live on a global basis is gonna have an incredible growth run for years to come. We obviously benefit from that anytime the market gets to this, this level of growth because we'll, we'll capture that growth also. We're looking next year, we're seeing top to bottom, as Joe said, incredible pipe of artists that will be filling all of the different venue types and markets across the world. We think we're headed to a very, very strong 2024, 2025 onward.

A combination of the market's gonna grow, the consumer demand is growing, and our ongoing bolt-on acquisitions, venues, new market entries, compounded on top of our organic growth, is gonna give us this continual one-two punch of growth for the next multiple years.

Brandon Ross (Partner and Media and Technology Analyst)

Thank you.

Operator (participant)

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

Stephen Laszczyk (Stock Analyst)

Hey, great. Good afternoon. Just maybe on the outlook for consumer spending, there's been a lot made over the last couple of months about the impact of student loan payments starting up in the fall. Maybe for Joe, if you could just remind us what percentage of the concert going base you think might be skewed toward this cohort, and then maybe more broadly, discuss how you're thinking about the risk that consumer spending pulls back, maybe into the back half of the year, next year? Are there any parts of your business that you think are more or less exposed, perhaps festivals? I just would, would be curious, if you could dive a little bit deeper, more deeply into the demand side of the equation.

Joe Berchtold (President and CFO)

Sure, Stephen. Thanks. I think first, just for context, I think it's important to remember relative scale. If you look at consumer spend, discretionary spend on goods versus experiences, as we know, it was in the high 60s in experiences, I think this is a Goldman report that talks about this pre-pandemic, and then how that has dropped and it hasn't yet caught up. Our analysis shows that the tailwind impact from getting experiences back as a portion of discretionary spend is about 10x the impact of any potential headwind coming from the student loan payments needing to get made. We think that the tailwinds on that specific macro factor is, is far outweighs any headwinds.

As Michael talked, on a global basis, we continue to see this as a tremendous tailwind business, as you have further and further globalization of demand. As we look at all the different pockets, I mentioned earlier that the amphitheaters is an example of a mid-level act. We're seeing, high single-digit increases in attendance per show, which is really driven by more lawn tickets being sold. The people that you might say are gonna be the most price conscious are continuing to expand, are continuing to spend strongly, per caps growing, even as we're continuing to increase our number of fans per show, which again, means that even the marginal fan is continuing to spend a lot when they show up. We're not seeing any indicators that would give us any concern on any slowdowns.

Stephen Laszczyk (Stock Analyst)

Great. Thanks for that. Maybe just one on concert segment margins, because, like, AOI margins were up year-over-year in the Q2. I think there might have been some assumptions that margins would be pressured year-over-year, just given the mix of the slate towards stadium and arenas this year. I'm curious what drove margin expansion in the quarter, and if you think this is a trend that will be sustainable for the rest of the year. Thank you.

Joe Berchtold (President and CFO)

Yeah. As we said in the last quarter, our expectation for the full year on concerts is that you will see margin expansion relative to last year. You're correct that any fan in third-party buildings is generally gonna be a lower margin than fans in our building. The countervailing factor is, is that we continue to increase the per fan profitability across all of the different venue types. As we increase that per fan profitability through all the different ways that we have to monetize, then we're gonna see some margin expansion. That comes from increased per caps on our own building. It also comes from continuing to focus on the costs. I think in particular, in North America, we've been very effective.

If we look at our amphitheaters, if we look at our theaters and clubs globally, we've been able to actually drive down our average operating cost per fan this year relative to last year, which certainly helps with our margins.

Stephen Laszczyk (Stock Analyst)

Great. Thanks, Joe.

Operator (participant)

The next question comes from the line of David Karnovsky with JPMorgan. Please proceed with your question.

David Karnovsky (Senior Research Analyst)

Hi, thank you. I'm curious, with your voluntary, all-in pricing initiative, I know you haven't implemented this yet, but curious what the reception's been so far from, you know, fans, clients, lawmakers? Then can you discuss, have you thought about any potential demand impact for the shows at your venues, as I think now, optically, at least, you're raising prices relative to maybe competing locations, and then maybe for third-party venues that would opt in, how you would think about the demand impact there? Thanks.

