INSIDE SFX: Financial Filings Reveal A Deeply Troubled Company
According to detailed financials made public as part the SFX Entertainment bankruptcy proceedings, the troubled promoter fell well short of expectations. At the beginning of 2015, its guidance was $500,000 of revenue with earnings of $60-70 million. Instead, 2015 revenue was $336.9 million – the same as 2014 – with a loss of $18 million.
The 2015 figures include estimates for the fourth quarter and are not final numbers.
The SEC filing makes clear why SFX filed for bankruptcy protection and agreed to undergo a restructuring. Months ago, SFX expected to have a negative cash balance of $29.9 million in January after interest payment and earnouts totaling $28 million. By March, it expected to have a negative cash balance of $33.1 million — over $58 million under management`s preferred $20 million cash buffer.
The financial information for 2014 and 2015 — the fourth quarter is an estimate — provides far more details than the income and expenses provided in quarterly earnings statements. The information was shared with various parties in November in discussions that led to the restructuring agreement that led to SFX filing for Chapter 11 bankruptcy protection. Those parties agreed to a confidentiality agreement which expired on February 1.
North American live events generated $140 million in revenue in both 2014 and 2015, but losses more than doubled, from $5 million to $13.2 million. Other live events segments, including international live events and ticketing, had positive earnings in 2015
One of the company portfolio`s stars, Beatport, also lost money. Acquired for $50 million in February 2013 and touted as "the all-in-one hub for everything EMC," or electronic music culture, the download and streaming service saw its revenue fall from $46.5 million in 2014 to $39.1 million last year. Due to the drop in revenue and a surge in salaries and general expenses, from $11.2 million to $18.7 million, Beatport went from $7.1 million in earnings in 2014 to a $5.5 million loss last year.
Sponsorships were supposed to be key to SFX`s business model. Brands would work with SFX because they wanted EDM`s young consumers. But global partnerships amounted to just $8 million in 2014 and actually dropped last year, to $7.3 million — 1.8 percent of SFX`s total revenue. As a point of comparison, Live Nation`s sponsorships and advertising division accounted for 4.7 percent of its revenue in the first nine months of the year.
Finally, the "other" category, a catchall that includes digital agency Fame House, had revenue of $6.3 million in a loss of $6.8 million in 2014. In 2015 it had revenue of $11.1 million and a loss of just $622,000.