SFX Entertainment's CEO Discusses Q4 2013 Results - Earnings Call Transcript

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 |  About: SFX Entertainment (SFXE)
by: SA Transcripts

SFX Entertainment Inc. (NASDAQ:SFXE)

Q4 2013 Earnings Conference Call

March 27, 2014 10:00 AM ET

Executives

Joe Jaffoni - IR

Bob Sillerman - Chairman and CEO

Richard Rosenstein - CFO

Analyst

Brian Fritz - Jefferies

Ben Lowe - Stifel, Nicolaus & Co

Doug Mitchelson - Deutsche Bank

Todd Morgan - Jefferies

Ben Green - BD Capital Partners LLC.

Rich Tullo - Albert Fried & Company

Operator

Greetings and welcome to SFX Entertainment Fourth Quarter and Full Year 2013 Conference Call. At this time all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over to Joe Jaffoni; Investor Relations please go ahead sir.

Joe Jaffoni

Thank you operator and good morning everyone. In a moment SFX Chairman and CEO Robert F. X. Sillerman and CFO Richard Rosenstein will review recent operating and financial developments. I would like to remind everyone that management will also review a presentation that is available on the investor relations section of the company’s website at investor.sfxii.com/presentations. We’ll get to management’s presentation and comments momentarily as well as your questions and answers. But first I’ll review the Safe Harbor disclosure.

This morning SFX issued a press release announcing its fourth quarter and full year financial results for the period ended December 31, 2013. The release is available on the investor relations section of the company’s website at sfxii.com. Before we get started, I’d like to remind everyone that this call is being recorded and a webcast replay will be available for 90 days, the details of which are in our press release issued this morning.

During the call we may make certain forward looking statements about the company’s performance, such forward-looking statements are not guarantees of future performance and therefore one should not place undue reliance upon them. Forward-looking statements are also subject to inherent risk and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company’s filings with the SEC. Also during today’s call the company may discuss non-GAAP financial measures as defined by SEC regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company’s website at www.sfxii.com by selecting the press release regarding the company’s full year 2013 earnings.

With that I’d like to turn the call over to SFX Chairman Bob Sillerman. Bob.

Bob Sillerman

Thank you, good morning everybody. It’s very exciting to be on this call. The principle focus of all our conversations with investors has been more impact, being able to realize the vision that we expressed about engaging the marketing partners and a broad conference and global program. And although we specifically don’t issue guidance as all of you know the analyst that suggested that in calendar year 2014 marketing partners would generate over $40 million in EBITDA. When we last presented, we indicated that there were three very likely in the pipeline and also dug [indiscernible] a year from now how many partners magnitude we might have, I said six and I am pretty sure that number is wrong.

We already have achieved four, and we have already achieved estimate of others for 2014 and there are no other dramatic and significant ones that we expect to let people know about the principle festival season which means we’ll be at six. No with this kind of effort and actually do a bit better than the six I have mentioned. These results don’t give you a good snapshot of the way I believe that we should operate this company. I never drive the quarterly results; many of you invested with me in the past know this. This quarter was a spectacular example of that, there was a brand that we already do business with, wanted to do a very limited and targeted transaction in the low eight (Ph) figures. And having done that, we have added well above $10 million to the quarterly EBITDA. I made a very conscious decision not to bring that in for only one reason that particular category provides much greater potential and this year we will in fact realize that. We do additional partnerships we have announced here will be named when the consumer facing announcement is made which will probably be the third week of April in rather large fun event. The partnerships are each five years in term and provide a minimum threshold as well as very realistic potential for participating in upside. One of them is a very well-known global financial services partner and the other is someone who already has been very helpful to the predecessor companies in helping them remain contact and maximize access to the individuals. Each of them represents a minimum of 75 million over the five years obviously 15 million per year. We expect them to be significantly larger.