Joe Berchtold (President and CFO)

Sure. I think the general reaction's been overwhelmingly positive. People understand that getting the all-in price up front is, is absolutely the best consumer experience. I think that there is a lot of concern that there will be still confusion in the marketplace because there will be a mix of all-in pricing for shows on our sites and on the primary tickets on our sites, and you go to secondary sites, you're going to see a different approach. That's why we continue to support legislation that drives a consistent fan experience. Because we are the primary ticketing provider in these events, I think it's our expectation in general that all-in primary price is generally gonna still be lower than any secondary price, even without service fees.

Our experience thus far in New York or Louisiana, that's recently implemented it, we haven't seen any impact on our primary ticket sales.

David Karnovsky (Senior Research Analyst)

Okay. Joe, for the $300 million of growth CapEx, wanted to see if you could provide any additional color around that. How would you bucket that between concerts and ticketing, and then within concerts, new builds or other growth initiatives? Your release noted international locations, specifically for the Venue Nation pipeline. I'm interested, do you now kind of see international as the key area where you're gonna be adding venues?

Joe Berchtold (President and CFO)

Sure. I think, if you look at the overall $300 million of spend, the vast majority of it would be concert-driven. 75%-80% of it would be on the concert side. If you look then on the concert side, I would put it in 3 buckets. One is, is where we're doing a lot of tactical improvements across a broad set of our amphitheaters or theaters and clubs around revenue-generating opportunities, putting in new bar designs, putting in additional points of sale, things that are going to tactically help drive our APF levels. Second is when we renew our amphitheaters or our theaters and clubs, we often go through a CapEx refresh cycle, that because we're gonna have a long-term lease, we're gonna be able to get a strong return off of that investment.

Then third would be the new builds, where at whatever level, generally coming in and building out the shell and taking on that building would be the third bucket. It's gonna move around year-to-year within those three, but those would be the three large buckets. In terms of the priorities, absolutely international, Latin America, Asia, and more in Europe is highest priority for the Venue Nation strategy. In, in the U.S., you benefit from having a strong arena infrastructure because NBA, NHL, their teams and their and their affiliate teams provide you with some of that infrastructure that you don't tend to have in the rest of the world.

This lets us both benefit from strongly attractive returns on those venues, also lets us just put on more shows for more fans because we're putting an infrastructure in place that didn't previously exist.

Operator (participant)

Our next question comes from the line of Stephen Glagola with TD Cowen. Please proceed with your question.

Stephen Glagola (VP in Equity Research)

Thanks for the question. Joe, you're on track for selling 300 million fee-bearing tickets this year, which is, I think, 7% growth over 2022. The first half ticket growth on fee-bearing was 22% year-over-year. Just, you know, maybe help us understand what's the slowdown in the second half in ticketing, or is that just some conservatism in the numbers? Then I had 1 more follow-up. Thanks.

Joe Berchtold (President and CFO)

I think it's just you don't yet know what Q4 looks like in terms of timing with on sales for shows next year. I think we're confident in the $300 million number at this point with the visibility we have. When we're sitting here talking next, I think we'll have better visibility into what Q4 is, and we'll guide from there.

Stephen Glagola (VP in Equity Research)

Okay, thank you. Similarly, on the, on the ticketing margin side, you know, you came in north of 40% again in Q2. You're reiterating, you know, high 30s from the back half or for the full year, excuse me, implies sort of like a mid-30 margin in the back half. Just, you know, similar to the revenue line, what, what's going on there sequentially and, the puts and takes? Thanks.

Joe Berchtold (President and CFO)

Yeah, I think as I long talk, there's a lot of timing that happens with us in a given quarter. I think you saw last year a lot of the same questions. We had lower margins in the second half, as we had a lot of costs associated with contract renewal cycles and other factors. I think at this point, we're comfortable continuing to reiterate the high 30s for the margin, but not yet ready to get more specific than that.

