Venu - Earnings Call - Q3 2024

Executive Summary

• Q3 2024 revenue was $5.45M, up 39% year over year, while net loss widened to $(4.53)M and operating loss to $(3.68)M given start-up and pre-opening costs; amphitheater operations contributed first-time net profit to VENU in the quarter.
• Ford Amphitheater opened in August with 17 shows, 83k+ tickets sold at a $152 average, ~$12.74M gross receipts, and 96k attendees; the venue was nominated for Pollstar’s 2024 New Concert Venue of the Year, setting a strong foundation ahead of a full 2025 season.
• Amphitheater naming rights revenue recognition is expected to be ~$1.3M annually; roughly half of the initial naming rights amount was recognized in Q3 with the remainder in Q4, creating a recurring sponsorship revenue base.
• Assets doubled to $166.6M by Sept 30, 2024, driven by property and equipment investments ($125.8M), underscoring balance sheet scale-up post-venue launch and pre-opening development activity.
• Near-term stock reaction catalysts: venue openings, sponsorships (Ford, Kaiser), new partnerships (EIGHT Lager/Troy Aikman), and an open-room booking strategy enabling both AEG and Live Nation to drive volume across Texas/Oklahoma markets.

What Went Well and What Went Wrong

What Went Well

• Ford Amphitheater launched successfully, delivering ~$12.74M in gross receipts during a limited August–September season, and earning a national nomination; management expects 2025 to “roar” with a full-season lineup.
• Premium seating materially outperformed internal expectations; “premium seating was 100% and… turnover in premium seating was about 50%,” highlighting robust demand and monetization of elevated experiences.
• Strategic partnerships expanded: Kaiser Permanente sponsorship at Ford, Phil Long naming rights for the music hall, and EIGHT Lager/Troy Aikman partnership across Texas/Oklahoma venues; plus introduction of the membership-based “EIGHTMAN Club”.

What Went Wrong

• Continued losses with Q3 operating loss of $(3.68)M and net loss of $(4.53)M; total operating costs scaled sharply to $9.13M with higher labor, operating expenses, and D&A typical of venue ramp phases.
• Interest expense rose to $(1.16)M in Q3, weighing on net results and reflecting growth financing for development and ramp; other expense items tied to financing also impacted YTD cash flows.
• Limited operating season (17 shows versus a typical 60-show season) constrained revenue scale this quarter, with full-season normalization expected in 2025.

Transcript

Operator (participant)

Good afternoon. Welcome to Venu Holding Corporation's third quarter 2024 earnings call and update. This afternoon, the company, also known as Venu, issued a press release that provided an overview of its third quarter 2024 results, which followed the filing of its quarterly report on Form 10-Q for the period ending September 30, 2024. Today's conference call is being recorded and will be available online along with our earnings press release covering our financial results at venu.live in accordance with Venu's retention policies. All participants on this call will be in a listen-only mode. The call will be followed by a question-and-answer session. At this time, I would now like to turn the conference over to Heather Atkinson, the company's Chief Financial Officer. Heather, please go ahead.

Heather Atkinson (CFO)

Thank you, Sarah, and thank you all for joining Venu's September 30th, 2024, third quarter earnings call and update. On the call today, we have our founder, chairman, and CEO, J.W. Roth, as well as our President, Will Hodgson. Following the Safe Harbor statement, JW will provide an overview of our business, and Will is going to provide an update on the current expansion plans for Venu. And finally, I'll provide a summary of the quarterly financial results. Following that, we'll open up the call for questions. We'd like to remind everyone that various remarks about future expectations, plans, and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Venu cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including risks described in the company's quarterly report on Form 10-Q for the quarter ended September 30th, 2024, and other filings with SEC, all of which can be reviewed on the company's website at venu.live, spelled V-E-N-U dot L-I-V-E, or on the SEC's website at sec.gov. Any forward-looking statements made on this conference call speak only as of today's date, Monday, December 23rd, 2024, as Venu does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today's date except as may be required by federal securities laws. With that, I'd like to turn over the call to our Founder, Chairman, and CEO, J.W. Roth.

