Madison Square Garden Entertainment Corp. (MSGE) Q4 2026 Earnings Call Transcript

Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp Fiscal 2026 4th Quarter and Year End Earnings Conference Call. 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 Daines, Senior Vice President, Investor Relations and Treasury. Ari, please go ahead.

Thank you. Good morning and welcome to MSG Entertainment's Fiscal 2026 Fourth Quarter and Year-End Earnings Conference Call. On today's call, David Collins, our EVP and Chief Financial Officer, will provide an update on the company's operations and review our financial results for the period. After our prepared remarks, we'll 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 Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On pages 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. With that, I'll now turn the call over to David.

Thank you, Ari, and good morning, everyone. fiscal 2026 was an outstanding year for our company with full year revenues of more than 1 billion dollars and adjusted operating income of 262 million dollars this represented increases of 13 and 18 respectively driven by growth across all key areas of our business in addition we continue to execute on one of our core capital allocation priorities during the year repurchasing approximately 25 million dollars of our class a common stock and in june we announced the proposed transfer of the infosys theater at madison square garden as part of the penn station redevelopment project a transaction that if finalized would further our goal of creating long-term shareholder value as we head into fiscal 27 we look to build on our operating momentum with a continued focus on growing the number of events across our venues, increasing per-event profitability, delivering another record-setting year for the Christmas spectacular, and advancing our sponsorship and premium hospitality businesses. We also anticipate strong ongoing demand from consumers and partners alike, which we believe sets us up for another year of solid growth both in revenues and AOI in fiscal 27. Let's now review some key operational highlights. During fiscal 26, we hosted approximately 6.4 million guests at nearly 960 live events. That included a strong fiscal fourth quarter where we more than doubled the number of concerts at the Garden year over year, reflecting our efforts to drive utilization within the NBA playoff window. And in terms of consumer demand, the majority of our concerts were again sold out during the quarter. Looking ahead to fiscal 27, we expect to grow the number of events at our venues year over year as we host a wide range of bookings across concerts, special events, family shows, and marquee sports. This includes a number of high-profile upcoming events, such as Harry Styles Residency, with 30 dates from august through october and the return of the ncaa men's basketball east regionals to the garden in march turning to the christmas spectacular production during fiscal 26 across 215 paid performances we sold over 1.2 million tickets the highest attendance in 25 years leading to another record-setting year for the production with approximately 195 million dollars in revenue we are currently on sale with 230 shows for the 2026 holiday season a new high in terms of number of performances in a year this year's show will feature the addition of a new rocket scene as well as new immersive technology that will give audiences different perspectives of the production as we continue innovating going into our 93rd season in terms of our agreements with MSG Sports, the Knicks and Rangers completed their 25-26 regular seasons during the quarter, with the Knicks advancing to the NBA playoffs and ultimately going on to win the NBA championship. For both our fourth quarter and full year, we saw robust growth on a per-game basis in our Knicks and Rangers shared revenue streams, including sweets and food, beverage, and merchandise, which all benefit from the Knicks' postseason run. We expect this momentum to carry forward into Fiscal 27. In addition, the cash component of the arena license fees will be approximately $47 million in Fiscal 27 and will continue to grow 3% each year through Fiscal 2055. On the marketing partnerships front, we capitalized on several notable opportunities in Fiscal 26. We welcome new partners, including, most recently, a multi-year deal with CalShe, while also reaching multi-year renewals with Lexus, Anheuser-Busch, and Infosys. And in terms of premium hospitality, we again saw strong new sales and renewal activity for suites at the Garden. That included a number of Lexus-level suites that were renovated at the start of the fiscal year. we're continuing to build on the successful initiative by renovating several more suites to drive incremental revenue in fiscal 27. so as we look to the next fiscal year we expect the positive momentum in both marketing partnerships and premium hospitality to continue turning to the penn station redevelopment in may amtrak selected penn transformation partners led by Halmar International and Skanska as the master developer team to redevelop Penn Station. We then announced in June that we had entered into a non-binding MOU with the master developer to transfer the Infosys Theater at Madison Square Garden. Our proposed agreement will also acknowledge that the arena will remain fully operational during the redevelopment. We believe the potential transaction, which remains subject to negotiation and definitive documents make strategic and financial sense for the company as we look to create long-term value for our shareholders we look forward to working with the master developer team and we'll keep you updated as we have more to share now let's turn to our financial results for the fiscal 26 fourth quarter revenues were 196.3 million dollars up 27 percent year over year this primarily reflected an increase in revenues from entertainment offerings and to a lesser extent higher food beverage and merchandise revenues the increase in revenues from entertainment offerings as well as food beverage and merchandise primarily reflected the increase in number of concerts at the garden during the quarter in addition we benefited from higher revenues subject to the sharing of economics with msg sports including the benefit of the next championship run in areas such as merchandise revenues from venue related sponsorships signage and suite license fees also grew year over year these increases were partially offset by fewer concerts at our theaters fourth quarter adjusted operating income of 18.6 million dollars increased $19.9 million from an adjusted operating loss of $1.3 million in the prior year quarter. This significant year-over-year growth primarily reflects the robust increase in revenues partially offset by higher direct operating and SG&A expenses. Turning to our balance sheet, as of June 30th, we had $294 million of unrestricted cash, while our debt balance was approximately $579 million. This cash balance includes a significant amount due to promoters, which reflects the robust concert activity ahead at our venues, led by the Garden. With respect to fiscal 27, we anticipate generating significant free cash flow on an underlying basis. This will primarily be driven by our substantial and growing adjusted operating income, partially offset by ongoing net interest payments related to our credit facilities which totaled $32 million in fiscal 26 our status as a full cash taxpayer capital expenditures which will reflect some incremental spend related to technology investments across the company and select suite renovations at the garden and the timing of working capital including the partial reversal of our cash due to promoters balance as a result of the timing of events as i touched on earlier we repurchased approximately 623 000 shares of our class a common stock for 25 million dollars during fiscal 26 since our spin-off in 2023 we have repurchased approximately 6.1 million shares in total for 205 million dollars and going forward we'll continue to explore ways to opportunistically return capital to shareholders. So in summary, we saw strong demand across our business in fiscal 2026. We see this momentum continuing in fiscal 2027 and remain confident in our ability to deliver long-term shareholder value. I'll now turn the call back over to Ari.

