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Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2024 Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Ari Danes, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2024 second quarter earnings conference call. On today's call, Phil D'Ambrosio, our EVP and Treasurer, and our Interim Principal Financial Officer will provide an update on the company's operations. I will then conclude with a review of our financial results for the period. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors 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 4 and 5 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. And with that, I'll now turn the call over to Phil.

Thank you, Ari, and good morning, everyone. With the first half of the fiscal year behind us, we remain on track to generate robust revenue and AOI growth for fiscal '24. We continued to benefit from strong demand for shared in-person experiences, most notably across our bookings business and the Christmas Spectacular Production. On the bookings front, we believe we're well positioned to achieve a low-double-digit percentage increase in events for fiscal '24. Four of our venues are on track to exceed our initial expectations for concerts this year, including The Garden, which is on pace to set a new record for the number of concerts at the arena on a full year basis. And last month, the Christmas Spectacular successfully completed its 90th holiday season. The production delivered another year of record-setting revenues with over 1 million tickets sold, which represents a return to pre-pandemic attendance levels. As a result of the positive momentum across our operations, we are now increasing our financial targets for fiscal '24, which Ari will discuss later in more detail. In addition, the strength of our business has also enabled us to make progress on our capital allocation priorities of opportunistically returning capital to shareholders and debt paydown. Since our spin-off last April, we have repurchased approximately $140 million, or about 10% of our outstanding Class A shares. And in the most recent quarter, we fully paid down the remaining balance on our revolving credit facility, which as you may recall, we had drawn upon in September primarily to facilitate a repurchase of our shares. Now let's review second quarter operational highlights. Across our portfolio of venues, we hosted nearly 450 live entertainment and sporting events and over 2.7 million guests in our second quarter. Our bookings business generated robust growth on a year-over-year basis, led by increases in the number of concerts and family shows held at our venues. One of the key drivers of concert growth was our continued efforts to increase our number of multi-night shows. For example, in the fiscal second quarter, we welcomed comedians Trevor Noah and Nate Bargatze, who combined accounted for 23 sold-out nights across Radio City, the Beacon, and The Chicago Theatre. These shows, along with numerous other multi-night performances, helped drive a double-digit percentage increase in total concerts versus the prior year's quarter. Furthermore, this robust supply of concerts across our venues was once again met by strong consumer demand, with the majority of concerts selling out during the quarter. In addition to concerts, family shows were an important contributor to event growth. After last taking place in 2021 with a shortened run due to the pandemic, we welcomed back Cirque du Soleil's holiday show, Twas the Night Before, to the theater at MSG and The Chicago Theatre for a total of 56 performances. While family shows have lagged other categories such as concerts, coming out of the pandemic we were pleased to see strong demand for Cirque's holiday run, which led to results that meaningfully exceeded our expectations in both markets. During the quarter, we also saw the start of the Knicks and Rangers 2023-'24 regular seasons at the Garden. I would note that as a result of this year's schedules, the Knicks and the Rangers played a combined nine fewer home games this past quarter as compared to the prior year's second quarter. This timing impact will reverse over the balance of the fiscal year. Turning to this holiday season's successful Christmas Spectacular Production. While we initially planned for 185 performances, we ended up increasing the number of shows to 193 in light of strong ticket demand. This compared to 181 shows last year. As I mentioned, we sold over 1 million tickets across seven weeks of performances. We saw healthy demand across group and individual ticket sales, both of which benefited in part from the continued improvement in tourism to New York City. Groups were particularly strong with an over 40% increase in sales as compared to last year as this category bounced back post-pandemic. Average per-show revenue increased a mid-single-digit percentage versus fiscal '23, driven by both higher average ticket prices and higher sell-through as well as higher food, beverage and merchandise per capita spending. Despite the significant increase in group ticket sales, which carry lower prices, we were able to increase our overall average ticket price by leveraging dynamic pricing during peak periods and substantially reducing the sale of discounted individual tickets. All of these factors, the increase in shows, higher average ticket revenue, and higher ancillary spending led to the Christmas Spectacular generating nearly $150 million in revenues this year. A new record for the production and a testament to the show's enduring popularity. Turning to marketing partnerships and premium hospitality. Coming out of the pandemic, we successfully renewed many of our key marquee and signature partners, which represent the majority of our sponsorship revenue. We also continue to make progress in transitioning our sponsorship sales efforts to Oak View Group's Crown Properties Collection and remain confident about the longer-term growth opportunity for this business. In terms of premium hospitality, our two new suite products at the Garden, an event-level suite and a luxury event-level club space, have been well received. We've already secured a multi-year agreement for the event-level suite, while the event-level club is nearly sold out. In summary, our fiscal second quarter was a reflection of the strong demand we continue to see in our business, leaving us increasingly confident in our ability to deliver robust growth this fiscal year and to generate long-term value for our shareholders. Before I turn the call over to Ari, I would like to welcome Michael Grau, who is joining the company as Executive Vice President of Finance and will then assume the responsibilities of Chief Financial Officer on April 1. Mike, is a seasoned leader with decades of financial and operating experience and will help us continue to drive our business priorities forward. With that, I will now turn the call over to Ari.