J.W. Roth (Founder, Chairman, and CEO)

Heather, thank you, and good afternoon, everyone. We appreciate you joining us today. For those of you that may be learning about Venu for the first time, let me take a few minutes and tell you our story and what we have accomplished over the past few years. Venu is a leading developer of luxury entertainment venues dedicated to transforming how fans experience live music and hospitality. From state-of-the-art amphitheaters and intimate music halls, our spaces are thoughtfully designed to put fan experience front and center with unparalleled entertainment and exceptional service. We are known for our disruptive approach to live entertainment. We have created unique, elevated amenities like luxury fire pit suites and premium custom-built owners' clubs. Our luxury outdoor amphitheaters range from 8,000 to 20,000 seats, and our entertainment campuses feature legendary restaurants, premium-sized, mid-sized event centers, and live music halls.

Our goal is to create unforgettable experiences for all of our fans. In our third quarter, Venu brought luxury entertainment to life. We successfully executed our business plan and most notably opened our gates to 8,000-capacity, $70 million development known as the Ford Amphitheater here in Colorado Springs. The amphitheater adopted the name Ford Amphitheater after Colorado Ford Dealers purchased the primary naming rights for 10 years for $13 million, which was one of the largest amphitheater sponsorships in history. The amphitheater is booked and operated in partnership with AEG Presents Rocky Mountains. We started hosting acts about a third of the way through our typical season, starting in August, with a sold-out three-day grand opening weekend by Grammy Award winner Ryan Tedder and his globally recognized band, OneRepublic.

We ended the season in September, having hosted 17 incredible shows featuring internationally renowned performers like Steve Miller Band, Robert Plant, Alison Krauss, and Walker Hayes. We ended the season welcoming over 96,000 fans from over 5,500 zip codes from all 50 states and was recently nominated for Pollstar Magazine's 2024 New Concert Venue of the Year, which recognizes venues that have made significant impacts in the live entertainment industry through exceptional design, operation, and audience experience. We believe 2025 is going to roar, and we are actively booking an exciting lineup with six shows already announced for the upcoming season. We are also set to unveil our highly anticipated $35 million dining and entertainment collection here in Colorado Springs in the spring of 2025. We're strategically developing the building to sit alongside the very eastern perimeter of the Ford Amphitheater.

We designed this to be able to be used year-round and with many different experience options: restaurants, bars, owners' clubs, and a vibrant social and private event space, all with floor-to-ceiling windows to showcase the unparalleled views of the Rocky Mountains. Outside of the Ford Amphitheater, we have 11 markets operating and/or in various stages of development. Colorado Springs, Colorado, and Gainesville, Georgia, are operating, and we are in the construction phase in Broken Arrow, Oklahoma, the Tulsa Market, Oklahoma City, Oklahoma, El Paso, Texas, and our largest in our collection so far announced in McKinney, Texas, the Dallas-Fort Worth Market. Further, there are five additional markets in the pre-construction stage, setting the stage for continued growth.

We believe that these initial markets are projected to add over $2 billion in real estate assets to our balance sheet and will bring our seating capacity and inventory to an anticipated 150,000 seats. When they are fully developed, the complexes in the collection will host up to 60 shows a year, which calculates gross saleable seating at approximately 10 million tickets per year. With an expected average gross sale price of $150, Venu's annual gross receipts could be in excess of $1.5 billion per year. In the past few months, we also made notable announcements. In the spring and early summer, we proudly announced two new public-private partnerships, one in McKinney, Texas, and the other in El Paso, Texas. These collaborations join our existing partnerships in Broken Arrow, Oklahoma, making three significant private partnerships for Venu.

These strategic alliances play a vital role in our site selection and expansion efforts, and we are honored to work alongside these great communities. This October, we announced Kaiser Permanente's exclusive partnership at Ford Amphitheater in Colorado Springs, and we held an official groundbreaking ceremony in Broken Arrow, Oklahoma. Of course, in August, Venu opened the Ford Amphitheater in Colorado Springs. In November, we rebranded our mid-sized music hall here in Colorado Springs after a new naming rights sponsorship was announced with Phil Long Ford Dealerships, one of Colorado's largest auto dealerships. Also in November, as mentioned previously, our Ford Amphitheater was nominated for Pollstar's 2024 New Concert Venue of the Year. In December, we announced our strategic partnership with Dallas Cowboys, three-time Super Bowl champion and founder of Eight Elite Light Lager, Troy Aikman.