Stephen Glagola (VP in Equity Research)

Okay, should we expect contract renewals again for Q3, similar to last year?

Joe Berchtold (President and CFO)

I don't think we're looking to guide at a specific margin for a specific quarter as much as just give the overall year guidance.

Stephen Glagola (VP in Equity Research)

Okay. Thank you. Thank you, Joe.

Operator (participant)

Our next question comes from the line of Peter Supino with Wolfe Research. Please proceed with your question.

Peter Supino (Managing Director and Senior Analyst)

Hi, thank you. Question on international, with it growing so strongly, more major tourists, artists touring globally, has your strategy changed at all? Does this, in fact, invite you to spend more money, perhaps, on international M&A? Are there other things that you can do now with higher visibility to international demand that you might not have done in the past? A second shorter question, just is on technology. There's all the controversy around bots and scalpers over the last year, indicate that the company could productively spend materially more on technology and solve some of those problems. Thanks.

Michael Rapino (President and CEO)

I'll do the global part, Joe and bots. Yeah, I don't think the strategy has changed. I think if you've listened to us for the last 5 years, or, or longer, we've been talking about that Live is a global business. The artist has been unlocked globally. Consumers, thanks to social media and others, are driving global consumption with no, with no gatekeepers. We are, you know, we have 100 offices in over 40 countries. We have been on this march for a long time, and we think there's still lots of opportunity, obviously, as we've talked about in Latin America, Pacific Rim, Eastern Europe.

Kind of plan is following as we kind of predicted, the artists would continue to go global, more global artists and international markets would want to be just like New York and, and Boston would want to be hosting U2 and, and Beyonces of the world. We had an opportunity to build out those markets. Pedal down, we see lots of great growth opportunities for years to come on that front.

Joe Berchtold (President and CFO)

On, on the bots, certainly new technologies allow us to continue to get more sophisticated in trying to stop the bots. We're regularly working on both the technologies as well as just new processes to try to weed out humans versus bots. Problem is, some of the same technologies is also being deployed by the bad actors trying to jump the line and get those tickets, and they have a $5 billion a year incentive to cheat to get those tickets, which is why we've been continuing to advocate.

I think we've seen a lot more visibility on some of the behavior that we need, or we'd like at least, more legislative support in terms of real punishments for the bad actors, for the platforms that enable the bad actors, ending practices like speculative ticketing that is clearly, price manipulative and anti-consumer. We're continuing to do our part to fight it, and we hope that we'll be able to get some help, with some rules and with some real penalties for people that are trying to cheat.

Operator (participant)

The next question comes from the line of David Katz with Jefferies. Please proceed with your question.

David Katz (Managing Director and Equity Research Analyst)

Hi. Afternoon, everyone. Thanks for taking my questions. I wanted to just get an update, if you don't mind, on, you know, the digital process, right, digital ticketing, et cetera, and then the second derivative of being able to, you know, harvest and, you know, drive better returns off of the information gathered from it. Where is that today, and where can it go, and how do you see that opportunity?

Joe Berchtold (President and CFO)

Yeah, at this point, digital ticketing is largely ubiquitous, globally, coming out of COVID. I haven't seen the latest numbers, but I would expect them to be in the 90s that are now digital tickets. It's at varying forms, shifting from barcodes to what we call SafeTix, which is rotating barcodes or NFC to keep tickets from being counterfeited and sold over and over. We have a number of initiatives that have launched then to use that data.

We've talked extensively about some of the things we've done in marketing, bringing all of our data together, to better understand the fan, how we market to that fan, how with the digital connection, we're able to market to them on behalf of our Ticketmaster clients, how we're able to market to them on behalf of sponsors, how we're able to send them, messages for upsells when they go to shows in our buildings. That all continues.

Then in the background, we have Ticketmaster using the data that it gets for a range of, I'll call it machine learning purposes and tools, in terms of helping clients figure out how do they price their shows, how do they market their shows, what are the, what are the tools that, that they should use can help our concert folks in terms of understanding likely demand for tours and shows in specific markets. So, certainly now it's the point where that data and now its use is permeating the business.

