MADISON SQUARE GARDEN ENTERTAINMENT CORP. REPORTS FISCAL 2024 SECOND QUARTER RESULTS
- 10% increase in FY24 revenue to $930-950 million
- 13% increase in revenues for the fiscal 2024 second quarter
- Record-setting revenues for the Christmas Spectacular production
- Over one million tickets sold for the Christmas Spectacular
- On track for a low double-digit percentage increase in events in FY2024
- None.
Insights
The announcement by Madison Square Garden Entertainment Corp. regarding the increase in FY24 revenue and operating income projections reflects a positive trajectory for the company's financial performance. The uptick in revenue by 13% to $402.7 million for the fiscal second quarter and the corresponding increase in operating income and adjusted operating income by 21% and 20% respectively, are indicative of strong operational efficiency and effective cost management. The reported growth in event-related revenues, particularly from the Christmas Spectacular production, suggests a successful recovery to pre-pandemic levels of consumer demand for live events. The increase in bookings business is also a promising sign for sustained revenue generation.
However, it is important to scrutinize the decline in advertising sales commissions and the decrease in arena license agreements with MSG Sports. These reductions could potentially signal vulnerabilities in certain revenue streams that may need strategic attention. Investors should also consider the impact of the termination of the advertising sales representation agreement with MSG Networks and the implications for future advertising revenue. Overall, the guidance increase is a robust indicator of the company's confidence in its business model, yet the reliance on live events necessitates close monitoring of market trends and consumer behavior.
The live entertainment sector, as evidenced by MSG Entertainment's performance, appears to be experiencing a resurgence, with consumers returning to in-person events post-pandemic. The over one million tickets sold for the Christmas Spectacular production underscore a significant consumer appetite for live experiences. With the company's bookings business on track for a low double-digit percentage increase in events for FY2024, it is evident that the live events industry is gaining momentum. This is likely driven by a broader industry trend where audiences are seeking shared experiences, which bodes well for other players in the sector.
Nonetheless, the decrease in revenues from arena license agreements and advertising sales commissions should prompt industry stakeholders to diversify their revenue streams to mitigate risks associated with any single source. The sector's growth prospects may attract new entrants and intensify competition, which could influence market dynamics. Companies within this industry must remain agile and innovative to maintain growth and market share in an increasingly competitive environment.
The reported financial results of MSG Entertainment can be seen as a microcosm of the broader economic recovery post-pandemic, particularly in the discretionary spending category. The substantial increase in live event attendance and the consequent financial performance are in line with the consumer confidence rebound. This economic indicator suggests that discretionary spending is robust, which is critical for businesses that rely on non-essential consumer spending, such as entertainment and leisure industries.
However, the company's financial results also highlight the importance of operational adaptability in the face of external challenges, such as the fewer Knicks and Rangers games impacting revenue from arena license agreements. As the economy continues to recover, businesses that can swiftly adapt to changing conditions, like MSG Entertainment has shown with its increased event bookings, are likely to outperform. The long-term implications for stakeholders include the need for sustained investment in customer experience and strategic diversification to capitalize on economic tailwinds while cushioning against potential headwinds.
FY24 Revenue Range Increased to
FY24 Operating Income Range Increased to
Record-Setting Revenues for Christmas Spectacular Production, With Over One Million Tickets Sold
Bookings Business Remains On Track to Deliver Low Double-Digit Percentage Increase in Events in FY2024
The fiscal 2024 second quarter was highlighted by the Christmas Spectacular production's record-setting holiday season run and robust growth across the Company's bookings business. After extending its run by 8 performances due to strong demand, the Christmas Spectacular concluded its 90th holiday season in early January with over one million tickets sold across 193 shows, marking a return to pre-pandemic attendance levels. In addition, the Company hosted a busy schedule of events across its portfolio of venues and remains well-positioned to achieve a low double-digit percentage increase in the number of bookings events in fiscal 2024.
Financial results for the three and six months ended December 31, 2023 reflect the Company on a fully standalone basis. Results for the three and six months ended December 31, 2022, which were prior to the spin-off from Sphere Entertainment Co. ("Sphere Entertainment"), are presented in accordance with generally accepted accounting principles ("GAAP") for the preparation of carve-out financial statements. These prior year results do not include all of the expenses that would have been incurred by MSG Entertainment had it been a standalone company for the periods presented. Therefore, results for the three and six months ended December 31, 2023 are not fully comparable with results for the prior year period.
