Q1 2020 Earnings Call
Good morning, My name is Carmen and I will be or conference operator today.
This time I would like to welcome everyone to the Madison Square Garden Company fiscal 2021st quarter earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
Okay question. During this time simply press star one on your telephone.
If you would like to withdraw your question press the pound key.
Thank you I would now like to turn the call over to our readings senior Vice President of Investor Relations for the Madison Square Garden Company. Please go ahead Sir.
Thank you Carlos.
Good morning, and walk into the Madison Square Garden companies' fiscal 2021st quarter earnings Conference call.
Our president and he loves Garden will provide an update on the company's operations after which Victorian they are easy pay a chief financial Officer will review our financial results [laughter] before they do so Gregg Seibert, our vice Chairman will begin today's call by discussing the update to our proposed spin off transaction.
After our prepared remarks, well open up the call for questions.
If you do not have a copy of today's earnings release is available in the Investor section of our corporate website.
Please take note of the following.
Today's discussion may contain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act that might you thought you saw.
Investors are cautioned that any such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties.
And the actual results developments and events may differ materially for those in the forward looking statements as a result of various factors.
These include financial community perceptions of the company in this business operations financial condition or the industry and we should offer.
As well the factors describing the company's filings with the Securities Exchange Commission, including the sections entitled Risk factors.
Management's discussion and analysis of financial condition results of operations contained therein.
The company disclaims any obligation to update any forward looking statements that may be discussed during this call.
Lastly 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 a non-GAAP financial measure.
And with that I'll now turn the call over to Greg.
Thank you Laurie and good morning, everyone.
Yesterday afternoon, we announced a revised plan for the proposed separation of our sports and entertainment businesses, a plan that simplifies the overall structure and story for our investors, while still positioning both companies for long term success.
We're now planning on pursuing a full spin off of our entertainment business from our sports business. As a result of this new structure. The entertainment company will not routine any equity interest on the sports company.
As a reminder, our prior plan was the spin off approximately two thirds of the equity interest in MSG sports businesses and have the entertainment company you retain the remaining approximate one third stake.
Key reason for the retained stake was to provide the entertainment company with additional financial flexibility.
Who enable us to fund its growth plans.
Well, Andy will have more to say on our MSP sphere initiative shortly the timeline for the opening up our London venue is evolving and we believe that the entertainment company will have sufficient financial flexibility to pursue its venue expansion plans without the need for the retained interest.
As a result, we think this new structure makes most sense for our shareholders.
It enables all shareholders to maintain their current economic interest in both the entertainment and sports businesses and eliminates any potential tax leakage associated with the sale of the retained interest in the sports company.
And the change to a spinoff of entertainment sports rather than sports from Entertainment also provides us with additional tax efficiencies.
In terms of timing without the retained interest and sports we no longer need to obtain a prior letter ruling from the private letter ruling from the IRS.
However, our revised structure will require us to file a new form and with the FCC.
Even with the changes to the structure. We believe we can still complete the transaction during the first quarter of calendar 2020.
And of course I'll just note that the spinoff remains subject to final board and and other approvals.
Let me conclude by saying that we continue to believe this transaction with better highlight.
The unique value of our entertainment and sports assets, while enabling the two companies to pursue their own distinct business plans and growth strategies.
And that this opportunity will ultimately set the stage for continued growth and long term value creation for our shareholders.
With that let me turn the call over to Andy.
Thank you Greg.
We expect fiscal 2020 to be a defining here as we move forward with the spin off as well as our plans for atmosphere in Las Vegas.
There are number reasons why we expect to be highly successful in Las Vegas.
First as a leader in live entertainment, we directly experienced the growing demand for immersive shared experiences.
Unlike any other venue that exist today atmosphere will be uniquely situated to deliver on this trend.
Second we believe Las Vegas, as one of the world's top entertainment destinations with over 40 million visitors annually is the ideal market to introduce the first MSG sphere.
Third.
We have a valuable partner in Las Vegas Sands.
A leader in convention based resorts.
Our venue will be directly connected to their Ekso center and the Nishan resort.
