Live Nation Entertainment Inc. has taken significant steps to boost its financial condition, moves that were met with a rave review by one Wall Street firm.
The Beverly Hills-based live event ticket seller and the music industry’s largest promoter on April 13 announced a $120 million revolving credit facility loan and plans for $500 million in 2020 cost cuts.
The cuts include Chief Executive Michael Rapino forgoing his $3 million 2020 salary and other top executives taking 50% salary cuts. Those changes amount to annual total compensation cuts of about 26% for Rapino and 16% to 20% for the other executives, according to calculations based on 2019 compensation figures from Salary.com
“We believe concerns over Live Nation’s liquidity and debt covenant have been eliminated with today’s announced amended credit agreement and cost containment measures,” Stephen Glagola and Doug Creutz, analysts for investment bank and research firm Cowen Inc. wrote in a report after the Live Nation announcement. “Uncertainty around when normalcy can return to live events is now the primary concern.”
With its business based on large gatherings, Live Nation has been particularly vulnerable to social distancing guidelines and stay-at-home orders in response to the coronavirus contagion. Live Nation ended all of its concert activity in mid-March.
This was reflected in the company’s preannounced first-quarter earnings — a roughly 20% drop in revenue to $1.38 billion from the year-earlier quarter and a small operating loss, according to Cowen estimates.
Live Nation’s stock price has fallen by about half since mid-February, compared to the S&P 500’s decline of about 17%.
But the Cowen analysts said they are still optimistic. “Covid-19 impact on FY20/21 cash flows won’t be indicative of (Live Nation’s) earning power and dominant market position,” they concluded, forecasting the stock will “outperform” going forward.
Live Nation said it expects show cancellations will affect only 10% of tickets already sold, as it has postponed or rescheduled most of the shows. The company added that when it has offered refunds, only 5% to 20% of customers have requested them.
Live Nation said half of its revenues in hand from ticket sales are for international shows, and governments in Germany, Italy and Belgium have passed laws allowing the company to offer ticketholders vouchers instead of cash refunds. Other countries may follow suit, the Cowen analysts said.
