管理層發言
Good morning and welcome to MSG Entertainment's fiscal 2024 fourth quarter and year end 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. If you do not have a copy of today's earnings release, it is available in the investor 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 Security 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 four and five 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. Fiscal 2024 marked our first full year as a standalone live entertainment company with our results reflecting strong performance across our businesses, including bookings, the Christmas Spectacular production and our premium hospitality offerings. In fact, the positive operating momentum we experienced throughout fiscal '24 led us to increase our guidance twice during the year. And with revenues of $959 million and adjusted operating income of $211.5 million, our full year results came in above the high end of our ranges. As we look ahead to fiscal '25, we remain focused on executing on our strategy of increasing venue utilization, growing per event profitability, building on the success of the Christmas Spectacular and expanding our sponsorship and premium hospitality businesses. We believe that this strategy, along with robust ongoing demand for our live entertainment offerings, positions us to deliver a high single to low double-digit percentage increase in adjusted operating income in fiscal '25.
So with a strong year behind us and a positive outlook for the year ahead, we remain confident that our business is well-positioned to generate long-term value for our shareholders. Let's now review some key operational highlights from our fiscal fourth quarter and full year. Fiscal 2024 was another busy year of events for our venues as we hosted approximately 6.3 million guests at over 960 live events. The majority of these events were driven by our bookings business, where we saw robust growth in the number of events held at our venues versus the prior year. This growth was driven by the concert and family show categories and included a record high for the number of concerts in a year at both the Garden and at Radio City Music Hall. The world's most famous arena ended the year on a particularly strong note with robust year-over-year growth in the number of concerts in the fourth quarter.
This reflects our efforts to increase venue utilization within the Knicks and Rangers' playoff window, as well as our success in attracting acts that are headlining the Garden for the first time. Consumer demand also helped drive this growth as customers continue to demonstrate their willingness to spend on experiences. Across our venues, the majority of concerts were once again sold out in the fourth quarter. We also saw higher overall per-cap spending on food, beverage, and merchandise at concerts in the fourth quarter as compared to the prior year period. Looking ahead, our bookings calendar continues to fill up and we expect to again increase the number of events at our venues in Fiscal '25, primarily driven by growth in concerts, family shows, and special events. Turning now to the Christmas Spectacular production. During Fiscal '24, we sold over one million tickets across 193 performances and generated nearly $150 million in revenue, a new record for the beloved production in its 90th season.
We are currently on sale with 197 shows for the 2024 Holiday Season and expect revenue growth for the production to be driven by the increased number of shows as well as by higher per-show revenue. This year's production will feature new technology and immersive elements as we continue to explore ways to enhance the experience for our guests. In our fiscal fourth quarter, both the Knicks and Rangers finished their exciting regular season and playoff runs. In total, they played 11 additional home games at the Garden as compared to the prior year quarter. In terms of our agreements with MSG Sports, for fiscal '25, the cash component of the arena license fees that we received will be approximately $44 million and will continue to grow 3% each year through fiscal 2055. Given the strong performance of both teams this past season, we expect to see positive tailwinds across our revenue and profit sharing arrangements with MSG Sports in fiscal '25.
That includes our share of food, beverage, and merchandise, suites, and signage at Knicks and Rangers home games. Turning to our marketing partnerships business. As you know, last year we transitioned our sponsorship sales effort to Oak View Group's Crown Properties Collection. I'm pleased to say that we are off to a strong start to fiscal '25 in terms of new deals. We expect to have more to share in the coming weeks and believe this business is positioned for growth this year. During fiscal '24, we saw strong demand for our premium hospitality offerings, including the two new suite products we introduced earlier in the fiscal year, an event level suite and a luxury event level club space. And given this demand, we are continuing to expand the capacity of the event level club space. Along those lines, we are also in the process of renovating a number of our event and Lexus level suites, which we anticipate will drive incremental revenue this year.
So as we look to fiscal '25, I'm pleased to say we expect another year of growth in this area of our business as well. Before I discuss our fiscal fourth quarter financial results, I have a couple of points regarding presentation and comparability. First, I'd like to remind you that last quarter, we 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. 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, this $68 million was comprised of approximately $43 million of cash revenue and $25 million of non-cash revenue.
