Good afternoon. My name is Carrie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment Second Quarter 2012 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 relating to the company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to 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 SEC Regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measures in the earnings release. The release, reconciliations and other financial or statistical information to be discussed on this call can be found on www.livenation.com/investors. It is now my pleasure to turn the call over to Mr. Irving Azoff, Live Nation Entertainment's Chairman of the Board.

We welcome everyone to our Second Quarter 2012 Earnings Call. Joining me today are Michael Rapino, our CEO and Kathy Willard, our CFO. I will begin the call with some brief comments and then turn it over to Michael, who will review our results for the quarter in more detail. We continue to deliver improved results without much help from the macro economy, and are making significant progress towards achieving the goals set following the merger. Adjusted operating income for the quarter increased by 5% over last year on essentially flat revenues, led by strong results from our concert division. In addition to my broader role at Live Nation Entertainment, I continue to lead Artist Nation, including Front Line Management. Touring activity by our key artists during the second quarter was slower than last year, but did include Van Halen, Jimmy Buffet and Jason Aldean. Summer tours commenced late June, July include: Kenny Chesney, Neil Diamond, Big Time Rush and The Fray. Summer touring for many of our artists currently looks good. This is currently expected to be lower than 2011, however. Christina Aguilera and Adam Levine continue with their success as judges on The Voice, and Mariah Carey has signed on as a judge on American Idol. We continue our program of aggressive new artist signings and securing merchandise and VIP ticketing rights with established stars in the new tween band, One Direction, which is performing exceptionally well. Full 2013 touring schedules for key acts are firming up and are currently expected to include the Eagles and Fleetwood Mac. So thank you again for your support, and I look forward to updating you on the progress during our next earnings call. I'd like now to turn it over to Michael for his remarks.

Good afternoon, and welcome to our conference call. This quarter, we continue to deliver positive results across revenue, AOI and free cash flow. Revenue increased 2% on a constant currency basis. AOI grew 5% and free cash flew -- flow grew 27%. Our core businesses have remained strong, not only in North America, but also internationally. Ticket sales grew this quarter 6% in both Ticketmaster and Live Nation and for the full 6 months, Ticketmaster sales grew 6% and Live Nation, up 5%. These strong sales validate the strength of the live event, which remains a high priority for discretionary spending with our fans. I have heard varying comments from the impact of the economy from other companies over the past few weeks. For us, the only markets with any noticeable impact was Spain and Italy. Both these markets together made up only 3% of our overall concert division sales and overall concert attendance between the 2 markets are expected to be flat for the year. On the ticketing side, Spain accounts for about 8% of sales and here again, we expect the business to be roughly flat for the year. As we continue to improve operating profitability across the core, we are investing in 3 key areas: Ticketmaster re-platform project, which continues on schedule and on budget; mobile expansion and continued concert portfolio expansion, which drives all contents to all divisions. With greater visibility now for the full year, we expect to deliver growth across revenue, AOI and free cash flow for the full year. As we look at the divisions, Live Nation concerts had a great second quarter. We now see strong growth in both attendance and profitability for the season. For the quarter, AOI grew 83%. Total attendance for the quarter grew 6%, which compares to 5%…

Thanks, Michael, and good afternoon everyone. For the first 6 months, we have delivered growth in revenue, AOI, operating income and free cash flow and we are pleased with these results for the first half of 2012. Concert ticket sales are up, driving a strong increase in deferred revenue. Our business is solid, enabling the company to deliver on our key operating metrics, while continuing to make necessary investments to drive our future growth. For the second quarter, revenue was $1.55 billion, essentially flat compared to 2011. However, after adjusting for the impact of changes in foreign exchange rates in the quarter, revenue actually increased by 2%. On a reported basis, our concert segment revenue was also essentially flat. Global concert's attendance was up 6%, driven by higher show count at our amphitheaters. The concerts revenue was also negatively impacted by foreign currency changes and the timing of global tours in the quarter. Ticketing revenue was up 2% due to strength in global ticket sales, which grew 6%, fueled by concerts and sporting events. Artist Nation revenue was down 8% from lower merchandise sales, while Sponsorship & Advertising is in line with last year. Adjusted operating income increased 5% for the second quarter to $146 million compared to last year's $139 million. The concerts division delivered this growth, up year-over-year by 83% due to more shares and higher attendance in our amphitheaters and strong global festival result, even as we continue to invest in building our portfolio, both organically and via acquisition. Ticketing AOI decreased 5% or $4 million, as our profitability was impacted by our continued investment in the ticketing platform, along with the higher sales of the Olympics tickets in 2011. Sponsorship & Advertising AOI was down $1 million, largely as a result of the timing of Europe…

[Operator Instructions] And we will take our first question from David Joyce with ISI Group.

