Madison Square Garden Entertainment Corp. (NYSE:MSGE) Q2 2024 Earnings Call Transcript
Madison Square Garden Entertainment Corp. (NYSE:MSGE) Q2 2024 Earnings Call Transcript February 7, 2024
Madison Square Garden Entertainment Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2024 Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Ari Danes, Senior Vice President, Investor Relations and Treasury. Please go ahead.
Ari Danes: Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2024 second quarter earnings conference call. On today's call, Phil D'Ambrosio, our EVP and Treasurer, and our Interim Principal Financial Officer will provide an update on the company's operations. I will then conclude with a review of our financial results for the period. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors section of our corporate website. Please take note of the following. Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On Pages 4 and 5 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. And with that, I'll now turn the call over to Phil.
Phil D'Ambrosio: Thank you, Ari, and good morning, everyone. With the first half of the fiscal year behind us, we remain on track to generate robust revenue and AOI growth for fiscal '24. We continued to benefit from strong demand for shared in-person experiences, most notably across our bookings business and the Christmas Spectacular Production. On the bookings front, we believe we're well positioned to achieve a low-double-digit percentage increase in events for fiscal '24. Four of our venues are on track to exceed our initial expectations for concerts this year, including The Garden, which is on pace to set a new record for the number of concerts at the arena on a full year basis. And last month, the Christmas Spectacular successfully completed its 90th holiday season.
The production delivered another year of record-setting revenues with over 1 million tickets sold, which represents a return to pre-pandemic attendance levels. As a result of the positive momentum across our operations, we are now increasing our financial targets for fiscal '24, which Ari will discuss later in more detail. In addition, the strength of our business has also enabled us to make progress on our capital allocation priorities of opportunistically returning capital to shareholders and debt paydown. Since our spin-off last April, we have repurchased approximately $140 million, or about 10% of our outstanding Class A shares. And in the most recent quarter, we fully paid down the remaining balance on our revolving credit facility, which as you may recall, we had drawn upon in September primarily to facilitate a repurchase of our shares.
Now let's review second quarter operational highlights. Across our portfolio of venues, we hosted nearly 450 live entertainment and sporting events and over 2.7 million guests in our second quarter. Our bookings business generated robust growth on a year-over-year basis, led by increases in the number of concerts and family shows held at our venues. One of the key drivers of concert growth was our continued efforts to increase our number of multi-night shows. For example, in the fiscal second quarter, we welcomed comedians Trevor Noah and Nate Bargatze, who combined accounted for 23 sold-out nights across Radio City, the Beacon, and The Chicago Theatre. These shows, along with numerous other multi-night performances, helped drive a double-digit percentage increase in total concerts versus the prior year's quarter.
Furthermore, this robust supply of concerts across our venues was once again met by strong consumer demand, with the majority of concerts selling out during the quarter. In addition to concerts, family shows were an important contributor to event growth. After last taking place in 2021 with a shortened run due to the pandemic, we welcomed back Cirque du Soleil's holiday show, Twas the Night Before, to the theater at MSG and The Chicago Theatre for a total of 56 performances. While family shows have lagged other categories such as concerts, coming out of the pandemic we were pleased to see strong demand for Cirque's holiday run, which led to results that meaningfully exceeded our expectations in both markets. During the quarter, we also saw the start of the Knicks and Rangers 2023-'24 regular seasons at the Garden.
I would note that as a result of this year's schedules, the Knicks and the Rangers played a combined nine fewer home games this past quarter as compared to the prior year's second quarter. This timing impact will reverse over the balance of the fiscal year. Turning to this holiday season's successful Christmas Spectacular Production. While we initially planned for 185 performances, we ended up increasing the number of shows to 193 in light of strong ticket demand. This compared to 181 shows last year. As I mentioned, we sold over 1 million tickets across seven weeks of performances. We saw healthy demand across group and individual ticket sales, both of which benefited in part from the continued improvement in tourism to New York City. Groups were particularly strong with an over 40% increase in sales as compared to last year as this category bounced back post-pandemic.
