管理層發言
Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corporation Fiscal 2024 Third Quarter Earnings Conference Call. At this time, all participants are in a 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.
Thank you. Good morning and welcome to MSG Entertainment's fiscal 2024 third quarter earnings conference call. On today's call Mike Grau, our EVP and Chief Financial Officer will provide an update on the company's operations and review our financial results for the quarter. After our prepared remarks, we will open up the call for questions. During Q&A, we will also be joined by Phil D'Ambrosio, our EVP and Treasurer. 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 5 and 6 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 Mike.
Thank you, Ari, and good morning everyone. I'd like to start the call by saying how pleased I am to be joining you today. MSG Entertainment has a really strong portfolio of assets and a great team and I feel privileged and excited to be working with everyone to ensure the company delivers on our key business objectives. I'm certainly very grateful for the opportunity and also very optimistic about our future prospects. Along those lines, there are less than two months left in our first full year as a stand-alone public company and thanks to our strong results, we remain on track to deliver robust growth for fiscal 2024. In fact, a strong operating performance that led us to increase our full year revenue and AOI guidance in February has continued, and we are now updating our financial forecast for fiscal 2024, including an increase to our expected AOI range for the year, which I will discuss in more detail shortly.
Two main areas are driving this financial performance. First, the Christmas Spectacular 90th Holiday Season Run, which ended in January delivered yet another year of record-setting revenues for the production. And second, our booking business has continued to grow and remains set to achieve a low double-digit percentage increase in events for fiscal 2024. This includes contract growth across all of our venues with the Garden and Radio City, both headed towards setting new records for the number of concerts in the year. The strength of our financial results has enabled us to repurchase a substantial amount of our Class A shares for this fiscal year. And as we look ahead, we remain confident that our business is positioned to continue generating long-term value for our shareholders. Let's now review some Q3 operational highlights. During the quarter, our portfolio of venues hosted more than 1.5 million guests at over 200 live events.
A majority of these events were driven by our bookings business, which delivered a double-digit percent increase in total concerts versus the prior year quarter. Key contributors to this increase were a strong multi-night comedy schedule. This included a combined 55 nights across Radio City, The Beacon, and The Chicago Theater from such acts as John Oliver and Seth Meyers, Tina Fey and Amy Poehler, Jerry Seinfeld, and Ali Wong among others. And as the volume of events at our venues continues to increase, we are pleased to see it matched by strong demand. For the third quarter, the majority of concerts at our venues were once again sold out. Sales of single-night suites increased significantly and per-cap spending at concerts on food, beverage, and merchandise again increased on a year-over-year basis. Also during the third quarter, the Knicks and Rangers continued the 2023, 2024 regular seasons at the Garden.
This included five more Knicks home games in the current year as compared to the prior year quarter. In addition to these extra matchups, Knicks and Rangers games followed the same trend we saw in our other live events, with increases in average per game revenues for food, beverage, and merchandise sales. We also saw continued demand for our premium hospitality offerings. As we have previously discussed, the Garden introduced two new suite products this fiscal year, an Event Level Suite and a Luxury Event Level Club Space. We already noted that we secured a multiyear agreement for the Event Level Suite earlier this year. And to add to that, we are now close to selling out the Event Level Club Space and have started adding more seats to help match the interest that we are seeing for this Premium Hospitality drive. Before we talk about our financial results, a couple of points regarding presentation and comparability; first, I'd like to note that we have revised our definition of adjusted operating income as it relates to the Arena License fees with MSG Sports.
We are no longer removing the non-cash portion of the Arena License fees in our reconciliation of operating income to adjusted operating income, which is reflected in the financial results we reported today for all periods presented as well as in our financial guidance. You may recall that the Arena License fees are recognized on a straight-line basis over the life of the 35-year agreements, which equates to approximately $68 million a year. For fiscal 2024, the $68 million will be comprised of approximately $43 million of cash revenue and $25 million of non-cash revenue. We will continue to disclose the non-cash component of the Arena License fees on a quarterly basis. Secondly, because the Company completed its spin-off from Sphere Entertainment in April of last year, our fiscal third 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 as a stand-alone public company.