Second, the company completed its spinoff from Sphere Entertainment to the arena license fees and the non-cash revenue was also spinoff from Sphere Entertainment on April 20th of last year. As a result, our fiscal fourth quarter results are not fully comparable on a year-over-year basis. Results for the prior year quarter are based on carve-out accounting for the first 20 days of April, and therefore, last year's fourth quarter results do not reflect all of the SG&A expenses we would have incurred had we been a standalone public company for the entire period. Turning now to our financial results. For the fiscal 2024 fourth quarter, we reported revenues of $186.1 million, an increase of 26% 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. The increase in revenues from entertainment offerings primarily reflected more concerts at the Garden in our fourth quarter compared to the prior year period.
The increase in food, beverage, and merchandise revenues primarily reflected the impact of additional Knicks and Ranger games at the Garden versus the prior year quarter, as well as higher sales at concerts and other live entertainment and sporting events at our venues. Fourth quarter adjusted operating income of $13.1 million increased by $12.4 million as compared to the prior year quarter. These AOI results include $2.5 million of non-cash arena license fees in the current year quarter as compared to $1.5 million in the prior year period. The increase in AOI primarily reflects higher revenues, partially offset by an increase in direct operating expenses and to a lesser extent, higher SG&A expenses. And as I mentioned earlier, fourth quarter SG&A expenses are not fully comparable on a year-over-year basis. Turning to our balance sheet. As of June 30th, we had approximately $33 million of unrestricted cash while our debt balance was approximately $626 million.
Looking ahead to fiscal '25, we currently expect our company to have another year of substantial free cash flow generation. This is underscored by the following expectations: a high single to low double-digit percentage increase in adjusted operating income, ongoing net interest payments related to our national properties debt, which totaled $51 million in fiscal '24. Our current status as a minimal cash taxpayer and capital expenditures, which will include both maintenance CapEx as well as some incremental spend related to Christmas Spectacular enhancements and suite renovations at the Garden, both of which I discussed earlier. In terms of capital allocation, we remain focused on our dual priorities of opportunistically returning capital to shareholders and paying down debt. As a reminder, we continue to have approximately $110 million remaining under our current share repurchase authorization.
In summary, fiscal 2024 reflected the strength of our business and the robust demand we saw for our assets. And as we look to fiscal '25, we believe we are well positioned to deliver robust AOI growth for the year. 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
Thank you. We will now begin the question and answer session. Your first question comes from Peter Henderson from Bank of America. Your line is open.
Great, thank you. Thank you for taking the question. Can you just provide us with an update on advanced ticket sales for the Christmas Spectacular and just also discuss the overall growth opportunities for the production, including pricing, show count, etc.?
Sure Peter, good morning and thank you for the question. Regarding advanced ticket sales pacing, we currently have 197 shows on sale, compared to 193 during last year's Holiday Season, with marketing starting in late July. It's still early, but we're encouraged by the current trends. Compared to last year, we've seen approximately an 18% increase in advanced ticket revenue, which is a mix of rate and volume, reflecting growth in both group and individual sales. We're a bit over 10% of the way to our annual goal, so while it's early, the initial indicators are positive. As for growth opportunities, we see potential in three main areas for the Christmas show. First, show count is increasing from 193 to 197, and we still have the flexibility to add more shows based on demand. We did that last year and are not at peak volume compared to previous years, so there’s room for expansion. Second, in terms of pricing, we are achieving better ticket yields this year compared to last, but we're still priced lower than similar entertainment options on Broadway.
Our dynamic pricing strategy has been successful, indicating further opportunities in ticket yield. Lastly, our sell-through rate this past year was around 90%, up from the mid-80s last year, though still below peak seasons of the past. We have previously seen higher sell-through rates during seasons with more shows. Therefore, looking ahead, we expect growth opportunities in all these areas: show count, pricing, and sell-through.
Great, thank you.
Your next question comes from a line of Stephen Laszczyk from Goldman Sachs. Your line is open.