For the fiscal 2024 second quarter, the Company reported revenues of
Executive Chairman and CEO James L. Dolan said, "We continue to see robust demand for our portfolio of live entertainment offerings, which led to record results for this year's Christmas Spectacular production. Looking ahead, we remain on track to deliver solid growth in fiscal '24 and believe we are well positioned to generate long-term value for shareholders."
Results for the Three and Six Months Ended December 31, 2023 and 2022: | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | Change | December 31, | Change | |||||||||||||
$ millions | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | ||||||||
Revenues | $ 402.7 | $ 355.9 | $ 46.8 | 13 % | $ 544.9 | $ 502.3 | $ 42.5 | 8 % | ||||||||
Operating income | $ 137.4 | $ 113.4 | $ 24.0 | 21 % | $ 104.0 | $ 102.1 | $ 1.9 | 2 % | ||||||||
Adjusted Operating Income(1) | $ 151.0 | $ 126.3 | $ 24.7 | 20 % | $ 150.2 | $ 137.8 | $ 12.4 | 9 % | ||||||||
Note: Amounts may not foot due to rounding. NM — Absolute percentages greater than | |
(1) | See page 3 of this earnings release for the definition of adjusted operating income (loss) ("AOI") included in the discussion of non-GAAP financial measures. |
Summary of Reported Results of Operations for the Fiscal 2024 Second Quarter
For the fiscal 2024 second quarter, the Company reported revenues of
The increase in revenues was partially offset by a decrease in advertising sales commissions of
Fiscal 2024 second quarter direct operating expenses of
Fiscal 2024 second quarter selling, general and administrative expenses of
Fiscal 2024 second quarter operating income of
Financial Guidance
As a result of the positive momentum across its operations, the Company is increasing its fiscal 2024 guidance for revenues, operating income and adjusted operating income. The Company currently expects the following:
- Revenues of
$930 million $950 million - Operating income of
$95 million $105 million - Adjusted operating income of
$170 million $180 million
An updated version of the MSG Entertainment investor presentation is now available at investor.msgentertainment.com.
(2) See appendix for a reconciliation of operating income to adjusted operating income for fiscal 2024 financial guidance.
About Madison Square Garden Entertainment Corp.
Madison Square Garden Entertainment Corp. (MSG Entertainment) is a leader in live entertainment, delivering unforgettable experiences while forging deep connections with diverse and passionate audiences. The Company's portfolio includes a collection of world-renowned venues –
Non-GAAP Financial Measures
We define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) excluding (i) the impact of non-cash straight-line leasing revenue associated with the arena license agreements with MSG Sports, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) share-based compensation expense or benefit, (iv) restructuring charges or credits, (v) merger, spin-off, and acquisition-related costs, including litigation expenses, (vi) gains or losses on sales or dispositions of businesses and associated settlements, (vii) the impact of purchase accounting adjustments related to business acquisitions, (viii) gains and losses related to the remeasurement of liabilities under the executive deferred compensation plan, and (ix) amortization for capitalized cloud computing arrangement costs. We believe that given the length of the arena license agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. We believe that this adjustment is beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Sports. In addition, this adjustment is included under the Company's debt covenant compliance calculations and is a component of the performance measures used to evaluate, and compensate, senior management of the Company. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to the settlement of an obligation that is not expected to be made in cash. We eliminate merger, spin-off, and acquisition-related costs, when applicable, because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the executive deferred compensation plan, provides investors with a clearer picture of the Company's operating performance given that, in accordance with
We believe adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company on a consolidated and combined basis. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and adjusted operating income (loss) as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of operating income (loss) to adjusted operating income (loss), please see page 5 of this release.
Forward-Looking Statements
This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments or events may differ materially from those in the forward-looking statements as a result of various factors, including financial community perceptions of the Company and its business, operations, financial condition and the industries in which it operates and the factors described in the Company's filings with the Securities and Exchange Commission, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.
Contacts:
Ari Danes, CFA
Senior Vice President, Investor Relations, Financial Communications & Treasury
Madison Square Garden Entertainment Corp.
(212) 465-6072
Justin Blaber
Vice President, Financial Communications
Madison Square Garden Entertainment Corp.
(212) 465-6109
Grace Kaminer
Vice President, Investor Relations & Treasury
Madison Square Garden Entertainment Corp.