The reason we are not mentioning them is pure and simply it’s a dramatic announcement for our fans and the message must be properly communicated. It’s a very exciting ride (Ph) engagement methodology that is something that has never been done like the Clear Channel deal, has never been done before with this twist. With those and others already announced conservatively we therefore booked over 40 million in EBITDA, revenue and EBITDA for marketing partnerships. That to me is confirmation that the vision we had is spot on and it’s increasingly being recognized. The two incrementals we anticipate announcing shortly are somewhat more traditional but like what we did for Anheuser-Busch which those of you who will enter to the Website you will see, is anything but traditional reflects our approach.

You may remember that my positive was that we have the capacity to engage with people every day of the year not just when there are live events and when you see the two that are described today and the next two, you will understand very specifically why that’s true. I do hope that you will take a moment to go through the slides when we are done, you will see the scope and magnitude of what we are able to do which of course contributes to the time it takes to complete by much more impactfully engages people every day of the year and our investments by our brand partners and multiyear commitments, not having chosen to limit our potential by managing to a quarterly number, the results for 2014 are were through three months in a year and the marketing partnerships already generate EBITDA that was projected for the year. I know if that threaten that somebody failed to know that there is more coming in and in fact I mentioned to others the other two things that are notable are to confirm that April 11th is a very important date in our platform or big port we are actually said before we have developed as broad and far reaching API and have already and incredible response from people want to take advantage of it. Over the course of the next month’s you’re also going to see now that the hard background work and foundation work has done new features offerings all the time that by August 28 will all be finished and in place.

When we prescribe the access program which will happen in a multimedia global introduction you will understand first of all why it was important to communicate one consumer message but also why August 28 is a pivotal date. The other thing that has been quite exciting has been to watch Joe and Mitch and Rich work their magic on the underlying companies. Not only as their been in education and ability to cut cost but I think equally siding has been a collaboration that is bringing different brands to different jurisdictions with our different participants whether it’s electrics to, to Mexico working with Donny or mystery land coming from Amsterdam working with Mike and Lauren soon to be announced additional acquisition.

The expansion is taking place organically without the need for the level of acquisitions that I might have expected. Having said that, there are bunch that we’re focused on that I expect we’ll complete in the very near future. And one other thing we’ve got some incredible creative resources. When you see what we created Corona which goes from everything from an entirely new type base advertising, logo, artwork, presentation, food (Ph), et cetera, you’ll get a sense for why there will be new offerings by us that will not require acquisition capital. I love the brand to let that there may be a comment on why my psychiatrist is trying to confine me but with the success of back to school and all the inherent assets we have real high hopes for that and that has a potential to be every bit as impactful, as an acquisition.

Richard’s going to go through some of the expansion with license deals. Fine, from my perspective I can raise my hand and say, suppose somebody asked me I knew a [indiscernible] some time ago, when will I be able to say that we’re on the way and we’ve achieved it and I said that we’re going to with that this May and I accepted. When you go through that and understand the impact and understand that despite skepticism within the industry and you’ve been among investors. We’re knocking it out of the park so I am thrilled and I’m even more thrilled that you ain’t seen nothing yet. With that I’m going to turn it over to Shecky Green.

Richard Rosenstein

Thank you Bob and thank you all for joining today. As Bob mentioned we continue to be very active here at SFX. Recently we raised 220 million in senior notes and we have the flexibility to borrow more, continue to execute our acquisition strategies selectively. We’ve also closed on a number of deals and have announced a few new ones. Specifically since our last earnings call we closed on the acquisitions of B2S, Paylogic, our investment in Rock in Rio and we’ve made a small investment in a company called elevateDigital. We’ve also announced the acquisitions of React Presents, a Chicago based EMC promoter and festival operator that we’re excited about and Flavorus, a US based ticketing company that has strong social marketing capability. Our platform is coming together quite nicely. While we present today the financial results of SFX it’s important to remember that during the fourth quarter we closed on a substantial set of businesses. In fact two thirds of our pro forma revenue in the quarter came from companies we closed on during the quarter. For this reason we thought it would be more helpful to present the results inclusive of those businesses from the beginning of the relevant periods on a pro forma basis to give you a more accurate and clear presentation of the company at this point in time and the foundation we have to build off of in 2014 and into the future.

