Madison Square Garden Entertainment Corporation (NYSE:MSGE) Q3 2024 Earnings Call Transcript May 10, 2024
Madison Square Garden Entertainment Corporation wasn't among the 30 most popular stocks among hedge funds at the end of the third quarter (see the details).
operator: good morning. Thank you for joining us for Madison Square Garden Entertainment Corporation's fiscal 2024 third quarter earnings conference call. All participants are currently in listen-only mode. There will be a question and answer session after the speakers' statements. I would now like to turn the call over to Ali Daines, Senior Vice President of Investor Relations and Finance. Please move on.
Ali Danes: thank you. good morning. Welcome to MSG Entertainment's Q3 2024 Earnings Conference Call. On today's call, Mike Grau, our Vice President and Chief Financial Officer, will provide an update on the company's operations and review our financial results for the quarter. After the prepared remarks, we will begin the question and answer session. During the Q&A, the EVP and Treasurer will be joined by Phil D'Ambrosio. If you do not have a copy of today's earnings release, you may obtain one from the Investor section of our website. Please note the following points. Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual results to differ materially. In forward-looking statements.
For a discussion of risks and uncertainties, please refer to the company's filings with the SEC. The Company undertakes no obligation to update any forward-looking statements that may be discussed during this call. Pages 5 and 6 of today's earnings release provide a consolidated statement of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. Now switch your phone to the microphone.
Mike Grau: Thank you, Ali, and good morning everyone. I would like to start the call by saying that I am very happy to be able to meet with you today. MSG Entertainment has a very strong portfolio of assets and a great team, and I am honored and excited to work with everyone to ensure the company achieves our key business objectives. I am very grateful for this opportunity and very optimistic about the future. Along these lines, we have less than two months left in our first full year as an independent public company. Thanks to our strong performance, we remain on track to deliver solid growth into his fiscal year 2024. Indeed, the strong performance is such that this has increased full-year revenue, his AOI outlook continued in February, and he is now updating his financial forecast for fiscal year 2024, which includes an increase in the expected AOI range for the current fiscal year. Updating. More on this later.
Two main areas drive this financial performance. First, the Christmas Spectacular's 90th holiday season run, which ended in January, led to another year of record earnings for the production. And second, our reservations business continues to grow and we expect to achieve low double-digit event growth rates in 2024. This includes increased all-venue deals with Garden and Radio City, both of which are working towards setting new records. For several concerts a year. Due to our strong financial results, we were able to repurchase a significant amount of Class A shares this fiscal year. And looking forward, we are confident that our business is positioned to continue creating long-term value for our shareholders.
So let's review some operational highlights from the third quarter. During the quarter, our venue portfolio hosted more than 1.5 million guests at more than 200 live events. The majority of these events were driven by our booking business, resulting in a double-digit percentage increase in total concerts compared to the same period last year. This increase was primarily due to a strong multi-night comedy schedule. This includes a total of 55 nights at Radio City, Beacon, Chicago Theater with John Oliver, Seth Meyers, Tina Fey, Amy Polo, Jerry Seinfeld, Ali Wong and more . We are also pleased that the volume of events at our venues continues to increase and this is consistent with strong demand. The majority of concerts at the venue were sold out in the third quarter as well.
Single-night suite sales increased significantly, and concert food, beverage, and merchandise per cap spending again increased year-over-year. Also during the third quarter, the Knicks and Rangers continued their 2023 and 2024 regular seasons at the Garden. This includes his five more home games for the Knicks this year compared to the same period last year. In addition to these additional matchups, the Knicks and Rangers games will follow the same trend seen in other live events, increasing his average revenue per game from food, beverage, and merchandise sales. did. We also saw continued demand for our premium hospitality services. As previously discussed, The Garden has introduced his two new suite products this year: Event Level Suites and Luxury Event Level Club Spaces.
