Q3 2025 Madison Square Garden Entertainment Corp Earnings Call
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David Joyce, Paul Golding, David Karnovsky, Paul Golding, David Karnovsky, Paul Golding, David Karnovsky [inaudible]
Speaker Change: Good morning, thank you for standing by, and welcome to Madison Square Garden Entertainment Entertainment Corp, Fiscal 2025, Third Quarter Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen only mode. After the speaker's remarks, there will be a question and answer session. I would now like to turn the call over to Ari Danes, the senior vice president investor relations and treasury. Please go ahead.
Speaker Change: Thank you. Good morning and welcome to MSG Entertainment's fiscal 2025 third quarter earnings conference call. On today's call, Lee Weinberg, our SBP business and financial operations will provide an update on the company's operations.
Speaker Change: David Collins, our EVP and Chief Financial Officer, will then review the company's financial results for the period. After our prepared remarks, we will open up the call for questions.
Speaker Change: If you do not have a copy of today's earnings release, it is available in the investor section of our corporate website.
Speaker Change: 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.
Speaker Change: Any such Ford-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 Ford-looking statements.
Speaker Change: Please refer to the company's filings with the SEC for discussion of risks and uncertainties.
Speaker Change: The company disclaims any obligations, update any forward-looking statements that may be discussed during this call.
Speaker Change: 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 Lee.
Lee Weinberg: Thank you, Ari. And good morning, everyone, as we near the end of our fiscal year, I'm pleased to say that we continue to see strong consumer and corporate demand for our live entertainment offerings, which is reflected in today's results.
Lee Weinberg: For the company's fiscal third quarter, we reported revenues of $242 million and adjusted the operating income of $58 million, both representing solid growth on a year-over-year basis.
Lee Weinberg: This reflected our success in attracting a wide variety of special events, family shows, and marquee sports to our venues robust ongoing demand for our premium hospitality offerings and the conclusion of this year's record setting Christmas spectacular run in January .
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Lee Weinberg: And while our businesses experience the year over year decline in the number of concerts that are venues this quarter, we remain on track to grow the overall number of bookings events this fiscal year.
Lee Weinberg: So putting it all together, I'm pleased to say that we continue to pace toward near this to high single digit A.O.I. growth this year.
Lee Weinberg: In addition, we continue to deliver on one of our core capital allocation priorities, opportunistically returning capital to shareholders.
Lee Weinberg: We have repurchased approximately $40 million of our Class A common stock to date this fiscal year, including $15 million during the fiscal third quarter. David will share more details on our buyback activity shortly.
Lee Weinberg: Let's now take a look at operational highlights from the quarter.
Lee Weinberg: Across our portfolio of venues, we hosted more than 1.5 million guests across 195 events held during the quarter.
Lee Weinberg: On the special events front, in February we hosted Saturday Night Live's 50th anniversary special at Radio City Music Hall, which is also set to host the Tony Awards next month.
Lee Weinberg: In our family show category, we welcome back the Westminster dog show to the garden for the first time since 2020 and we are pleased to say the event will return next year for its 150th anniversary.
Speaker Change: With respect to our concerts, we saw a year-over-year decrease in the number of events that are venues during the quarter. This was driven by a lower number of concerts at our theatres, as well as at the Garden, which includes the absence of three-billigual performances that took place in the prior year quarter.
Speaker Change: From a demand standpoint, the majority of concerts that are venues continued to sell out during the quarter. In addition, food and beverage per caps at concerts at the garden were up, while per caps at our theaters were essentially unchanged as compared to the prior year quarter.
Turning to the Christmas spectacular
Speaker Change: The show's 91st holiday season concluded in January with a record-setting run generating over $170 million in total revenues across 200 performances.
Speaker Change: 15 of those shows took place in the third quarter with results reflecting year-over-year growth in Pursuit, Tendons, and Average Ticket Prices.
Speaker Change: We are currently on sale for the 2025 holiday season and following this year's success we believe the production is well positioned to deliver continued growth next fiscal year.
Speaker Change: On the marketing partnerships and premium hospitality front, this year has been highlighted by several notable sponsorship announcements which, most recently, included a multi-year renewal with Pepsi.
Speaker Change: And in terms of premium hospitality, we have also seen strong new sales and renewal activity for suites at the garden this year, including our now sold out, expanded, event-level club space.
Speaker Change: I would now like to introduce David Collins, our new EVP and Chief Financial Officer to take you through our financial results.
David Collins: Thanks, Lee, and good morning to everyone. I'd like to start by saying, have pleased I am to be here today. MSG Entertainment is a world-class organization with an incredible portfolio of assets, and I really look forward to working with the team to achieve our long-term goals.
David Collins: Now let's review our fiscal third quarter financial results. For the fiscal 2025 third quarter, we reported revenues of $242.5 million, an increase of $14.2 million, or 6% as compared to the prior year quarter.