In terms of comparisons with the prior year I would remind everyone that the operations we had in place in the fourth quarter of 2012 were really just the operations of two small companies that we acquired in the third quarter of 2012 and our overhead at the time was considerably lower. For this recent comparison of results on a year-over-year basis isn’t terribly meaningful. On a reported basis full year revenues were a $170.5 million and the consolidated net loss was a $118.8 million that includes nearly $33 million in stock based compensation and a number of non-recurring items. For the fourth quarter reported revenues were 84.2 million and the loss was $40.5 million. This also included $10.1 million of stock based compensation and a number of non-recurring items. Now when you include closed acquisitions namely IB&T, Totem, i-Motion, [indiscernible], Paylogic and B2S, full year revenues would have been $313.6 million, a $143 million more than our reported revenues on a pro forma basis. Fourth quarter revenues would have been $92.6 million on a pro forma basis. As we mentioned on our last earnings call, as we integrated these businesses we’ve already identified and implemented a number of efficiencies already. The first of which is the nearly $7 million of annualized cost savings, split roughly evenly between our live business and our existing digital businesses. These were largely in overheads and also areas where we found redundant efforts around the organization. These were implemented just before the end of last year and we’re already enjoying the benefit of this in 2014. Now we adjust for a number of customary onetime items including cost savings and due related costs, pro forma adjusted EBITDA would have been $23.6 million for the year. This includes our proportionate share of EBITDA from Rock in Rio, for the quarter pro forma EBITDA was $3.5 million, $3.6 million. Now for the year our pro forma festival attendance grew nearly 35% to approximately 2.5 million and our total attendance including smaller events rose more than 25% to nearly 4 million for the year. For the quarter, festival attendance grew 21% to more than 570,000 despite the fact that we put on five fewer shows year-over-year due to our decision to reduce the number of smaller license shows in the period.

Now as Bob mentioned we made a conscious decision to defer short term deals in favor of a larger marketing partner deals and as a result we absorbed some of that expense in front of now appears to be a much larger marketing engagement beginning this year.

In addition I would highlight that the fourth quarter is generally a slow one seasonally across most of our live businesses, the one exception to this is Stereosonic our festival in Australia. You may recall that we closed on Totem the operator of that festival in late October and the event took place about a month later. Now historically, Stereosonic have been a one day festival toward five cities until last year and in 2012 hosted almost 200,000 fans. In 2013, the event move for the time to two days per city and this was the first for Australia and demand was quite strong. Only two day tickets were sold and nearly as many attended per day as last year. Meaning, expanded nearly double from the [indiscernible].

There was some added cost to ensure the event went smoothly which it did and many of which of those costs were already examining with the guys of Totem and we see great room for growth and margin expansion this year. More, importantly the demand we saw emboldened us to bring this brand into multiple new markets across Asia which we’re doing this year under our licensed model.

This helps establish the brand and we could minimize risk with fix licensees. As we setup for this year’s festival season Joe and all of our operations have put in place a number of initiatives to help drive event profitability higher. It continues to be our goal to drive our live event profitability to 25% margins or better. Right now, our live event business is running at low double digit margin pre-corporate overhead.

In addition to all of the scale benefits we see in production, there are number of other drivers of profit. One easy example to see is in merchandising. Today, our per caps in this area roughly a dollar. We’ve already put in place our customized merchandising solution and in one small event recently we saw merchandise per caps of $7 and that was really only with some modest tweaks. On our attendance base, improving these per caps represents a big opportunity for us those revenues come at quite impressive margins.