And we see this is an extremely beneficial relationship for both companies as we helped drive each other's business.
And fourth we've assembled the is the expertise to bring this venue to life.
From venue design and construction to immersive content creation, two tickets sponsorship and suite sales, we brought together an extremely talented team to execute our plants.
Regarding expected returns, let me be very clear.
We expect a robust after tax return on our investment and let me tell you why.
We have a strong track record of delivering significant returns on large scale the new projects.
We successfully renovated the Madison Square Garden Arena.
And the form in Los Angeles and in both cases, we've delivered robust returns on our investments.
We've been developing our strategy for MSP sphere for a number of years. We've a business plan that includes a wide variety of revenue streams and takes into account unique aspects of MST sphere, which make the opportunity around residencies attractions corporate events in sponsorships, especially significant.
We expect MSG sphere to change, how we think about the entertainment experience.
Which is why we anticipate the Las Vegas sphere, becoming the most highly utilized venue in our portfolio.
With respect to our timeline.
In Las Vegas, where full speed ahead on construction as we worked towards our goal of opening the venue in calendar 2021.
Turning to London.
We continue to move forward with our planning application process, which will now run into calendar 2020.
In addition, we are taking the time to apply what we're learning in Las Vegas to our design and construction plans for London.
So while we have previously planned to open our London venue approximately one year after Las Vegas.
That timeframe is no longer realistic.
And as we work through the planning application and design process, our timeline will continue to evolve.
And therefore, we do not have a target opening date at this time.
In terms of cost for our Las Vegas venue.
We shared last quarter that our contractor had provided us with an initial estimate as part of the contractual process for 70 incentive benchmark.
The incentive benchmark is meant to encourage our contractor to bring the cost and lower.
To the extent actual costs come in higher than that benchmark the contractor receives lower fees on that portion of the work.
Therefore, it's in our contractors interest to set the benchmark as high as possible to ensure that the actual cost did not exceed that number.
On the other hand, it is an hour interest to set the benchmark lower so there is there is more risk on the contractor if costs exceed the agreed targets.
As we said on our last call. We believe our contractors initial benchmark proposal was too high.
That should not be surprised given the competing goals.
We are now deepen the process of reviewing every estimate and assumption and are working closely with our design team and with our contractor towards reaching an agreed incentive benchmark.
We're making good progress.
I continue to believe this process will result in significant cost savings.
Turning to our operations.
For the fiscal 2021st quarter, our bookings business again benefited from growth in the overall number of concerts held at our venues.
However, we hosted the MTV video music Awards at Radio City last year and did not have a comparable special event. This first quarter.
Which creates a difficult year over year comparison.
In addition, as you think about our second quarter on a year over year basis keep in mind, we had a record breaking quarter last year that included one of the busiest october's and the company's history.
That said, we expect to make up this grounds by the end of the fiscal year.
We would also like to note that we are honored the garden was recently named Billboards Arena of the year for the second year in a row.
Result, we've also been encouraged by the continued improvement in tell group's results.
After a challenging first half last fiscal year tell group's results have steadily improved including solid year over year results this past quarter.
New venue openings continue to be a positive story for tell group.
Since September of last year tell group has successfully debuted several new restaurants in may clubs, including the popular tell Chicago as well as additional venues in Singapore and New York.
Building on this momentum tell group has launched another great restaurant brand of Cathedral.
Which will we believe has the potential for expansion into other locations.
The diesel opened in September as part of the New Moxy East village Hotel, which also includes other dining and nightlife offerings managed by Calgroup.
With regards the Christmas spectacular last years, one was record setting in terms of revenue and profitability.
Reflection of the shows enduring popularity.
87 season is set to debut today.
And despite nine few words schedule shows this year.
Primarily due to the holiday calendar walk through a terrific start in ticket sales and anticipated another successful year.
Turning to our sport segment.
While our first quarter do not include any regular season games, we were able to head into the season with strong full season ticket renewal rates for both the Knicks and Rangers.
With the season now underway and important focus for US is on delivering the best in venue experience and continuing to establish a more direct connection with our fans.
