With festival season in full swing, and with additional acquisitions to bolster its numbers, EDM-focused promoter SFX Entertainment is showing signs of financial life.
In the third quarter, the company's revenue increased 194.5 percent to $143.5 million, with about 80 percent coming from festival and live events. The remaining 20 percent came from "platform revenue," SFX's name for out-of-concert engagement such as Beatport download sales, ticketing fees, and marketing activities.
SFX managed a $2.8-million net income in the quarter, which historically is the most or second-most active in the live events business. "With streamlined operations that are laser focused on providing the best possible experience for fans worldwide, the cash flow generated in the third quarter allowed SFX to invest an additional $11 million toward future initiatives," SFX chairman and chief executive officer Robert Sillerman said in a statement.
The third quarter is arguably SFX's strongest. While it had only 28 festivals in the first and second quarters combined, 30 of its 82 festivals in 2014 were held in the third quarter. (SFX defines a festival as an event with a capacity of 10,000 or greater.) The fourth quarter will also be active, with 24 festivals globally.
On a same-festival basis -- only comparing festivals that existed a year earlier, similar to the "same-store" metric used in retail -- attendance grew 26 percent and revenues grew 10 percent. Same-festival earnings before interest, depreciation and amortization (EBITDA) rose 69 percent, driven by an "eight-figure profitability swing from last year" by the TomorrowWorld festival in Atlanta, said Rich Rosenstein, chief financial and administrative officer, in Friday morning's earnings call.
The TommorrowLand brand drove festival growth. Attendance doubled at Tommorrowland Belgium, rose 25 percent at Nature One Germany, grew 33 percent at SummerSet. This year, TomorrowWorld attendance has grown 25 percent to over 150,000. "It's clearly set the stage for major growth of this brand" in the U.S. and elsewhere, said Rosenstein.
It's not easy to make sense of a growing company's earnings releases. Comparing results to the prior year is difficult for a young company making many acquisitions. For this reason, SFX provided pro forma, or hypothetical, numbers that suppose SFX's acquisitions were part of the company a year earlier. Pro-forma third-quarter revenue was $289.2 million, over twice the actual revenue. The company calculated earnings before interest, depreciation and amortization, after a number of adjustments, at $14.9 million in the quarter. During the earnings call, the company further adjusted that number to $26 million by removing $11 million of acquisitions that were expensed rather than capitalized.
During the third quarter, SFX produced and promoted 267 live events that attracted 1.6 million attendees. Excluding Rock in Rio, pro-forma third-quarter attendance grew 26 percent. Rock in Rio, in which SFX invested in the fourth quarter of 2013, is a bi-annual event held in the third quarter, making year-over-year attendance comparisons difficult.