In terms of growth potential, you’ve seen the type of growth our festivals are enjoying. Tomorrowland this year is going to two weekends. Mysteryland, as Bob mentioned is coming to North America for the first time. We’re launching a new festival called The Hudson at Saugerties and we’re also brining Electric Zoo to Mexico among others.

We plan to grow the number of festivals by 20% or more this year while continuing to grow organically at existing events. In terms of our platform, we continue to make progress in making our digital presence more comprehensive and more cohesive as Bob laid out the timetable around that and importantly the flavor at that position helps broaden the geographic presence and skill set that we already have at Paylogic.

Importantly, marketing partners are coming together as Bob described. With the deals in place simply looking at the fee base components and minimums this represents 40 million plus in EBITDA in 2014. It’s also important to note that there are some variable components of these deals as well and there are many more partner discussions in the pipeline what add to this as Bob said.

Now, these fields are complicated and involved and really reflect our efforts as not only a live events in digital company but also one with the strong marketing services approach, in fact think of us is a marketing services company that brings its own assets to their partners. We have existing live events, we have digital assets and we have expertise across these businesses to craft the disposed solution for our partners.

This is considerably more than simply sponsoring existing live events. What I’d like to do now is turn everyone to the presentation we posted to the website. I’m not going to through it in detail but will give you a sense of what it is, we’re talking about and the extend of the services that we deliver for our partners.

The first few slides highlight our capabilities, our capabilities as a company, our presence globally, our reach and our brands. If you get to slide 6, you’ll see we mentioned FX1, this is really a marketing services solution for our partners. Flipping through you’ll see on page 8, we highlight by just what their services are. To illustrate this I’d like to flip forward to the Corona example which starts on page 13. Now, Corona and this is the AB marketing partnership that we announced in late December. Corona is obviously strongly associated with the beach and so we’re creating an entirely new concept for Corona which is Sounds of the Beach, Corona sunsets, Sounds of the Beach.

And this is a highly customized solution. If you go to page 15, I mean we really have narrowed it down by day part as we approach sunset and then after sunset down to the number of Beach per minute of the programming that will be involved at these events. As you flip forward to page 16, you’ll see what these events look like in the locations that they will be in.

On the next page, page 17 you’ll see the Griffin, which is on the label of the Corona bottles. We’ve taken that Griffin and to the right you’ll see we’ve incorporated it into the stage design and included the sun as part of the stage design. Nowhere on the stage where you’ll see the name Corona, but the stage customize and spoke for Corona itself.

The next page shows another element of the Corona design which is the crown stage. Again, this is all highly customized for Corona. This is not Corona hanging patterns or having foreign rights at sensation events or other live events that we already have. This is the creation of entirely new events for Corona.

As you flip forward you can see we’ve even incorporated sand art, our food areas and our rest areas incorporate the crates use to bring the beer to the events. All of this is highly customized in terms of design for Corona. And I won’t bore with the rest of it but you can see on your own how customized this approach is. As you flip forward we go to Clear Channel, and what I would like to highlight here are couple of things. On Page 28, we will soon be launching in the next few weeks a weekly radio program which will include cow films it will include interviews, DJ mix sets, it’s going to be hosted by Pete Tong and it’s going to be on 88 Clear Channel’s radio stations at launch. Now some of these are under the evolution brand which is Clear Channel’s EDM oriented stations, but the vast majority of these are on what are known as contemporary hit radio stations or top 40 radio stations which really illustrates how pervasive EDM has become or as we call EMC has become in term of mainstream music.

We’re very excited about that. We’re also doing a DJ competition with Clear Channel in the U.S. which will complement the DJ competition we’re doing with Corona outside of the U.S. And then last we are creating an entirely new the spoke event for Clear Channel which will be in conjunction our iHeartRadio which will be similar to the Jingle Ball event which as many of you may know in New York, LA, Boston and another markets is a very popular event, multi-artist event. In the case of Jingle Ball, its mainstream top 40 artists and these events are quite popular and quite profitable. We are doing the same with Clear Channel, but in this case we’re creating a similar entirely new branded holiday theme right around Halloween.