With regard to media rights. In addition to our local media rights deal with MSG networks, which have 16 years remaining we also expect national media revenue from the NHL and an inch and NVCA to continue to grow.
We also expect to continue benefiting from the strength of our suite offerings with a significant majority or our contracted for multiyear period.
With respect to sponsorships in September we announced our renewed expanded multiyear agreement with the hospital for special surgery.
Which provides this long term partner with significant brand exposure across the Knicks, Westchester Nicks and RMB eight UK team Nics gaming.
In addition, as you may recall last year, we entered into a new marketing partnership with Verizon wireless.
Across a number of entertainment assets. We recently expanded this important relationship to include integration opportunities across the Knicks and Rangers.
We're pleased with our ongoing success in partnering with Blue Chip brands, which reflects both the strength of our assets and the unique value we provider partners.
Looking ahead, we are optimistic about our sports business the underlying fundamentals remain strong and we believe there is meaningful upside when team performance improves.
We're also bullish on the potential impact of legalized gaming if approved in our market.
We have seen how transformative it's been in Europe and in the various states, where it's been legalized in terms of driving fan engagement and sponsorship opportunities.
And we believe it would have a notable impact on our in venue business and on the value of sports media rights in the U.S.
In summary, we are focused on growing our core business also pushing forward with our plans for both our spinoff and MSG sphere.
We are executing on a strategy that positions our company for long term growth and continued value creation for our shareholders and with that I'll turn the call over to Victoria.
Thank you Andy and good morning, everyone.
I'd like to start by discussing results for our fiscal 2021st quarter.
On a total company basis, we generated $214.8 million in revenues, a decrease of 2% year over year.
In addition, we generated an adjusted operating loss of $41.1 million as compared to a loss of $9.9 million year ago water.
The increase AOL I loss reflects higher employee compensation related to corporate and our NSG spear initiative.
Additional expenses in NSG spear related content and technology.
And a 10.2 million dollar charge related to a player waiver.
Turning to our segment results.
MSG entertainment revenues of $159 million decreased 2%.
As Andy mentioned last year in the first quarter, we hosted the MTV video music awards, but did not have a similar special event in our fiscal 2021st quarter.
In addition, the wind down of obscure digital third party business continues to impact year over year comparability of results.
As a reminder, we are winding down of skiers third party business. So we can focus those resources on our MSP Seer initiative.
These revenue decreases were mostly offset by growth in both concert related and tower group revenues.
MSG Entertainment AOL by $6.2 million decreased by $2.8 million, primarily due to the decrease in revenues, partially offset by lower direct operating expenses.
At MSG sports revenues of $56 million increased 1%.
This was primarily driven by higher revenues from other live sporting events, partially offset by lower ticket related revenue.
The increase in revenues from other live sporting events was due to higher average per show revenue.
During the quarter, we hosted a number of sporting events, including two W.W. events at the garden and Abella to our M&A event at the Forum.
The decrease in ticket related revenue included the impact of our sale of the New York Liberty basketball team, which occurred in January .
MSG sports AOCF decreased $14.2 million to a loss of $13.7 million.
This reflects higher direct operating and SGN a expenses offsetting the 1% increase in revenues.
The increase in direct operating expenses reflects a $10.2 million charge related to a player waiver, partially offset by other net cost decreases.
Lastly, corporate and other adjusted operating loss of $33.7 million increased $14.2 million.
The increase reflects higher employee compensation related to corporate an hour NFCC or initiative as well as additional expenses for NFC seer related content development and technology.
Now turning to our balance sheet.
As of September Thirtyth, total unrestricted cash and cash equivalents and short term investments were approximately $1.1 billion.
In addition, there has been no borrowings made under either our $150 million in New York Rangers revolving credit facility or our $215 million, New York mix credit facilities.
With respect to tell group as of September Thirtyth $52.5 million with outstanding on its five year bank term loan and revolving credit facility.
With that I will now turn the call back over sorry.
Thank you Victoria.
Harman can we open up the call for questions.
Certainly at this time, if you would like to ask a question simply press star one on your telephone keypad. Your first question is from a line of Bryan Goldberg with Bank of America.
