Live Nation Entertainment Inc (LYV) 2016 Q4 法說會逐字稿

Good afternoon. My name is Christy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment fourth-quarter 2016 earnings conference call. Today's conference is being recorded.

(Operator Instructions)

Before we begin, Live Nation has asked me 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 the Live Nation's SEC filings, including the risk factors and cautionary statements included in the Company's 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.

Live Nation will also refer to some non-GAAP measures on this call. In accordance with the SEC Regulation G, Live Nation has provided a full reconciliation of the most comparable GAAP measure in their earnings release. The release reconciliations and other financial or statistical information to be discussed on the call, can be found under the Investor Relations tab on investors. LiveNationEntertainment.com.

It is now my pleasure to turn the call over to Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment.

Good afternoon, and welcome to our fourth-quarter and full-year 2016 conference call. Live Nation delivered its sixth consecutive year of record results across revenue, AOI and free cash flow, with revenue up 17%, operating income 47%, and AOI 12% at constant currency. Our three core divisions, concerts, ticketing and advertising, each delivered their strongest AOI results in the history of the Company.

We continue to see tremendous power of the live event, with strong consumer demand and robust supply of new and established artists hitting the road from clubs to stadiums. Live is truly a unique entertainment form, that cannot be duplicated and creates lifetime memories. The fans today are craving more than ever from this experience economy. We believe the Live business will continue to have strong growth for years to come, as fans drive demand, artists are motivated to tour, and technology drives conversion.

On the concert business, Live Nation continued to grow its global concert market share, adding 7 million fans in 2016 for a total of over 71 million fans, driving revenue up 20%, and more than doubling concerts' AOI. We built our global leadership position in every part of our business, with double-digit fan growth in both North America and International and across all channels of stadiums, amphitheaters, festivals, theaters and clubs. We continued expanding our global footprint in 2016, as we added promoting offices in Germany, South Africa, and Israel, taking us to over 40 countries worldwide.

Across all markets, we invested $4.4 billion to stage 26,000 shows, making Live Nation, by far, the largest financial supporter of artists in the music business. Average ticket prices for our show increased by 5% in 2016. These increases were driven largely by higher pricing for the best tickets, as artist move to more effectively capture the true value from their shows, versus leaving billions outside the event P&L. On site, our average spend grew as well. Amphitheater spending grew by 9%, to over $22 as we added more high-end products, improved the quality of our offering, and increased our points of sale.

Our growth is continuing into 2017, a further sign of the tremendous fan demand for concerts and the success of our global platform. Ticket sales are up double-digits year-on-year through February 17th, driven by sales for arena and stadium shows. And we're confident we will again see strong demand across the business this year.

Our advertising unit continued with its strong consistent growth profile, with revenue up 15%, and AOI 10% in 2016. 71 million fans on site, provides a unique advertising platform for our sponsors to touch fans directly at scale. And as brands spend more on events, Live Nation is poised to capture these dollars, given the direct fan touch, its scale, data insights, and digital footprint.

We saw this movement in 2016 as our top strategic sponsors, were key driver for our growth. We now have over 50 plus brands who spend over $1 million per year with us, a collective spend of $245 million, up 20% from last year.

Sponsorship in our festival portfolio continued to be very attractive for brands, with sponsorship growth of 18% across our festival portfolio. And at the same time, we continue to amplify our on-site events, with online mobile reach. In 2016, we generated over 4 billion views across Live Nation sites and platform partners, including Snapchat, Facebook, and YouTube, providing our brand partners with further scale and reach. We expect continued advertising AOI growth at historic levels in 2017 with 70% of our budgeted advertising revenue for the year already contracted, and pacing double-digit ahead of last year at this time.

In 2016, Ticketmaster continued growing its global leadership in ticketing, with fee-bearing GTV up 16%, and overall GTV up 11% to $28 billion in constant currency, while delivering 480 million tickets to fans in 28 countries. Our secondary business continues to have robust growth with GTV up 26% in 2016.

Overall, the Ticketmaster platform continues to demonstrate its effectiveness at selling tickets to fans, with six of the top 10 sales months ever, occurring in 2016 and conversion rates up across both online and mobile platforms.

Our recent investment in Ticketmaster's enterprise platform, an open API, now allows clients to sell tickets on partner sites, driving the sale of over 10 million tickets in 2016. This has further deepened our relationship with teams and artists who looking for enhanced reach with sites such as Spotify, Bandsintown, Facebook, Groupon, Costco, and more to come.