Turning now to our financial results, for the fiscal 2024 third quarter, we reported revenues of approximately $228 million, an increase of 13% as compared to the prior year period. This reflected growth across our three revenue categories: Entertainment Offerings, Food, Beverage and Merchandise, and Arena License fees. Revenues from entertainment offerings increased primarily due to higher revenues from concerts and suite license fees, partially offset by the absence of the NCAA East Regional Tournament which took place at the Garden in the prior-year quarter. Higher food and beverage revenues were primarily due to an increase in the number of concerts held at our venues as well as the impact of five more Knicks games at the Garden during the quarter. This was partially offset by lower per-concept food and beverage revenues which reflects a mix shift to more concerts at our theaters during the current year quarter and the increase in arena license fees reflects the impact of five additional Knicks games in the quarter as compared to the prior year period.
Third quarter adjusted operating income of $38.5 million decreased by $11.6 million as compared to the prior quarter. These AOI results include $13.2 million of non-cash Arena License fees in the current year quarter as compared to $12.1 million in the prior year period. The decrease in AOI primarily reflects higher SG&A expenses. And as I mentioned earlier, third quarter SG&A expenses are not fully comparable on a year-over-year basis. Moving on to our fiscal 2024 outlook, given the positive momentum in our business, we are updating our guidance for fiscal 2024. We now expect revenues of between $940 million and $950 million, versus our prior range of between $930 million and $950 million. The midpoint of this updated range reflects 11% revenue growth versus fiscal 2023. We also expect operating income for the year of between $100 million and $110 million versus $95 million to $105 million previously.
And adjusted operating income is now expected to be between $200 million and $210 million. This compares to our previous range of $195 million to $205 million with both prior and updated guidance having been adjusted to no longer remove the $25 million non-cash portion of the Arena license fees. Turning to our balance sheet, as of March 31, we had approximately $28 million of unrestricted cash. In addition, our debt balance was approximately $630 million consisting of a single-term loan facility with mandatory quarterly principal repayments of approximately $4 million per quarter. Looking ahead, we remain focused on our dual capital allocation priorities of opportunistically returning capital to shareholders and paying down debt. As a reminder, since our spin-off last year, we have repurchased approximately $140 million or about 10% of our outstanding Class A shares. We continue to have $110 million remaining under our current buyback authorization.
In addition, subsequent to quarter end and through the end of April, we sold approximately 1.6 million shares in Townsquare Media for net proceeds of approximately $15.6 million as we continue to build our cash balance back up following our share repurchase and debt paydown activity earlier this fiscal year. In summary, we had another quarter that reflected the strength of our assets and robust demand for our business. And as we near the end of our first full year as a stand-alone company, we are continuing to offer consumers unforgettable experiences while delivering attractive growth for fiscal 2024. With that, I will now turn the call back over to Ari.
Thank you, Mike. Operator, can we open up the call for questions?
分析師問答
We will now begin the question-and-answer session. Your first question comes from the line of Stephen Laszczyk with Goldman Sachs. Please go ahead.
Hey, great. Thanks for taking the questions. Just to clarify on the AOI guidance, is it correct for us to be interpreting the revision on a like-for-like basis on your prior way of reporting as a move from $170 million to $180 million to $175 million to $185 million, so that would be a $5 million revision higher at the midpoint? And then fundamentally, just thinking ahead on Christmas Spectacular, it sounds like demand for live entertainment remains strong. I'd be curious for your updated thoughts on the opportunity to increase show count versus the opportunity to increase price or sell-through both this year and beyond for that property?
Thank you, Steve, and thank you for your questions. Before I answer, I want to apologize to the audience for the technical issues at the beginning of the call that caused a delay of about 15 minutes. We apologize for any inconvenience and will work to resolve this issue in the future. Regarding your questions, your understanding of the AOI guidance is correct. We have redefined AOI and will no longer adjust for the non-cash portion of arena license fees, which this year amounts to approximately $25 million. Therefore, moving from our previous guidance of $170 million to $180 million, we adjust it by an additional $5 million to $175 million to $185 million. This adjustment is on an apples-to-apples basis. You then add $25 million to both the upper and lower bounds to arrive at the guidance we discussed, which is $200 million to $210 million. As for your second question about the Christmas show, we actually see significant opportunities on both fronts.