Thanks, I've got some questions on the new spin plans.
First since Youre no longer have the retained interest.
Financing tool to entertainment company and given your comments about the financial flexibility. The Entertainment company was wondering if you could share your latest thinking in terms of how you intend to pay for this year build in Las Vegas in London is there a more definitive financing plan now and then I have a follow up.
Great Good morning, Brian It's Craig.
I think I'd start by noting that with the timeframe continuing to evolve in London.
The first impact of that is that the entertainment companies capital expenditure needs would be spread out over a much longer period than we had previously anticipated.
That said, let me walk you through our current thinking regarding financial flexibility for the Entertainment company.
Entertainment Company, we'll start with an extremely strong cash position. This is expected to include the vast majority of our current $1.1 billion in cash on hand.
And it's also likely that we'll look to the Knicks and Rangers revolvers to make some cash contribution to entertainment prior to the spin off as you heard from Victoria earlier, the total availability on those revolvers is 365 million.
Million dollars.
Further to the entertainment company as an independent public company it will have additional debt capacity.
And it would also the flexibility to add some debt, but one thing I want to make absolutely clear is that we're not planning on Collateralizing, The Madison Square Garden Arena.
Lastly, we anticipate that the cash flow of the entertainment company. Both the current cash flow and what we are ultimately going to see out of the spheres in Las Vegas are going to provide additional support and financial flexibility.
So so as you can see that between the entertainment companies, starting liquidity position current and future financing options. The cash from operations. The company is going to be well position to fund its growth plans.
You asked about.
Other financing options for the entertainment company on an all extend that over two to the London sphere at the end of the day, we feel that we're going to have the complete playbook of corporate finance options available to the entertainment company.
For saying any future spheres, what do I need to buy that non recourse debt financing.
Other types of securitized financings, perhaps maybe even the possibility of having an equity partner or partners in future spheres. So we're very comfortable that that we have adequate.
Adequate financial resources at entertainment to be able to.
To make the company's plants a success.
Thanks, That's that's really helpful. My.
My second question is more of a structural one.
In the revised spin plan entertainment companies not going to be the spin co versus your previous plan to spend sports and was just hoping if you could provide some perspective as to why.
This way of separating sports from entertainment is more advantageous for shareholders.
Well, let's go back to the previous structure for a second because of the fact that we were considering a retained interest was necessary to spin on the partial interest in sports and able to in order to enable entertainment.
To retain the approximate one third interest that we were talking about that since there is no retained and for us that doesn't really apply at this point.
And as you look at.
Which entity to span I think its tax considerations that they're primarily driving the spin of entertainment.
For example, if we were to borrow some portion of the $365 million and revolvers.
I mentioned, we have against the teams.
Those those proceeds could go directly to the entertainment company without incurring packs. If we were added to the spend the other way around borrowings at the.
Sports Company to help fund entertainments growth plans would be taxable and so I think we've got some pretty significant savings built in there I also think that.
One of the important points here is that even though we are changing the direction of the spin.
Our shareholders are going to on a 100% interest in both companies and I really believe that's.
On a long term basis.
It's beneficial to to shareholder value.
Thank you very much very helpful.
Operator, do we have another question I would hope.
Next question is from the line of Brandon Ross with light shed.
Hi, how are you guys.
Just.
Following up on.
Brian . So first question there I mean, even with this additional financial flexibility that you talk about.
Simple math tells us that.
You're not going to be able to fund a second fear for many years.
Is it reasonable to assume that you would wait like several years to build.
We are in London or that the scope of.
That project.
May change dramatically, especially given.
Whatever push factor spin.
From.
The city in London.
Okay.
Third as Brendan and good morning.
As we mentioned before we don't have clarity on our open entitlement.
We're still in the process of.
We're still in the process of planning application and design process and our timeline is going to continue to will evolve, but we don't know what it's going to evolve to one thing I can tell you is that when you asked about the venue itself.
Sphere is once intended for London, it's what's in the planning applications and it's what the Companys intent is to build in London.
