MSGE) ("MSG Entertainment" or the "Company") today reported financial results for the fiscal third quarter ended March 31, 2024.
The fiscal 2024 third quarter was highlighted by the continued strength of the Company's bookings business, led by robust growth in the number of concerts held at the Company's venues. With these positive results, the Company remains on track to achieve a low double-digit percentage increase in the number of bookings events in fiscal 2024. During the fiscal 2024 third quarter, the Company also continued to host the New York Knicks ("Knicks") and New York Rangers ("Rangers") 2023-24 regular season home games at the Madison Square Garden Arena ("The Garden"), which included five additional Knicks home games as compared to the prior year quarter.
Financial results for the three and nine months ended March 31, 2024 reflect the Company on a fully standalone basis. Results for the three and nine months ended March 31, 2023, which were prior to the spin-off from Sphere Entertainment Co. ("Sphere Entertainment"), are presented in accordance with generally accepted accounting principles ("GAAP") for the preparation of carve-out financial statements. These prior year results do not include all of the expenses that would have been incurred by MSG Entertainment had it been a standalone company for the periods presented. Therefore, results for the three and nine months ended March 31, 2024 are not fully comparable with results for the prior year period.
For the fiscal 2024 third quarter, the Company reported revenues of $228.3 million, an increase of $27.1 million, or 13%, as compared to the prior year quarter. In addition, the Company reported operating income of $16.8 million and adjusted operating income of $38.5 million, decreases of $7.9 million and $11.6 million, respectively, as compared to the prior year quarter.(1)
Executive Chairman and CEO James L. Dolan said, "Our business continues to outperform our original expectations for fiscal 2024, and we are on track to generate robust growth in our first full year as a standalone public company. Looking ahead, we remain confident in the strength of our assets and our ability to generate long-term value for our shareholders."
Results for the Three and Nine Months Ended March 31, 2024 and 2023: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | Change | March 31, | Change | |||||||||||||
$ millions | 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | ||||||||
Revenues | $ 228.3 | $ 201.2 | $ 27.1 | 13 % | $ 773.2 | $ 703.6 | $ 69.6 | 10 % | ||||||||
Operating Income | $ 16.8 | $ 24.7 | $ (7.9) | (32) % | $ 120.8 | $ 126.8 | $ (6.0) | (5) % | ||||||||
Adjusted Operating Income (1) | $ 38.5 | $ 50.2 | $ (11.6) | (23) % | $ 198.4 | $ 200.9 | $ (2.5) | (1) % | ||||||||
Note: Amounts may not foot due to rounding. | |
(1) | See page 4 of this earnings release for the definition of adjusted operating income (loss) ("AOI") included in the discussion of non-GAAP financial measures. The Company has amended this definition so that the non-cash portion of operating lease revenue related to the Company's Arena License Agreements with Madison Square Garden Sports Corp. ("MSG Sports") is no longer excluded in all periods presented, as well as in the Company's financial guidance. For full year fiscal 2024, the non-cash portion of operating lease revenue is expected to be $25.3 million, which is now included in the current AOI range of $200-210 million and in the prior AOI range of $195-205 million. For the three and nine months ended March 31, 2024, the non-cash portion of operating lease revenue was $13.2 million and $22.8 million, respectively, and for the three and nine months ended March 31, 2023 the non-cash portion of operating lease revenue was $12.1 million and $25.1 million, respectively. |
Entertainment Offerings, Arena License Fees and Other Leasing(2)
Fiscal 2024 third quarter revenues from entertainment offerings of $146.2 million increased $17.0 million, or 13%, as compared to the prior year period, primarily due to higher event-related revenues and revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements.
- Event-related revenues increased $10.7 million, as compared to the prior year quarter, primarily due to an increase in the number of concerts at the Company's venues, partially offset by the absence of a marquee sporting event that took place in the prior year quarter.
- Revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements increased $6.8 million, primarily due to higher suite license fee revenues as compared to the prior year quarter.
Fiscal 2024 third quarter arena license fees and other leasing revenues of $36.7 million increased $4.7 million, or 15%, as compared to the prior year period, primarily due to higher arena license fees, the result of five more Knicks games played at The Garden, as compared to the prior year quarter.
Fiscal 2024 third quarter direct operating expenses associated with entertainment offerings, arena license fees and other leasing of $113.0 million increased $22.7 million, or 25%, as compared to the prior year quarter. The increase reflected higher event-related expenses of $12.0 million, primarily due to the increase in the number of concerts at the Company's venues and, to a lesser extent, higher per-concert expenses, both as compared to the prior year quarter. In addition, expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements increased $6.0 million, primarily due to higher expenses incurred as a result of the increase in suite license fee revenues, while venue operating costs increased $2.6 million, both as compared to the prior year quarter.
