Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Madison Square Garden Sports Corp (MSGS, Financial) generated record revenues of over $1 billion and adjusted operating income of $172 million for fiscal 2024.
- Both the Knicks and Rangers had successful seasons, with the Rangers reaching the Eastern Conference final and the Knicks advancing to the Eastern Conference semifinals.
- The company saw strong fan engagement, with a combined season ticket renewal rate of approximately 94% for the Knicks and Rangers.
- Merchandise revenue hit new highs, driven by successful partnerships with premium brands and new product offerings.
- The company has a strong balance sheet with a cash balance of approximately $89 million and has paid down significant debt, including $55 million under the Rangers' revolving credit facility.
Negative Points
- The evolving sports media landscape, including the reduction in the number of exclusive telecasts available to regional sports networks, poses challenges for MSG Networks and local media rights revenue.
- National and local media rights fees decreased by 1% due to a reduction in the number of exclusive games made available to MSG Networks.
- The company faces significant debt maturity for MSG Networks in October, adding financial uncertainty.
- Despite strong financial performance, the company decided not to increase season ticket prices for renewing holders, potentially limiting immediate revenue growth.
- The company is still evaluating the potential impact of the new NBA national media rights agreements on local media rights revenue, which could partially offset the increase in national media rights revenue.
Q & A Highlights
Q: With the pressure on the RSN ecosystem, are you considering taking haircuts on rights fees for the Knicks and Rangers? Also, how do you view the net impact of the new NBA national rights deal?
A: Our local media rights partner, MSG Networks, is facing refinancing challenges, and the new NBA national media rights agreements may reduce the number of exclusive telecasts available to MSG Networks. We are actively evaluating these developments and their potential impact on our local media rights revenue. Regarding the NBA's new national media deal, it will increase our national media rights fees revenue, but there may be a reduction in local media rights fees if certain thresholds are not met.
Q: Why not raise ticket prices, and what are the implications for revenues and AOI in fiscal '25?
A: We decided not to increase season ticket prices for renewing holders to maintain strong relationships with our loyal fans. However, we will opportunistically price new season ticket packages and individual/group tickets, expecting modest ticket revenue growth in fiscal '25. We will continue to reevaluate our season ticket pricing annually.
Q: How are you thinking about capital return, and how does the situation with MSG Networks play into this?
A: Our capital allocation priorities remain the same: maintaining liquidity, ensuring a strong balance sheet, and being opportunistic with cash flow. We have $185 million remaining under our share repurchase authorization and will continue to evaluate the RSN industry landscape before making decisions.
Q: Are you still considering minority sales of the teams given the increase in franchise values?
A: We remain confident in the value of our teams and believe it is not fully reflected in our stock price. While we do not rule out the possibility of a minority stake sale, we have nothing to report at this time.
Q: What initiatives are you considering to drive organic revenue growth beyond the new broadcast rights deal?
A: We are seeing strong demand for tickets with a 94% combined average season ticket renewal rate. We will continue to price new ticket packages and individual/group tickets opportunistically. We also expect growth from sponsorships, premium hospitality, and suite renovations. We believe these areas will drive revenue growth in the upcoming year.
Q: Can you provide additional detail on the financial dynamics of the playoffs this year and how it factors into future planning?
A: Playoff runs result in increased demand across all offerings, including ticket renewals and sales, social media followers, and corporate partnerships. This past quarter, we hosted 15 playoff games, generating $128 million in playoff-related revenues. We expect the positive impact of the playoffs to carry forward into fiscal '25.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