Andy had previously mentioned that we plan to open London, a year after Vegas, it's not going to be a year. After Vegas I don't know if it's going to be two years. After Vegas for three years after Vegas, but we're going to continue to go through the process, there and that's going to determine what the capital expenditure profile is going to look like.
Sure and you know as I mentioned before.
Response, I think to Brian's question I.
I think we have the complete corporate finance playbook available to US here, we could probably if we wanted to go out to do nonrecourse financing against this fear in Las Vegas right now as it stands.
We wouldn't do that because we've got the cash balance that's in place the equity fund the beginning of that I think you could see us very easily.
Looking at this fear in Vegas as a financing sources, we go forward.
We're going to have significant then certainly in our business plan, we have significant sponsorship.
One other.
Revenue opportunities, which are month, which are you should be fairly easy to monetize.
So I think we've got an awful lot of options here and I'm not concerned.
About this company, having the financial flexibility that will be required to build London.
And I guess related in limiting your very near term financial flexibility.
Our taminco.
Should we read into it that you have increased confidence that you can keep the Vegas capex.
Far below your contractors estimate.
Yes.
Hey, Brandon.
Good morning so.
He said, we feel good about where we are in the process.
And as we've said previously we thought our contractors initial fee setting benchmark estimate was too high.
So we are deep in a very detailed process of reviewing and challenging the estimates and assumptions.
We're also very carefully reviewing our plans with an eye towards ensuring we're efficiently and effectively achieving our design objectives for the Las Vegas here.
And just as a reminder, one of the reasons that we entered into a cost plus contracts. So we could negotiate a more and play a much more vigilant role in the process, where part of the negotiations we're selecting the sub contractors the materials labor rate and we believe that this will maximize not only the quality of the work but helps.
Manage the projects costs overall.
So this is all part of that process, but what I can tell you is that we continue to believe will be successful in achieving a significant cost reductions.
Okay, and then I guess, just lastly for Greg you spoke recently about introducing sports to the right like quote backdrop.
Which presumably meant with embark on sports team.
Now there is no mark so what is the new right backdrop for sports as it becomes the separately traded entity.
Thanks Brandon.
Let me go back to a scenario, where the entertainment company would have maintained a retained interest and sports and.
No wonder that scenario.
I could see how a sale of some portion of the retained interest would have made sense or could have made sense for both the company and the and the investors.
It may have benefited valuation it certainly would have helped to reduce any potential stock overhang from the approximately 33% retention to some amount smaller than that.
But if you if you're looking at it at the same time the valuation more would have been for a minority stake, which an investor could could purchase overtime in the market. After the spin so I'm not sure what type of premium would have been associated with that type of a.
With that type of the stake sale and.
It's more important but as we move forward with the new structure.
We're going to have a fully distributed very liquid sports stock and what we need to do is get out and tell the story about about MSG sports, which we will do.
Prior to the prior to the spend taking place, but as you know as I've said in the past our teams are clearly extremely valuable assets, there or 30 NVH teams a limited number of which are located in major metropolitan areas. There do happen to be too on the New York area.
Only one in Manhattan and.
If you take a look at the NHL. There were 31 teams with the addition of the the Las Vegas Golden Nights, a couple of years ago and that's it. So these are incredibly scarce assets and as you've seen from private market transactions there.
They are incredibly valuable.
So I think as we as we look at things other than the scarcity value and we also want to look at strong underlying fundamentals legalize gaming.
Andy said if approved in our market I would like to say when approved in our market represents a very attractive growth opportunity for us we've got upside potential should the performance of the teams improve over time.
And we're sports businesses generate significant recurring revenue a substantial portion of thats contractual suites sponsorships media rights.
So we anticipate that as a pure play as this company is not expected to be an active acquirer of other assets.
And.
Arguably either a de levering initially or ultimately a return of capital story.
We think this the future for the sports business was right and we're looking forward to meeting with our Investor base to communicate that story as we get closer to the spend.
Thanks, so much.
Your next question is from the line of Michael Morris with Guggenheim Securities.
Thank you good morning, two topics one on the London sphere, and then one on on sports gaming.