With that I would like to turn it back to Bob for some closing remarks.

Bob Sillerman

Thanks, Rich. You know, every time, I look at why we created for Corona, this is the first time that we’ve been able to confirm that the AB relationship is with Corona. I am really impressed with the breadth of what we’ve done and what we can offer. It’s precisely that reason that the marketing partnership program is exploring the way it is. I am thrilled and have to give a shout-out to the folks who have really gotten hold of the live entertainment business. As I mentioned Joe, Mitch and [indiscernible] have really done a great job on that. And the marketing partnerships speak for themselves.

We have added key Individuals but if you spoke to anyone of our partners. I think they will tell you that. They see a level of professionalism and capacity that does not exist elsewhere. And I am excited to be where we are I’m also going to be very excited on the first quarter call because I fully expect to have do more significant marketing partnerships which if that’s the case then of course we will blow away the $40 million EBITDA estimate from this area.

So with that, we will turn it over to the operator and we will let it the [indiscernible] one more thing, we’re also out to give a shout-out at the Rich who has not only done a great job in organizing this but he went to comedian school and his Shecky Green imitation is getting a bit better. Now, operator, we’ll entertain some caller on questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first comes from the line of Brian Fritz with Jefferies. Please go ahead.

Brian Fritz - Jefferies

Thanks. Congrats on the partnerships. Rich, you’ve mentioned you’re going to be licensing Stereosonic across Asia can you give us a sense for why you’ve decided to license that festival instead of hosting it directly? And curious, if you could give us a sense for the economics of the licensed festival versus a traditional SFX festive? And also any other suggestions of how many festivals in general you could do? And then quickly while we’re on the festival tops regarding new festivals, how many new festivals do you think you can create on a year-over-year basis similar to what you’ve talked about in terms of 'Don't Let Daddy Know' et cetera? Thanks.

Richard Rosenstein

Sure. I guess first and please point out, if miss any of these. First I would say on the licensing approach as you know we’ve a acquired a number of companies that have presence in a variety of geographies and so wherever we have a local market presence, or local promotion presence et cetera we can bring a new brand into that geography, then of course we are going to work with that local SFX company if you will, to bring the brand into that geography.

Wherever we don’t have that partner to bring a brand into a new geography, we could do it on our own. We could do it in partnership with somebody, but we would bear the risk up-and-down, and for a new market in some cases it may not be worth taking that risk. And so if we can find a good licensing arrangement for the first year or two, we can bring the brand and we can nurture that brand into a new geography, and essentially be paid a fees to help guide the local partner to produce the event, and it is essentially risk-free to us. So it’s a way to introduce the brand into new geographies without taking a lot of risk, and if we determine that that market ends up being right for expansion; expansion in demand, and expansion in capacity, we will then do it ourselves. But licensing is a terrific way to bring brands into new geographies and manage the risk appropriately.

In terms of introducing new brands, the 'Don't Let Daddy Know' brand is an interesting one because ID&T is a [indiscernible] in Amsterdam, and throughout Europe and around the world, and has nurtured a number of young developing artists and festival promoters. And this is one example of that where it is essentially an innovation lab where that nurturing results in partnership with the creators of those events, and so, again, in a less risky fashion, we can introduce these new brands and grow them. And then when they’re ready to take off you can really bring them all over the world in a way that the smaller company might not have been able to accomplish that on their own.

Brian Fritz - Jefferies

Got it. And just any sense for a number of new events that you can announce like that on an annual basis?

