But with the live event business at a standstill and few prospects for a full return for the better part of the year, fast-paced growth will give way to deep losses in 2020. CTS Eventim has enough liquidity to get through at least 2020 -- but how long can it sit idle?
The earnings releases for Q2 and Q3 will be more revealing about the state of the company during the pandemic. In the meantime, here are three takeaways from the Q1 earnings release.
There are no live events for the foreseeable future. In its earnings statement, the company stated it’s “unclear when events can be held again.” Enough said. Given that European governments are lifting social distancing orders in small increments, concert venues could be among the last businesses to open. And because many tours have been postponed to 2021, venues will have fewer opportunities to open their doors. As a result, 2020 live entertainment revenue will likely be a fraction of last year’s €985.8 million gross.
Liquidity is considered to be adequate. CTS Eventim’s liquidity was €884.5 million ($968.3 million) on March 31. It had cash and cash equivalents of €684.5 million ($749.4 million) at the end of Q1. Plus, the company has a €200 million revolving credit facility -- “used for specific projects” -- that was not tapped by Dec. 31, according to the 2019 annual report. The first quarter earnings report gave a status update on the company’s available credit and nothing on the balance sheet suggests cash was drawn from the credit line. Given operating costs were €166.9 million ($182.7 million) in the last three quarters of 2019, €684.5 million of cash and cash equivalents should get the company through the same period this year.
Liquidity will be helped by some European countries’ voucher laws. “A voucher scheme is in development in many European countries, which will have a positive effect on CTS Group’s liquidity position.” In key markets such as Germany, Austria and Italy new laws allow companies to give vouchers -- rather than a refund -- to ticket holders unable or unwilling to accept an alternative event date. In Germany, the event organizer must reimburse the value of the ticket if it’s not redeemed by the end of 2021. Lawmakers did not want refunds to drain event organizers or lead to bankruptcies that would lead to reimbursements going unpaid. In Italy, if an event was canceled, the ticket holder could request a voucher for a credit to be used within one year.
What’s unknown is unknown. CTS Eventim said the events of the COVID-19 crisis “do not jeopardise” the company “as a going concern” but hedged by adding that currently immaterial or unknown factors “could jeopardise the continued existence of the CTS Group as a going concern.” Put another way, currently unknowable factors or known factors could cause the company to fail to meet its financial obligations within the next year.