Madison Square Garden Entertainment (MSGE) - 2025 Q4 - Annual Report

PART I Item 1. Business Madison Square Garden Entertainment Corp. is a leading live entertainment company operating iconic venues and producing marquee content like the Christmas Spectacular, primarily concentrated in the New York City market - The company operates as a leader in live entertainment experiences, managing a portfolio of iconic venues such as Madison Square Garden, Radio City Music Hall, and The Chicago Theatre[14][15] - Key business strategies include enhancing the live entertainment experience, increasing venue utilization with unique events and residencies, delivering marketing exposure for partners, offering premium hospitality, and utilizing customer data to drive revenue[17][19] - In Fiscal Year 2025, the company hosted nearly 6 million guests at more than 975 events across its venues[22] - The company has long-term Arena License Agreements with MSG Sports, requiring the New York Knicks (NBA) and New York Rangers (NHL) to play their home games at The Garden[27] - The Christmas Spectacular production is a core property, selling approximately 1.1 million tickets across 200 performances in Fiscal Year 2025[35][36] - As of June 30, 2025, the company had approximately 1,200 full-time and 5,400 part-time employees, with about 71% of the total workforce represented by unions[70][73] Item 1A. Risk Factors The company faces significant risks including intense competition, heavy reliance on the Christmas Spectacular, economic sensitivity, geographic concentration in New York City, regulatory challenges, substantial indebtedness, cybersecurity threats, and Dolan Family control - The company's business is highly competitive, facing challenges from other leisure activities, entertainment venues, and changing consumer tastes[75][76] - Financial results are significantly dependent on the Christmas Spectacular production, which accounted for 18% of total revenues in Fiscal Year 2025[79] - The Madison Square Garden Complex benefits from a New York City real estate tax exemption, which amounted to $43.0 million for Fiscal Year 2025, with potential material impact if repealed or amended[86] - The business is geographically concentrated in New York City, making it vulnerable to adverse local events, economic conditions, and regulatory changes, such as the renewal of The Garden's zoning special permit[93][99] - As of June 30, 2025, the company is highly leveraged with total indebtedness of $609 million[111] - The company faces evolving cybersecurity risks, having previously addressed a payment card issue in November 2016 at several of its venues[125] - The Dolan Family Group controls the company with approximately 64.0% of the total voting power, enabling them to prevent changes in control and influence corporate actions[137][140] Item 1B. Unresolved Staff Comments The company reports that there are no unresolved staff comments - None[153] Item 1C. Cybersecurity The company maintains a comprehensive cyber risk management program overseen by the Audit Committee and a cybersecurity leadership team, including regular testing, incident response, and employee training, acknowledging past incidents and evolving threats - The company's cyber risk management program is overseen by the Audit Committee of the Board of Directors and senior management[153][159] - A cybersecurity leadership response team, including the Chief Security Officer (CSO), CFO, and General Counsel, is in place to manage threats and incidents[156][157] - The program includes regular system security testing, an incident response policy, security awareness training, and vulnerability analysis systems[154] - A payment card issue affecting merchandise and food/beverage locations at several venues was identified and addressed in November 2016[160] Item 2. Properties The company owns the Madison Square Garden Complex and The Chicago Theatre, and operates Radio City Music Hall and the Beacon Theatre under long-term lease agreements, in addition to leasing administrative and executive office space Property Portfolio | Property | Location | Ownership | Seating Capacity | | :--- | :--- | :--- | :--- | | Madison Square Garden Complex | New York, NY | Owned | ~21,000 (The Garden) | | The Theater at MSG | New York, NY | Owned | ~5,600 | | The Chicago Theatre | Chicago, IL | Owned | ~3,600 | | Radio City Music Hall | New York, NY | Leased | ~6,000 | | Beacon Theatre | New York, NY | Leased | ~2,800 | Item 3. Legal Proceedings The company is a defendant in various lawsuits, but management does not believe their resolution will have a material adverse effect on the company - The company is involved in various lawsuits, but management does not expect the outcomes to materially and adversely affect the business[164] Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[165] PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A