First on this fear can you share any more detail on on what's happening there with the planning application processing.
What the sort of delay is relative to what your expectations, where and maybe.
Is that progress is or doesn't progress are there any other geographies that perhaps would make sense to be a second destination for spheres.
And then on a on the gaming side, Andy and Greg you. Both brought the topic up one of your peer companies monumental sports announced opening a sportsbook inside the capital one arena in DC, So I realize it depending legalization New York, but Tom how are you thinking about and venue gaming from either a sportsbook perspective online.
Kind of what what would it take.
From where you are now to take advantage that opportunity. Thanks.
Thanks.
I appreciate it will.
Let's start with London.
Let me just start by what the site as.
We love the site because of its connectivity.
That said.
The site has rail yard rails on three sides and a bridge that connects to it. So it's a complicated site and we have to work with.
Multiple stakeholders the local planning authority the local government the two different rail companies given the three different rail sites.
Other organizations and we're deep into it.
The plot process is moving forward we're in the planning.
Application process.
And.
This just stuff takes time.
We're expecting it to run through into 2020 now.
This is typical planning application process in London.
Especially for a project of this size, there's a lot of work to be done and we're we're well into it.
And we're really looking to what's going on in Las Vegas to inform both our construction or design.
To make sure London is the best project, we could be.
And we're looking forward to working with all the shakes stakeholders to get this dawn and expect to will happen. It's just a question of women.
That answers are running question in terms of gaming so let's talk a little about sports betting.
And DC so.
Well, let me start actually I mean, I made the comment of sports gaming being legal in our market. The truth is it's actually legal and the New York market at currently but it's only based in the for land based casinos that are up Steve from New York So.
We strongly believe that there needs to be a downstate option.
Either mobile or venue basis in DC.
Wanted to where the.
The capital one arena they were able to secure a license to have sports betting in their venue. So they will be able to offer sports betting and venue.
We of course would be very interested in either a venue based or mobile application and we'd be open to.
Other one.
But I will say the sports gaming landscape.
Just slated landscape is fluid right now.
And.
And so there is going to be a lot of questions and to exactly what will it be and what and what's the time.
But we're very bullish for the opportunity and we believe it will occur. It's just a question of one.
We've seen how we've seen how transformative has been in both Europe and in other municipalities, including New Jersey.
Sure. It's just been the gaming spin off the chart as well as the fan engagement and sponsorship opportunities and so we're very bullish about what's this is what does it mean for our sports business.
Great. Thank you Andy.
Your next question is from the line have been Swinburn with Morgan Stanley .
Thanks, Good morning.
Just on process for the spin maybe back to Greg.
I don't think you commented on this but on the league approval front.
And sort of the other gating items beyond the FCC process do you have any update I think lease terms between the teams me arena as part of the.
One of the many things you guys were working on I didn't know if you also needed approval on the on levering up the teams at all that just added any complexity to it just any update on that piece as we think about.
It has to happen between now and Q1 to execute this.
I'm going to turn it over to Mark General Counsel, Lawrence periods and talk about the league approval process, but.
I don't think there's anything.
At all involved in our.
Borrowing against the existing revolvers. They are there to provide availability Madison square garden.
Works teams.
We're not proposing changing anything at this point in time.
Laurence let me turn it over to you for or sort of more detail perspective.
At first of all let me just confirm with let Gregg said, which is the revolvers are in place where free to borrow against them that does not require any further league approval and so what what Greg set as a 100% accurate in terms of the rest of the league approval process.
We have a wonderful relationship with each of the Nbn the NHL.
They could not be more collaborative with us as we've been working through the process.
The change of spinning entertainment from sports rather than sports from entertainment actually makes that approval process simpler because there is no longer any transfer in any ownership interest even technically in the team. So it actually mises the approval process.
We are very far along in terms of putting in place the intercompany arena license and a couple of other key operational intercompany agreements.
The leads have been fully engaged in that process and we are close to finalizing them.
That's helpful. And then Greg are there any other tax benefits to the new structure beyond what you talked about being able to send the revolver cash over tax free.