David Collins: The majority of this growth came from a $14 million or 10% increase in revenues from entertainment offerings.
David Collins: This primarily reflected growth in event-related revenues from other live entertainment and sporting events due to higher-per-event revenues and an increase in the number of events a year over year.
David Collins: In addition, revenues from our Christmas spectacular production increased year-over-year, primarily due to higher-per-show ticket revenue and to a lesser extent, five additional performances in the quarter, both as compared to the prior year period.
Lee Weinberg: Per show revenues for the Christmas spectacular were up by double digit percentage year over year, mainly reflecting the increases in average attendance and ticket prices that Lee had mentioned earlier.
Lee Weinberg: The overall increase in revenues from entertainment offerings was partially offset by a decrease in event-related revenues from concerts.
Lee Weinberg: This mainly reflected lower per-concert revenues primarily due to a mixed shift at the garden from promoted events to rentals and a decrease in the number of concerts at our venues.
Lee Weinberg: Aside from revenues from entertainment offerings, we also saw a modest increase in food beverage and merchandise revenues for the quarter, which primarily reflected higher food and beverage sales at other live entertainment and sporting events, mostly offset by lower food and beverage sales at concerts.
Lee Weinberg: In addition, arena license fees and other leasing revenues were modestly lower year-over-year, primarily due to the Nixon Rangers playing two fewer home games during the fiscal third quarter, mostly offset by higher other leasing revenues.
Lee Weinberg: Third quarter adjusted operating income of $57.9 million increased $19.3 million or 50 percent as compared to the prior year quarter. The increase in AOI primarily reflects the increase in revenues as well as lower direct operating expenses and selling general and administrative expenses.
Lee Weinberg: I would also note that third quarter operating income results include a non-cash impairment charge of $9.7 million related to the company's operating lease at two pin plaza.
Lee Weinberg: Now, turning to our balance sheet, as of March 31st, we had approximately $89 million of unrestricted cash and our debt balance was approximately $613 million.
Lee Weinberg: As Lee mentioned earlier, fiscal year-to-date we have repurchased approximately 1.1 million shares of our Class A common stock for $40 million.
Lee Weinberg: That includes approximately 436,000 shares repurchased in March at an average price of $33.70 per share for approximately $15 million.
Lee Weinberg: Following these most recent repurchases, we now have $70 million remaining under our current buyback authorization. Going forward, we will continue to explore ways to opportunistically return capital to shareholders. With that, I will now turn the call back over to Ari.
Speaker Change: Thank you, David. Operator, can we open up the call for questions, please?
Speaker Change: Yes, thank you. If you would like to ask a question, please press star one on your telephone keypad. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you.
Speaker Change: Your first question comes from David Karnovsky with JP Morgan. Your line is open.
David Karnofsky: Hey, thank you. So you reported AOI growth through the first nine months of the year at 13%. Just with the guide maintaining that mid-to-high range that does imply, I think, a decline in AOI in the fourth quarter. So it's one of the things you can walk through the puts and takes in a revenue and cost side for the fiscal fourth. Thank you.
David Karnofsky: Sure, David, thanks. Thanks for the question. This is David Collins.
David Karnofsky: There are definitely several factors impacting our fourth quarter. First of all, the overall New York arena concert market is down this quarter compared to last year.
David Karnofsky: And at the garden we do have a tough comparison, as well as included three Billy Joel shows, a number of first time headliners, and some late ads to the calendar.
David Karnofsky: In addition, the Garden hosted 15 playoff games last year. This year, the Rangers did not qualify for the playoffs while the
David Karnofsky: In terms of our theaters, we continue to pace ahead in concerts for the June quarter and expect a strong fourth quarter in special events with the Tony Awards at Radio City.
David Karnofsky: We also continue to monitor how each individual event plays off as we have seen improving per event trends this year, and that could be another area of upside for us. So while there are a number of puts and takes as we close out the year,
Very helpful. Thank you.
Speaker Change: The next question comes from Cameron Manson Perone with Morgan Stanley . Your line is open.
Speaker Change: Hi, good morning. I just wanted to follow up on those concert bookings comments.
Speaker Change: Look particularly looking kind of beyond this year. You know, as we look ahead to 2026, how is that? I know it's early and we're still a bit away from there, but how is the early booking activity shaping up looking ahead to next year? Thanks.
Thanks, Cameron. This is Lee Weinberg, so for...
Speaker Change: Bookings Pacing, we continue to see a number of positive signs for fiscal 26. At this stage, we have substantial visibility into the September quarter, and we're pacing ahead of both the garden and our theaters. In fact, we're likely to set a new record for concerts in a single quarter at the garden. [inaudible]
Speaker Change: Looking ahead to the December quarter, we're again pacing ahead at our theaters, but we're behind at the garden. However, we are encouraged by the conversations we're having at the arena and we're actively narrowing that gap.