Thanks, David. Operator, can we now open up the call for questions?

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile up the Q&A roster. Your first question comes from the line of Peter Henderson with Bank of America. Your line is open. Please go ahead.

Good morning. Thank you for taking the questions. Two, if I can, relate it. Can you just update us on the status of the Infosys Theater sale process?

And if that sale occurs, how much of the venue's event volume and associate economics, like the sponsorship, do you believe you can recapture elsewhere in your portfolio? uh sure good morning to you thanks thanks for the question um you know first i'd like to congratulate penn transformation partners on being selected to redevelop penn station and you know as i had mentioned earlier we believe that this potential transaction is in line with our goal of creating long-term you know value for our shareholders so currently we're working through the definitive documents with their team you know and we will keep you posted on that progress you know as it relates to our ability to redirect the theater's business you know first i would remind you that you know a significant majority of our company's economics are driven by the garden and the christmas spectacular production you know the theaters in aggregate you know follow those two revenue streams um you know that said we we are exploring all opportunities to maximize the economic benefits of this uh potential transaction which does you know which does include analyzing our ability to shift events from the infosys theater to our other theaters uh in new york um and i would say in terms of sponsorship and signage you know our our partnerships do generally allow us the flexibility within our business uh you know while protecting the value delivered to our partners so you know similar to events we are evaluating ways to leverage our other live entertainment assets you know for sponsorship and signage great thank you your next question comes from the line of brandon ross with light shed your line is open please go ahead good morning thanks for taking the question um just maybe a follow up on the last one.

Assuming the Infosys sale does go through, how do you guys expect to use the proceeds and limit tax leakage at the same time? And do those options include partnering with Sphere potentially on a New York Sphere or Sphere elsewhere? Thank you.

