SFX Entertainment, the country’s leading live music and sports promoter, beat analyst expectations Tuesday by reporting a tenfold increase in revenues and equally impressive gains after covering fixed costs.
Cash flow, or earnings before interest, taxes, depreciation and amortization, climbed 452% to $18.2 million as revenues topped $230 million.
Meanwhile, SFX posted a net loss of $39.6 million — a consequence of higher depreciation charges, interest expense and other costs associated with rapid growth — compared with a profit of $1.8 million in the year-earlier quarter.
The company, headed by former radio magnate Robert F. X. Sillerman, has been on a yearlong billion-dollar acquisition binge to build an empire that already comprises 47 venues and an array of enterprises to book, market and manage those venues.
Along the way, SFX has drawn the ire of USA Networks chief Barry Diller, who as the proprietor of Ticketmaster, has been challenging Sillerman’s veracity, most recently this week in the Wall Street Journal.
Any concern caused by Diller, however, appears to have been placated by SFX’s second-quarter results.
“SFX’s 12-month trailing cash flow is already ahead of my projection for all of 1998,” said Frank Bodenchak, an entertainment analyst at Morgan Stanley. And the outlook is such that Bodenchak is sticking with his “strong buy” recommendation, even in this market.
Behind Wall Street’s optimism is the potential for additional revenue streams ascribed to what is the country’s only nationwide concert promotion firm.
Sillerman himself has promised to provide, in the very near future, details of “over $500 million in incremental revenue proposals.”
Although it’s premature, such proposals are expected to include such high-margin maneuvers as selling the name of venues such as the PNC Arts Center, for-merly known as the Garden State Arts Center.