Thank you, Phil. As you know, our company completed its spin-off from Sphere Entertainment in April of last year. As a result, our fiscal second quarter results are not fully comparable on a year-over-year basis. Results for the prior year quarter are based on carve-out accounting and do not reflect all of the SG&A expenses we would have incurred had we been a standalone public company. For the fiscal 2024 second quarter, we reported revenues of $402.7 million, an increase of $46.8 million, or 13% as compared to the prior-year quarter. The increase in revenues was primarily driven by higher event-related revenues, which reflects the increase in the number of events at our venues and to a lesser extent, higher average revenue per event. The increase in overall revenues also reflects growth from the Christmas Spectacular Production, primarily due to higher ticket-related revenues. This was driven by higher per-show revenue and to a lesser extent, nine additional performances as compared to the prior year quarter. Second quarter adjusted operating income of $151 million increased by $24.7 million as compared to the prior-year quarter. This increase primarily reflects the year-over-year increase in revenues, partially offset by an increase in direct operating expenses and to a lesser extent, higher SG&A expenses. And as I just mentioned, second quarter SG&A expenses are not fully comparable on a year-over-year basis. Moving on to our fiscal '24 outlook. Given the strong performance of our business, along with the visibility we now have into the remainder of the year, we are increasing our financial guidance for fiscal '24. We now expect revenues of between $930 million and $950 million, up from between $900 million and $930 million. The midpoint of our revised range now reflects 10% revenue growth versus fiscal 2023. We also expect operating income for the year of between $95 million and $105 million versus our prior range of $85 million to $95 million. And adjusted operating income is now expected to be between $170 million and $180 million versus $160 million to $170 million previously. With respect to our fiscal third quarter, we expect results to reflect strong ongoing performance in concert bookings, offset by the absence of the NCAA tournament at the Garden this year, the positive timing of Knicks and Rangers games at the arena versus the prior year quarter and the continued impact of our new corporate office lease. Turning to our balance sheet. As of December 31st, we had approximately $35 million of unrestricted cash and our debt balance was approximately $634 million. These balances reflect the repayment of $90 million, or the remaining outstanding balance under our revolving credit facility during the quarter. As Phil mentioned, we remain focused on our dual capital allocation priorities of opportunistically returning capital to shareholders and debt paydown. And as a reminder, we continue to have $110 million remaining under our current buyback authorization. With that, operator, can we now open up the call for questions?

[Operator Instructions] Your first question comes from the line of Peter Henderson from Bank of America. Your line is open.

Good morning, and thank you for taking the question. So early in the fiscal year, you had flagged three areas of growth in bookings, concerts, family business and special events. Can you give us an update into the visibility for the remaining fiscal year for each of those three areas?

Sure. Good morning, Peter. Let me start by saying our visibility is solid for the balance of the fiscal year. And beginning with concerts, as I mentioned earlier, four of our venues are on track to exceed our initial expectations for concerts this year, and that includes The Garden, where we're on track to set a new record for the number of concerts on a full year basis. So overall, we now have complete visibility into our original concert's bookings goal and we expect to exceed it. With regard to family shows, the vast majority of our business took place in the fiscal second quarter, so this plays a much smaller role as we look out for the balance of fiscal '24. And then with special events, first, this is our smallest bookings category, and the bulk of this business typically occurs in the fiscal fourth quarter. And I would add that this area of our business is coming on softer than originally expected. A factor is that this category has been slower to recover coming out of the pandemic, but part of the reason is that we've prioritized booking concerts, which are generally more profitable. So overall, we feel really good about our bookings calendar for the balance of fiscal '24, and we remain on track for a low-double-digit percentage increase in bookings this year.