Our partnership with Troy Aikman makes Eight Brewing the powerhouse partner for all of our Texas and Oklahoma venues, along with making Troy the namesake of our membership-based owners' clubs in both Texas and Oklahoma. We are branding these exclusive suites the Aikman Club. Finally, I am honored to have accepted a seat on Eight's advisory board of directors. In addition to these exciting developments, we are very fortunate that just a few weeks ago in December, we announced two additional employees. The first, our new President, Will Hodgson, who we will hear from shortly, and our powerhouse Chief Marketing Officer, Terri Liebler. And finally, in December, we believe in giving back to the communities that support us, so we announced our official nonprofit organization, Venu Arts and Culture Foundation, dedicated to nurturing talent, creating shared experiences, and that will unite communities together and champion our initiatives.

Now, with that, I will turn it over to Will Hodgson, our President. Please go ahead, Will.

Will Hodgson (President)

Thanks, J.W., and it's certainly a pleasure to talk to everybody today on the call. I've lived and breathed this industry for 25 years and just coming off of close to a decade of running the House of Blues entertainment brand and just really excited to dig in and help develop and execute Venu's disruptive vision. I mean, we have a robust roadmap for Venu's growth as we move into 2025. Not only are there significant opportunities to improve profitability from our existing revenue streams through more strategic F&B tactics, streamlined premium upgrades, innovative marketing, and better cost control through system integration and data analytics, we also plan to add several outlets J.W. just spoke of, but none bigger than the Broken Arrow Amphitheater coming in the fall of 2025.

As always, we will continue to evaluate the guests and artist experiences at our venues, always striving to improve our already best-in-class reputation. With that, I'd like to turn it back over to our Chief Financial Officer, Heather Atkinson. Heather, please go ahead.

Heather Atkinson (CFO)

Thank you, Will. I appreciate everyone being on the call. I'm going to dive right into some of our performance highlights from the Q3 and on our press release. As you might have seen already, our total assets rose to $166.6 million as of September 30th, 2024, an increase of 100% compared to the same period from $83.2 million as of December 31, 2023. Property and equipment totaled $125.8 million as of September 30th, 2024, an increase of 118% compared to $57.7 million as of December 31, 2023. Over the limited 2024 season of 17 shows at the Ford Amphitheater for the three months ended September 30th, 2024, this location generated gross receipts of $12.7 million, which is inclusive of ticket sales, concessions, ticketing fees, parking, premium upgrades, as well as other receipts.

The Ford Amphitheater sold over 83,000 tickets at an average of $152 per ticket in its first 17 shows. Total revenues for the company were $13.6 million for the nine months ended September 30th, 2024, an increase of 56% compared to $8.7 million for the nine months ended September 30th, 2023. For the three months ended September 2024, total revenues were $5.5 million or an increase of 39% as compared to $3.9 million for the three months ended September 30th, 2023. Our restaurant operations business generated $2.7 million or 50% of our total revenue for the three months ended September 30th, 2024, and $8.1 million or 60% for the nine months ended September 30th, 2024.

Our event operations, defined as our small to mid-sized live entertainment venues, generated $3.7 million or 28% of our total revenue during the nine months ended September 30th, 2024, or $1.1 million or 21% of our total revenue during the three months ended September 30th, 2024. Our amphitheater operations generated net profit, which is defined as profits after our split with our operating partner, AEG, which included receipts from our naming rights agreements, which are outside of our AEG partnership agreement of $1.6 million or 30% of our total revenue for the three months ending September 30th, 2024, or 12% of our total revenue, and we did not recognize any amphitheater operation net profits prior to the opening of Ford Amphitheater in August 2024. With that said, I'd like to now turn the call back over to J.W.

J.W. Roth (Founder, Chairman, and CEO)

Heather, thank you. And again, thanks for everybody being here. At Venu, we are built for music fans. We're built by music fans, and we're redefining the live music experience from every angle. And we're proud to be doing all that we are doing. Okay, with that, I'm going to open it up to Q&A.

Operator (participant)

Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from the line of Stephen Hemedes with T.R. Winston & Company. Your line is open.