David Katz (Managing Director and Equity Research Analyst)

Got it. If I can follow up, please, with respect to Platinum, right? We do have discussions about, you know, inflation and the cost of things, et cetera, et cetera, which, you know, doesn't seem to be at play here. You know, where is that? Where can it grow? You know, any pressure points with respect, other than, you know, the artists themselves authorizing it, right? Any pressure points toward sort of growth in Platinum and how that mixes you higher?

Joe Berchtold (President and CFO)

Yeah, I wouldn't characterize it as artists, not allowing it. I mean, the, the artists are the ones who are, set the price of their tickets. It's our job to, to provide the information to them, to help them understand the market value of their tickets, so they can figure out the balance that's right for them and their fan base in terms of, pricing the tickets so that they're getting the value, they're giving it to the fans, how do they keep it from going to the scalper? A lot of artists now, I would say it's almost becoming the standard that they're understanding they should price the front of their house to capture most of the value.

Otherwise, it's the scalper who's going to take it, and then they want to make sure the back of the house is priced so that every fan can afford to buy a ticket and get in. The trend we've seen coming out of COVID is, I think, a switch from it being partially used to being very ubiquitous here in North America, and then over the past year or so, it becoming much, much more heavily adopted in international markets. I think we still have a long ways to go in international markets towards full adoption. If you look at the pricing with Platinum, there's still a substantial gap relative to average secondary pricing, which would imply that artists are continuing to give a lot of or attempting to give a lot of the value to fans, and we'll see how that evolves over time.

David Katz (Managing Director and Equity Research Analyst)

Thank you very much.

Michael Rapino (President and CEO)

Just to jump in on-

David Katz (Managing Director and Equity Research Analyst)

Sorry.

Michael Rapino (President and CEO)

Just to jump in on Platinum. The magic of Platinum isn't to increase the first rows. The magic of Platinum is it gives that artist the opportunity to look at the whole house. We have never historically jumped on an earnings call and told you we couldn't sell the first 10 rows out. Our job is always to sell the last 10 rows out in the upper, upper, nosebleeds, as they call them. What Platinum has enabled the industry to do is, as the artist has increased show costs and needs to get a certain gross for that night, is we should figure out how to maximize some of the front of the house closer to market. That's also let us bring the price down in the back end of the house.

The net gross can be more overall, but it's giving fans a better sell-through rate on the back end of the house. We used to be locked into kind of three ticket prices that didn't have that opportunity. The biggest advantage to dynamic pricing and Platinum pricing over the last few years was really just how do you help the whole house get sold? How do you reduce the prices in the back end of the house that are always the harder ones to sell, so you truly get a full house and the proper gross for the artist, and then all of us benefit when more people walk through those doors.

David Katz (Managing Director and Equity Research Analyst)

Understood. Thank you very much.

Operator (participant)

The next question comes from the line of Jason Bazinet with Citigroup. Please proceed with your question.

Jason Bazinet (Managing Director and Senior Equity Research Analyst)

I just had a question on the secondary market. My question is pretty simple. Has your philosophy or emphasis on this market changed? Because I think in your 10-K, you talked about the GTV on secondary being something like almost $4.5 billion in 2022, more than double 2019 levels. In this release, you're talking about secondary ticketing volumes up double-digit. Is this just indicative of the overall strength that we're seeing in consumer interest in going to live events, or is it something that you're doing as well, or both?

Joe Berchtold (President and CFO)

First off, I, again, just to keep it in context, we've, we've long said that, first and foremost, our job is to sell the primary ticket. We're a primary ticketing company, and that secondary is a kind of low to mid-teens portion of our GTV. It's, it's relevant, but it's also not the primary focus. We have long thought that we need to be in secondary because fans have a need to buy a ticket, and when a show is sold out, if we're not giving them an option to buy a legitimate secondary ticket, then we're forcing them to go to other platforms, to buy their ticket, and we think they're better off being served within the Ticketmaster ecosystem.

