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Stay Nation Leisure (NYSE:LYV) simply reported a record-breaking monster quarter, as demand for stay occasions continues to blow up, even within the midst of very troublesome financial instances.
Pent-up demand to get out and expertise issues continues to inspire folks, because it wasn’t simply the big live shows that had been driving income, however there was double-digit attendance progress from small golf equipment, festivals, arenas and stadiums, amongst different venues.
The corporate overdelivered in nearly each metric for the quarter, and seems poised to complete the 12 months sturdy, with sturdy momentum heading into 2023.
On this article we’ll have a look at the sturdy earnings report it just lately launched, and why the corporate is unlikely to decelerate within the close to future.
Newest numbers
LYV had a mind-boggling quarter, with all the things aligning proper for his or her enterprise mannequin. I believe its success goes again to the lockdowns related to COVID-19, and it nonetheless hasn’t slowed down, and possibly will not within the close to future.
As for its efficiency, income jumped to $6.15 billion within the quarter, up 128.02 p.c year-over-year, beating estimates by a rare $1.06 billion.
GAAP EPS for the third quarter was $1.39, surpassing estimates by $0.33.
Working revenue jumped to $506 million, up 95 p.c from the third quarter of 2021.
Money circulate for the primary three quarters is $928 million, and free money circulate within the first three quarters is $996 million, a acquire of 88 p.c. AOI for the interval soared to $621 million, up 45 p.c, and on a continuing foreign money foundation was $645 million, a rise of 51 p.c. The numbers communicate for themselves, and ensure the very fact the demand for stay occasions continues to be sturdy.
Breaking down a few of the numbers
LYV loved the most important attendance ever in 1 / 4, with over 44 million followers attending over 11,000 occasions. Up to now in calendar 2022, roughly 89 million followers have attended 31,000 occasions.
When in comparison with 2019, the 115 million ticket bought are up 38 p.c from the identical time interval of that 12 months. To me, that underscores my thesis that that is pushed by pent-up demand to get out and expertise issues in individual.
So far as 2023, the corporate reported it has had a double-digit enhance in tickets already bought for its live performance tickets compared to 2021 and 2022, aside from exhibits that needed to be rescheduled.
Sponsorship for 2023 is already up by 30 p.c as measured in opposition to the latter a part of 2021 when trying ahead to 2022. As for third quarter sponsorships, income jumped 59 p.c with Ticketmaster platform integration and Festivals being the 2 main catalysts there.
Live performance phase
As ordinary, the stable efficiency of LYV was led by its live performance enterprise, which attracted 44 million followers throughout 11,000 live shows. That represented just below 50 nations, underscoring the very fact demand for stay occasions was a worldwide phenomenon, and never restricted to nations or areas. Live shows income was $5 billion within the quarter, up 67 p.c from the third quarter of 2019. AOI within the quarter was $281 million, up 44 p.c from the third quarter of 2019.
As for venues, stadiums led the best way, representing nearly 9 million followers. It doesn’t matter what the venue although, the corporate mentioned all of them skilled double-digit attendance progress when measured in opposition to 2019.
Its Venue Nation division elevated attendance within the quarter to 19 million, up 14 p.c from Q3 of 2019. Up to now this 12 months it has had 38 million followers, with projections of fifty million for the entire 12 months, together with festivals. Regarding ancillary spending, the corporate reported spending there elevated in a variety of 20 to 30 p.c thus far this 12 months, compared to 2019. That implies when followers attend the stay occasions, they not solely need to be there, but additionally improve their expertise with different services or products provided on web site. The corporate sees this as a chance to generate much more income by providing extra high quality experiences to its fan base.
With such excessive demand, it has resulted in sturdy pricing energy for LYV, which motivates the artists from the added income paid out by LYV, which I believe will most likely enhance the likelihood of extra live performance performances, which is able to drive much more income for the corporate in 2023.
As for sponsorships, that progress was pushed by the worldwide presence of LYV and the energy of its festivals and related on-line partnerships LYV is engaged in. That caused $226 million in AOI, a acquire of 56 p.c over the third quarter of 2019. Sponsorship within the U.S. is up 48 p.c, whereas worldwide sponsorship soared 93 p.c by the third quarter. For on-site progress, pageant sponsorship has been the most important driver.
Share worth motion
During the last LYV traded as excessive as $127.75 per share, and a low of simply over $67.53; not a lot above the place it is buying and selling as I write. Going again a few years, it is buying and selling between $1.00 and $2.00 per share increased.
As with many shares, the corporate went by a interval of decline in its share worth in 2022, however I believe which will change, despite the fact that preliminary market response was to drive the share worth of the corporate down by nearly $8.00, when together with afterhours buying and selling. As a matter of truth, the 52-week low got here on November 4, 2022, after the information of the terrific quarter.