Stephen Hemedes (Analyst)

Good afternoon all, and congratulations on the progress to date. Thanks for taking my question. As you look ahead to the next five years, how will the insights gained from ongoing and completed construction projects inform your approach to future buildouts? In terms of growth, how do you see the scale of your amphitheater network evolving and the milestones and metrics that you will use to track your progress, if you have any? Finally, as you expand, is the company targeting other new U.S. markets beyond the ones mentioned in the prepared remarks? And how do you see the broader macroeconomic environment impacting the company's segment of the entertainment industry in the years to come? Thanks.

J.W. Roth (Founder, Chairman, and CEO)

So first, thanks for joining. I appreciate the question. Let me sort of start with how we have viewed the amphitheater here in Colorado Springs, the Ford Amphitheater, and what it has sort of taught us as we've gone along. Number one is we have honed in on our public-private partnerships. The whole key to our business and the foundation of our business is developing these public-private partnerships. Bob Mudd has done an excellent job. Ryan and company has done an excellent job in developing these relationships, expanding these relationships, and prospecting new relationships in new communities. We have a very strong list of communities that we are working with. And over the course of the next several years, we will continue to build these amphitheaters under these public-private partnerships. As sort of the idea of learnings go, and it's interesting, you learn sort of three different things.

The first is the value of premium seating. We never knew going into the Ford what sort of—or we didn't know what to anticipate. I apologize. There's big construction going on right next to us, and it keeps knocking my phone out of here. Kristen, would you do me a favor and call the construction company and have them stop just a second? Again, I apologize for the construction noise. What I meant by premium seating is our premium seating has been more than we could have ever imagined. We went into our season in the 2024 season thinking that our premium seating would represent about 50% and that we would earn about 20% on that premium seating. Turned out that premium seating was 100% and that our turnover in premium seating was about 50%.

So to answer the question, I would say that, I'm going to have to go back and relearn the question, but to answer the question, I would say that's where we're at with our learnings. Next question.

Operator (participant)

Thank you. Your next question comes from the line of Martin Kjellberg with Morgan Stanley. Your line is open.

Martin Kjellberg (VP and Equity Research Analyst)

J.W. and team, great quarter, way to come out of the gates hot. Congratulations. I'm just wondering, for the new markets that are happening in Oklahoma and Texas, will AEG continue to be your partner there, and will they go along to each venue along with you, or will you secure a new partner in each one of those locations?

J.W. Roth (Founder, Chairman, and CEO)

Marty, thanks for the question, and thanks for joining us today. That's a good question. Here in Colorado, AEG has been our operating partner, and they've done a terrific job. I don't think we could be more happy than we are with that partnership. As we move forward into new markets, every market has strengths and weaknesses as it relates to operating partners, operating partners being AEG and/or Live Nation or whoever it might be in that particular market. We have made the decision, at least for right now, to operate Tulsa and McKinney and possibly El Paso as an open room. So we'll see how that shakes out. But what that means is that it will be open to Live Nation to book into those amphitheaters as well as AEG.

Actual operations will either come through an operating partner agreement or it will come through an ASM-style agreement. Does that make sense?

Martin Kjellberg (VP and Equity Research Analyst)

Makes perfect sense. Thank you so much, J.W. Merry Christmas to everyone.

J.W. Roth (Founder, Chairman, and CEO)

Merry Christmas. Happy Hanukkah.

Operator (participant)

Your next question comes from the line of Steve Emerson with Emerson Investment Group. Your line is open.

Steve Emerson (CEO)

Thank you, J.W. This is a great kickoff. Just going ahead, and please excuse me if I missed your opening comments, but the $2 billion of facilities, what proportion of that is signed, and what proportion are there preliminary letters of intent and are just in the pipeline that you're working on?

J.W. Roth (Founder, Chairman, and CEO)

Steve, thanks for the question. And first, Steve, thanks for taking the time to be on the call. You're a very, very good investor, and I appreciate your question. So we are in the process, actually in the development process, at several different stages with several different municipalities. So as I said earlier, we're either open or opening 11 new venues, and we're somewhere in that process with all 11 venues. At the end of the day, we really don't know the exact number per development until the fire pit suites are circled, and we have a good idea of what the end result will be. So as each municipality comes on, they could be worth between $150 million and, in the case of McKinney, well over $300 million. So I've got to be a little careful to talk about the specific municipalities because we have confidentiality agreements with them.

But I can tell you that we have a good line of sight to over $2 billion in net tangible assets in the municipalities that we currently have prospected. So where we're at in each one of those, I've got to be careful talking about, but I can tell you that we have a good line of sight to that number.