With this combination of a stronger than ever ticketing platform, increased broad distribution, Ticketmaster is better positioned than ever to continued growing its global leadership position in ticketing. This success is continuing into 2017, as ticket sales are up 9% through February 17th, positioning us for continued growth.

Overall, our success in 2016 reconfirms that Live Nation has created an unparalleled live platform, bringing 550 million fans in 40 countries, those unrivaled two hours of live events. The Live business continues to have strong growth opportunity, with artists touring as the primary source of income, and fans showing up at record levels across the globe for that lifetime experience.

All of this creates tremendous runway for Live Nation to continue delivering the level of growth we have demonstrated over the last several years. As I've already indicated, the key leading indicators for each of our businesses, on a year-on-year basis into February, are pointing to another strong year in 2017.

With that, I will turn it over to Joe, who will take you through additional details on performance of each division.

Thanks, Michael. Looking at our business segments, first concerts, for the full-year, Live Nation concert's revenue was up 20%, and AOI was up 125%, in constant currency. We grew attendance by 12%, to a record 71 million fans, once again promoting the vast majority of the top-level tours, including Beyonce, Coldplay, and Guns N Roses.

For the year, looking at markets, in North America attendance grew by 12% to 48 million fans, with show count up 4%, and attendance per show up 7%. And stadiums and amphitheaters were each up by about 2 million fans.

Internationally, attendance was up 13%, driven by a 2 million fan increase in stadium attendance. Globally, we continued growing our festival portfolio, adding 11 festivals to give us a global portfolio of 85 festivals in 12 countries. As a result, we increased festival attendance by 15% to over 7 million fans, and now have 23 festivals that each attract over 100,000 fans.

Looking specifically at the fourth quarter, concert revenue was up 3%, and AOI up 45%, both at constant currency. These results were driven by a favorable shift in show mix, with more fans at higher-priced arena and stadium shows, while overall attendance was flat year-over-year for the quarter.

As we move into 2017 as Michael said, ticket sales are up with over 28 million tickets already sold for shows this year. And our confirmed show pipeline for amphitheaters, arenas, and stadiums is up 11%, with three artists, Coldplay, U2, and Bruno Mars, already selling over 1 million tickets each for tours this year.

At Artist Nation, revenue was down 2% at constant currency in 2016, and most importantly, our Artist Nation artists continue to be a key feeder to our concert supply wheel, and in 2016 these artists performed for over 7 million of our fans in almost 600 shows.

Turning to sponsorship and advertising, it delivered 15% revenue, and 10% AOI growth for the year, at constant currency, and in the fourth quarter at constant currency, revenue was up 22% and AOI was up 11%.

Finally, Ticketmaster. In 2016 ticketing revenue was up 13%, while AOI was up 6% as we grew global GTV on fee-bearing tickets by 16%, all at constant currency. Primary ticket fee-bearing GTV was up 15% at constant currency for the year, with concerts leading this growth with over a $1 billion increase in GTV. Secondary ticketing GTV was up 26% for the full year at constant currency, with concerts and the major sports leagues similarly contributing to this growth.

Mobile ticketing continued growing rapidly, up 36% to over 45 million tickets sold in 2016, as we continued improving our mobile website and apps. Ticketing margin declined 1.1% year-on-year, as we continued growing our global platform, both geographically and with new products. We entered four new countries in 2016, as we continued focusing on expanding our international business substantially in markets that have a lower service fee structure, and therefore lower margin profiles than the traditional US business.

Similarly, we delivered very strong growth in both our Frontgate festival platform, and our Universe do-it-yourself business in 2016, with ticket sales up almost 30% and more than doubling, respectively. Continued expansion into these markets and product lines is core to our global ticketing strategy, one which has been successful in growing our customer base, ticketing volume and profitability over the past several years, and which we expect to continue being successful going forward.

For the fourth quarter, global fee-bearing GTV was up 15%, revenue was up 11%, and AOI down 4%, at constant currency. And secondary GTV grew by 13%, while primary GTV was up 15%, both at constant currency.

In summary, in 2016 each of our core businesses grew revenue and AOI. Looking forward in 2017, we expect to continue our growth, based our leading indicators. In concerts, show count and ticket sales for shows this year are both up double-digits.

Sponsorship and advertisers has sold over 70% of their budgeted activity for the year, pacing double-digits ahead of last year. And ticketing sales volume is up 9% through mid-February. Together, this gives us confidence that we will continue growing our business at historical rates.

