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Seaport Entertainment Group Inc.(SEG) - 2025 Q2 - Quarterly Report

Part I - Financial Information Financial Statements The company's financial statements for the period ended June 30, 2025, reflect a decrease in net loss compared to the prior year, driven by increased revenues and lower general and administrative expenses, with total assets decreasing slightly and liabilities increasing Consolidated Balance Sheets Consolidated Balance Sheets (Unaudited) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $717,226 | $743,556 | | Total liabilities | $189,421 | $172,174 | | Total equity | $527,805 | $571,382 | | Cash and cash equivalents | $123,276 | $165,667 | - Total assets decreased by approximately $26.3 million from December 31, 2024, to June 30, 2025, primarily due to a reduction in cash and cash equivalents12 - Total liabilities increased by $17.2 million, while total equity decreased by $43.6 million, reflecting the net loss for the period12 Consolidated and Combined Statements of Operations Statements of Operations Highlights (Unaudited) | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $39,801 | $33,670 | $55,870 | $48,181 | | Hospitality revenue | $15,177 | $9,053 | $22,912 | $13,130 | | Entertainment revenue | $19,908 | $17,153 | $24,117 | $20,717 | | Operating loss | $(16,007) | $(25,360) | $(48,709) | $(56,681) | | Net loss attributable to common stockholders | $(14,774) | $(34,997) | $(46,662) | $(79,075) | | Net loss per share (Basic & Diluted) | $(1.16) | $(6.34) | $(3.68) | $(14.32) | - Total revenues for Q2 2025 increased by 18% YoY to $39.8 million, driven by a 68% increase in Hospitality revenue14 - Net loss attributable to common stockholders significantly narrowed to $14.8 million in Q2 2025 from $35.0 million in Q2 2024, largely due to lower general and administrative expenses14 Consolidated and Combined Statements of Cash Flows Statements of Cash Flows Highlights (Unaudited) | (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(21,232) | $(39,149) | | Cash used in investing activities | $(18,751) | $(33,027) | | Cash (used in) provided by financing activities | $(2,499) | $73,907 | | Net change in cash, cash equivalents and restricted cash | $(42,482) | $1,731 | - For the first six months of 2025, cash used in operating activities improved to $21.2 million from $39.1 million in the prior year16 - Financing activities showed a net cash use of $2.5 million, a stark contrast to the $73.9 million provided in the same period of 2024, which was primarily due to net investments from the Former Parent (HHH) prior to the spin-off16 Notes to Consolidated and Combined Financial Statements - The company, Seaport Entertainment Group (SEG), was spun off from Howard Hughes Holdings Inc. (HHH) on July 31, 2024, and now operates as an independent public company20 - Its business is divided into three segments: Hospitality, Entertainment, and Landlord Operations20 - Effective January 1, 2025, the company became the primary beneficiary of the Tin Building by Jean-Georges joint venture and began consolidating it into its financial statements, significantly impacting the comparability of Hospitality segment results between 2025 and 20247175 - As of June 30, 2025, the company had $101.4 million in total mortgages payable, consisting of a $40.1 million fixed-rate loan and a $61.3 million variable-rate loan, secured by real estate assets with a net book value of $243.0 million8588 - Prior to the spin-off, financial statements for periods up to July 31, 2024, are prepared on a carve-out basis from HHH's records and include allocations for shared corporate expenses, which may not reflect the costs the company would have incurred as a standalone entity232930 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management's discussion attributes the improved financial performance in Q2 and H1 2025 to several factors, including a significant reduction in G&A expenses and improved results from unconsolidated ventures due to the consolidation of the Tin Building, with revenue growth led by Entertainment and Hospitality segments, and current liquidity deemed adequate Overview - The company operates a collection of assets at the intersection of entertainment and real estate, organized into three segments146 - Hospitality: Owns and operates food and beverage businesses, including restaurants and bars at the Seaport, and holds a 25% interest in Jean-Georges Restaurants147 - Entertainment: Includes the Las Vegas Aviators Triple-A baseball team, the Las Vegas Ballpark, and events at The Rooftop at Pier 17149 - Landlord Operations: Owns and operates real estate assets at the Seaport in Manhattan, including Pier 17, the Tin Building, and the Fulton Market Building151155 Results of Operations Comparison of Three Months Ended June 30, 2025 and 2024 | (in thousands) | 2025 | 