If you get any kind of basis benefit on the entertainment assets or does it allow remainco to be monetize more efficiently should something like that play out given if not being spine I know if there's anything else you would add beyond what youve already highlighted.
No I think the only other tax saving that exists here between the.
I'm going to answer the question I'm going to turn it over to my tax guide to make sure that I answered it properly but.
From from my perspective, the other tax saving that exists here.
Was that if we were to have sold.
And a position in the retained interest under the prior structure.
Quite likely that a portion of that transaction would have been taxable and so that's we have saved tax leakage there.
Filled ambrosio is there anything further on the tax side that you think we should highlight.
Okay. Okay. Thank you.
Thank you and then lastly.
Just for Andy on the bookings side of the business any update on sort of how much what sort of the pipeline looks like for fiscal 20 sitting here in early November versus last year, just trying to get a sense for through the growth of the underlying booking business as you look for the fiscal year sitting here today.
Sure happy too.
Let me take a macro view, we're very bullish I've said this before ill say the and we're very bullish about live entertainment and live entertainment experiences. So in the long term view, we're very bullish about the booking business.
However, as I mentioned earlier, we had a record breaking second quarter last year, which included our busiest October in the company's history.
This obviously impacts our year over year comparison.
But as I said also earlier, we expect to make up this ground. This this fiscal year.
In addition.
We've had we've had pretty strong success with our sports booking business do you have see just played here on Saturday night It was a.
A massive success.
And we have the NC double A. East regionals coming in March along with a number of other events. So we feel we feel good.
Great. Thank you thanks, everyone.
Thanks, then carbon we have time for one last caller.
And your final question will come from the line of David Joyce with Evercore ISI. Please go ahead.
Thank you and thinking about the entertainment business there were some elevated costs at how because we've had some openings what's the outlook there for the cadence of further openings are they going to be relatively the same size is what you've been opening and then on the.
On the new entertainment offerings.
There are some elevated expenses for that was up more one timers that ongoing and is there any any sphere costs other them in the corporate line, that's helping our that's in the Hey, why for entertainment. Thank you.
Turing to yeah sure high David.
I guess first I would say that the preopening cost of you referred to were actually.
The pre opening costs that we experienced very towers, Chicago, which was the year ago first quarter had including some of those costs were actually down year over year as it relates to pre opening but I want to I'll cover a little bit about tower going on an overall basis. The group revenues were up 2.4 million on a year over year basis in the first quarter.
Our expenses only slightly higher than we did.
We are seeing some good success with how Chicago.
And our results do include the impact of closing one venue in New York After a successful 15 year Ron.
But as I mentioned on an overall base as we think have delivered solid growth in our first quarter.
And as I think we've talked about on previous calls we continue to work with talent management to identify areas of cost efficiencies and we are seeing the positive impact on tax expenses.
But when we think about pipeline and preopening costs and yes.
Just respect with respect to the new venues in how group evaluate each opportunity on a case by case basis in terms of how best to structure in our current expectations is that well continue to do so over the next several years.
Managed or least venues.
Pending domestic or international but it really will be evaluated based on opportunities that we see in the most efficient way to use our capital whether its managed or or owned.
Sandy just give a little Laurence I also.
The Tories point about lease versus managed and leased venues generally we put up our own capital and keep keep all the benefits of that and managed venue somebody else generally puts up the capital, but we have a smaller share the profit. The workload generally is the same so the question is capital and where the deals our with our partner and so.
We anticipate doing looking at both types of deals sometimes for their own money, sometimes using other people's money.
But.
But they both they're both offered options in the 10 Natal group continues to pursue both types of model.
Thanks are there any fear or other entertainment new entertainment offering costs.
Hey, why for entertainment this quarter.
Yes, so David well of the cost associated with our CRM initiatives related to content developing technology all of that is within our corporate and other segment.
Okay, great. Thank you.
Now I'd like to turn the call back over to Ari days for any closing remarks.
Thank you all for joining US we look forward to speaking with you on our next earnings call have a good day.
Good bye.
Thank you. Thank you again for joining today's call you may now disconnect.
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Yeah.