(212) 631-5076
Conference Call Information:
The conference call will be Webcast live today at 10:00 a.m. ET at investor.msgentertainment.com
Conference call dial-in number is 888-660-6386 / Conference ID Number 8020251
Conference call replay number is 800-770-2030 / Conference ID Number 8020251 until February 14, 2024
MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) | ||||||||
Three Months | Six Months | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Revenues | $ 402,666 | $ 355,880 | $ 544,878 | $ 502,332 | ||||
Direct operating expenses | (202,761) | (180,603) | (304,438) | (282,265) | ||||
Selling, general, and administrative expenses | (48,389) | (43,301) | (97,211) | (83,415) | ||||
Depreciation and amortization | (13,205) | (15,586) | (26,789) | (31,571) | ||||
Gains, net on dispositions | — | 4,412 | — | 4,412 | ||||
Restructuring charges | (888) | (7,359) | (12,441) | (7,359) | ||||
Operating income | 137,423 | 113,443 | 103,999 | 102,134 | ||||
Interest income | 1,083 | 1,812 | 1,935 | 3,322 | ||||
Interest expense | (15,049) | (13,205) | (29,336) | (24,632) | ||||
Other income (expense), net | 2,846 | (2,172) | (1,625) | (1,286) | ||||
Income from operations before income taxes | 126,303 | 99,878 | 74,973 | 79,538 | ||||
Income tax expense | (1,054) | (2,797) | (395) | (731) | ||||
Net income | 125,249 | 97,081 | 74,578 | 78,807 | ||||
Less: Net loss attributable to nonredeemable noncontrolling interest | — | (181) | — | (553) | ||||
Net income attributable to MSG Entertainment's stockholders | $ 125,249 | $ 97,262 | $ 74,578 | $ 79,360 | ||||
Income per share attributable to MSG Entertainment's stockholders: | ||||||||
Basic | $ 2.61 | $ 1.88 | $ 1.52 | $ 1.53 | ||||
Diluted | $ 2.59 | $ 1.88 | $ 1.52 | $ 1.53 | ||||
Weighted-average number of shares of common stock: | ||||||||
Basic | 48,029 | 51,768 | 48,955 | 51,768 | ||||
Diluted | 48,293 | 51,768 | 49,168 | 51,768 | ||||
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)
(in thousands)
(Unaudited)
The following is a description of the adjustments to operating income in arriving at adjusted operating income as described in this earnings release:
- Non-cash portion of arena license fees from MSG Sports. This adjustment removes the impact of non-cash straight-line leasing revenue associated with the arena license agreements with MSG Sports.
- Depreciation and amortization. This adjustment eliminates depreciation and amortization of property and equipment and intangible assets in all periods.
- Share-based compensation. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under the Company's Employee Stock Plan, Sphere Entertainment's Employee Stock Plan, the Company's Non-Employee Director Plan and Sphere Entertainment's Non-Employee Director Plan in all periods.
- Restructuring charges. This adjustment eliminates costs related to termination benefits provided to certain corporate executives and employees.
- Merger, spin-off, and acquisition-related costs. This adjustment eliminates costs related to mergers, spin-offs and acquisitions, including merger-related litigation expenses, in all periods.
- Amortization for capitalized cloud computing arrangement costs. This adjustment eliminates amortization of capitalized cloud computing arrangement costs.
- Remeasurement of deferred compensation plan liabilities. This adjustment eliminates the impact of gains and losses related to the remeasurement of liabilities under the executive deferred compensation plan.