Common Stock trades on the NYSE under "MSGE," with no current plans for cash dividends, and a stock repurchase program authorized for up to $250 million, of which $40 million was repurchased in FY2025 - The company's Class A Common Stock trades on the New York Stock Exchange (NYSE) under the symbol "MSGE"[167] - The company does not currently have plans to pay a cash dividend on its common stock for the foreseeable future[171] - Under its $250 million stock repurchase program, the company repurchased 1,117,601 shares for approximately $40 million in Fiscal Year 2025, with approximately $70 million remaining available for future repurchases as of June 30, 2025[172] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In Fiscal Year 2025, revenues decreased by 2% to $942.7 million, primarily due to lower event-related revenues, while operating income rose 9% to $122.1 million due to reduced expenses, though net income significantly decreased by 74% to $37.4 million due to a prior-year tax benefit, with Adjusted Operating Income (AOI) increasing 5% to $222.5 million, and the company maintaining sufficient liquidity with $43.0 million in cash and $134.0 million available under its revolving credit facility Results of Operations For Fiscal Year 2025 compared to 2024, total revenues decreased by $16.5 million (2%) to $942.7 million, driven by declines in entertainment offerings and food/beverage, partially offset by increased arena license fees, leading to a 9% increase in operating income to $122.1 million due to reduced expenses, despite a sharp 74% drop in net income to $37.4 million primarily from a prior-year tax benefit, while Adjusted Operating Income (AOI) rose 5% to $222.5 million Consolidated Results of Operations (Fiscal Year 2025 vs. 2024) | Financial Metric | FY 2025 ($M) | FY 2024 ($M) | Change ($M) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 942.7 | 959.3 | (16.5) | (2)% | | Total Direct Operating Expenses | (535.6) | (568.8) | 33.2 | 6% | | Operating Income | 122.1 | 111.9 | 10.2 | 9% | | Net Income | 37.4 | 144.3 | (106.9) | (74)% | - The decrease in revenues from entertainment offerings was primarily due to lower event-related revenues of $49.2 million, partially offset by a $20.2 million increase in revenues from the Christmas Spectacular production[218] - The Christmas Spectacular's revenue growth was driven by higher per-show revenue and an increase in performances to 200 in FY2025 from 193 in FY2024, with ticket sales rising to approximately 1.1 million from over 1.0 million[221] - The increase in operating income was primarily due to decreased direct operating expenses and lower restructuring charges, which offset the decline in revenues and an $11.2 million impairment charge on long-lived assets[239] Reconciliation of Operating Income to Adjusted Operating Income (AOI) | Metric | FY 2025 ($M) | FY 2024 ($M) | Change ($M) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating Income | 122.1 | 111.9 | 10.2 | 9% | | Depreciation & Amortization | 57.8 | 53.9 | 3.9 | 7% | | Impairment of long-lived assets | 11.2 | 0.0 | 11.2 | NM | | Share-based compensation | 27.7 | 24.5 | 3.2 | 13% | | Restructuring charges | 1.1 | 17.6 | (16.6) | (94)% | | Adjusted Operating Income | 222.5 | 211.5 | 11.0 | 5% | Liquidity and Capital Resources The company's primary liquidity sources are cash on hand, operating cash flow, and its revolving credit facility, with $43.0 million in unrestricted cash and $134.0 million available under its refinanced $150 million revolving credit facility as of June 30, 2025, alongside a new $609.4 million term loan, both maturing in June 2030, which management believes provides sufficient liquidity for the foreseeable future Liquidity Position as of June 30, 2025 | Item | Amount ($M) | | :--- | :--- | | Unrestricted Cash & Cash Equivalents | 43.0 | | Total Debt Outstanding | 609.4 | | Available Revolver Capacity | 134.0 | - On June 27, 2025, the company refinanced its credit facilities, establishing a new five-year $609.4 million term loan and a $150 million revolving credit facility, both maturing on June 27, 2030[256][259] Cash Flow Summary (Fiscal Years 2025 vs. 2024) | Cash Flow Activity | FY 2025 ($M) | FY 2024 ($M) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 115.3 | 111.3 | | Net Cash used in Investing Activities | (23.7) | (62.4) | | Net Cash used in Financing Activities | (81.6) | (99.7) | Future Contractual Obligations as of June 30, 2025 | Obligation | Total ($M) | Year 1 ($M) | Years 2-3 ($M) | Years 4-5 ($M) | More Than 5 Years ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | | Leases | 1,109.6 | 30.8 | 125.8 | 115.4 | 837.6 | | Debt Repayments | 609.4 | 30.5 | 60.9 | 518.0 | 0.0 | | Total | 1,719.0 | 61.2 | 186.8 | 633.4 | 837.6 