Richard Rosenstein

It’s really going to vary. As you’ve seen in what we have said today, in addition to some of those brands, we’re doing with marketing partners, we are creating our brands. And so with Corona we are doing five new events. With Clear Channel we are doing two new events. Other marketing partners, entry marketing partners that we have been in discussions with have really been blown away by this concept and some were interested in doing the same. It’s really -- it depends upon how we can do it. But we have such strong capabilities within our company and in fact, that speaks to what the marketing partners see in our capability. Again, they are not -- these discussions were not simply around, can they have the flooring rights at existing events. Of course, that’s part of the discussion, but the acknowledgement of our capability in creating these both events for them is really speaks to what our capabilities can accomplish in terms, and we are going to do it on a risk managed basis.

Bob Sillerman

And Brian, we had 65 festivals, and counting on the books for this year. The magnitude of what we can do on the live side just dwarfs anybody else. It also provides the backbone, the temples, if you are bored of the things that have nothing to do with the festivals. There is no numeric answer to how many new ones. The answer on that, only can be, whatever is right.

Operator

Our next question comes from the line of Ben Lowe with Stifel, Nicolaus. Please go ahead.

Ben Lowe - Stifel, Nicolaus & Co

So, Richard, I wanted to just sort of get a sense of sponsorship on the ramp. If we sort of started off in 2013, what would be the sponsorship EBITDA on a pro forma basis, kind of as you can sort of put it together?

Bob Sillerman

I will take that one Ben. The sponsorship in 2013 was the traditional hanging banner at an event illustratively, and now it’s about 20 million. That is growing and that revenue is captured at the event level. The partnerships are an entirely different source. So well that 20 will grow to whatever it does. And it’s growing quite rapidly. The marketing partnerships are an entirely new revenue line, which by the way was started at zero and not ‘13 because there simply was no consolidated opportunity that exists now. We have not given your revenue number on the partnerships, what we have given you is the fee, non-incremental expense, EBITDA if you will, revenue of course is a bit higher. And as we get into the participatory elements we’ll raise even higher. Most of them are 50-50 revenue shares on different lines, so obviously that will be pretty exciting revenue as well.

Ben Lowe - Stifel, Nicolaus & Co

And in terms of the $40 million of partnership revenue, am I correct that the sort of the financial services deal and the expansion existing, you kind of said we’re around 30 million between the two of them together. That’s in the 40 or is that above the 40?

Bob Sillerman

That’s in it but it’s not revenue, it’s EBITDA.

Ben Lowe - Stifel, Nicolaus & Co

Sure, EBITDA I apologize, sorry.

Bob Sillerman

Yes that’s included in it. So you can get an idea of how conservative we have been about Corona and Clear Channel to only allocate $10 million of EBITDA booked to that. As events roll out, as DJ got that radio show et cetera, that number will better increase significantly.

Ben Lowe - Stifel, Nicolaus & Co

And then may be just lastly on the acquisition front. How active are you seeing other participants, how are you seeing multiples, how active you’ve seen the market in general?

Bob Sillerman

No real change in multiple, it’s clear that other people are interested but it’s also clear is that there is a fundamental difference and approach to bring the known players, all of them have a productive and successful business model surrounding the live event business, that’s not our model. And we’re in Miami at the moment at the Winter Music Conference. We have all of the constituent companies here, we’re a management session as well as whenever they’re doing at nigh which I prefer not to participate in unless would be jealous. But while we put down here, they have been two excellent companies than fundamentally said holy shit let me add, hope that’s responsive.

Ben Lowe - Stifel, Nicolaus & Co

Yeah, that’s great I mean I get your -- you cannot get a tonne of granularity on discussions but that’s helpful I appreciate it Bob. Thanks.

Operator

Our next question comes from the line of Doug Mitchelson with Deutsche Bank. Please go ahead.

Doug Mitchelson - Deutsche Bank

It feels well, so Bob I think you mentioned a couple of participatory elements that could provide upside to the numbers. Any chance you can sort of give us the full list or is it sort of too long to go to? What would drive upside to the 40 million from the deals that you have already struck?