Thank you.

Thank you.

Your next question comes from the line of Stephen Laszczyk from Goldman Sachs. Your line is open.

Hi. Great. Maybe just to expand on Peter's question a little bit there. Thank you for some of the update on the commentary for fiscal '24. But maybe as we look out the fiscal '25, could you talk a little bit more about the visibility you have into the pacing of bookings across the venue footprint, The Garden, the theaters, and maybe how that compares to what you've seen in prior years at this point in the year. And then secondly on corporate demand and sponsorship, could you speak to any changes you're seeing on the demand front for corporates and advertisers? Just as you look into fiscal '25, perhaps beyond the new suites at The Garden, what are some of the key growth drivers we should be thinking about as we take a look into that segment for the next 12 months to 24 months? Thank you.

Hi, Stephen, it's Ari. I'll take your first question and then I'll turn it over to Phil for the second one. So in terms of how we're looking for fiscal '25 from a bookings pacing standpoint, as you know, the typical bookings lead time for concerts at The Garden is about six months to nine months out. So it is still early. That being said, our visibility is beginning to build for the first half of fiscal '25 at The Garden. And I'm pleased to say that we're currently pacing ahead by a fairly strong double-digit percentage in terms of the number of concerts for the first half of fiscal '25 at the arena versus where we were same time last year. In terms of the theaters, also I think, as you know, the typical bookings lead time for concerts is around three months to six months out, so it's still a little bit early there. I think we'll know more a few months from now, but we're really pleased with how we've gotten off to in terms of fiscal '25. And I'll turn it over to Phil for your second question.

Thanks, Ari. So with regard to what we're seeing from corporate and advertisers for sponsorship and suites, let me first start by saying, we're not seeing a change in demand. Our demand remains vibrant. And if we begin with suites and premium hospitality, we're seeing strong demand from corporate partners and this has poised us for growth in this area of our business. And that's versus last year's results where you might recall we were already above pre-pandemic levels. We're benefiting from strong suite renewals and even new sales, including our two new event-level suites that I mentioned we introduced in October. Moving on to the sponsorship business. As you know, we have a long track record of success with wonderful results over the past several years and now we're exceeding pre-pandemic levels. This fiscal year happens to be a year in which we are light in terms of deals coming up for renewal, and those renewals typically reset rates and drive additional growth. But that said, we've recently entered into a new relationship with Oak View Group who is handling our sponsorship sales efforts, and we think having them rep our sales is a good way to take our sponsorship level -- our sponsorship business to a new level and to grow the business in the future years. So while it's still early with Oak View Group, we're excited about the opportunity of partnering together to drive additional sponsorship growth.

Great. Thank you, both.

Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.

Hi. Good morning, Phil. Good morning, Ari. Two questions. I wanted to ask you guys about margin performance as you guys look out into the forecast and then also come back to your comment in the prepared remarks about the use of dynamic pricing. I think your new guidance suggests margins will be up something like 50 basis points year-on-year, maybe 40 basis points year-on-year versus pro forma '23. Can you talk a little bit about your opportunity to grow margins in the business as you look out over time? Particularly, if these top line trends continue is that an objective for the company? And then maybe on dynamic pricing, it sounded like it was a tailwind for Christmas Spectacular revenue growth. Can you talk a little bit about how you guys go to market with that dynamic pricing product and if that's an opportunity in your concert business as well, or if that's more of a Ticketmaster dynamic? Thank you.

Hi, Ben, it's Ari. I'll start on your first question and then turn it over to Phil. So I guess just to start and just step back, I'd say we're really pleased with how this year is unfolding. The business is clearly growing at a faster clip than we had initially anticipated. And as you saw this morning, we've raised our financial targets for the year that includes our expectation for pretty strong top line growth in the second half of the year. If you look at the midpoint of our revised revenue range, our guidance implies 13% year-over-year growth in revenues for the second half. That said, there are a couple of items which we previously flagged to you all that will impact AOI and margins in the second half. And Phil, do you want to take Ben through those moving parts?

Yes, please, Ari.

Sure.

Hi, Ben.

Hi, Phil.