A few points of note. First, from a phasing standpoint, with our planned strong, summer concert season, particularly with festivals and stadiums, we expect our AOI to be even more Q3 driven this year. As result, we expect Q1, as a percentage of full-year AOI, to be lower than last year. And on FX, we ended 2016 with a 2% impact on revenue, and a 1% impact on AOI. At this point we don't see a material impact on 2017 numbers.

I will now turn the call over to Kathy to go through more on our financial results.

Thanks, Joe, and good afternoon, everyone. I'll start with our results for the fourth quarter.

Revenue increased by 4% to $1.8 billion, and AOI was $83 million. Revenue improved 5% to $1.83 billion on a constant currency basis. Ticketing contributed to more than half of the overall revenue growth, up 11% at constant currency, driven by increased volume in both our primary and resale businesses.

Fourth-quarter concert revenue was also up 3% at constant currency, driven by higher ticket prices from show mix. Strong profit growth in our concert segment, along with higher advertising results, largely drove our AOI performance in the fourth quarter.

Operating loss was $37 million in the fourth quarter, an improvement of 8% compared to last year. Net loss for the quarter was $101 million, compared to a loss of $78 million in the fourth quarter of 2015. Results were negatively impacted by $14 million in expenses, associated with refinancing our debt in October; additional interest expense of $5 million, primarily due to the timing of the 7% note redemption, and $4 million due to the timing of income attributable to non-controlling interests.

And now for the full-year results, revenue was $8.4 billion, an increase of 15%. And AOI was up 11% to $640 million. On a constant currency basis, revenue improved by 17% to $8.5 billion, and AOI was $646 million, an increase of 12%. Free cash flow was $352 million, as compared to $335 million in 2015.

All of our core segments - concerts, sponsorship and advertising, and ticketing - delivered strong revenue growth for the year. The majority of our overall revenue increase was driven by the concert segment, which was up 20% at constant currency, primarily from higher global stadium activity, as well as arena and amphitheater events in North America. Concerts revenue also benefited from higher ancillary on-site revenue at our North America amphitheaters this year.

Ticketing revenue increased 13% at constant currency, with higher global primary and resale volume. And sponsorship and advertising revenue was up 15% at constant currency, from new or expanded sponsorship programs, higher online advertising, and increased festival activity in North America. The 12% growth in our overall AOI for the full year at constant currency, was driven by all of our core segments delivered growth at AOI during the year.

Concerts AOI more than doubled as a result of higher event activity, along with an increase in on-site ancillary spend. Our advertising business continued to deliver strong AOI growth of 10% at constant currency from higher sales. As we mentioned last quarter, we recorded a bad debt reserve of $6 million related to a client going out of business in Q3. This impacted our full-year AOI growth in this segment by almost 3%.

And our ticketing segment's AOI was up 6% at constant currency, driven by the higher primary and resale volume during the year. Operating income was $195 million, an increase of 48% over last year, driven by the increase in AOI.

Net income for the year was $3 million, compared to a loss of $33 million in 2015. For the full-year, we recorded $50 million related to the accretion of redeemable non-controlling interests, from certain acquisition related put-call arrangements that impact the calculation of earnings per share. We expect accretion of $60 million in total for 2017 based on our current holdings.

And finally, amortization of non-recoupable ticketing contract advances for 2016 was $86 million, compared $88 million in 2015, including purchase accounting impacts. Beginning in 2017, we will move from four to three reportable business segments: concerts, sponsorship and advertising, and ticketing. We believe combining our concerts and artist nation segments will more accurately reflect the activities of our concerts business by including the full range of services we provide to artists.

Moving to our balance sheet, as of December 31, we had total cash of $1.5 billion, including $591 million in ticketing client cash, and $525 million in net concert event-related cash, leaving a free cash balance of $411 million.

Cash flow provided by operations was $597 million in 2016, compared to $308 million in 2015. This growth came from higher net income and an improvement in net working capital, driven by increased cash received for future events along with timing of payables.

Free cash flow for the year was $352 million, up 5% over last year, driven by the growth in our AOI. Free cash flow as a percentage of AOI was 55%. This percentage was impacted by higher distributions to non-controlling interests, and non-consolidated affiliates in 2016.

$26 million of this increase was driven by investing in new or increased equity interest, along with a multi-year distribution that was paid in 2016. Without this impact, our free cash flow as a percentage of AOI, would've been 59%, and we expect our free cash flow percentage to return to historical levels for 2017.

For the full year, total capital expenditures were $187 million, essentially split between maintenance and revenue generating items. The increase this year was primarily due to technology system enhancements and venue-related projects. For 2017 we expect our total capital expenditures to be approximately $220 million, with about half of this towards revenue-generating expenditures.