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $39,801 | $33,670 | $6,131 | 18% | | General and administrative | $8,291 | $18,613 | $(10,322) | (55)% | | Operating loss | $(16,007) | $(25,360) | $9,353 | 37% | | Net loss attributable to common stockholders | $(14,774) | $(34,997) | $20,223 | 58% | - The $20.2 million decrease in net loss for Q2 2025 was primarily driven by a $10.3 million reduction in G&A expenses (due to a $7.9 million decrease in separation costs), a $4.0 million positive swing in interest income/expense, and a $7.2 million improvement in equity in losses from unconsolidated ventures178183184 Comparison of Six Months Ended June 30, 2025 and 2024 | (in thousands) | 2025 | 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $55,870 | $48,181 | $7,689 | 16% | | General and administrative | $18,073 | $35,167 | $(17,094) | (49)% | | Operating loss | $(48,709) | $(56,681) | $7,972 | 14% | | Net loss attributable to common stockholders | $(46,662) | $(79,075) | $32,413 | 41% | - For the first half of 2025, the net loss decreased by $32.4 million, mainly due to a $17.1 million decrease in G&A expenses (primarily separation costs) and a $17.6 million improvement in equity in losses from unconsolidated ventures186189 Segment Operating Results - Hospitality: Adjusted EBITDA for Q2 2025 improved by $1.4 million YoY, with results heavily impacted by the consolidation of the Tin Building by Jean-Georges, which moved its results from 'Equity in losses' to direct revenue and costs191193 - Entertainment: Adjusted EBITDA for Q2 2025 increased by $2.7 million YoY to $4.8 million, driven by a $3.0 million increase in revenue from additional concerts at The Rooftop at Pier 17199201 - Landlord Operations: Adjusted EBITDA for Q2 2025 increased by $3.3 million YoY to $2.0 million, primarily due to a $2.6 million decrease in operating costs (payroll and marketing) and a $0.8 million increase in rental revenue206208210 Liquidity and Capital Resources - As of June 30, 2025, the company had cash and cash equivalents of $123.3 million, down from $165.7 million at year-end 2024215 - Following the separation from HHH, the company's capital structure has changed, and it no longer receives financing from its former parent, but management believes existing cash and access to capital markets are sufficient to meet current and long-term obligations217219 - Cash used in operating activities for H1 2025 decreased to $21.2 million from $39.1 million in H1 2024, showing improved operational cash flow221222 Quantitative and Qualitative Disclosures about Market Risk The company is primarily exposed to interest rate risk related to its variable-rate mortgage payable, where a hypothetical 1% increase in short-term interest rates would have increased interest expense by approximately $0.3 million for the six months ended June 30, 2025 - The company is subject to interest rate risk on its variable-rate debt, where a 1% increase in short-term rates would have increased interest expense by approximately $0.2 million for Q2 2025 and $0.3 million for H1 2025244245 - As of June 30, 2025, the company had $40.1 million of fixed-rate debt with a weighted average interest rate of 4.92% per annum245 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective248 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls250 Part II - Other Information Legal Proceedings The company is involved in legal proceedings arising in the ordinary course of business but believes that as of June 30, 2025, none are expected to have a material adverse effect on its financial condition or results of operations - As of June 30, 2025, the company believes there were no pending lawsuits or claims that could have a material adverse effect on its business, results of operations, or financial condition252 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There were no material changes to the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2024253 Unregistered Sales of Equity Securities and Use of Proceeds The company completed a rights offering on October 17, 2024, which generated net proceeds of approximately $166.8 million, and the intended use of these proceeds for general corporate purposes has not materially changed - The company completed a rights offering on October 17, 2024, generating net proceeds of approximately $166.8 million, which are intended for general operating, working capital, and other corporate purposes254 Other Information During the quarter ended June 30, 2025, none of the company's directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements - During the fiscal quarter ended June 30, 2025, no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements257 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - The report includes standard exhibits such as the Separation Agreement, corporate governance documents, and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act258