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to market risk from changes in interest rates on its variable-rate debt and from market performance affecting its defined benefit pension plans, with a hypothetical 200 basis point interest rate increase raising annual interest expense by $12.2 million, and pension obligations sensitive to discount rates and asset returns - The company is subject to interest rate risk on its variable-rate credit facilities; a hypothetical 200 basis point increase in floating rates would increase annual interest expense by $12.2 million[283] - The company's defined benefit pension plans are subject to market risk; a 25 basis point decrease in the assumed discount rate would increase the projected benefit obligation by approximately $2.9 million[286] - A 25 basis point decrease in the long-term return on pension plan assets assumption would increase the net periodic pension benefit cost by $280 thousand for Fiscal Year 2025[289] Item 8. Financial Statements and Supplementary Data This section incorporates by reference the company's audited consolidated and combined financial statements and supplementary data, which begin on page F-1 of the report - This item refers to the full financial statements and supplementary data which are included starting on page F-1 of the Annual Report[290] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[291] Item 9A. Controls and Procedures Based on management's evaluation, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2025, and internal control over financial reporting was also concluded to be effective, as audited by their independent registered public accounting firm - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[292] - Management concluded that internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework; this assessment was audited by Deloitte & Touche LLP[295] Item 9B. Other Information The company reports no other information for this item - None[297] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[298] PART III Item 10. Directors, Executive Officers and Corporate Governance Information required for this item will be included in the proxy statement for the 2025 annual meeting of stockholders and is incorporated by reference - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2025 proxy statement[300] Item 11. Executive Compensation Information required for this item will be included in the proxy statement for the 2025 annual meeting of stockholders and is incorporated by reference - Information regarding executive compensation is incorporated by reference from the forthcoming 2025 proxy statement[301] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required for this item will be included in the proxy statement for the 2025 annual meeting of stockholders and is incorporated by reference - Information regarding security ownership is incorporated by reference from the forthcoming 2025 proxy statement[302] Item 13. Certain Relationships and Related Transactions, and Director Independence Information required for this item will be included in the proxy statement for the 2025 annual meeting of stockholders and is incorporated by reference - Information regarding related party transactions and director independence is incorporated by reference from the forthcoming 2025 proxy statement[303] Item 14. Principal Accountant Fees and Services Information required for this item will be included in the proxy statement for the 2025 annual meeting of stockholders and is incorporated by reference - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2025 proxy statement[304] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and all exhibits filed as part of the Form 10-K report, including key corporate agreements such as the Distribution Agreement with Sphere Entertainment, Articles of Incorporation, credit agreements, and various employment and lease agreements - This item lists all documents filed as part of the report, including financial statements and exhibits such as material contracts and governance documents[307] Item 16. Form 10-K Summary The company has elected not to provide a summary for the Form 10-K - The Company has elected not to provide summary information[315] Financial Statements and Notes to Financial Statements This section presents the company's audited consolidated and combined financial statements for the fiscal years ended June 30, 2025, 2024, and 2023, including the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Deficit, with accompanying notes detailing accounting policies, revenue recognition, leases, debt, pension plans, and extensive related party transactions with Dolan Family-controlled entities Consolidated Balance Sheets As of June 30, 2025, the company reported total assets of $1.67 billion, an increase from $1.55 billion in the prior year, with total liabilities also increasing