Three Months Ended | Six Months Ended | |||||||
$ thousands | 2023 | 2022 | 2023 | 2022 | ||||
Operating income | $ 137,423 | $ 113,443 | $ 103,999 | $ 102,134 | ||||
Non-cash portion of arena license fees from MSG Sports(1) | (9,120) | (12,410) | (9,615) | (12,929) | ||||
Depreciation and amortization | 13,205 | 15,586 | 26,790 | 31,571 | ||||
Share-based compensation (excluding share-based compensation in restructuring charges) | 7,773 | 6,555 | 13,950 | 13,965 | ||||
Gains, net on dispositions | — | (4,412) | — | (4,412) | ||||
Restructuring charges | 888 | 7,359 | 12,441 | 7,359 | ||||
Merger, spin-off, and acquisition-related costs(2) | — | — | 2,035 | — | ||||
Amortization for capitalized cloud computing arrangement costs | 448 | 29 | 448 | 104 | ||||
Remeasurement of deferred compensation plan liabilities | 343 | 160 | 198 | 6 | ||||
Adjusted operating income | $ 150,960 | $ 126,310 | $ 150,246 | $ 137,798 | ||||
(1) | This adjustment represents the non-cash portion of operating lease revenue related to the Company's Arena License Agreements with MSG Sports. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Operating income on a GAAP basis includes lease income of (i) | ||||||||||||||||||
(2) | This adjustment represents non-recurring costs incurred and paid by the Company for the sale of the retained interest by Sphere Entertainment Co. | ||||||||||||||||||
MADISON SQUARE GARDEN ENTERTAINMENT CORP. | ||||
(in thousands) | ||||
December 31, | June 30, | |||
ASSETS | ||||
Current Assets: | ||||
Cash, cash equivalents, and restricted cash | $ 37,572 | $ 84,355 | ||
Accounts receivable, net | 101,955 | 63,898 | ||
Related party receivables, current | 41,318 | 69,466 | ||
Prepaid expenses and other current assets | 69,408 | 77,562 | ||
Total current assets | 250,253 | 295,281 | ||
Non-Current Assets: | ||||
Property and equipment, net | 626,172 | 628,888 | ||
Right-of-use lease assets | 310,219 | 235,790 | ||
Goodwill | 69,041 | 69,041 | ||
Intangible assets, net | 63,801 | 63,801 | ||
Other non-current assets | 100,789 | 108,356 | ||
Total assets | $ 1,420,275 | $ 1,401,157 | ||
LIABILITIES AND RETAINED EARNINGS (DEFICIT) | ||||
Current Liabilities: | ||||
Accounts payable, accrued and other current liabilities | $ 197,256 | $ 214,725 | ||
Related party payables, current | 52,677 | 47,281 | ||
Long-term debt, current | 16,250 | 16,250 | ||
Operating lease liabilities, current | 35,539 | 36,529 | ||
Deferred revenue | 236,349 | 225,855 | ||
Total current liabilities | 538,071 | 540,640 | ||
Non-Current Liabilities: | ||||
Long-term debt, net of deferred financing costs | 605,685 | 630,184 | ||
Operating lease liabilities, non-current | 310,952 | 219,955 | ||
Deferred tax liabilities, net | 24,070 | 23,518 | ||
Other non-current liabilities | 43,544 | 56,332 | ||
Total liabilities | 1,522,322 | 1,470,629 | ||
Commitments and contingencies | ||||
Deficit: | ||||
Class A Common Stock (a) | 455 | 450 | ||
Class B Common Stock (b) | 69 | 69 | ||
Additional paid-in-capital | 25,339 | 17,727 | ||
Treasury stock at cost (4,365 and 840 shares outstanding as of December 31, 2023 and June 30, 2023, respectively) | (140,512) | (25,000) | ||
Retained earnings (deficit) | 45,881 | (28,697) | ||
Accumulated other comprehensive loss | (33,279) | (34,021) | ||
Total deficit | (102,047) | (69,472) | ||
Total liabilities and deficit | $ 1,420,275 | $ 1,401,157 | ||
(a) | Class A Common Stock, | |||||||||
(b) | Class B Common Stock, | |||||||||
MADISON SQUARE GARDEN ENTERTAINMENT CORP. (in thousands) (Unaudited) | ||||
Six Months Ended | ||||
December 31, | ||||
2023 | 2022 | |||
Net cash provided by operating activities | $ 105,232 | $ 69,336 | ||
Net cash (used in) provided by investing activities | (62,731) | 22,390 | ||
Net cash used in financing activities | (89,284) | (553) | ||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (46,783) | 91,173 | ||
Cash, cash equivalents, and restricted cash, beginning of period | 84,355 | 62,573 | ||
Cash, cash equivalents, and restricted cash, end of period | $ 37,572 | $ 153,746 | ||
MADISON SQUARE GARDEN ENTERTAINMENT CORP. FISCAL 2024 FINANCIAL GUIDANCE ADJUSTMENTS TO RECONCILE OPERATING INCOME TO ADJUSTED OPERATING INCOME (in millions) | ||
Fiscal Year 2024 | ||
Operating income | ||
Non-cash portion of arena license fees from MSG Sports | (25) | |
Depreciation and amortization | 55 | |
Share-based compensation | 30 | |
Restructuring charges | 13 | |
Merger, spin-off and acquisition-related costs | 2 | |
Adjusted operating income | ||
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SOURCE Madison Square Garden Entertainment Corp.
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