Hey, great, thanks for taking the questions. First on margins from Mike, could you talk about what you see as the biggest drivers of margin expansion ahead for your business and maybe the extent to which you think we could see some of that operating leverage flow through in 2025. And then on the post-season, would you be able to unpack just how much of a benefit you saw from the Knicks and Rangers post season runs this quarter and how we should think about any momentum that you called out, I think in the prepared remarks on what that could mean for 2025? Thank you.
Sure, thanks for the question. We expect to see growth in AOI margins in 2025. We have mentioned that AOI overall could grow in the high single to low double digits percentage wise. Part of this growth will come from margin expansion, and we believe there are further opportunities for margin improvement in the long run. There are some factors to consider, especially regarding our bookings, which include a mix of rentals and promotions. For promotions, we recognize all ticket revenue and the artist costs, while in a standard rental, that revenue goes to the promoter, and we just record the rent. The AOI for these events is generally similar, but rentals typically offer better margins than promotions. Additionally, we face some challenges with corporate rent, which we've highlighted before. The year-over-year comparisons due to new office leases will lead to increased SG&A expenses, mainly in the first half of the year, as we move past this in the latter half.
Nonetheless, we are optimistic about margin expansion in fiscal 2025 and beyond. Our revenue streams, including bookings, the Christmas show, and premium marketing partnerships, all have high margins, and we anticipate growth in these areas in the coming year, contributing to margin expansion. Furthermore, we believe our overhead infrastructure is sufficiently positioned to support this growth. In our recent budget process, we focused on efficiency and identified several cost reduction opportunities that we have begun to implement. We expect more potential in this area moving forward. All these factors are expected to drive margin expansion in fiscal 2025 and later. Regarding playoff games, these events are definitely advantageous for us. We amortize arena license fees across regular season home games, meaning that there is no additional arena license fee for playoff games. However, we share revenue streams with MSG Sports from food and beverage, merchandise, and suite revenues tied to single events.
Notably, food and beverage income from playoff games significantly contributed to the overall food and beverage revenue increase in the fourth quarter year-over-year. Playoff games are very profitable on their own. Additionally, we’ve succeeded in booking concerts during playoff periods without displacing other events. As mentioned in our scripted comments, arena concerts in the fourth quarter saw a double-digit percentage increase compared to the previous year, even with the extended playoff runs from both the Knicks and Rangers. This reflects all incremental profitability from playoff games. Finally, while it's harder to quantify, I do believe that the success of the Knicks and Rangers provides a tailwind or momentum into fiscal 2025 for the teams, which will also benefit us through the same shared revenue streams.
That's great. Thank you.
Your next question comes from a line of Cameron Mansson-Perrone from Morgan Stanley. Your line is open.
Thanks. Good morning, two if I can. First, on the booking business, could you just give us some additional color on how booking activity is pacing for fiscal '25 and how we should think about that in terms of the visibility you have sitting here today? And then second, on venue utilization, you call out improvement in the earnings presentation. Could you just elaborate on that opportunity? How much runway for improvement do you see, and as we look across the venue portfolio, where or which venues do you see more or less opportunity to really push forward on the utilization front? Thanks.
Thank you for the questions. Regarding the pace of bookings, we're currently on track to match last year's figures. We do have a challenging comparison this year because of Billy Joel concluding his residency, which has dropped us from 12 shows to just one show this fiscal year compared to last. Nevertheless, our booking pace remains essentially unchanged from this point last year. Specifically for the Garden, our primary venue, we anticipate a modest increase in events for the first quarter compared to last year, despite strong competition from events such as Phish and Dave Chappelle residencies and three Billy Joel shows last summer. We expect to host a few more events this first quarter than we did last year. In the second and third quarters, we're also on track to match last year in terms of booked events at this point. However, we may be slightly behind in the fourth quarter, though we have a robust pipeline and are confident in our ability to fill that gap.