Thanks, Brandon. You know, I would say, you know, with regard to the proposed transfer of the theater you know our focus right now currently is on completing the proposed transaction you know no no decisions have been made at this stage in terms of the use of those proceeds you know should the transfer be completed but you know with that said we are certainly mindful of the the potential tax implications related to the transfer of the theater and you You know, as you may know, the primary way to minimize the tax leakage would be to reinvest, you know, the potential proceeds in another venue. So, of course, we would evaluate venue opportunities in New York City market if they, you know, presented to us in the future. But, you know, I don't think we're in a position to speculate on any hypothetical venue transactions at this time. I'd also add that any decision that we do make will be in line with our core priorities for capital allocation, which, as you know, are ensuring that we continue to have a strong balance sheet, that we maintain our flexibility to pursue compelling opportunities when they arise, and lastly, to opportunistically return capital to our shareholders. So, you know, we will continue to make our decisions based on these priorities. And, you know, we will, you know, we'll have more to share as we move through that process.

Thanks, Brandon. Operator will take the next question.

Your next question comes from Stephen Lashik with Goldman Sachs. Your line is open. Please go ahead.

Great. Thanks for taking the question. I wanted to see if you could provide an update on the pacing of event bookings in 2027 across the portfolio. Just to be curious how much visibility you have into bookings potentially growing at the garden year-over-year, and then wanted to check in on the pacing of bookings around the feeder footprint since we last caught up in the third quarter, how that's progressed since.

Sure, Stephen. You know, in terms of our progress, we're almost 90% to our bookings goal for this year for the Garden, and about 60% of the way there for 60% to our goal for our theaters. You know, our fiscal first quarter is already underway, and, you know, we remain on track to shatter our record for the number of concerts in any quarter at the Garden. And, you know, obviously that includes the impact of the Harry Styles residency at our theaters. We are currently pacing behind for the September quarter, you know, and looking at at the December quarter, we are again pacing ahead at the garden in terms of the number of concerts, but still behind at the theaters. However, you know, as I've discussed in the past, the booking window at our theaters is typically a three to six months in advance window. So, you know, we do still have time and we are definitely working to narrow that gap. So I would say overall, all in, we feel good about our start to the year and expect to drive growth at both the garden and our theaters in fiscal 27.

Thank you very much. your next question comes from the line of david karnofsky with jp morgan your line is open please go ahead hey thank you for that caller on the upcoming year uh as it relates to the christmas show can you just update on the sales pacing and price strategy and you mentioned a 230 show pound is there any room to move that higher if uh if the demand is there thanks sure david um you know while it's still early in the, in the sale cycle, you know, our expectation is that we will grow ticketing revenue this year, uh, you know, which reflects, uh, both more shows and higher average

ticket yields. You know, as you mentioned, we are, we are on sale with 230 performances right now for, uh, the 2026 holiday season, which, which is up from 215 last year. And, and, you know, and that translates to a you know mid single digit percentage increase in show count year over year in addition the christmas spectacular continues to be a premium entertainment product and is still priced well below average ticket prices for comparable entertainment options in the city so you know given all that you know we will continue to thoughtfully manage and market and price our ticketing inventory, you know, to maximize revenue for every show. I would again note that this year's show will feature the addition of a new Rockette scene as well as new immersive technology, which we believe will give audiences a different perspective of the production. So, you know, we continue to believe that our efforts to continue innovating the show will help drive increased interest and that we remain confident in the growth opportunity for the 26th holiday season.

Your next question comes the line of Cameron Manson Perrone with Morgan Stanley. Your line is open. Please go ahead.

Thanks, Morning. I wanted to ask a general one on residency models. Specifically, you know, when you lost the Billy Joel residency, it took you some time to replace that activity. Obviously, found a great replacement in Harry Styles. But looking back on that, why was the situation with Billy Joel maybe unique? And what do you think you can do or have you done operationally to try to reduce similar volatility around residency changes year to year going forward?

Thanks. That's a good question, Cameron. You know, we believe there is great value, obviously, in bringing residencies to our venues. You know, we believe it builds more of a, you know, recurring base of our business, and it really also increases the visibility into our forward calendar. So, you know, bringing residency remains a really important area for our bookings business and, you know, a key focus of our team. You know, with that said, you know, every residency is going to look a little different, right? You know, artists want to put their own unique structure and spin on their residency. You know, for example, Billy Joel, you know, that was one concert per month, you know, where with Harry Styles, that means every Wednesday, Friday, Saturday, you know, for 10 straight weeks. So, you know, each one is going to look a little different. I would also note that, you know, we also have a number of other residencies across our venues in the first half of fiscal 27. You know, Bon Jovi and Fish have been at the Garden both this past month. Joe Hisaishi currently at Radio City. And Seth Meyers and John Oliver, as well as Jerry Seinfeld, have each extended their long-running residencies at the Beacon Theater. So, you know, I would reiterate that, you know, we are off to a strong start in terms of our concert booking for fiscal 2027. And, you know, while it's a little early to discuss fiscal 2028 and beyond, you know, We continue to have discussions with other artists about future residencies at all our venues, including the garden. So we will certainly keep working on that and keep you updated on the progress.

That's helpful. Appreciate it.

Your next question comes from the line of David Joyce with Seaport. Your line is open. Please go ahead.

Thank you. I appreciate the color that you had an increase in Madison Square Garden sharing. revenue from the Knicks championship run. Could you please detail the revenue and AOI components on the various business lines that contribute to that? Does sponsorship provide some of that? I know you mentioned merchandise, food and beverage suites. If you could please help us understand what that contribution was. Thanks.

Sure, David. First of all, I would say that we were very excited to see the Knicks win the NBA championship. As you mentioned, we benefit from the playoff games at the Garden through our agreements with MSG Sports. We share in revenue streams like F&B, merchandise, single night suite rentals. First of all, we operate and manage the F&B services during all team events. And MSGE shares 50% of the net profits with the Knicks and Rangers. We also operate and manage the team merchandise sales at the Garden and retain 30% of net revenues. And we also earn commission on sales of single night suites at the Garden during Knicks and Rangers games. So, you know, this year we hosted nine Knicks playoff games during the team's championship run. You know, while that compares to the same number of games in the year ago period, when the team advanced to the Eastern Conference finals, today's results reflect a 7.4 million increase in fourth quarter revenues related to our agreements with MSG sports, which includes that, you know, the impact of the championship run. So, you know, we believe that this reflects the enthusiasm we saw from fans throughout this year's championship run in those areas, such as merchandise and F&B sales. And one thing I also like to say is we believe that that strong team performance will benefit this upcoming year in the form of, you know, continued strong in-arena attendance, which will further benefit, you know, our shared revenue streams with MSG Sports.

Thanks for the question, David. Operator will take one last caller.

Your last question comes from the line of Joe Stoff with Susquehanna. Your line is open. Please go ahead.

Good morning. This is Eric Mandelblatt on for Joe. Thanks for the question. Just one from us.

You gave some helpful details on the Fiscal 2027 Bookings Outlook in aggregate, it but could you talk about the bookings outlook by category across concerts special events family shows and marquee sporting events thank you uh thanks for the question eric um you know as i mentioned earlier we expect to increase the number of bookings uh in fiscal 27. uh you know we expect that growth to be driven primarily by concerts um and to a lesser extent special events and and marquee sports. For our concert category, you know, our expectations include another year of concert growth at the Garden, as well as increases across our theaters. I would say in terms of special events, we are also expecting an increase in the number of events, along with improved per event economics. Looking at marquee sports, you know, we expect to see modest event growth this coming year which will include the ncaa east regional tournament uh returning to the garden in march and and that will be a significant multi-day event in our fiscal third quarter and lastly in terms of our family show category i would say we face a tough year over year comparison with the absence of of cirque de soleil's holiday run at the infosys theater and the chicago theater that took place this past year. However, you know, we expect that to be largely offset by a variety of family and performing arts attractions in the year ahead, including the Les Mis production that just ran at Radio City Music Hall. So overall, we are expecting growth across a number of our bookings categories and feel really good about our booking calendar for fiscal 27.

We have reached the end of the question and answer session. I will now turn the call back to Ari for closing remarks.

Thank you all for joining us. We look forward to speaking with you on our Fiscal 27 First Border Earnings Conference Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.