Food, Beverage and Merchandise(2)
Fiscal 2024 third quarter food, beverage and merchandise revenues of $45.4 million increased $5.4 million, or 14%, as compared to the prior year period. This was primarily due to the increase in the number of concerts held at the Company's venues and the impact of five more Knicks home games, as compared to the prior year period, partially offset by lower per-concert food and beverage revenues, which reflects a mix shift to more concerts at the Company's theaters during the current year quarter.
Fiscal 2024 third quarter food, beverage and merchandise direct operating expenses of $29.0 million increased $4.2 million, or 17%, as compared to the prior year quarter, primarily driven by the related increase in food and beverage revenues.
Selling, General and Administrative Expenses
Fiscal 2024 third quarter selling, general and administrative expenses of $53.9 million increased $9.8 million, or 22%, as compared with the prior year period. Fiscal 2024 third quarter results reflect the Company on a fully standalone basis. Results for the fiscal 2023 third quarter reflect the allocation of corporate and administrative costs based on the accounting requirements for the preparation of carve-out financial statements. These results do not include all of the expenses that would have been incurred by MSG Entertainment had it been a standalone company in the prior year period. This was the primary driver of the overall increase in selling, general and administrative expenses, partially offset by the impact of the Company's transition services agreement with Sphere Entertainment Co.
Operating Income and Adjusted Operating Income
Fiscal 2024 third quarter operating income of $16.8 million decreased $7.9 million, or 32%, and adjusted operating income of $38.5 million decreased $11.6 million, or 23%, both as compared to the prior year quarter. The decrease in operating income and adjusted operating income was primarily due to higher selling, general and administrative expenses as discussed above.
(2) | Effective for the third quarter of fiscal 2024, the Company modified its presentation of revenues and direct operating expenses. As a result of this new disclosure, total revenue is now presented in three categories consisting of i) Revenues from entertainment offerings, ii) Food, beverage and merchandise revenues, and iii) Arena license fees and other leasing revenues. In addition, total direct operating expenses is now presented in two categories consisting of i) Entertainment offerings, arena license fees and other leasing direct operating expenses and ii) food, beverage, and merchandise direct operating expenses. Prior period financial information has been revised to conform with the current period presentation. |
Financial Guidance
As a result of the positive momentum across its operations, the Company is narrowing its fiscal 2024 guidance for revenues and increasing its fiscal 2024 guidance for operating income and adjusted operating income. The Company currently expects the following:
- Revenues of $940 million to $950 million, as compared to its prior range of $930 to $950 million.
- Operating income of $100 million to $110 million, as compared to the prior range of $95 to $105 million.
- Adjusted operating income of $200 million to $210 million, as compared to the prior range of $195 to $205 million. The Company's AOI range now includes approximately $25 million in non-cash operating lease revenue related to the Company's Arena License Agreements with MSG Sports.(3)
An updated version of the MSG Entertainment investor presentation is now available at investor.msgentertainment.com.
(3) | See page 4 of this earnings release for the definition of adjusted operating income (loss) ("AOI") included in the discussion of non-GAAP financial measures. The Company has amended this definition so that the non-cash portion of operating lease revenue related to the Company's Arena License Agreements with Madison Square Garden Sports Corp. ("MSG Sports") is no longer excluded in all periods presented, as well as in the Company's financial guidance. For full year fiscal 2024, the non-cash portion of operating lease revenue is expected to be $25.3 million, which is now included in the current AOI range of $200-210 million and in the prior AOI range of $195-205 million. |
About Madison Square Garden Entertainment Corp.
www.msgentertainment.com.
Non-GAAP Financial Measures
Contacts:
Ari Danes, CFA
Senior Vice President, Investor Relations, Financial Communications & Treasury
Madison Square Garden Entertainment Corp.
(212) 465-6072
Justin Blaber
Vice President, Financial Communications
Madison Square Garden Entertainment Corp.