Following our debt refinancing in October, our total net debt as of December 2016, was $2.3 billion, with a weighted average cost of 3.8%, down from 4.3% at the end of the third quarter. As we look forward to 2017, our total deferred revenue for future shows, our key leading indicator, was $722 million at the end of 2016, up 30% over the $553 million last year, another factor pointing to the strength of our 2017 concert pipeline.

Thank you for joining us today, and we will now open the call for questions. Operator?

(Operator Instructions)

First, we will take John Janedis, from Jefferies. Your line is open.

Thank you. Michael, there's been a lot of focus on ticketing with the potential for new entrants from Amazon to much smaller players. So, as you look at to this year and beyond, do you anticipate much of a change in the competitive landscape? Or the profitability or fee structure of the industry more broadly?

Yes, we don't see the core profitability of the business changing. Service fees are a pretty vital part of the client business, so the service fees are driven by the client, and majority of that go to the sports team, or the venue, or the artist, ultimately. So, we don't see the economics change. Tickets have always been a competitive industry.

I think some of the pivotal moves that we made over the last few years, on our platform, predicting that eventually we would have to become more flexible for our clients, and build a better platform that was more open than closed. TM+, when we put secondary on our platform, was the start of opening up a historically closed platform.

And then, the APIs that we've talked about over the last year, of really looking to figure out how to power that buy button, and allocate tickets to other platforms that can increase conversion, such as the Groupons, and Facebooks, Spotifys. And we're having conversations with Amazon and we'll look to allocate our API that way, too, if there's some incremental ticket sales that can occur.

We think -- within core value of Ticketmaster, at the core is incredible system software that helps clients sell tickets. We have an incredible, great marketplace -- one of the largest websites in the world that's growing stronger every year. And we think we're also going to make sure that our clients, and artists, and fans, through our new platform, have the opportunity to enhance their reach, also, through these platforms.

So, we think that the fact we've embraced over the last couple years, this idea that having multiple points of sale is good for our business, that increases sales, and ultimately Live Nation core business, our 70 million plus fans. Lots of shows are unsold, lots of fans don't know about shows still. So, we're all supportive of having a wider distribution platform selling concert tickets to increase, ultimately, the sale.

All right. Thanks, Michael. And maybe, separately, I appreciate on the comments on the segment, at least historically. Can you talk more about Artist Nation? Obviously, costs have ticked up over the past couple of years, along with margin pressure, and I was hoping you could speak to them. Maybe the underlying health of that business, and any secular headwinds that may be emerging.

No, we've been very consistent on that segment. We don't consider it a core segment, in itself. We've always considered it a very important strategic piece of the business to power our core business.

So this year, we had some investments in certain of the management companies that brought down some of the margin, but overall we like that business. It's a very high-margin business, it's a very accretive business when we bring in partners. And, more importantly, it's great to be close to the talent if you can feed your core businesses to drive your overall segments.

So we like the business. We're going to keep, we think, being closer with artists' managers. And having up to 300 artists in your portfolio while decisions on what promoter, and what sponsors to play with, and what ticketing companies can help you, are smart strategic businesses to be in. And we think 2017 will actually be a stronger year for that division, as it's got a robust touring schedule ahead for them.

Thank you, very much.

And next, we'll go to Amy Yong, with Macquarie. Your line is open.

So, first question is for Kathy. On the $220 million CapEx guidance, can you talk about where the revenue generating CapEx is being allocated to? And perhaps, where the growth is actually going to come from, and where we see that on the top line? And then, as you start generating cash, can you just talk about priorities of cash given some of the M&A activity that we've seen? Thank you.

Yes, so basically, the $220 million will be spent on ticketing, as it has in the past, generally. And then in concerts, we have some opportunities with venues for expansion of the overall footprint, that we're going to be putting some money into. So, those are the main drivers for the change.

I'm sorry, and then continuing on the on-site part, continued VIP, as well as food and beverage changes, as we've been doing in 2016. And then, as far as where we're putting the money, there's no change in what we've been saying. So, we're continuing to invest in the business and that's revenue generating CapEx; that's acquisitions; that's advances to artists and clients. I don't see any change in that direction in 2017.

Got it. And just on the on-site revenue, which grew 9%, and I think a lot of people think there's a long runway for growth here, and it's pretty achievable. Where do you think that, that can go?