I think as we continue to do a better job with our offer, reducing friction, understanding how to deliver on the fan needs, as we've aligned with the NFL, the NBA, and others on the sports side, that have a slightly different model for secondary, I think we've naturally grown our position in the market. What really matters to us, first and foremost, is that we have a great primary sale, and that's managed in a way that is gonna keep content happy.

Jason Bazinet (Managing Director and Senior Equity Research Analyst)

Perfect. Thank you.

Operator (participant)

The next question comes from the line of Paul Golding with Macquarie. Please proceed with your question.

Paul Golding (Senior Equity Research Analyst)

Thanks so much. Congrats on the quarter. I just quickly wanted to see if you had an update on a metric you've given before in terms of the average ticket price and how that's been trending. I think in the past, you've said it's, it's been below $35. Secondly, as a follow-up, as we watch sort of the macro tightening in the backdrop and not so much for, for your business, but in general, in tracking sponsorship, any color you could give on cohorts that are more or less meaningful for that sponsorship growth that you've been seeing as we track forward into this tightening environment? Thank you.

Joe Berchtold (President and CFO)

First of all, on the average ticket price, I think what we've talked in the past is that the average the entry ticket price, so the lowest price that a fan can find a ticket at for our amphitheaters, for our theaters and clubs, is generally averaged below $35. For the reasons that Michael spoke to, it continues to be below $35 because the artists are wanting to make sure that almost all fans can get in to see their show. What you've seen is because their costs have gone up, because they've seen what's going on in the secondary market, some of the closer in parts of the house have increased ticket pricing.

I mean, you can see from the overall Ticketmaster GTV and number of tickets sold, that pricing in total is up double-digit still year-on-year, while the entry prices remain low. On the sponsorship, I'm not sure I fully understood your question. I think we've seen no slowdown in terms of our sponsorship business. We have over 90% of our expected revenue for the year is booked, being driven by a lot of the large multi-asset, multimillion-dollar sponsors that we work with, who have long-term agreements with us that continue to go very well and continue to sign more.

Paul Golding (Senior Equity Research Analyst)

I guess my question around that was more around sector. For example, if we were to think about sports and sports betting, maybe being a predominant sponsor, boost this year or the tail end of last year, or anything in that in that type of area of color around the mix.

Joe Berchtold (President and CFO)

Yeah, I don't think there's

Michael Rapino (President and CEO)

We have a, we have a wide- we have 900 different sponsor brands. Every category you can imagine, it's fairly distributed evenly. We haven't seen any, any sector pullback, that has affected any, any of the, the core business overall. We've, we've always said we believe that our business is a, you know, it is a much less of an investment than a lot of the other TV and big campaign investments that brands make. It's, it's a much more targeted approach. We've seen more brands shift some of their dollars from the other categories to the event space, where they can kinda get that direct consumer, interaction that they can't maybe get on digital and, and elsewhere. We've seen most sectors increase their spend in our category. It's been growing, and we've been growing with it.

We think that, we think that trend is gonna stay, 'cause as they're all trying to figure out how to connect with consumers in a digital world, we we, in sports on, live, give them that one opportunity to hit consumers at scale on a Thursday in Pittsburgh. We think, we're gonna see more of, more, more growth in our category.

Paul Golding (Senior Equity Research Analyst)

Great. Thanks so much.

Operator (participant)

The next question comes from the line of Cameron Mansson-Perrone with Morgan Stanley. Please proceed with your question.

Cameron Mansson-Perrone (Equity Research Analyst)

Thanks for taking the questions, too, if I can. The increase in accretion expectations for the year, that you call on the release connected with OCESA, imply that the performance there is pacing pretty well above your expectations earlier in the year. Can you talk a little bit about, you know, what specifically has been outperforming with OCESA? Then more generally, in terms of Latin America, it's obviously been a focus for you guys. Do you feel like now with kind of touch points in Mexico, Brazil, Colombia, that you're in a position where you can kinda expand to the rest of that region organically, or are there other kind of individual markets where it might make more sense to penetrate into through M&A? Thanks.