I are inclined to assume that many traders are considering when it comes to: “okay, what subsequent?” In any case, while you break your quarterly report throughout many metrics, it is troublesome to imagine one of the best is but to come back. I am not saying it’s, however I do assume traders could also be underestimating demand for 2023.
My guess is, traders could also be trying on the slower interval that often come within the early a part of the 12 months, considering the efficiency of the corporate is not sustainable going ahead. Whereas that could be true within the close to time period, from the commentary of administration, it seems it will retain momentum all through 2023, with the same old sluggish durations. I am not saying it will break extra data (despite the fact that it is attainable), I am saying there’s nonetheless loads of demand for stay occasions and experiences, and I do not assume that’s going to abruptly decline in 2023.
With its report efficiency, traders could also be considering the corporate has peaked due to the pent-up demand which will now be assuaged. I do not assume demand will decelerate considerably over 2023, however there’s the uncertainty of the weak economic system which will pressure followers to tug again on spending subsequent 12 months. Once more, I do not assume that is the way it’ll play out, but it surely’s positively one thing on the minds of many traders basically.
The purpose right here is we’re coping with client psychology, and with the troublesome instances we are actually residing in, attending stay occasions is a option to join, blow off some steam, and take our minds of issues for a brief time period. These forms of wants simply do not abruptly disappear. I do not assume they’re able to over the subsequent 12 months.
Financial impact
As for the affect of a weakening economic system, excessive inflation, and uncertainty surrounding what the Federal Reserve will do from month to month with rates of interest, there’s the counterbalance to stay occasion demand, by which I imply having the ability to afford it.
If inflation continues to leap increased, particularly with meals and different on a regular basis gadgets we’d like, ultimately customers could also be pressured to decide about the place they may spend their cash. We aren’t there but, but it surely’s attainable the constructive outlook of LYV might be annoyed if issues get so much worse.
As a result of the summer time months are the place the majority of demand comes from, by the point subsequent spring and summer time come alongside, I’ve little question in my thoughts we’ll know the solutions to most questions on the economic system, inflation and rates of interest.
We’ll additionally know heading into the summer time what the possible prospects for LYV can be.
The main factor to think about is weighing spending on wants vs. spending on needs, such because the experiences provided by stay occasions. The situation of the worldwide economic system will decide which one wins out in 2023.
My expectations are the Fed will elevate to someplace close to 5 p.c and begin to maintain off from there. The explanation why is it will make it extraordinarily troublesome for the U.S. authorities to pay down its debt if the Fed throws off restraint and single-mindedly focuses on inflation and rates of interest alone, on the expense of all the things else. I do not assume that can occur, however you by no means know if inflation continues to stay excessive, or presumably even enhance.
The opposite financial problem is that if the recession will go deeper for longer, or be a extra delicate one that’s brief lived. There are arguments on either side of the problem, however the actuality is, nobody actually is aware of, however we should assume when it comes to what we must always make investments no matter situation performs out
Conclusion
LYV had a rare quarter. And based mostly upon administration steerage, is heading for one more nice 12 months in 2023, considering gross sales are going to tug again within the winter months.
Whereas customers are shrugging off the weak economic system and rising inflation presently, it would not essentially imply it will final. Then there
One constructive I took out of the report was the pricing energy of LYV and the way that flows over into artists being paid extra. That, to me, is a probably sturdy, motivating catalyst heading into 2023. Administration said they’re considering when it comes to ramping up live shows and different occasions due to the excessive demand.
The opposite factor is, pricing energy means the demand is actual, and because it’s already forward of 2019 ticket gross sales, it seems the demand is not going away.
One other factor to think about is that if the economic system does enhance and there is extra disposable revenue to spend on different issues, will the competitors from exterior stay occasions lower meaningfully into LYV’s income and income?
In conclusion, I believe LYV goes to have one other nice 12 months in 2023, but it surely might pull again within the close to time period as most of the stay occasion fan base cocoon up throughout the colder winter months.
If LYV can persuade traders that it might generate stable returns sustainably by rising its fan base, this inventory will take off to new highs. However that is not right here or now, and it looks as if traders are nonetheless hesitant to decide to the inventory.
Assuming a protracted interval of progress, some traders may need that they had taken a place within the firm close to these worth ranges. Then once more, as soon as the sluggish season comes, the share worth will most likely pull again, offering an excellent higher entry level.
The easiest way to play a seasonal inventory like LYV is to place dimension together with your threat profile, after which interact in dollar-cost averaging to get an appropriate price foundation.
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