Amy, this is Joe. We've said on a few occasions that we benchmark ourselves against sports teams in that regard. We are at about $22 for our amphitheaters, right now. We think that over time that could be a $30 kind of number for our fans at the amphitheaters.

Great. Thank you.

And, next, we will go to David Karnovsky, with JPMorgan. Your line is open.

Hi. Just on concerts, I think this was the best Q4 in terms of AOI, at least since merging with Ticketmaster. Was this entirely driven by mix, or were there other factors at play here, such as higher ancillary spending? Just trying to get sense for the strong performance.

Yes, I think number one, as we called out, was the mix, and just the volume of some of the bigger shows. Michael also talked about the higher ticket pricing that flowed through, particularly on the front of the house, which helps a lot in the concert business. And then, yes on-site, all the bip that flowed through for festivals or amphitheaters, into the early part of the fourth quarter.

Okay. And then, just with Lollapalooza expanding to another location, in Paris this year, how much of an ongoing opportunity do you see to take some of your festival brands and bring them abroad?

Well, we think Lolla has just a real exceptional profile. It's one of the few brands that has been able to expand through South America, now into Europe, successfully. We see that brand is very global with -- we got a runway of growth planned for that brand around the world.

And our Electric Daisy brand in Vegas, the largest dance festival in the world. Now in Mexico this week -- next week, we will sell 200,000 tickets to that EDC Mexico addition that we started a couple years ago. So we see that EDC now in Europe, in Brazil, in Mexico, and Japan.

So we think out of our 80 plus brands, we have a very central strategy around what brands can move, or what best practices can move. So, we think there's a few others that have some potential.

Okay. Thanks.

We'll take Jason Bazinet, with Citi. Your line is open.

Thanks. I'll always get a smidgen nervous when things get reclassified or combined, but I recognize Artist Nation is pretty small. Is there any reason to believe that the revenues or adjusted operating income at Artist Nation will change from sort of, the historic levels once we mash this together with concerts? Thanks.

No. It is purely -- if you've listened to us earnings after earnings, we have three core businesses. The management business is obviously, paramountly strategic to our concert business. That's why we're in it, and it is where all of the material value is driven.

So, we want to make sure that we just align that kind of activity around the outcome. We wake up every day talking to artists' managers about what our market share is in the concert business, not whether they made $3 million or $4 million that year. So our core goal of all of that is to provide a great value to those artists, and win over their touring business, and drive it.

When you separate it slightly, and you get questions like the other one, on what's the growth profile, to look at the growth profile, you have to say how many shows did you promote last year and what was that success rate. We want to just align those activities against what the core mission is. It's to drive our global touring business, and we use that as an investment strategy to do that.

Thank you very much.

And next we'll take John Tinker, with Gabelli. Your line is open.

Thank you. A more general question. Well, two questions. One is, well, you're now part of -- or your largest shareholder is now actually Formula 1. And, could you perhaps discuss where you think you fit into that?

And, secondly, what might the opportunities be, given that Chase has said he really wants to turn each one of the races into a Super Bowl. You can certainly look at the fact that Taylor Swift saved the event in Austin. Would that be material, or is it just a small add on?

Yes, I mean. Where Maffei and Malone decide to park their investment in us, or what they call it, they are much smarter at that than I am. They have been incredible shareholders. They are long-term players, as you know. We're aligned to the same principles. We want to grow long-term shareholder value, and they've been great shareholders.

I don't spend much time worrying about where they're housing their investment. It doesn't affect our day-to-day business. Greg is our Chairman. We talk strategy, not what ticker it will be under.

As far as Formula One, I met Chase. Big fan of his -- his history, obviously. I don't know a lot about Formula 1, from what I've seen under the covers, it certainly looks like it's got a real untapped potential. A little bit relevant to our business, in the sense that it's a global business, with different local promoters that they will have to figure out how to centralize some strategies to extract some value.

We don't think it's an overriding huge opportunity to the bottom line, but we're absolutely talking to them, as we would be talking always to the NFL. We've done it with the Indianapolis 500 in the past, NASCAR.

If you've got a race track, a lot of people, and a checkbook, we are willing to figure out how to enhance your event through entertainment. I think they are very motivated to reinvent the experience, and we are going to see if we could help them on a few of those.

Just one more quick question. What's your NOL now? And at what point would you anticipate beginning to pay more tax?

Hold on while I pull up the total. Not really much change. We still have several years, John, before we think that we'll be a US taxpayer. As you know, we paid state and we've paid some federal. But, we're several years out from hitting that.

Thank you.