Appreciate that the second quarter concerts AOI was up based on the incremental festivals, but I was wondering if you could quantify any of the benefits you've had from the dynamic pricing that you've started rolling out?

Well, as I said, David, on my script here, without getting precise because of competitive reasons, you can appreciate, as I said, that the key is the adoption rate. So I think, last year, I spoke about build the tool that we could get adopted throughout the business. We think we have a great simple dynamic pricing product now that agents and managers in the industry can use. We've got -- we spent the year selling it in over 100 artists participating or shows, if you want to call it, against either dynamic pricing or a platinum scaling. Either version is about secure some of the high revenue that ends up on the scalpers column and put it into the P&L of the artist and the promoter. So as I've alluded to here, we've got -- when activated and an artist or a show is using the dynamic pricing tool and/or platinum, increasing some of the scaling or thinking about a few different ways to scale the house, based on from factual input, we're getting an 8% to 10% increase in that show's contribution. So early success the first year we've started to roll it out, and as I promised, the Street was about getting some adoption, learned some lessons and get some successes built, and we're very happy right now that we have close to 100 participating, and our goal by the end of the year is if you got 100 artists and agents and managers participating and all having an increased revenue output for that show, that will be a great way to pave the future to higher adoption.

And if I may, on another front, some of your peers and competitors seem to have some potential to stream concerts on cable networks, such as AAG and Access TV, Madison Square Garden, like are you able to do that with Fuse for example? Do you have right -- do you participate in rights for the streaming with your artists or with your promotions or do you foresee anything more tangible that you might do with the cable network partnership?

Well, in general, the ownership of that live show is owned somewhere between that artist and the record label. The rights to stream a show are a lot easier to obtain than obviously the rights to download and buy a show. So we do somewhere around 300 to 400 shows a year where we would be filming them, recording them or steaming them, whether they're for sponsors, whether they're at livenation.com or whether they are at -- we stream the entire iTunes Music Festival in partnership with some at iTunes. So we have a Live Nation studio division that's been at it for a while. We have found the easiest way to monetize that live show to date has been to build a division that can service sponsors. So most sponsors have websites and Facebook pages and desire for live streams and content. So we've been delivering direct to sponsors as a way to build our sponsorship base to date, but we have definitely been stepping up this year and you will see us more aggressive in the fall at livenation.com, as we launch that website coming into the fall into a much more interactive website that we'll definitely have a higher level of live streams shows and live concert interaction. We would think that the best model for us is to build our current online business as the main vehicle supported by our sponsorship strategy then start to venture into the cable right now.

And we'll take your next question from Doug Arthur with Evercore.

Yes 2 questions, kind of back to concert margins for a second. I mean this is the fourth quarter in a row where revenues have exceeded costs, i.e., costs have gone down at a pretty good clip. So is it -- do you feel you've reached sort of an inflection point in terms of all the initiatives, dynamic pricing, better scheduling in this division and can that sustain itself in a big seasonal third quarter? And then secondly, on the Sponsorship & Advertising, I mean, is this timing going to be sort of a fact of life in this division, where you have some big quarters and some flat quarters because it seems like as the -- you gain more critical mass, there's just been more kind of not randomness, but kind of the quarterly numbers have jumped around a lot.

Well, I'll take a stab at a bit of that. I'll start from the back forward. I mean, as you know, other than the natural reality of quarters for Wall Street, we play for the year. It tends to be in the world of concert touring, it's a January December kind of season. So obviously, in our business, the second and third quarter mean in the summers both internationally and festivals. Amphitheaters tend to be the highest -- obviously, the highest activity globally for the artist. So somewhere between the second and third quarter, depending on what day that cuts off and what shows we're having, you can have a swing. So definitely, there are chances that sometimes, the Madonna tours in the second quarter in 1 year, U2s in the third quarter, so you have some swing. Generally, why you continually hear us talk about full year is we're less worried about whether the show happens in June or July and more worried about during the year. In totality, do we have the line-up and the show count to deliver the growth, so definitely, a business where you have continual movement between Q2 and Q3. In the odd time, you get a big Q1 Roger Waters world tour that launches in the wintertime that can take your numbers on a year-over-year basis, but totality, over the year is what we play for to kind of smooth out the reality when certain things happen. Concert division, you're right. We were very proud that we, over the last couple of years, are running the business a lot better than we had previously. We've got a great team both in international and in North America. We're buying better, but a lot of the focus has been on the execution. When you have…

That's great and Kathy, just a quick follow-up on the concert division, was there -- can you explain the one-time item in D&A in the concert division?

There was impairment of about $14 million in the quarter related to some of the intangibles, but timing wise, it's really a timing issue because it's coming off one way or the other. The impact for the full year is going to be about $9 million.