I already mentioned that we signed a multi-year deal for our Event Level Suite earlier this year. In addition to that, our event level club space is currently close to being sold out and we have begun adding more seating to accommodate the interest in this premium hospitality activity. Before we discuss our financial results, I would like to make a few points regarding presentation and comparability. First, note that we have revised the definition of adjusted operating income in connection with the arena license fee with MSG Sports. We do not eliminate the non-cash portion of arena license fees in our reconciliation of operating income and adjusted operating income. This is reflected in our financial results and financial guidance for all periods reported today.
You may recall that arena license fees are recognized on a straight-line basis over the 35-year term of the agreement. This equates to approximately $68 million annually. His $68 million in fiscal year 2024 consists of approximately $43 million in cash income and $25 million in non-cash income. The Company will continue to disclose the non-cash portion of Arena His license fees on a quarterly basis. And second, because we completed our spin-off from Sphere Entertainment last April, our fiscal third quarter results are not fully comparable year-over-year. Our results for the prior year period were based on carve-out accounting and did not reflect all of the selling, administrative and administrative expenses that we would incur, and we were an independent public company.
Turning now to financial results, revenue for the third quarter of fiscal 2024 was approximately $228 million, an increase of 13% compared to the same period last year. This reflects growth across his three revenue categories of entertainment products. Food, Beverage, Merchandise and Arena License Fees. Revenue from Entertainment increased primarily due to higher revenue from concert and suite license fees, partially offset by the absence of the NCAA East Regional Tournament held at The Garden in the prior year period it was done. The increase in food and beverage revenue was primarily due to an increase in the number of concerts held at our venues and the impact of the addition of five Knicks games at The Garden during the quarter.
This was partially offset by lower food and beverage revenue by concept, reflecting a mix shift to hosting more concerts in our theaters during the quarter. Additionally, the increase in arena license fees reflects the impact of five additional Knicks games in the quarter compared to the previous quarter. Previous year period. Adjusted operating income for the third quarter was $38.5 million, a decrease of $11.6 million compared to the previous quarter. These AOI results include non-cash arena license fees of $13.2 million in the quarter, compared to his $12.1 million in the prior year period. The decrease in AOI was primarily due to an increase in selling, general and administrative expenses. Additionally, as I mentioned earlier, SG&A expenses for the third quarter are not completely comparable with the same period last year. Moving on to our outlook for fiscal 2024, we are updating our outlook for fiscal 2024 based on the positive momentum in our business.
The company now expects revenues of $940 million to $950 million, compared to its previous revenue range of $930 million to $950 million. The midpoint of this updated range reflects an 11% revenue increase compared to fiscal year 2023. The company also expects full-year operating income to be between $100 million and $110 million, compared with $95 million to $105 million previously. And adjusted operating income is now expected to be between $200 million and $210 million. This is an increase from the previous range of $195 million to $205 million if both the previous and updated guidance were adjusted to no longer remove the $25 million non-cash portion of the arena license fee. Compare with dollars. Let's take a look at the balance sheet. As of March 31, we had approximately $28 million in unrestricted cash. In addition, our outstanding debt is approximately $630 million, consisting of single term financing facilities with approximately $4 million of principal repayments required each quarter.
Going forward, we remain focused on our dual capital allocation priorities of returning capital to shareholders and repaying debt. Since our separation last year, we have repurchased approximately $140 million, or approximately 10%, of our outstanding Class A shares. Under the current repurchase authorization, $110 million remains. In addition, from the end of the quarter to the end of April, we sold approximately 1.6 million shares of Townsquare Media stock for approximately $15.6 million in net proceeds. This is as we continue to build up our cash balance following our share buyback and debt repayment activities earlier this year. fiscal year. In summary, we had a quarter that reflected the strength of our assets and solid demand for our business.
And as we near the end of our first full year as an independent company, we continue to deliver unforgettable experiences for our consumers and deliver compelling growth into fiscal 2024. . Now, I'll turn the phone back to Ali.
Ali Danes: Thank you, Mike. Operator, may we begin accepting questions?
See also
20 best long-lasting lipsticks
The 12 best large-cap growth ETFs.
To continue reading the Q&A session, click here.