Madison Square Garden Entertainment ($MSGE) FYQ224 Update
MSGE is a live entertainment company comprised of iconic venues and marquee entertainment content. The company’s portfolio of venues includes The Garden, The Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre.
$MSGE reported earnings on Feb. 7th
After the recent appreciation, what continues to make this compelling? Here are a few points to ponder:
Financials are still masking the underlying goodness of the business.
Bookings for FY25 are already looking good, and The Garden is only at 70% capacity.
Strong Return of Capital Program
1. Financials are still masking the underlying goodness of the business
On a consolidated basis in the quarter, revenue grew 13%, and Adjusted Operating Income (AOI) grew 21% despite several headwinds :
The most important revenue line item is “Event-related and entertainment offerings,” which grew 25% in the quarter. Still, overall revenue growth was only 13% given several headwinds which should reverse in the future.
This 25% growth was a function of double-digit growth in the number of events across the different venues and record revenue at the Christmas Spectacular:
2. Bookings for FY25 are already looking good, and The Garden is only at 70% capacity
The Garden is currently at a 70% utilization rate, hosting 230 events in FY24, including Knicks and Rangers games, alongside 140 other bookings. Efficient scheduling strategies should increase utilization by reducing load-in days and going after multi-day residences.
Regarding FY25, the company expressed confidence that the current trends will continue since shows need to be booked 6-9 months in advance and are tracking at a double-digit growth rate relative to FY24.
3. Return of Capital and improving financial performance in FY24
Since the spinoff, MSGE has repurchased $140mm or 10% of its Class A stock and fully paid down its revolver. CapEx runs ~$20mm per year and is primarily used for maintenance. Management has indicated that it intends to return excess capital to shareholders.
Valuation:
