Los Angeles Music Scene: Live Nation reports Q2 2021 results

This might be my last look at Live Nation's financials. COVID-19 is spiking across the United States, but it doesn't appear like we'll be seeing a shut down of music venues anytime soon. Just because live music is back doesn't mean that all is well in the music industry. I think that can be seen by the fact that Live Nation ran a $20 all-in ticket promotion for nearly 1,000 shows. We also know that some planned 2021 tours have recently been postponed (Stevie Nicks and Lynyrd Skynrd are examples). Yet, at least for now, venues are open for those who want to tour and those who want to attend. Also, as can be read below, it appears that Live Nation sees itself as having a solid concert pipeline for the next few years (which means a solid revenue pipeline).

As with prior looks at their financial statements, my main interest is their cash flow situation. Here's the key quote from their August 3rd earnings call:

Looking at free cash and liquidity. As of June 30th, we had total cash of $4 billion, including $1.1 billion in ticketing client cash and $1.8 billion in net concert event related cash, leaving free cash of $1.1 billion. This was flat relative to our first quarter reported number.

Our free cash, along with $971 million of available debt capacity, gives us $2.1 billion in readily available liquidity up from $1.6 billion at the end of 2020, and steady with our Q1 ending liquidity. Benefiting our free cash position, the second quarter was $161 million in favorable timing, largely the result of classification of our event-related deferred revenue between short-term and long-term.

Our total free cash usage in the quarter was $163 million or $54 million per month, which included $115 million per month of operational burn up from $100 million per month in the first quarter, as furloughed employees returned to prepare for our reopening and we reinstated full pay for most employees, plus another $58 million per month of non-operational costs, including investment in capital expenditures, acquisitions and artists and ticket client advances to give us $173 million average per month in gross burn. In Q2, we had $119 million average per month cash contribution margin, double our Q1 average.

Now I'll admit that in my Q1 2021 review, I anticipated that cash would drop by $500 million. Instead, it dropped by only $163 million.

What drove my $337 milion miss in cash usage? First, their cash contribution margin increased by $180 million versus the first quarter. I didn't think this would happen as concerts in the United States (at least in California) didn't start up until July. Also, they had a $161 million favorable cash timing due to "event-related deferred revenue between short-term and long-term." I'm thinking this means that if events are only a short period off in the future, they can shift cash that is related to advance ticket sales into the free cash part of their cash flow statement.

Here are some other key comments that I picked up from the call:  

What does Live Nation have to say about consumer behavior? People are buying more food and beverage. We're selling more VIP packages, more upsells. So, in general, the pocket books are open.

What do they think about their calendar? And we're not -- we're very content with our 2022 lineup right now. We're talking mostly about what to add now into 2023 and 2024. So that idea that -- it's just one year of -- our bigness isn't really true. We've got three, four years here of strong demand that we're going to smooth out over the time, so everyone can get the right markets and the right Friday nights and the right dates.