Steve Emerson (CEO)

Okay. It would be very useful if you sliced and diced that by category, not by city. How many are signed versus how many are under construction, and how many are letters of intent? Let's say for the future, if not today.

J.W. Roth (Founder, Chairman, and CEO)

Okay, so as we've reported, Colorado Springs is open and operating. Gainesville is open and operating. Broken Arrow is under construction. We are under construction and under development in McKinney. We'll be closing on that land here in about two weeks, but the development agreement is signed, and dirt is moving. In El Paso, we are not under construction yet, but we are signed there. We have LOIs going back and forth in three additional markets, and then we have development agreements in process and/or prospecting in process in an additional three markets, if that answers your question.

Steve Emerson (CEO)

Okay. What proportion of that have signed agreements with the city and finished development, obviously under construction count? But once you have the site, that's a huge step.

J.W. Roth (Founder, Chairman, and CEO)

Yes. No question about that. So El Paso signed, McKinney signed, Broken Arrow signed, Colorado Springs completed, Gainesville signed and completed. Oklahoma City is in process right now, not signed, but in process. And then we have there are a total of three and then three more, so six altogether that are not signed, but they are in process. That's about all I can say about that.

Steve Emerson (CEO)

Excellent. And how long are your agreements with AEG and Live Nation?

J.W. Roth (Founder, Chairman, and CEO)

Typically, Steve, these operating agreements are 10 with two fives. We will be operating Broken Arrow most likely as an open room, as we will be in McKinney and in El Paso. With that said, we will most likely have agreements very similar to what we have in Colorado Springs with AEG, but limited. So in other words, we might have a. I'll give you an example. In McKinney, we'll most likely have two or three agreements with two or three operators that would all be participating in booking and promotion into that room. And the reason that is, is because a market like McKinney is just tough for one promoter to do it all, especially in an amphitheater that size. So most likely, there'll be multiple partners in that particular amphitheater. But to answer your question, a typical arrangement is 10 with two fives.

Steve Emerson (CEO)

Got it and how much of the Ford agreement was included in your quarter?

J.W. Roth (Founder, Chairman, and CEO)

Okay, so Steve, ask that question one more time.

Steve Emerson (CEO)

Okay. Let me be more clear. You show in the quarter an operating profit, which is great. I wonder how much of those revenues each year or in this period is the Ford signing payment?

J.W. Roth (Founder, Chairman, and CEO)

Yeah. So let me break that down into sort of three buckets. So the first bucket, if I understand correctly, you're asking how much of the revenue is associated with the Ford. It would be less than a third. So on a typical season, like for example, the season that we're building out right now.

Steve Emerson (CEO)

No, I'm not being clear enough. That's the scale of the naming rights. How much in revenue did you show in the quarter, and how much are you going to show per year going ahead?

J.W. Roth (Founder, Chairman, and CEO)

Okay. So for the quarter, we showed $1.3 million, I believe, in this quarter. Heather, correct me if I'm wrong, or is part of that coming in the October quarter? I mean, I'm sorry.

Heather Atkinson (CFO)

Basically, what you're asking, we recognized we were able to recognize August and September, so two months' worth of the naming rights sponsorship.

J.W. Roth (Founder, Chairman, and CEO)

Okay. Okay. So Steve, about, I'm going to say 50% or so of the naming rights were recognized so far. The rest of it will be recognized in the fourth quarter. But on a go-forward basis, Ford will be recognized to the tune of about $1.3 million annually. And then in addition to that, will be the other four sponsorships, which would be the Kaiser, and then obviously the Air Academy Bank, and then Koch and Budweiser.

Steve Emerson (CEO)

Got it. Thank you and looking forward to your future calls.

J.W. Roth (Founder, Chairman, and CEO)

I appreciate it, Steve. I mean, just to go back and talk a little bit about this, we're in the development stage, and we're working hard on our P&L, and we believe that over the next six quarters, you will see it continue to do what it did this quarter, and you'll see those operating profits continue to be what they are, but you will also see. Go back to the previous question as it relates to our balance sheet. You will see the acceleration of assets coming onto our balance sheet based on the public-private partnerships that we are currently developing.

Operator (participant)

If there are no further questions at this time, this will conclude today's conference call. Thank you so much for your participation. You may now disconnect.