And next, we'll take David Joyce, with Evercore ISI.

Thank you. I wanted to touch on the ticketing margins, again. Joe, you had mentioned how you entered four more countries in the past year, and that impacted the margins a little bit. You also, more recently, entered Israel and Eastern Europe. Could you help us think about the margins for 2017, in terms of how far along you are in integrating the acquisitions from last year, as well as the new additions to the footprint? Thank you.

Yes, I mean, the acquisitions are integrated. I don't think that's the issue. The issue is, is when you enter new market, you're going to be a lower scale. And, most of these markets are also lower service fee as a percentage of your ticket price. Often times in some of them, you are also a lower ticket price.

So, your margin profile is just going to be structurally lower in those markets. As we've talked, our overriding focus at Ticketmaster is to continue to drive the global sales of that business. On our platform, as Michael talked, through the open APIs. Off of our platform, we serve the teams and the artists by selling their tickets more effectively and selling more of them. That means more countries, it means more other platforms like the Frontgate and do-it-yourself platform, that I talked about.

And in a lot of those cases, those tickets that we sell, the incremental ticket may be at a lower margin than some of the other tickets. But, it continues to build the business, serve our customers, and drive the overall cash profitability of the business.

So, that play book has worked pretty well for the past five years, and we expect to continue doing that over the next few years. I don't think we're at a point that we are going to declare what the margins are for 2017 in that business right now. But you can expect us to, overall, continue to do everything we can to grow the business.

All right. Thank you.

And, next we'll take John Healy, with Northcoast Research.

Thank you. Joe, I wanted to ask a little bit about the Ticketmaster business. On secondary, I think you said gross ticket value grew at 26%. Is there a way that you can help us think about maybe which units of tickets are growing on that platform? And as you study that business, and how it is evolving, how you feel that your share shook out within the industry in 2016? And, maybe, how you think it compared to a year ago.

Yes, again, I think stepping back, John, the first thing that we always look when we talked about the secondary business, is that it's $8 billion of value, that is sitting outside the P&L of the artists and the teams that are driving the content.

And, so we then, have a two-part strategy. One is, is how do we through the concert side and through the ticketing side, work with the artists, in particular, to remove as much of that price arbitrage as we can. And how do we work with the teams, to make sure they've got both the data as well as the marketing capability to remove their arbitrage.

And we will always be most successful the more that we can drive that arbitrage back into the primary side of the house. And again, Michael talked earlier about the price increases that we were seeing, as artists are becoming very transparent. And our artists are seeing it, and understanding it, and therefore they're going after that money.

So, item number one, is, we're attacking it that way. Item number two, is then, yes, as long as there is price inefficiency, we are going to be focused on building the best secondary offer out there for fans, to transparently, easily, get their tickets, have them verified, and have a great experience with it.

So we had a lot of success and growth of our market share, and of our overall business in 2016. I expect that continued in 2017. But we also don't obsess over which column is it in. Frankly, we would rather have more in column A than column B, but that's going to depend, as we work with every artist and every team, on what agenda they want.

Fair enough. And I wanted to ask, just about capital allocation going forward. If I think about the evolution of the Company, you guys have got AOI at record levels for number of years, and, the free cash flow has been great, and you guys have grown into the leverage of the business. As I think about that, is there any changing thought process in terms of how you think about allocating capital? And is returning capital to shareholders, more of a buyback start to become more of a priority for the Company than it has been historically?

No, we absolutely believe that every opportunity that we've seen over the last five years, exists more today than at any other point. As we go into more markets, that gives us the scale and infrastructure to continue going into more markets. As we build our management teams, our technology platforms, very focused on delivering the fans and our clients on a global basis. We just think we're better at it, and we're better able to go into markets, and either build or acquire additional assets to keep doing exactly what we've been doing.

Thank you.

Next, we have Doug Arthur, with Huber Research.

Yes, thanks. One of the numbers that really jumped out all year long was the average attendance per event. I think was up, globally, about 9% for the year. How much of that was just the mix this year, because you had a lot of big stadium tours? And how much of it was this long-term strategy of trying to better sell out the house? And then I've got a follow-up.

It was obviously both, and we have not given the exact breakdown, but the year benefited by the large increase in stadiums that I called out, 2 million increase in each North America and international. But even when you back that out, absolutely, in 2016, across the board we did continue to see that we were growing attendance per show at our amphitheaters, at our arenas, stadiums, as we were continually better at marketing and pricing the product, distributing the ticket sale to hit every fan everywhere that we could. And that continues to be a priority in 2017.