And we'll take your next question from Martin Pyykkonen.

A couple of questions on the AOI margin for the concert segment kind of going forward into onto next year, is there a sort of normalized or peak level that you can obtain relative to cost and the dynamic pricing initiatives you've had? And then a clarification, Kathy said something about 3 points of FX impact, was that specific to the concerts segment or was that overall? And if it was overall, do you have that broken out for concert revenues, specifically?

Yes, I'll answer that, the second question first. The FX impact, the 3%, for the full company. We do -- the concert piece of it alone was about 2%. So it is obviously the biggest piece of our revenue and does drive all sorts of things.

And as far as the margin, we wouldn't give you a guidance on that, but I think the tone is the important part. We believe, obviously, with our scale and concerts and ticketing and our kind of leadership market position, overall, our #1 goal is obviously to drive higher free cash flow from the existing business and ultimately delever our balance sheet over time as we build that stockpile. The way we're going to get there is less about more revenue and definitely about driving higher margins from our existing business. So without giving you the guidance on the numbers, yes, the thematic here is how do we drive higher margins from those existing 200 million-plus consumers that are transacting with our core business, and obviously then that drives down to the cash flow bottom line. So we think there's opportunity to increase the margin. Now it's tough because of the revenue mix in our business when you drive big revenue tours like Madonna and you're driving $5 billion or $6 billion in that revenue mix. Mathematically, it's tough to make a substantial difference in the bottom line margin. But generally, the thematic on how we're going to execute here has been over last year and continues to drive higher margin from existing business.

Okay. And then just one quick follow-up on the fall winter, deep fall winter, as you said, it's a full year, the way you look at it, that's obviously the less seasonal part. Qualitatively, at this point in terms of those that are touring that you know the number of shows kind of planned, just what's the general outlook for year-over-year that's coming fall winter versus the previous?

You're right, we would, at this point in the year, we know 2 things that matter. We know how strong Q3 is going to close generally, because, obviously, all those shows are all well booked and on sale, and now it's just a matter of how they close. So that would be the biggest determination to how the overall year will play out. And then after that is what does your show count look like from both the ticketing and a concert perspective for Q4? Now Q4 is always light, so you're never going to make a substantial change in Q4. You're not going to gain a lot of bottom line in Q4. You just don't want to give a lot -- you don't want to give away a lot. And at this point, I would say that Q3 is looking very strong and Q4 is looking on par with history. So I don't think we'll be giving away much in Q4. It should be flat year-over-year as we look at the rest of the lineup. So we believe that's kind of the basics on how we could sit here today and call the year in terms of we believe it's a strong revenue AOI and cash flow growth year-over-year. If we close everything in Q3 like we hoped and all the PVDs come to life in Q4, those too look on course, right now, to deliver our growth.

And we'll take your next question from Ben Mogil with Stifel, Nicolaus.

Kathy or Michael, I don't know if you -- I don't think you did this call in the past. You kind of given a sort of a current quarter update on ticketing trends. Can you give us anything along those lines?

Yes, Ben, we did say that so kind of this is when we're looking at ticket sales during the year, regardless of the event date. And through July, concert is currently at 15% over last year and Ticketmaster is at 5%, with North America up 4% and international up 9%.

And that's -- and so that's just the entire year-to-date. That's not a -- that's not just the current quarter, correct?

Right, but that basically shows you -- I mean, that's in line with what we were showing as Ticketmaster tickets for the 6 months and gives you a different view on concerts, but shows you why the deferred revenue is so strong.

Okay. And then I think just going back to your comments before on cost on the sponsorship numbers that you look to be, think you'll you'd be sort of up low double digit EBITDA on constant currency, which I guess would kind of be a mid to high single digit on U.S. dollars. Any thoughts about hedging that going forward or is it just not worth it from where you guys sit -- hedging the currency exposure on that?

Again, we continued our process of hedging the artist contracts in foreign countries where we're paying in a different currency than ticket sales, and we continue to evaluate the other, but no real claims right now.

And lastly, on the CTS arbitration, I saw in the Q that you noted that you expect something in the fall. It's obviously beyond your control. Has the arbitrator gone back to either party for more information or has it really been no change in an update since almost, I guess, the beginning of the year?

No change. No information, just a delay on the arbitrator side to deliver the judgment. So we're now waiting for a fall due date, is the latest, but still feel confident. No changes in our perspective on our defense.

And we'll take your next question from Rich Tullo with Albert Fried & Company.

Did you say that ticket sales, mobile ticket sales, were 1 million for concerts and about 3 million for Ticketmaster, is that correct?

Yes.

And is there a demographic difference from your typical customer from the customer that's acquiring a ticket on mobile?