Speaker Change: So, Lynn, we're pleased with how concert bookings are pacing so far for fiscal 26.
Very helpful. Thanks.
Speaker Change: The next question comes from Peter Supino with Wolf Research. Your line is open.
Jack State: Thank you. This is Jax did on for Peter with two questions.
Jack State: First, with the Penn Station project now in federal hands, have your conversations with public officials or private developers shifted, and you believe the odds of selling the theater at MSG have increased the result, and then secondly, is there anything you can share on Christmas Spectacus exposure to domestic or international tourism? Thank you.
Jack State: Thanks. I'll take the Penn Station question first. So as invested members of our community, we remain committed to improving Penn Station and the surrounding area. And as we've said before, we and our guests are already seeing the benefits of some of the recent improvements that have taken place in the surrounding area of the garden.
Jack State: As redevelopment of the area continues, we're committed to collaborating closely with all stakeholders.
Jack State: In terms of the theater, specifically, we'd always consider options that make strategic and financial sense, but we have nothing further to report at this time.
Speaker Change: And this is David Collins, Jack. I'll take your question on the international tourism at across the company. So let's start with Christmas.
Speaker Change: We sold approximately 1.1 million tickets this past holiday season, and we estimate that international tourists accounted for approximately 10% of those tickets sold.
Speaker Change: In terms of concerts, let's look at the Garden, which is our most economically significant venue.
Speaker Change: We believe international tourists accounted for a low to mid single digit percentage of concert ticket sales last year.
So, for both Christmas and concert [inaudible]
Speaker Change: We estimate that international ticket sales are the smallest geographic segment by far with Canada and the UK being the main international feeder markets for both so vast majority of ticket sales for both businesses come from the US both local residents and domestic tourists [inaudible]
That's helpful. Thank you.
Stephen Lyszyczyk: The next question comes from Stephen Laszczyk with Goldman Sachs. Your line is open.
Stephen Lyszyczyk: Thanks for taking the questions. Just to follow up on Christmas Spectacular, I'd be curious if you could talk, perhaps a little bit more about how you're thinking about the upcoming season for Christmas and what you see as the main drivers of that continued growth that you called out in your prepared remarks. And then perhaps related to that, is there anything you can say around advanced ticket sales for Christmas this year or any maybe high level comments you could give on demand just given the macro backdrop. Thank you. Thank you.
Stephen Lyszyczyk: Thanks, Stephen. We see growth potential for next year's Christmas spectacular through both more shows and higher average ticket yields. We're currently on sale with 211 shows for the 2025 season, which is up from 200 shows last year. And depending upon demand, we have the ability to further increase this year's show count beyond the current 211.
Stephen Lyszyczyk: We're also focused on improving our average ticket yield. We're still price below comparable live entertainment options on Broadway and we'll continue to manage our ticket inventory to maximize revenue.
Stephen Lyszyczyk: In terms of advanced ticket sales, we went on sale about a month earlier this year which allows us to capture some incremental business for people that are already making Christmas
Stephen Lyszyczyk: So, while the earlier on sale impacts the year-over-year comparison, advanced ticket sales are currently pacing up over 60% in terms of close ticket revenue.
Stephen Lyszyczyk: That reflects improvements across both volume and ticket yield and it also reflects growth in both group sales and individual ticket sales so while it's still early we're confident in the growth opportunity for the 25 holiday season.
That's great. Thank you.
Thanks, Stephen. Operator, we have time for one last caller.
Stephen Lyszyczyk: Thank you. Your last question comes from Peter Henderson with Bank of America. Your line is open.
Peter Henderson: Good morning and thank you for taking the question so I don't believe there are any material capital projects in the horizon
Peter Henderson: The net leverage is now at two and a half times and that should continue to naturally deliver over time due to organic growth. So I'm just wondering how, you know, how we should think about capital returns moving forward, and if you can provide any specific fits to these sort of around, you know, how you think about opportunistically.
Thank you.
Speaker Change: Sure, Peter, thanks. It's David Collins. You know, as you've heard the company discussed before, we have three main priorities in terms of capital allocation.
Speaker Change: Looking over the near-term horizon, there aren't any material capital projects to flag.
Speaker Change: Our third priority is to opportunistically return capital to our shareholders.
We've now repurchased $40 million of stock this fiscal year.
Speaker Change: including $15 million as past quarter, and we have $70 million remaining under our current buyback authorization. So, going forward, we will continue to explore ways to opportunistically return capital to our shareholders.
Thank you.
Speaker Change: This concludes the question and answer session. I'll turn the call to Ari Danes for closing remarks.
Speaker Change: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.
Speaker Change: This concludes today's conference call. Thank you for joining. You may now disconnect
[inaudible] David Joyce, Paul Golding, Paul Golding, Paul Golding