Okay, and then a follow-up. You talked a lot about the momentum in sponsorship. Where are you at from a progress point of view, in terms of monetizing your digital audience, in terms of digital advertising.

I think monetizing our digital audience, the way we think about it, Michael alluded to a bit is, our truly unique positioning starts with our 70 million fans. These other people have on line access as well. And so, what we're really seeing with the online business is that, when you're talking to a sponsor about a large strategic platform for their brand, and their brand strategy for reaching out, touching a target customer, that the online is an enhancement and augmentation that gives us an additional set of ad units, gives us additional reach against the core of our on-site interaction activation that we can deliver.

Okay. Thank you.

Next we have Kyle Evans, from Stephens.

Hi. Thanks for taking my questions. You talked a little bit about the dynamics in the secondary market, and how much money is outside the artists' P&L.

We saw the expected slowed down at StubHub because they annualized some of their process changes. Could you give us an updated view on the competitive landscape, specifically, as it relates to StubHub? And then I have some follow-ups.

I think, as we've said all along, that our view is, is we're focused on the business as StubHub has gotten refocused on business, as well. And as a few others, Vivid here, Viagogo internationally, that we all have the capability to invest a lot of dollars on brand, on customer acquisition. You probably see some concentration amongst some of the larger players that are now fighting out for the volume and the share.

Okay.

And, also, just to add to that. We kind of get a little US centric here. We've been very effective on a global basis, of moving faster than the historic Ticketmaster that we inherited did here. So, in the UK, Australia, all across Europe, where we have launched a secondary platform, we are number one, close to number one, I mean, StubHub really is only strong in America. They are obviously expanding.

But we, on a global basis, we're seeing great success as we're either a leader, or an early entrant into a lot of the markets. So, we see on a global basis we will continue to have market share growth on that segment.

Great. I know it's early, but you are giving us this February 17th, show pipeline number in the supplemental. If attendance stays strong, and you've got -- you're at 11% on show growth, amphitheaters, arenas, and stadiums. Aside from an economic slowdown, are there other any other scenarios where you would expect that metric down to tick down over the course of the year into the single-digits?

We are seeing artists confirming and putting on their shows earlier and earlier, which is great because it gives us more clarity on the volume of activity we're going have. I think if you looked over time, that number probably ticks down modestly, and we weren't giving it to give a specific, this is exactly how much many more shows we're going to give. We gave it to indicate, we believe the business will continue to grow in 2017.

Okay. We're deep into the call, maybe this is a little nitpicky, but your overseas cash jumped up by a couple hundred million, to $712 million. And, in the case, as you don't plan to repatriate, how should we think about that cash number?

A lot of that is part of the deferred revenue at year end. So, they've sold for future shows as well, so the reason why we say we don't repatriate is we use for their events, and pay artists, et cetera.

Okay. How much of that is not deferred?

I'm sorry?

You said a lot of that is from deferred.

Yes, it is going to be primarily deferred, sponsorship, all kinds of things. We don't have more granularity to give you on that. But generally, our cash is going to tick up with the deferred revenue.

Okay. Thank you.

And next we'll take Ben Mogil, from Stifel.

Good afternoon, and thanks for letting me on. I just want to go back again to Kyle's question around the secondary market. Are the numbers that I think you were talking about, around an $8 billion market size? And, I think you talked about it in 2015 being in the $5 billion, or $7 billion, $6 billion range. Are these estimates still relatively loose, just given that there's large part of market which is non-institutional, if you will?

Yes.

And are you finding that, in general, the two of you, you and StubHub, collectively, are gaining share, not only as the market grows, but gaining share from independents? Or are the independents, in collective, holding their own as well?

I would say, where I think StubHub has always had market leadership in the US, I think we've obviously grown strong and taken market share from the independents in the US. Outside of America, Viagogo and others have been out there, and we would be the one taking market share from most of the independents in different countries.

And then -- and I apologize, because I got on the call late. I'm not sure if you talked much about some of the European -- I know it's very early in terms of festival onsale dates in Europe, and particularly in the UK. Are you seeing any kind of weakness, just given some of the economic turmoil over there, if you will? Turmoil is my word just for the economic climates.

No, we haven't seen that. We have a strong 2016 in Europe, obviously and international. And, we're off in February to a strong on-sale, right now across Europe. We don't see any slowdown in any countries, right now. We see very robust planned and on-sale, so far.

Okay. That's great. Thanks, Michael.

Next will take Brandon Ross, with BTIG.