Average per-show revenue increased a mid-single-digit percentage versus fiscal '23, driven by both higher average ticket prices and higher sell-through as well as higher food, beverage and merchandise per capita spending. Despite the significant increase in group ticket sales, which carry lower prices, we were able to increase our overall average ticket price by leveraging dynamic pricing during peak periods and substantially reducing the sale of discounted individual tickets. All of these factors, the increase in shows, higher average ticket revenue, and higher ancillary spending led to the Christmas Spectacular generating nearly $150 million in revenues this year. A new record for the production and a testament to the show's enduring popularity.
Turning to marketing partnerships and premium hospitality. Coming out of the pandemic, we successfully renewed many of our key marquee and signature partners, which represent the majority of our sponsorship revenue. We also continue to make progress in transitioning our sponsorship sales efforts to Oak View Group's Crown Properties Collection and remain confident about the longer-term growth opportunity for this business. In terms of premium hospitality, our two new suite products at the Garden, an event-level suite and a luxury event-level club space, have been well received. We've already secured a multi-year agreement for the event-level suite, while the event-level club is nearly sold out. In summary, our fiscal second quarter was a reflection of the strong demand we continue to see in our business, leaving us increasingly confident in our ability to deliver robust growth this fiscal year and to generate long-term value for our shareholders.
Before I turn the call over to Ari, I would like to welcome Michael Grau, who is joining the company as Executive Vice President of Finance and will then assume the responsibilities of Chief Financial Officer on April 1. Mike, is a seasoned leader with decades of financial and operating experience and will help us continue to drive our business priorities forward. With that, I will now turn the call over to Ari.
Ari Danes: Thank you, Phil. As you know, our company completed its spin-off from Sphere Entertainment in April of last year. As a result, our fiscal second quarter results are not fully comparable on a year-over-year basis. Results for the prior year quarter are based on carve-out accounting and do not reflect all of the SG&A expenses we would have incurred had we been a standalone public company. For the fiscal 2024 second quarter, we reported revenues of $402.7 million, an increase of $46.8 million, or 13% as compared to the prior-year quarter. The increase in revenues was primarily driven by higher event-related revenues, which reflects the increase in the number of events at our venues and to a lesser extent, higher average revenue per event.
The increase in overall revenues also reflects growth from the Christmas Spectacular Production, primarily due to higher ticket-related revenues. This was driven by higher per-show revenue and to a lesser extent, nine additional performances as compared to the prior year quarter. Second quarter adjusted operating income of $151 million increased by $24.7 million as compared to the prior-year quarter. This increase primarily reflects the year-over-year increase in revenues, partially offset by an increase in direct operating expenses and to a lesser extent, higher SG&A expenses. And as I just mentioned, second quarter SG&A expenses are not fully comparable on a year-over-year basis. Moving on to our fiscal '24 outlook. Given the strong performance of our business, along with the visibility we now have into the remainder of the year, we are increasing our financial guidance for fiscal '24.
We now expect revenues of between $930 million and $950 million, up from between $900 million and $930 million. The midpoint of our revised range now reflects 10% revenue growth versus fiscal 2023. We also expect operating income for the year of between $95 million and $105 million versus our prior range of $85 million to $95 million. And adjusted operating income is now expected to be between $170 million and $180 million versus $160 million to $170 million previously. With respect to our fiscal third quarter, we expect results to reflect strong ongoing performance in concert bookings, offset by the absence of the NCAA tournament at the Garden this year, the positive timing of Knicks and Rangers games at the arena versus the prior year quarter and the continued impact of our new corporate office lease.
Turning to our balance sheet. As of December 31st, we had approximately $35 million of unrestricted cash and our debt balance was approximately $634 million. These balances reflect the repayment of $90 million, or the remaining outstanding balance under our revolving credit facility during the quarter. As Phil mentioned, we remain focused on our dual capital allocation priorities of opportunistically returning capital to shareholders and debt paydown. And as a reminder, we continue to have $110 million remaining under our current buyback authorization. With that, operator, can we now open up the call for questions?
See also Analysts on Wall Street Lower Ratings for These 10 Stocks and 25 Countries where Muslim Population will Increase the Most by 2030.
To continue reading the Q&A session, please click here.