(212) 465-6109
Conference Call Information:
The conference call will be Webcast live today at 10:00 a.m. ET at investor.msgentertainment.com
Conference call dial-in number is 888-660-6386 / Conference ID Number 8020251
Conference call replay number is 800-770-2030 / Conference ID Number 8020251 until May 16, 2024
MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) | ||||||||
Three Months Ended | Nine Months Ended | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Revenues | ||||||||
Revenues from entertainment offerings | $ 146,221 | $ 129,260 | $ 581,025 | $ 524,331 | ||||
Food, beverage, and merchandise revenues | 45,380 | 39,954 | 127,379 | 112,412 | ||||
Arena license fees and other leasing revenue | 36,712 | 32,015 | 64,787 | $ 66,818 | ||||
Total revenues | 228,313 | 201,229 | 773,191 | 703,561 | ||||
Direct operating expenses | ||||||||
Entertainment offerings, arena license fees, and other leasing direct | (112,997) | (90,296) | (375,786) | (332,290) | ||||
Food, beverage, and merchandise direct operating expenses | (29,024) | (24,837) | (70,673) | (65,108) | ||||
Total direct operating expenses | (142,021) | (115,133) | (446,459) | (397,398) | ||||
Selling, general, and administrative expenses | (53,945) | (44,122) | (151,156) | (127,537) | ||||
Depreciation and amortization | (13,182) | (14,798) | (39,972) | (46,369) | ||||
(Loss) gains, net on dispositions | - | (51) | - | 4,361 | ||||
Restructuring charges | (2,362) | (2,461) | (14,803) | (9,820) | ||||
Operating income | 16,803 | 24,664 | 120,801 | 126,798 | ||||
Interest income | 341 | 2,482 | 2,275 | 5,804 | ||||
Interest expense | (14,425) | (13,423) | (43,761) | (38,055) | ||||
Other income (expense), net | 78 | 8,070 | (1,545) | 6,784 | ||||
Income from operations before income taxes | 2,797 | 21,793 | 77,770 | 101,331 | ||||
Income tax expense | (2) | (73) | (397) | (804) | ||||
Net income | 2,795 | 21,720 | 77,373 | 100,527 | ||||
Less: Net loss attributable to nonredeemable noncontrolling interest | - | - | - | (553) | ||||
Net income attributable to MSG Entertainment's stockholders | $ 2,795 | $ 21,720 | $ 77,373 | $ 101,080 | ||||
Income per share attributable to MSG Entertainment's | ||||||||
Basic | $ 0.06 | $ 0.42 | $ 1.59 | $ 1.95 | ||||
Diluted | $ 0.06 | $ 0.42 | $ 1.58 | $ 1.95 | ||||
Weighted-average number of shares of common stock: | ||||||||
Basic | 48,109 | 51,768 | 48,675 | 51,768 | ||||
Diluted | 48,447 | 51,768 | 48,883 | 51,768 | ||||
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)
(in thousands)
(Unaudited)
The following is a description of the adjustments to operating income in arriving at adjusted operating income as described in this earnings release:
- Depreciation and amortization. This adjustment eliminates depreciation and amortization of property and equipment and intangible assets in all periods.
- Share-based compensation. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under the Company's Employee Stock Plan, Sphere Entertainment's Employee Stock Plan, the Company's Non-Employee Director Plan and Sphere Entertainment's Non-Employee Director Plan in all periods.
- Loss (gains), net on dispositions. This adjustment eliminates the impact of gains or losses from the disposition of assets or businesses in all periods.
- Restructuring charges. This adjustment eliminates costs related to termination benefits provided to certain corporate executives and employees.
- Merger, spin-off, and acquisition-related costs. This adjustment eliminates costs related to mergers, spin-offs and acquisitions, including merger-related litigation expenses, in all periods.
- Amortization for capitalized cloud computing arrangement costs. This adjustment eliminates amortization of capitalized cloud computing arrangement costs.
- Remeasurement of deferred compensation plan liabilities. This adjustment eliminates the impact of gains and losses related to the remeasurement of liabilities under the executive deferred compensation plan.