Hi, thanks for taking the questions. I actually just want to follow-up on some of the earlier questions in the call. First question, is a follow-up on John Janedis' question. Michael, to be clear, do you view Amazon as a competitor, or as a partner? And do you think the US exclusivity model could be in jeopardy with Amazon and StubHub looking to be primary retailers?

Then a follow-up on Amy's question on the CapEx. On ticketing CapEx, can you just help us decipher how you divide between revenue generating and maintenance CapEx there? It could be very hard to unpack that. If you re-platform or move infrastructure to the cloud, do you consider that revenue generating? Or do you consider that maintenance?

And then, a follow-up on David's question about margins. You mentioned international growth, and the mix there. But, on the Q2 call, when we asked about down margins, you guys reiterated that margins would end up flat for the year despite the mix pressures in the middle of the year. What happened there that you did not anticipate in prior guidance that you gave? Thanks.

That's all, Brandon? (laughter)

Well, I actually have one more, but I'll save it. (laughter)

We've been talking for the last couple years about an API open allocated market. We've been very clear that the rest of the world has always been allocation, and Ticketmaster does very well in those markets. We've got a strong market leadership, generally at a lower cost per ticket.

We've seen over the years, that eventually we always had kind of stated that we thought that multiple -- more distribution points were going to be a reality in the business for clients. While we were very aggressive over the last three years of building an API to help clients and artists, et cetera, have opportunity like StubHub -- or Spotify, Bandsintown, Groupons, and others.

We believe that the smartest strategy for Ticketmaster as a software platform, has always been to solve its clients' needs to provide great platform software, provide a great marketplace, and provide the flexibility to use partner sites to help augment its sales.

Because, as you know, when you have as many customers as we do, you're the hottest team in the NBA, you're not that worried about partner sites. You're not really worried about Amazon if your U2 sold a million tickets in an hour. But if you're a team or an artist, that's like most of the business, needs to sell a few extra tickets, you are always going to be looking for incremental distribution points. So we've always believed that being open API driven, letting our clients have opportunity to power other retail sites is a smart strategy for Ticketmaster, and we've been doing that over the last couple of years now -- finding partner sites to augment sales.

So, you see Amazon as partner then?

Yes. We see them as retail partner, absolutely.

Okay.

On the CapEx question, think about it from a new tools or new clients, versus other things. So if we are adding technology to our mobile product, or adding functionality to TM+, those things would be revenue generating. If we get a new client where we have to add hardware or make some changes, that's going to be revenue generating. Other things, like your question on CapEx related to cloud -- moving to the cloud, or just replacing hardware, et cetera would generally be maintenance.

So if you work on your mobile app, that would be considered revenue generating CapEx?

Yes. If we're adding new technology and new tools to it, absolutely.

So we sold 45 million tickets on mobile this year, versus zero a few years back. So that obviously helped generate additional revenue.

Right.

On the TM margin, you're right, six months ago we had a slightly different forecast for what the margin was going to be, and as you could imagine, a lot of things happened -- 100 things happened over the six months, as we unpacked it. It's really -- a lot of it is what I called out. One is, is we had tremendous performance by our Frontgate ticketing business. That little festival-focused ticketing business, up 30% in terms of the volume of tickets that it sold.

It's a fantastic product. It's been very successful with a lot of festivals. And, if it has a little lower margin, okay.

The same with the do-it- yourself at Universe more than doubling in terms of their ticket volume. In some cases you're a victim of your own success. Driving the overall profitability of the business, but at the impact of some of the margin. But, there was nothing dramatic or different, it was just all the pieces and how they came together.

And as we've said, we're happy as long as we're continuing to grow the cash profitability of the business.

Okay, and, just one more on secondary. I think it was up 13% in Q3, and then again 13% in Q4, even though it had reaccelerated, I think early in Q4. What happened the rest of the quarter there? And do you foresee a reacceleration in secondary GTV into 2017? Or do you think this is sort of the new normal that we should model off of?

It's as I talked to, Brandon, we have two columns -- the bringing into the primary and building the secondary. And, we're way too early to have a view on what is the mix of that, that we think that we will be most successful in. We'd love to move that entire $8 million, shrink the secondary, and bring it all under the primary; but a lot of that depends on our conversations with the artists, and with the teams, and exactly what they want to do and how they want to do it.

So we're not worried about, again, the forecast of that split, as much is continuing to offer great products on both, and building the overall business.

Thank you for the questions.

Sure.

We have no further questions. That does conclude our call for today. Thank you for your participation. You may now disconnect.