Michael Rapino (President and CEO)

Yeah, we think Latin-- as we think the, you know, kind of our global playbook has, has always been the same. We enter most of these markets, low cost, maybe a bolt-on, promoter or festival. We end up having enough content that we can bring the, the tour to the market, and then we build up the, the flywheel once we get to that market. In Brazil, we've got Rock in Rio, an incredible festival foundation. We now have a great touring business there, bringing, artists to the ground. We've launched our sponsorship business there, and now we've just launched ticketing there. I think it's a great combination. We'll see, continual growth in Latin America, Brazil. Had a big year in Argentina, as crazy as the market is on ticket sales.

We like the entire market down there. You'll see us organically grow. We've always been a predominantly organic-driven business. We'll use continual bolt-ons to keep powering and doubling up on our, our, our efforts there.

Cameron Mansson-Perrone (Equity Research Analyst)

How about on, on OCESA and what's, what's driven that outperformance?

Joe Berchtold (President and CFO)

I mean, that's been across the board. I think on their concert side, we've done well in terms of starting to get shows on our touring platform down to Mexico. Latin artists are clearly on fire, so they've got very, very strong set of regional shows they've been doing. Their festival business is doing great. They've continued. We've worked with them to get the ticketing platform enhanced, and that's continuing to perform very well. They've been bringing in sponsors. It's really across all elements of their business. I would say, has well outperformed relative to what we thought when we acquired them, or even what we thought, six months ago, nine months ago, on how this year would be.

Cameron Mansson-Perrone (Equity Research Analyst)

Got it. Thank you.

Michael Rapino (President and CEO)

Remember, remember, we bought, we bought OCESA in COVID, God blessed us.

Joe Berchtold (President and CFO)

Yeah.

Michael Rapino (President and CEO)

We believed in the market. Did we, did we model out our IRR to think that the industry would bounce back as big as it has? No. Anything we're doing down there has been above and beyond what we expected for a Latin market and industry in general overall. We've got an incredible management team down there, partnership with the CEO. They're a very, very well-run organization. They've got venues, ticketing. We've been able to take a really kind of archaic ticketing platform and continually reinvent it now that we're partners on the Ticketmaster side, sponsorship upgrades. Off their incredible base, our expertise and the market dynamics, it's been an incredible return.

Cameron Mansson-Perrone (Equity Research Analyst)

Is that, if I can follow up quickly on one of those points, is that generally a one-way, you know, bringing sponsors from elsewhere into those new markets, or is there also kind of a reverse dynamic where, you know, you're taking local sponsors and also giving them exposure in, you know, North America, Europe, that they may not have had previously?

Michael Rapino (President and CEO)

Yeah, it's, you know, I don't want to say it's completely one way, but it's our global concert or our global sponsorship partnership team. When you're sitting with any of these big brands you can imagine, and you're trying to sell a, you know, a global sponsorship, that maybe they're only doing with the Olympics and F1 because there's not a lot of global properties, right? The NBA, most sports is, is regional.

When we can sit in that room and say, "Now we have a big office and a, and a, and a now a market in Brazil, and we can get you to Rio, São Paulo, and Mexico City, and Milan." You know, the more major markets we can add to our pitch when we're sitting with that CE-CEO, CMO on a global basis, it helps look at our sponsorship business, that we can now deliver kind of a global platform and bring bigger sponsors to some maybe local deals they had. We'll, we'll always kind of look to replace a local deal with a global deal, would be the return we'd look for. Adding Latin, adding Mexico City, adding these markets, big markets for most big brands, gives us more, more markets to sell our global story to.

Cameron Mansson-Perrone (Equity Research Analyst)

Makes sense. Thanks.

Operator (participant)

Our final question comes from the line of Matthew Harrigan with The Benchmark Company. Please proceed with your question.