For the 2023 season, we initially planned for 185 shows but increased that to 193 shows based on demand. Looking ahead to the upcoming show, which is about six months away, we've already released 197 shows for sale, with potential to add more depending on demand. Our early sales figures are promising, with gross revenue from Christmas show ticket sales up about 35% compared to this time last year. While this is a small sample size since we haven't started aggressive promotion yet, the trend is encouraging. Regarding ticket pricing and sell-through, the sell-through for the recently concluded Christmas show season was approximately 90%, up from the mid-80s the previous year. In the past, we've achieved sell-through rates higher than 90%, indicating potential for further growth in this area. Ticket yield generally increases each year, and 2023 marked our highest ticket yield to date, although our prices still remain a healthy discount compared to similar Broadway shows.
Given our success with dynamic pricing, we are optimistic about further growth in ticket yield. We believe there is a strong opportunity to expand the Christmas Spectacular in terms of the number of shows, ticket pricing, and sell-through.
Got it. Thanks for all that. And then maybe one more, if I could on margin. In the past, I think you've called out some one-time margin headwinds you're facing this year. As we move past your fiscal 2024 and some of these come off. I’m curious how you're thinking about the opportunity for margin expansion and maybe some of the drivers in 2025 and beyond.
In 2024, we expect to achieve substantial revenue growth along with margin expansion. I won't provide specific details regarding fiscal year 2025 at this moment as we're still early in our budgeting process. We plan to discuss this in more depth during our year-end earnings call, likely scheduled for early August. Looking at the long-term, we see opportunities for margin improvements across various areas of our business. In terms of bookings, we believe there is potential to enhance venue utilization. We've seen significant progress in event profitability in 2024, and we are optimistic about maintaining this trend through 2025 and beyond. Regarding the Christmas show, we noted the strong sell-through and ticket price impact on margins, which should contribute positively to our financial performance. Additionally, our sponsorship, signage, and premium suite offerings are high-margin revenue streams with growth potential.
As we approach fiscal 2025, we anticipate more renewal activity for sponsorship deals following a quieter fiscal 2024. These renewals often provide opportunities to increase pricing or upsell. We are also making gains in our OBG relationship, which allows us to introduce unique assets to our offerings. We believe we can continue growing sponsorship and signage revenues, which are margin-enhancing. On the premium side, we've discussed our success in adding new suites and club spaces in 2024, and we expect further opportunities in this area. Finally, on the expense front, our current infrastructure enables us to scale the business and achieve operating leverage without significantly increasing operating expenses to support our growth initiatives. Overall, we see considerable long-term potential for margin expansion.
Great. Thank you for that.
Your next question comes from the line of Daniel Duran with Morgan Stanley. Please go ahead.
Good morning and thank you for taking the question. You mentioned that your bookings business has grown low-double-digits in fiscal 2024. And I wanted to know if at this point you had any sense of what that would look like for fiscal year 2025. And on top of that, if you have seen any softening of per-caps or consumer spending as we've seen in other larger consumer businesses like McDonald's or Starbucks? Thank you.
Thank you, Daniel, for the questions. Appreciate it. In terms of bookings, I think you have to look at that really in two parts. I think the arena and the theaters are slightly different animals in that regard. With the Arena, we've talked historically and still is relatively the case. The booking window tends to be about six to nine months out. So we do have enhanced visibility there. As we look at fiscal 2025 and the kind of the number of shows we have booked now versus the same point a year ago for fiscal 2024, I would say we’re up mid-single-digits for the full year 2025. And if I were to look at just the first half of 2025 probably up more like low-double-digits in terms of number of events. So, pretty encouraged by the current trends in terms of bookings on the arena. On the theaters, the booking window is a little shorter, three to six months. So the pipeline is a little less developed and the visibility is not as good.
Nevertheless, if we look at it the same way, we are up high-single-digits versus the prior year in terms of events booked at the theaters at this point in time. So look, we're coming off what will be a record year in fiscal 2024 in many respects as to event volume. We’re still pacing very nicely versus that record year. In regard to your second question, in terms of softening of consumer spending and demand, and you referenced McDonald's and Starbucks, we're not really seeing that. We see that on a couple of different data points that would support that. Most of our shows continue to sell out. For our fourth quarter shows, we're pacing ahead of the prior year in terms of our sell-through percentages versus where we were, again same point last year. We still have a lot of apps that are selling, that are adding additional shows because of demand. So in terms of events and tickets, the demand is very healthy, which supports just what we're seeing in the live experience sector in general both here and amongst our peers.