Three Months Ended | Nine Months Ended | |||||||
$ thousands | 2024 | 2023 | 2024 | 2023 | ||||
Operating income | $ 16,803 | $ 24,664 | $ 120,801 | $ 126,798 | ||||
Depreciation and amortization | 13,182 | 14,798 | 39,972 | 46,369 | ||||
Share-based compensation (excluding share-based | 5,611 | 8,014 | 19,561 | 21,979 | ||||
Loss (gains), net on dispositions | - | 51 | - | (4,361) | ||||
Restructuring charges | 2,362 | 2,461 | 14,803 | 9,820 | ||||
Merger, spin-off, and acquisition-related costs(1) | - | - | 2,035 | - | ||||
Amortization for capitalized cloud computing arrangement costs | 388 | 65 | 836 | 169 | ||||
Remeasurement of deferred compensation plan liabilities | 191 | 126 | 389 | 132 | ||||
Adjusted operating income(2) | $ 38,537 | $ 50,179 | $ 198,397 | $ 200,906 | ||||
_________________ | |
(1) | This adjustment represents non-recurring costs incurred and paid by the Company for the sale of the retained interest by Sphere Entertainment Co. |
(2) | The Company has amended the definition of adjusted operating income so that the impact of the non-cash portion of operating lease revenue related to the Company's Arena License Agreements with MSG Sports is no longer excluded in all periods presented. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Adjusted operating income includes operating lease revenue of (i) $22,372 and $38,610 of revenue collected in cash for the three and nine months ended March 31, 2024, respectively, and $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and (ii) a non-cash portion of $13,216 and $22,831 for the three and nine months ended March 31, 2024, respectively, and $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively. |
MADISON SQUARE GARDEN ENTERTAINMENT CORP. | ||||
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS (unaudited) | ||||
(in thousands) | ||||
March 31, | June 30, | |||
ASSETS | ||||
Current Assets: | ||||
Cash, cash equivalents, and restricted cash | $ 28,308 | $ 84,355 | ||
Accounts receivable, net | 108,560 | 63,898 | ||
Related party receivables, current | 29,690 | 69,466 | ||
Prepaid expenses and other current assets | 89,240 | 77,562 | ||
Total current assets | 255,798 | 295,281 | ||
Non-Current Assets: | ||||
Property and equipment, net | 636,014 | 628,888 | ||
Right-of-use lease assets | 307,435 | 235,790 | ||
Goodwill | 69,041 | 69,041 | ||
Indefinite-lived intangible assets | 63,801 | 63,801 | ||
Other non-current assets | 126,482 | 108,356 | ||
Total assets | $ 1,458,571 | $ 1,401,157 | ||
LIABILITIES AND DEFICIT | ||||
Current Liabilities: | ||||
Accounts payable, accrued and other current liabilities | $ 205,076 | $ 214,725 | ||
Related party payables, current | 46,596 | 47,281 | ||
Long-term debt, current | 16,250 | 16,250 | ||
Operating lease liabilities, current | 31,570 | 36,529 | ||
Deferred revenue | 251,270 | 225,855 | ||
Total current liabilities | 550,762 | 540,640 | ||
Non-Current Liabilities: | ||||
Long-term debt, net of deferred financing costs | 602,468 | 630,184 | ||
Operating lease liabilities, non-current | 330,902 | 219,955 | ||
Deferred tax liabilities, net | 24,151 | 23,518 | ||
Other non-current liabilities | 44,851 | 56,332 | ||
Total liabilities | 1,553,134 | 1,470,629 | ||
Commitments and contingencies | ||||
Deficit: | ||||
Class A Common Stock (a) | 455 | 450 | ||
Class B Common Stock (b) | 69 | 69 | ||
Additional paid-in-capital | 29,656 | 17,727 | ||
Treasury stock at cost (4,365 and 840 shares outstanding as of March 31, 2024 and June | (140,512) | (25,000) | ||
Retained earnings (deficit) | 48,676 | (28,697) | ||
Accumulated other comprehensive loss | (32,907) | (34,021) | ||
Total deficit | (94,563) | (69,472) | ||
Total liabilities and deficit | $ 1,458,571 | $ 1,401,157 | ||
_________________ | |
(a) | Class A Common Stock, $0.01 par value per share, 120,000 shares authorized; 45,523 and 45,024 shares issued as of March 31, 2024 and June 30, 2023, respectively. |
(b) | Class B Common Stock, $0.01 par value per share, 30,000 shares authorized; 6,867 shares issued as of March 31, 2024 and June 30, 2023, respectively. |
MADISON SQUARE GARDEN ENTERTAINMENT CORP. (in thousands) (Unaudited) | ||||
Nine Months Ended | ||||
March 31, | ||||
2024 | 2023 | |||
Net cash provided by operating activities | $ 111,054 | $ 132,341 | ||
Net cash (used in) provided by investing activities | (72,625) | 13,261 | ||
Net cash used in financing activities | (94,476) | (85,194) | ||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (56,047) | 60,408 | ||
Cash, cash equivalents, and restricted cash, beginning of period | 84,355 | 62,573 | ||
Cash, cash equivalents, and restricted cash, end of period | $ 28,308 | $ 122,981 | ||
MADISON SQUARE GARDEN ENTERTAINMENT CORP. APPENDIX FISCAL 2024 FINANCIAL GUIDANCE ADJUSTMENTS TO RECONCILE OPERATING INCOME TO ADJUSTED OPERATING INCOME (in millions) | ||
Fiscal Year 2024 | ||
Operating income | $100 - $110 | |
Depreciation and amortization | 54 | |
Share-based compensation | 28 | |
Restructuring charges | 15 | |
Merger, spin-off and acquisition-related costs | 2 | |
Other (1) | 1 | |
Adjusted operating income | $200 - $210 | |
(1) | This adjustment reflects the elimination of amortization of capitalized cloud computing arrangement costs and the elimination of the impact of gains and losses related to the remeasurement for deferred compensation plan liabilities. |
SOURCE Madison Square Garden Entertainment Corp.