Bob Sillerman

The principle one will come from in Clear channel’s case well, I’ll take a walk pretty simply. Sponsorships and media sales, we have taken a very conservative approach to, with Corona same thing. Parallel sponsorships and ticket sales, and the other two I cannot take out for you, simply because it would explain too much about what they are. But you only have a few more weeks to wonder about that or speculate about it. And it’s a broad, very comprehensive list.

Doug Mitchelson - Deutsche Bank

And then I was just sort of curious, you said $75 million over five years was the minimums on the two new deals that you are going to announce. Do those scale over time, obviously you sort of started can and go higher, is it just $50 million a year?

Bob Sillerman

Well, that’s a minimum and the participation grows as the programs roll-out.

Doug Mitchelson - Deutsche Bank

Are you willing to offer what the margin assumption is on the $40 million of partnership EBITDA for ‘14?

Bob Sillerman

Yes, that number is fundamentally an entry fee, if you will be, then from Clear Channel and Corona, is not as high but the access program is something that has been created by us with them and there is really no incremental cost on our side. So, it is at close to 100% as you can get. On the incremental, there is work to do and of course revenue sharing, so those margins will be on the 40% to 45% levels.

Doug Mitchelson - Deutsche Bank

Got it. And I know as you said at the beginning of the call, you don’t give guidance but if I just take the $23 million, $24 million of 2013 pro forma EBITDA, add the $40 million incremental new partnership EBITDA. I am just, you have talked a little bit potential for attendance growth at the festivals, Rich you mentioned that margins are low double-digits with the target of 25%. Can you talk at all about how much of that margin expansion you can achieve in ‘14 on the festival side, as we try to round out, adding up to what 2014 EBITDA might look like?

Richard Rosenstein

Sure. The low double-digit margins on the lodge side are pre-overhead as I mentioned, so this is at the event level companies. The initiatives that we have in place take us to 25% margins over the next couple of years, some we will be able to get to more immediately and some will be through efforts over the course of the next couple of years but that should steadily ramp up the 25% over the next few years. Some of the newer events that we introduced into new geographies might start-up at more modest margins than that but we are only launching them with the sense that those margins have the potential to get the 25% or better when they get to capacity and that’s initial capacity that’s not assuming that we are going to go to two weekends, three days per week and that’s how we get there with the, really with the initial plan of the event and watching that scale all the time. But that should mark steadily over the next couple of years for that.

Doug Mitchelson - Deutsche Bank

So, just to pin you down, if I heard you right, I think you said some of the existing events will have margin expansion but there are some new events that are coming at lower margin. On a net basis for 2014, should we expect some margin expansion out of live events?

Richard Rosenstein

Yes.

Doug Mitchelson - Deutsche Bank

And I am not even sort of sure how to ask this question but we understand that you are something of a non-traditional CEO but any comment you want to make on the gestures you are making or is that to a specific person or to everybody as you playing yesterday, we are just trying to make sure that you are still same?

Bob Sillerman

Thank you for referring to me as a non-traditional CEO, that was a result of an internal, the combination of an internal conversation and joke within the company. And while I certainly wasn’t crazy about the fact that it was treated out, it had a very interesting reaction from the music community as fundamentally said yeah, we got it but now I was not trying imitate Michael Jackson or Stephen Colbert talking to somebody about how much better the, our talks war in New York that was an internal thing. But it’s fairly indicative I think of the way internally that we enjoy ourselves and we are willing to push the envelope I guess it’s the best way to say it.

Doug Mitchelson - Deutsche Bank

Its okay, guys. Thank you.

Bob Sillerman

No, not [indiscernible] you weren’t concerned [indiscernible] were you?.

Doug Mitchelson - Deutsche Bank

Yes it seemed a more general than that.

Bob Sillerman

Yes.

Operator

(Operator Instructions) Our next question comes from the line of Todd Morgan with Jefferies. Please go ahead.