Overall, we're in a strong position and coming off a record year at the Garden and Radio City in fiscal '24. We believe we can increase the number of events across our venues this year, and we are pleased with our current progress towards that goal. Regarding venue utilization, the story is positive, as we continue to see year-over-year improvements. However, there remains significant potential for growth without facing any limitations. At the Garden, we held 250 events, including Knicks and Rangers games, which translates to just over 70% utilization, slightly up from last year. Across all theaters, we hosted 520 events in fiscal '24, including all the Radio City Christmas showings. There is ample opportunity for growth since live entertainment is a booming industry right now, and we are well-positioned to take advantage of that and further enhance utilization. Our iconic venues, strong industry relationships, and effective bookings team have allowed us to explore various options, such as residencies and multi-night runs, to boost utilization annually.
Our marquee sports division also continues to expand its reach, and we see potential for increased utilization in special events this year. We’ve performed well during playoff seasons, and that trend is likely to continue. Overall, our track record with utilization is robust, and we have no current ceilings hindering our growth in this area.
Helpful, thank you.
Your next question comes from a line of Brandon Ross from LightShed. Your line is open.
Hey, thanks for taking the questions. On the MSGS call, they said they were entering a very strong sponsorship year. And I guess you kind of hinted at the same in the prepared. Can you just help us understand how much is up for renewal this year and how to think about the renewal cadence for sponsorships or premium marketing opportunities going forward? Thanks.
Sure, Brandon, thanks for the question. I'd say this as a sponsorship revenue, it is a stronger renewal year in fiscal '25. I'm not going to get into specifics around dollars, but there are some large renewals which always create opportunities, whether that being upselling the existing partner or perhaps bringing up the category for a different player. So that's always an opportunity for growth. I mean, taking a wider view of the sponsorship in general, we're feeling pretty bullish about it. We're one year into the partnership with Oak View Group. So I think we're able to capitalize on some of the year one learnings, as well as some of the investments that our partner has made in people and infrastructure. I think we're pretty well positioned right now. I mean, between the success of the Knicks and the Rangers and the success we've had and how many concerts we're showing at the Garden, MSG is a pretty desirable partner right now for those who are looking to spend some money in this area.
Both the access to tickets and to premium, the quality of the events we're hosting, as well as just the general cachet and at the Garden, which probably has never been higher. We're actually anecdotally even seeing a couple partners approach us to kind of proactively early renew the arrangements that are expiring in the future. So I think that we're off to a really good start. I don't have anything specific to offer, but we're hoping to be able to have something specific around that in the not-too-distant future. But all signs are pointing north in this regard, and I think we'll probably have a strong year in this arena.
Great. And then just following up on the guide, you gave high singles to low doubles on AOI. Can you just tell us how to think about that in terms of the revenue for this year?
Sure. I mean, listen, I think the demand, as I mentioned, I think right now live experiences or the demand for shared experiences is very strong, and so we'll continue to ride that wave. We are not providing explicit revenue guidance for '25, but we do expect to see broad-based revenue growth, and that will be a driver, certainly, towards the high single to low double-digit percentage increase in AOI that we are guiding towards. I mean, I can break it down by pieces. If we talk about our bookings business, talked about already coming off a record year and expecting to increase the number of events across our bookings business this year. I will reiterate again the difference in the accounting around promotions and rentals. And I mentioned this Billy Joel deal was a promoted deal, and so we booked the ticket revenue and the artist costs. Those will more likely they'll not be replaced by straight rentals, so that creates a little bit of a revenue headwind, but does not translate to profitability, as I discussed earlier.
But outside of that, just the sheer growth in number of events should fuel revenue growth in the bookings business. Christmas Spectacular, we spoke to a little bit already. Still early, but seeing an 18% increase in advanced ticket sales versus the same point last year. We continue to project the continued return of tourism to New York City, higher average per show revenue. So we see revenue growth in the Christmas show. Premiums, talked about this a little bit in our prepared comments. We are expanding the event level club space that we added just last year to meet current demand. We're renovating a number of our event and Lexus level suites, which also drives incremental revenue. Talked about the tailwind around the Knicks and the Rangers' success and our success in launching concerts, which will drive demand for premium products. So we're expecting to deliver another year of growth across premium hospitality business.
And then I talked about the sponsorship business in response to your first question. And then lastly, just those shared revenue streams with the Knicks and Rangers should also be positioned for growth, given the success that those teams have had. So we're looking at broad-based growth across really all of our different revenue streams as we go into fiscal '25.
Thank you for all that color.