So if you recall, Ben, on our earnings call last August, we noted that for fiscal '24 we faced some substantial headwinds with regard to AOI, and it was due to a number of factors. Our current estimate of those headwinds are a little over $18 million, but about three quarters of that figure impacts the second half of fiscal '24. And to touch upon the two main items, last March, we hosted the NCAA's East Regionals at The Garden, and that is a very profitable, very high margin, but nonrecurring event. Second, back in August, we also mentioned our new corporate office leasehold here at 2 Penn. That primarily took effect in December, but most of the impact will be seen and more pronounced in the back half of the fiscal year. So if you just give some thought to the seasonality in our business and that Q3 and Q4 are seasonally smaller than Q2 in particular, the impact of that rent increase is more pronounced. And I'd like to add with regard to the new rent on the corporate leasehold, the accounting rules require us to straight-line the rent over the life of the leasehold. And that's notwithstanding the fact that our cash rent will not go up substantially for quite some time. But again, those are the U.S. GAAP rules and that's impacting AOI, again, a noncash piece of AOI. So notwithstanding those headwinds, when you look at our margins, as Ari mentioned, given our new guidance, they seem like they're relatively flat, small growth. But if you factor in these two items, we're actually expanding our margins. And as we think about our business on a go-forward basis, we think there's plenty of growth ahead of us, given our premium venues coupled with the Christmas Spectacular. So in that regard, we see upside in bookings and this involves not only increasing utilization but also adding more events. We see the ability to drive higher ticket yield at the Christmas Spectacular. And we also see the suite business continuing to progress and grow as well as marketing partnerships, or sponsorships. And again, we think our new arrangement with Oak View Group is going to help us drive more growth. Coming back to the Christmas Spectacular, yes, we had a wonderful holiday run that just concluded about a month ago. And notwithstanding, we think there's more growth ahead of us for the production. Look, it's a premium entertainment product. And if you compare the pricing for the Christmas Spectacular to comparable shows on Broadway during the holidays, there's room for us to increase ticket yield. And we were very happy to see group sales return. We mentioned that 40% year-over-year increase. But at the same time, we were able to dynamically price our tickets and reduce discounts for individual tickets. That is done by us, by the way, it's not Ticketmaster. And in light of this, we see more opportunity and it's early yet. The holidays won't be here again for a good 11 months. But we think that we're going to drive incremental growth. The Christmas Spectacular, look, it's a one-of-a-kind, iconic asset and our plan is to nurture it and grow it.

Thank you, Phil.

Thank you.

Your next question comes from the line of David Karnovsky from JPMorgan. Your line is open.

Thanks for the question. We've seen the announcement that Billy Joel is planning to end his Garden run, and those shows are unique in that I think you promote them and therefore incur all the associated concert and revenues and costs. I wanted to see if it was possible maybe to frame the financial impact for us about coming to an end in future fiscal years. And then separately, maybe you could just discuss demand trends for shows that you're seeing right now across different venue types. Thanks.

Okay. Thanks, David. So first, let me start by saying it's been our privilege to partner with Billy Joel for 10 years. Many ways, it's hard to believe that he started in January of 2014, and Billy Joel was certainly our first-ever music franchise. You're right that it's not like our typical bookings, which are venue rentals or venue licenses. With regard to Billy, it's more of a co-production or a co-promotion. But I think some of the key takeaways, the Billy Joel residency was a great example of how we've been developing ways to increase our venue utilization. And I can tell you that we're exploring the potential for other residencies at our venues, and we're in discussions with many artists. Quite frankly, we're seeing that the appetite for residencies from artists is growing. Residencies, as we've noted in prior discussions, mean less travel and less wearing down on the artists. So it helps the artists and it helps us drive incremental growth. But with regard to Billy, it's important to note that as we replace his residency, it's not going to be exactly the same. Artists will want to put their own unique structure and spin on something like this. But again, we're discussing residencies with many artists where we have strong relationships and we look forward to those future residencies. And just to mention, again, what Ari said earlier, even though it's early, if you look at The Garden in terms of concerts pacing ahead for the first half of fiscal '25, again, we're seeing a strong double-digit increase for those first six months relative to this fiscal year '24. And of course, that forward look on those six months includes multiple anticipated residencies of The Garden. I can turn now to your next question with regard to consumer demand and what's it looking like across our venues and show types. Let me begin by saying, notwithstanding the current question that's been twisting and turning with regard to the economy and whether or not we're going to have a recession or we're going to have a soft landing, something in between, we're not seeing any change in consumer demand. If anything, as we've mentioned in our press release, given Jim's quote, we continue to see strong demand for our live entertainment offerings. And this is across the arena and our four theaters and across our various event types led by concerts. So with regard to concerts, in particular, our recent on sales continued to perform very well. In fact, recently, we announced concerts for a number of artists and the demand was so strong that we wound up adding additional shows. So this is happening now. It's not something that just happened in the past. Again, continued strong demand. We also have a number of sold-out multi-night runs across our various venues, such as Olivia Rodrigo, Tina Fey & Amy Poehler, and Matt Rife. In addition, the number of tickets sold for concerts in the second half of this fiscal year, so January through June, are up by a strong double-digit, excuse me, percentage increase year-over-year. And this reflects a number of factors, including more events, the timing of on sales and higher average sell-through. Turning to family shows, this category has been very strong this year and you heard us talk about the success of the Christmas Spectacular run this past holiday season. But on top of that, ticket sales for Cirque du Soleil's holiday show came in well above our expectations, both here at The Theater at MSG and in Chicago -- at The Chicago Theatre. And finally, if you look at our per-cap spending, food and beverage and merchandise per caps at concerts were up approximately 10% year-over-year this past second quarter, while per-cap spending on the Christmas Spectacular was also up a low-double-digit percentage increase. So again, we're continuing to see strong demand in our venue spending from our guests.