Matthew Harrigan (Senior Equity Research Analyst)

Thank you. Down to some fairly down in the weeds questions. You did an acquisition in March, Clockenflap in Hong Kong. Great name, by the way. Is that any sort of real expansion platform? You did put out a release on it. You know, obviously, that market has peculiarities, to say the least, but is that a potential growth vector for you? Secondly, I guess off Peter's question earlier, you know, some of the issues with Eras in November weren't so much that the bots could get through Verified Fan, is that your network basically couldn't handle the amount of traffic that was generated.

Do you feel like you've made sufficient upgrades at this point, that if you had the same situation and there was not going to be another immediate Eras to where, but if there was, do you think you'd be able to scale appropriately so you didn't have the level of disgruntled customers? Thank you.

Joe Berchtold (President and CFO)

Yeah, let me take the second one first. This is Joe.

Matthew Harrigan (Senior Equity Research Analyst)

Yeah, Joe, punch that one, yeah.

Joe Berchtold (President and CFO)

just to be very specific, what, what happened was, is there were two vectors of attack during that on-sale. One was a very large number of bots trying to crash into our Verified Fan system. That slowed down the fan experience, but that did not crash the system or cause it to stop. At the same time, we had what was in effect, a attempted cyberattack that was a brute force cyberattack that had the effect of a denial of service attack, not through our front door of our Verified Fan system, but through a specific server that we have. in order to fight off that cyberattack, we had to stop the on sale.

Within five hours, we had figured out how to fully reinforce the defenses to, in effect, move out the defense line so that, by stopping the cyberattack or the attempted cyberattack, we no longer had any load on our system for the Verified Fan experience. We started it back up. what, the answer to your question is, is within 5 hours, we had solved that problem. It's not something that's taken us six months or nine months to figure out how to solve. We solved it quickly. We ultimately did sell 2 million tickets that day. and once those five hours were passed, while it was a long wait at times for fans, because there were a lot of people trying to buy the tickets, there were not the system overload issues. I'll let Michael speak to Clockenflap.

Michael Rapino (President and CEO)

Yeah, you're deeper in the, the weeds than I am. What was that? Where was, what-

Matthew Harrigan (Senior Equity Research Analyst)

Oh, sorry about that.

Michael Rapino (President and CEO)

What acquisition were you referring to?

Joe Berchtold (President and CFO)

Which one?

Matthew Harrigan (Senior Equity Research Analyst)

Clockenflap in Hong Kong, you know, festivals. I knew it was small. It got a little bit of attention in the trade media, and, and you did put out the press release. I assume it obviously isn't that much of an expansion platform, but if you had any specifics on your ability to do anything on that market and expand more in Asia, outside of Australia and Japan, I thought that would be interesting. Thanks.

Joe Berchtold (President and CFO)

I would say it's, it's part of our broad bolt-on strategy in Asia. As we've, as Michael said earlier, we'll go in and we'll look for local promoters, local festivals that we can bring on, and then we can then tie in with our broader concerts platform, bring our sponsorship team into. It was an example, I would say, of the type of activity or type of M&A that we're doing in the region.

Matthew Harrigan (Senior Equity Research Analyst)

Thanks. Thank you for the clarification.

Michael Rapino (President and CEO)

Just, just, just, just to jump on it for others. I mean, we talk about Latin America, but, you know, Pacific Rim and others are, are, are equally important. It's a global business, so, you know, Japan, real, real important market for us. Latin America, I mean, Pacific Rim in general, we're already in most of those markets in some form. We have offices in Singapore. We've had a very successful operation in Korea, which has been kind of the foundation on why we ended up being the promoter for BTS and other K-pop artists throughout the world. We look at Pacific Rim equally as important as Latin America. You'll continually see us, with a bolt on, you know, promoter, venue, festival, as we're building out that business and, and driving, content there also.

Matthew Harrigan (Senior Equity Research Analyst)

Beautiful. Thank you.

Operator (participant)

Thank you, everyone. This marks the end of the question and answer session, and this also concludes today's teleconference. You may disconnect your lines at this time.