Todd Morgan - Jefferies

Thank you. Good morning guys nothing that exciting just was trying to get a handle on the level of pro forma cash that you guys are looking at right now I guess especially if it’s pro forma for everything that you at least announced today if you could give us any sense of that. Thank you.

Richard Rosenstein

Yes, it’s a bit over $100 million.

Todd Morgan - Jefferies

Great, thanks.

Operator

(Operator Instructions)

Richard Rosenstein

I think we have time for one more operator.

Operator

Our last question comes from the line of...

Richard Rosenstein

We can take two more, I’m sorry.

Operator

Our question comes from the line of Ben Green with BD Capital Partners LLC. Please go ahead.

Ben Green - BD Capital Partners LLC.

Hey the adjustment to get your adjusted EBITDA looks like you guys take out some of the legacy losses as a platform company what is that is that some of the shitty deals or what I guess isn’t included in that total number of 52 for the full year?

Bob Sillerman

It’s funny, I pointed at Rich and Rich pointed at me. On this I’m not sure that we have done any shitty deals and this is a very modest adjustment based on non-recurring transfers and investment and upgrades nothing more or less.

Richard Rosenstein

I would just add to that, that we folded them into our platform business so these companies have standalone businesses historically with largely technology people and that’s been created into our platform development effort. So the legacy business isn’t really not particularly relevant given the platform expense going forward.

Operator

And our last question comes from the line of Rich Tullo with Albert Fried & Company. Please go ahead.

Rich Tullo - Albert Fried & Company

Hey guys. I guess this question is for Shecky. How much was the revenue loss from Electric Zoo in the quarter, is it fair to say you could have been in the $5 million to $7 million range on revenue?

Richard Rosenstein

Yes, thanks Rich. Electric Zoo actually took place in the third quarter, so the third day that it was launched this was an event that was attended by I believe it was over about 40,000 people a day. So if you take a look at where ticket prices were and made some assumptions about what additional spending might have been on food and beverage you would get to something in that range that you described.

Rich Tullo - Albert Fried & Company

And what was the total attendance for 2013 on festivals in terms of…

Richard Rosenstein

2.5 million.

Rich Tullo - Albert Fried & Company

2.5 million, and are you...

Richard Rosenstein

And overall it’s 4 million.

Rich Tullo - Albert Fried & Company

And overall are you guys going to talk about deferred revenue or can you what is deferred revenue in the quarter?

Richard Rosenstein

It will be in our 10-K when we file that, deferred revenue is really a temporary notion in this business and it’s really whatever shows has been on sale as of the end of the period and especially end of the year through our for the upcoming period and then that deferred revenue goes away when the events take place. So we don’t have multiple years of deferred revenue which really a short term phenomenon around ticket sales for events once they go on sales.

Bob Sillerman

And there were very few of those. So I will wrap up simply by saying that I out-balled (Ph) if you heard when I said that we’ve only described 10 million of EBITDA to Clear Channel and Corona that, that is not where we expect those deals to come out. This is what is booked and known at this point I think you can expect that those deals will be at the magnitude than we originally discussed we wanted to add in the lineup consistently with the two new ones. For all of you when you’re thinking about marketing partners, EBITDAs you’re probably you’d expect that number to be not insignificantly EBIT to EBITDA, not insignificantly higher than $40 million. You are probably there not to stand back already from what reason discussed about Clear Channel and Corona you’ll really understand it when we introduce an rather fun event the access program and with the [indiscernible] we expect to announce this quarter the number could well be a lot higher, I guess that’s all that I would say so. We thank you for your support I know that previously was a level of frustration that the marketing partnerships were not as visible and there was a question mark as to whether it was achievable, pretty nice to be sitting here in March having already achieved it. We appreciate your interest and support and looking forward to connecting as time permits. Finally I give Shecky a 6.3 on that, he’s working on it. Thanks everybody.

Operator

Ladies and gentlemen that does conclude the conference call for today, we thank you for your participation and I’ll say you please disconnect your lines, have a good day everyone.

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