SFX Losses Up 77% Despite 199% Revenue Growth, Stock Jumps 6%

Revenue at EDM powerhouse SFX grew 199% to $82 million while net loss increased 77.6% to $43.7 million, the publically traded company reported to Wall Street after the markets closed on Thursday.  Inverstors rewared the mixed report, driving the stock upward 6% in after hours tradiing. 

"An important, meaningful, and successful quarter.”

“With the additional proof of concept of our ability to expand our existing powerful festival brands, with, for instance, Tomorrowland coming to Brazil and Rock in Rio coming to Las Vegas in 2015, we are now well-positioned to grow all aspects of our business," commented Robert F.X. Sillerman, Chairman and CEO of SFX. “With inherent organic growth at our repeating festivals, the completion of major and meaningful marketing partnerships with quantifiable minimum values, and the significant investment in our platform and new festival locations now complete, the second quarter set the stage for near- and long-term growth, and equally importantly, a new generation of fan experiences. In short, this was an important, meaningful, and successful quarter.”

Here is the full report:

NEW YORK–(BUSINESS WIRE)–SFX Entertainment, Inc. (NASDAQ: SFXE) today reported financial results for the three and six months ended June 30, 2014.

Revenue for the three and six months ended June 30, 2014 totaled $82.0 million and $115.3 million, respectively. Direct costs for the three and six months ended June 30, 2014 totaled $61.5 million and $84.4 million, respectively. Net loss and net loss per share for the three month period was $(43.7) million and $(0.50), respectively, while net loss and net loss per share for the six month period was $(107.2) million and $(1.23), respectively.

Pro forma revenue (a non-GAAP measure, see definition and reconciliation below) for the three and six months ended June 30, 2014 was $82.1 million and $121.2 million, while pro forma adjusted EBITDA (a non-GAAP measure, see definition and reconciliation below) for the respective periods was a loss of $10.2 million and $22.2 million.

Second quarter pro forma festival attendance rose more than 70% year over year to approximately 675,000 as the Company held 17 festivals versus 14 in the comparable year-ago period. Attendance at events other than festivals declined 15% to approximately 353,000, reflecting the Company’s strategy to continue to focus on larger events while hosting a fewer number of smaller events. In the second quarter ended June 30, 2014, the Company experienced strong growth on a same festival basis (for the festivals we held both last year and this year in the second quarter), as attendance grew 33% and EBITDA rose by 39%.

The success of SFX festivals in general as well as the acceptance of festivals appearing in new territories allowed the Company to invest in three festivals introduced in new territories and the start-up losses related to the initial iterations of these festivals in new territories were all absorbed in the quarter ended June 30, 2014. Additionally, the Company invested in further building its platform and expensed those costs in the 2014 second quarter. The operating results also reflect the fact that Company moved several historically successful festivals to the second half of 2014, and as such, the benefit of those events will be reflected in the operating results for the 2014 third and fourth quarters. The pro forma adjusted EBITDA for the 2014 second quarter includes just $1.1 million in EBITDA related to marketing and sponsorship partnerships and these contributions are expected to accelerate going forward. The table below details the effect of these items.

(1) costs related to the Company’s investment in introducing proven festivals in new locations, including Mysteryland to upstate New York and Electric Zoo to Mexico
(2) corporate overhead costs related to a meaningful expansion of our platform needed to support the events and results SFX intends to deliver for its marketing partners
(3) impact of shift in the timing of several profitable events to later quarters
(4) the inclusion of SFX’s share of Rock in Rio losses during the quarter, including startup costs for the Rock in Rio event to be held in Las Vegas in 2015

“With our foundational focus on delivering fans the best EMC experiences, the second quarter marked a turning point in our progress toward driving growth from the scale and synergies we’re achieving from our integrated platform of live events, online interactions and a growing number of unique marketing and sponsorship partnerships,” commented Robert F.X. Sillerman, Chairman and CEO of SFX. “Since the end of 2013 we have already established sponsorship partnerships representing $50 million to $60 million in guaranteed EBITDA from our Qualified Marketing Agreements (“QMAs”) which exceeds 2014 expectations and approaches the level SFX was forecasted to achieve in 2015. The partnerships announced to date are with some of the world’s premiere brands – including Anheuser-Busch InBev, Clear Channel Media and Entertainment, Syco Entertainment, viagogo, T-Mobile US and MasterCard – which underscores the power and value of our platform. Recently, the CEOs from two of our marketing partners publicly applauded our unique collaboration with them which is gratifying and incentivizing to the entire SFX team.

“With the additional proof of concept of our ability to expand our existing powerful festival brands, with, for instance, Tomorrowland coming to Brazil and Rock in Rio coming to Las Vegas in 2015, we are now well-positioned to grow all aspects of our business. The EMC Revolution is just beginning. With an absolute dictum to keep our fans first, the next few periods should see significant impact from our investments in our core business, successful partnerships, and additional events.

“With inherent organic growth at our repeating festivals, the completion of major and meaningful marketing partnerships with quantifiable minimum values, and the significant investment in our platform and new festival locations now complete, the second quarter set the stage for near- and long-term growth, and equally importantly, a new generation of fan experiences. In short, this was an important, meaningful, and successful quarter.”

Key Recent Financial and Commercial Milestones

• Entered into a global strategic alliance and joint venture agreement with MasterCard that establishes MasterCard as SFX’s exclusive global sponsor, among other things, in the financial services category with guaranteed payments and revenue sharing;
• Entered into an international marketing and ticket revenue share agreement with viagogo AG to provide an exclusive authorized secondary ticket marketplace for certain SFX events and festivals on a global basis;
• Produced for marketing partner Anheuser-Busch InBev N.V., three beach-themed dance music events in Summer 2014 with two additional events to be held in August 2014;
• Launched with Anheuser-Busch InBev N.V. an international DJ contest competition through the Company’s Beatport platform;
• Entered into a sponsorship and promotional agreement with T-Mobile, which includes T-Mobile’s sponsorship of certain festivals, media placement on certain SFX properties and execution by SFX of on-site activations at certain T-Mobile events;
• Launched and completed key festivals in new locations, including Mysteryland USA at Bethel Woods (May 24–25) and The Hudson Project at Saugerties (July 11–13);
• Grew attendance at Spring Awakening in Chicago and Nature One in Germany to record levels;
• Announced the first Tomorrowland Brazil festival in May 2015;
• Scheduled the first U.S. iteration of Rock in Rio to be held in Las Vegas in May 2015;
• Introduced the first all cashless festival at Mysteryland USA, dramatically improving the fan experience leading to higher food, beverage and merchandise spending; and
• Expanded and reorganized our management team for greater integration of our media, creative, e-commerce and event assets and the realization of operating efficiencies.

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