Yes, in general, we ran a bunch of research around this, but if you simplified it, as you would expect, they are younger, younger and more active buyers. So the first to convert are going to be the obviously high user and younger demo.

And in terms of streaming, does it make sense for Ticketmaster to link up with one of the Internet radio services such Pandoras, Spotify or iHeart, to do sponsorship channels on the air platform?

What we're talking and always evaluating all our options with partners. Remember, let's just call the competitor set we have, nobody has what we have, meaning, the platform and the presence of ticketmaster.com and livenation.com. So our first priority in the way that we monetize 100% of the advertising dollar is to deliver that business to our sponsor in our own platform. And the larger our platform and the higher our traffic at our platform, the more tickets we sell and the higher our sponsorship is. So to date, we believe we will continue to kind of feed our tm and livenation.com businesses, and that's the way we can keep delivering that double-digit sponsorship online advertising growth versus kind of producing and delivering to someone else's advertising platform.

Okay. And one last question in regards to, I guess, concert disruption. The London Olympics going on right now, is that going to be somewhat disruptive in the third quarter? Can we see some shifting of revenues from the third quarter to the fourth quarter?

Not in general. I mean, we -- everybody, obviously, it's a big business over in Europe in general, so it's only really affected in London proper. So there wouldn't be a lot of shows planned over those 2 weeks if you're an artist. But in general, the European concert season or the festival season, which kind of drives the London business, just naturally, it happens to be a May, June and end of August business. So not a big change in these 2 weeks during the Olympics that has changed any of the historic business in London.

One last question, do relative costs to promote a electronics dance music, concert or festival relative to more traditional type of festival, is the -- are the margins on those kind of events a little fatter for you?

Well, I mean, festivals, in general, are one of the highest margin businesses we have. So we like the festival business period, and electronic festival versus a good pop or rock 'n roll festival would be on par to possibly a few points higher on margin.

[Operator Instructions] And we'll take our next question from John Tinker with Financial Services.

Actually it's Maxim. This is a follow-up to the festival's higher profitably. I noticed the British company called Music Festivals, which had issued a profit warning a few days ago and it's looking to raise capital. Is that company specific or you think there could be a turn in the festivals business as people start to overbid to get the talent?

Yes, that company you're referring to has been down that path a couple of times. So if you're in the business of owning one festival in the U.K, you're fairly exposed on that one event. Then you have a portfolio of 57 -- it's a portfolio that really kind of hedges the risk. So every year, out of 57, you always have 2 or 3 that just don't hit it, maybe weather is bad, maybe you don't have a perfect lineup, and you have 2 or 3 that hit it out of the park. In totality, as you can see by our numbers, we're growing 25% ticket sales year-over-year. So I think, definitely, the festival business is high-margin. Obviously, there's a lot of festivals continuing to evolve, but the leadership position that we have is the competitive advantage that lets us, obviously, buy in bulk, deliver sponsorship in bulk, ticketing in bulk, marketing in bulk. So it wouldn't be a business that you'd want to start today in one by one, but we believe that given we've been in this business for 10 years-plus and are a market leader, it lets us build it efficiently with a good tolerance to the risk that comes with them.

And just another quick question. What's your view on paperless tickets in terms of the way to attack the secondary market and stop scalpers reselling?

In general, our -- how sensible is this, we believe that our job is to protect the first sale and what I mean by that is I'd like to tell you that every artist is going to charge exactly what the market will bear, but that's not reality. There are some artists that just want to charge $99, regardless of how expensive that first row could go for. Our job is to figure out how to make that first sale secure. If Bruce Springsteen absolutely wants to charge $99 in Detroit, our job is to figure out all of the ways we can deliver that $99 ticket to a real fan who has a shot to buy it. Now what that fan does with it after, if they want to resell it on the secondary market, we're -- we have no problems with that, we'll support that. But anyway, we can help deliver that $99 to a true fan for the first sale is what we believe is we're in business to do and make that consumer feel like they have a shot of getting it. Now paperless is one tool you can use, which we've done many times. If you use paperless, it gives you a shot to deliver kind of a deterrent to the scalping system and deliver that to that first fan. I think, in general, mobile is going to be an incredible tool to deliver a digital ticket to an exact person, who then can walk in to that venue and scan it at the door. So whether it's paperless or whether it's mobile, we're continuing to look at new technology to deliver a direct sale to that first fan, and we think mobile is probably going to be the most exciting opportunity for us to deliver that digital ticket to that fan.

And ladies and gentlemen, that concludes our question-and-answer session for today. I will now turn the call back over to Mr. Rapino for closing remarks.

Thank you, everybody, and have a great summer and we'll talk on Q3.

Ladies and gentlemen, this includes the Live Nation Entertainment Second Quarter 2012 Earnings Conference Call.