Your next question comes from the line of David Karnovsky from JP Morgan. Your line is open.
Hi, thank you. Just first, given the kind of volatile macro environment, figured it's worth asking if you'd seen any signs of consumer weakening either in current or forward bookings or in your per caps. And then separately on capital allocation, any update there and how you're thinking about the right conditions potentially for resuming a buyback? Thanks.
Thanks, David, for your questions. We're aware of the narrative about a slowdown in consumer demand, but we’re not seeing it. Some of our peers have faced similar questions and have had similar responses. Specifically, we’re not observing any decrease in consumer demand for live entertainment experiences. For example, the Radio City Christmas show is seeing growth in advanced sales, which is significant. In terms of bookings, looking at year-over-year sell-through for the fourth quarter and the first quarter compared to the same periods last year, we are either on par or performing better across our venues, despite facing tough comparisons. In the fourth quarter, sell-through was near 90%. We're not witnessing any decline in consumer demand for bookings. We even have certain acts adding shows after initially selling out. As for per cap spending, we've seen a double-digit increase in the fourth quarter for food, beverage, and merchandise at our concerts.
To date, there’s been no sign of a slowdown in consumer demand; everything appears quite positive. Should there be any slowdown, we believe we’re in a good position given the resilience in the New York marketplace and our iconic menus, but currently, we haven’t observed anything of that nature. Regarding capital allocation, we have discussed in the past, and we maintain the focus on balancing returning capital to shareholders while paying down debt. We finished the year with about $33 million in unrestricted cash and expect to generate significant free cash flow in fiscal '25. Our busiest quarters are the second and third quarters, which is when we anticipate cash levels rising and reassessing the return of capital to shareholders. Since becoming a standalone public company, we have bought back about $140 million, representing roughly 10% of our Class A shares. We still have around $110 million allocated for share buybacks.
On the debt side, we are fulfilling our mandatory quarterly principal payments of about $4 million and believe the business will naturally decrease leverage due to our projected growth. We aim to continue balancing debt reduction and share repurchases. Regarding reinvestment in the business, we don’t have significant plans at this time. There’s no M&A activity planned, and no major renovations are necessary for our venues. We will focus on smaller, strategic, and high-return capital investments, like expanding the event-level club space at the Garden, renovating some Lexus level suites, and enhancing the Christmas Spectacular to improve the guest experience. These represent solid investment opportunities we plan to pursue.
Thank you.
Operator, we have time for one last caller.
Certainly. Your final question comes from a line of Peter Supino from Wolfe Research. Your line is open.
Hi, good morning. I wanted to follow up on a prior question about 2025 revenue and dig into the event growth next year and specifically how you see the mix changing between concerts or theaters versus the Garden. If you could just help us think about those trends and what they might mean for margins in 2025? Thank you.
Thank you for the question, Peter. When we discuss events, we categorize them into a few groups: concerts, family shows, special events, and marquee sports, which includes any sporting events beyond the Knicks and Rangers. For concerts, we anticipate growth this year, building on a record-setting year in fiscal '24. We have successfully introduced new acts, helping them progress to the point where they can perform at the arena. We’ve had success with two arena-level shows and some multi-night runs. I believe we are well-positioned to increase the number of concerts this year. Regarding family shows, we recently announced 64 Annie holiday shows at the theater at MSG in Chicago, which puts us at about 75% of our goal for family shows, contributing positively to profitability as well. Additionally, we are excited to welcome back the Westminster Dog Show to the Garden, last hosted in February of '20 before the pandemic.
For special events, much of that business occurs in the fiscal fourth quarter, so it’s a bit early to provide specifics, but we are seeing some positive signs and hope to make announcements soon. In marquee sports, we will continue to engage with college sports and maintain strong relationships with St. John's and the Big East. We recently announced a high-profile game, Duke versus Illinois, at the Garden. We also expect to see a return of various events in areas like boxing, the darts championship, and bull riding, with plans to expand the range of events in that category. Overall, we believe we are set to grow the count of events in fiscal '25 compared to an already strong fiscal '24.
Thanks so much.
Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.
This concludes today's conference call. Thank you for your participation. You may now disconnect.