to $1.68 billion from $1.58 billion, and the total deficit improving to $13.3 million from $23.2 million, primarily due to net income and changes in additional paid-in capital Consolidated Balance Sheet Highlights (as of June 30) | Account | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | 43.5 | 33.6 | | Total Current Assets | 237.1 | 219.1 | | Property and equipment, net | 621.1 | 633.5 | | Total Assets | 1,669.8 | 1,552.7 | | Total Current Liabilities | 502.4 | 505.8 | | Long-term debt, net | 568.8 | 599.2 | | Total Liabilities | 1,683.1 | 1,575.9 | | Total Deficit | (13.3) | (23.2) | Consolidated and Combined Statements of Operations For the fiscal year ended June 30, 2025, the company generated $942.7 million in total revenues, a slight decrease from $959.3 million in 2024, while operating income increased to $122.1 million from $111.9 million, and net income attributable to stockholders was $37.4 million, or $0.78 per basic share, a significant decrease from $144.3 million, or $2.99 per basic share, in 2024, which was impacted by a large tax benefit Statements of Operations Highlights (Years Ended June 30) | Account | 2025 ($M) | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | :--- | | Total Revenues | 942.7 | 959.3 | 851.5 | | Total Direct Operating Expenses | (535.6) | (568.8) | (499.9) | | Operating Income | 122.1 | 111.9 | 105.0 | | Net Income Attributable to Stockholders | 37.4 | 144.3 | 76.6 | | Basic EPS | $0.78 | $2.99 | $1.48 | | Diluted EPS | $0.77 | $2.97 | $1.47 | Note 4. Revenue Recognition The company disaggregates its revenue into several categories, with ticketing and venue license fees being the largest contributor, totaling $862.8 million from contracts with customers in FY2025, and has significant remaining performance obligations, with an estimated $558.2 million of revenue expected to be recognized in future periods as of June 30, 2025 Disaggregation of Revenue (Years Ended June 30) | Revenue Category | 2025 ($M) | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | :--- | | Ticketing and venue license fee revenues | 453.2 | 463.3 | 396.4 | | Sponsorship, signage, suite license, and advertising commission | 252.7 | 254.1 | 243.1 | | Food, beverage, and merchandise revenues | 150.5 | 162.1 | 135.9 | | Total revenues from contracts with customers | 862.8 | 886.0 | 779.8 | | Arena license fees and other leasing revenue | 79.9 | 73.3 | 71.7 | | Total Revenues | 942.7 | 959.3 | 851.5 | - As of June 30, 2025, the company had $558.2 million in estimated future revenue related to remaining performance obligations, with $189.0 million expected to be recognized in Fiscal Year 2026[465] Note 12. Credit Facilities In June 2025, the company refinanced its debt, establishing a new credit agreement with a $609.4 million term loan facility and a $150 million revolving credit facility, both maturing in June 2030, with the total principal balance outstanding at $609.4 million as of June 30, 2025, and the facilities subject to floating interest rates and financial covenants with which the company was in compliance - The company refinanced its debt on June 27, 2025, entering into a new agreement for a $609.4 million term loan and a $150 million revolver, both maturing in 2030[500] Debt Maturities as of June 30, 2025 | Fiscal Year Ending June 30 | Principal Amount ($M) | | :--- | :--- | | 2026 | 30.5 | | 2027 | 30.5 | | 2028 | 30.5 | | 2029 | 30.5 | | 2030 | 487.5 | | Total | 609.4 | Note 16. Related Party Transactions The company engages in extensive related party transactions with other entities controlled by the Dolan Family, primarily MSG Sports and Sphere Entertainment, including Arena License Agreements with MSG Sports which generated $68.1 million in revenue in FY2025, and various services agreements, resulting in $109.8 million in revenues from related parties and $122.8 million in net operating credits in FY2025 - The Dolan Family Group controls MSG Entertainment, Sphere Entertainment, MSG Sports, and AMC Networks, leading to numerous related party transactions[574] - Key agreements exist with MSG Sports for arena licensing, sponsorship sales, and services, and with Sphere Entertainment for corporate services and marketing partnerships[575][577] Summary of Related Party Transactions (Years Ended June 30) | Transaction Type | 2025 ($M) | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | :--- | | Revenues | 109.8 | 101.8 | 105.9 | | Operating Credits (Expenses), Net | | | | | Revenue sharing expenses | (21.3) | (21.6) | (19.1) | | Reimbursement under Arena License Agreements | 29.6 | 25.1 | 22.3 | | Cost reimbursement from MSG Sports | 37.2 | 37.4 | 38.5 | | Corporate reimbursement/allocations (Sphere) | 78.5 | 108.8 | 151.2 | | Other operating (expenses) credits, net | (1.2) | 0.8 | (3.9) | | Total operating credits, net | 122.8 | 150.5 | 189.0 |