In terms of the per-cap spending on food and beverage and merchandise, we are up low single digits versus the prior year for concerts. That's actually most notable would be arena, which is where the biggest opportunity is. The per-cap spending of the Arena outpaces the theaters for a variety of reasons and we're seeing even more robust growth there. So we're not really seeing a softening demand average. I would speculate that we enjoy certain tailwinds that I think maybe McDonald's and Starbucks don't in terms of again the kind of the burgeoning popularity of live experiences and the continued return of New York City tourism from the pandemic. So by virtue of that, we are not seeing that kind of softening of demand.
Got it. Thank you very much.
The next question comes from the line of Peter Henderson with Bank of America. Please go ahead.
Yes, good morning, and thank you for taking the question. Just wondering, if you can help us sort of think through the size of the potential benefit from extended run for both the Knicks and Rangers in the playoffs? And then also, just how much or how deep of a run for both teams is already contemplated in your guidance. Thank you.
Thank you, Peter, for your questions. I appreciate it. Regarding the benefits of an extended playoff run for the Knicks and Rangers, arena license fees, as you know, are fixed. However, we do have variable revenue streams that we collaborate on with our partners in Sports, including areas like food and beverage, merchandise, individual events, and suite sales. Each event contributes to our revenue in that sense. More broadly, the success of the teams can enhance attendance and renewals moving forward. Our interests are closely aligned with those of the Knicks and Rangers. As a New York-based company, what benefits New York will also benefit us in the long term, along with our short-term economics. We appreciate these variable incremental revenue streams. On the other hand, we've gained experience in managing potential conflicts, working with the league and artists to optimize scheduling.
For instance, this week illustrates that well, as we've just had four consecutive days of home playoff games, and tonight we’ll have Billy Joel at the Garden. This demonstrates our ability to enhance flexibility. We hope the Knicks and Rangers will continue their extended run. There is a small risk of shows potentially being pushed into fiscal '25, but we have narrowed that down to just a few shows. Regarding your second question, I won't specify what is included in our internal forecasts about the number of rounds. I can say, however, that our guidance covers all these different scenarios regarding how far the Knicks and Rangers advance, and we wouldn’t adjust our guidance for any of those outcomes.
Thank you.
Next question comes from the line of David Karnovsky with JPMorgan. Please go ahead.
Maybe just following up on that last point. I'm curious, you know, how many days in general does the Arena keep on hold when it does its planning process that may not hold for the playoffs? And what does the optionality to look at on a short-term basis that those games are in play recognizing this is less of an issue this year? And then following up on capital allocation, you noted the share authorization and I wanted to zero in on what circumstances would lead you to restart buyback? Thank you.
Sure. So thank you, David, for the questions. What I'm going to do is I'm going to take your first question and then I'm going to ask Phil D'Ambrosio, our Treasurer who is with us to address your question on capital allocation. In terms of how many days we keep on hold, I'm probably not going to get into specifics other than to say we generally have a kind of one-and-a-half, two-month window which is a playoff window for both hockey and basketball where we're again managing it in the manner I described earlier. We continue to book acts. There's certain language in the contracts for acts on this time day and date subject to change that kind of thing. We remain in constant contact with the league, with the sports teams, and with these acts in order to manage. And again, I feel like we've done a really solid job on the bookings team has become very adept at maximizing utilization during this window, which can be challenging at times.
But again, done a really nice job and we don't really have too many shows at risk as I alluded to earlier. You also asked about the ability to replace shows. I agree with you. That feels less relevant this year as both teams seem to be doing well, knock on wood. It depends on the type of the orders and what the schedule is. It needs to be an artist that can sell out in a short period of time, is a narrow pool of artists who could probably satisfy those criteria. It's possible. And I don't know that it's probable, but it's certainly possible to book an event to sense something opened up unexpectedly. And with that, I'd like to defer to Phil if you could address the question on capital allocation.
Thanks Mike. Hi, David. So our capital allocation priorities remain unchanged. We have two; the first is opportunistically returning capital to our shareholders. And the second is debt paydown. Again, since our spinoff last April, we've repurchased approximately $140 million of Class A shares outstanding, which represents about 10% of those Class A shares outstanding. And we have remaining authorization for repurchases of $110 million. So on a go-forward basis, we will continue to opportunistically seek attractive opportunities to return capital to shareholders. Turning to debt paydown, as Mike noted our debt balance at the end of March is almost $630 million. And as we mentioned last quarter on our earnings call in early February and the December quarter we paid down the revolver completely. So on a go-forward basis, in terms of debt paydown, we will simply continue to pay a quarterly amortization on our term loan of $4 million per quarter, but we're not planning to pay down any more debt beyond that.
So when you think about leverage as the company continues to grow and to generate more AOI, the company will naturally delever. And when you keep in mind a substantial level of activity on the repurchase front over these last 11 months, currently we're focused on digesting that meaning we're going to build our cash balance up again. And as Mike noted, we sold most of our position at Townsquare last month and generated just over $50 million of cash. So on a go-forward basis, we will rebuild the cash balance that syncs very nicely with the seasonality of our business. And at the same time, we're going to keep our eye on opportunities to return capital to shareholders.
Thanks.
Thank you.
Your next question comes from the line of Logan Angress with Wolfe Research. Please go ahead.
Hi. Thank you. First I'm curious with the Garden only available for a relatively fixed number of days throughout the year, but with more and more artists touring, have you seen that supply demand imbalance translate to pricing at the Garden? And then I'm curious obviously Christmas Spectacular has been a big success. I'm curious how you think about opportunities to potentially move more into owned and operated shows more year-round or is the focus just to continue growing Christmas Spectacular? Thank you.
Thank you, Logan, for your questions. Regarding your first question, I believe you are spot on. Specifically for the arena at the Garden, we are well-positioned in terms of supply and demand. We expect to host approximately 245 events at the arena in fiscal 2024, which would set a record for us. This translates to about 70% utilization, remaining relatively consistent year-over-year. We have reduced the number of loading days and made progress in multimedia offerings. While the number of events is increasing, utilization remains stable, though there is potential for improvement. You are correct that there is a limited supply. On the demand side, we are witnessing a growing number of artists touring, and live experiences are becoming increasingly popular. The Garden serves as a premium venue for artists, often leading promoters to secure dates with us first before booking other locations.
This gives us some leverage in pricing compared to other venues. As for our position in the supply and demand dynamics, our current rates reflect this situation. We continuously review our pricing, especially in light of the ongoing budget process and market conditions. Although this isn't a new dynamic, we are well-positioned. Regarding your second question about the Christmas Spectacular, it is a distinctive franchise with a unique history. We recorded record revenues last season, and it has rebounded well from the pandemic. The economic model for this show differs from our other productions due to content ownership. As you hinted at earlier, our focus is on maximizing the profitability of the Christmas show through various strategies, including ticket yield and sales. We will continue to make gradual enhancements, including upgraded technology and content modifications, such as adding or changing scenes.
For instance, last season, we incorporated drones and varied scenes, all of which were positively received. We will keep refining the show and concentrate on growing the Rockettes brand. However, we currently do not have plans to develop additional owned content or new productions at this time. Thanks, Logan. Operator, let's take one last caller.
Your final question comes from the line of Paul Golding with Macquarie Capital. Please go ahead.
Thanks so much for taking the question. Mike was wondering if you could elaborate a bit more on how the Oak View relationship is going and I think you referred to it in relation to sponsorship and finance. So wanted to get a broader view of how that's driving the business and if you're seeing any tangible uplift at the moment? Thanks.
Thank you, Paul, for your question. Our partnership with Oak View Group and their subsidiary Crown Properties began last September and officially started on October 1. Under this agreement, Crown Properties manages all our sales and sponsorship signage inventory across our venues and live entertainment properties, while we maintain certain in-house functions due to our legacy expertise. We work closely with Crown Properties, often on a daily basis, and we retain all responsibilities for activation and fulfillment related to these sponsorship deals, which can be quite complex. We are encouraged by the momentum we are experiencing. Recently, we have achieved a couple of significant wins that are either finalized or nearly complete, and we have noticed that our pipeline is becoming much stronger over time. We believe this is a long-term partnership, and the reasons we entered into this agreement are beginning to show positive results. Although we are still in the early stages of this deal, it certainly feels like we are gaining traction in the marketplace. We are observing trends that fill us with optimism and confirm our initial reasons for this partnership. We will continue to discuss this moving forward, and we are very optimistic about the current situation. Thank you.
Thanks so much.
I will now turn the call back over to Ari Danes for closing remarks. Please go ahead.
Thank you all for joining us. We look forward to speaking with you on our year-end earnings call in August. Have a good day.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.