Your next question comes from the line of Brandon Ross from LightShed Partners. Your line is open.

Hi. Thanks. Very quickly. In the quarter, I guess you used your excess cash to pay down, I think you said $90 million in debt. Stock was significantly lower than it is at this time. What made you decide to pay down debt there instead of buying back stock? And when do you expect for us to see a return to buyback activity?

Sure, Brandon. How are you? So...

Thanks.

With regard to our capital allocation priorities, they remain unchanged. We have two, as you just noted, opportunistically returning capital to our shareholders and paying down debt. With regard to debt, on our earnings call in November, we had noted that it was our intention to fully pay down the revolver, which was at $90 million. And again, we drew a significant amount on the revolver in September to fund the share repurchase we made at the time in September. So we're happy that we were able to deliver on that intention and pay down the revolver. It's obviously available to us in the future if we need it. But given where rates are, we wanted to eliminate that interest cost. And then turning to our share repurchase program. Even though we've acquired about $140 million of our stock since we spun off last April, we still have $110 million of authorization. And it's our intention to continue opportunistically returning capital to shareholders. If you look at these two priorities and how they will operate, with regard to debt, we simply plan to continue making the quarterly amortization payments on our Term Loan A. So that's just over $4 million per quarter. The balance will be directed toward a return of capital, and again, we intend to be opportunistic. Finally, with regard to leverage, we also want to point out that while we're not providing a specific leverage target, as our business grows and we're certainly anticipating growth and AOI improvement in the future, our leverage will come down. So in summary, we think we're very well-positioned to execute on these two priorities for capital allocation.

Thank you so much.

Operator, we'll take one last caller.

Your final question comes from the line of Logan Angress from Wolfe Research. Your line is open.

Hi. Thank you. Just quickly on Garden utilization. Since you now have 100% visibility into The Garden pipeline for this fiscal year, can you comment on how utilization is tracking versus prior years? And specifically, you last said that effective utilization was around 70% and I'm curious how realistic is it that at some point that reaches 100%, or are there sort of roadblocks in the way like artists maybe not wanting to perform during certain weekdays or other factors like that? Thank you.

Sure, Logan. So please let me start by saying again that The Garden is on track to deliver solid bookings growth this fiscal year and Ari touched upon the outlook for the first six months of fiscal '25. If you look at this fiscal year '24, we're currently estimating around 230 total events at The Garden or the arena. And this includes over 140 bookings events, plus the Knicks and Rangers home games. On a base of 365 days a year and taking into account load-in and load-out days, we estimate that venue utilization this year is essentially the same as it was last year. So referencing the 70% that you mentioned, and that's despite the fact that we've increased events at The Garden. There are a number of items driving this, beginning with lower or fewer load-in days. And another factor again is that we've been able to program more multiple-event days than we've had in the past. So that's an area that we're focused on and it really helps drive the business for The Garden. And then in terms of booking events during the weekdays, it's important to keep in mind that New York is a unique market and The Garden is certainly a unique venue. And we have a track record of shows selling out without regard, again, without regard to the day of the week. We see that trend continuing and we plan to expand upon it. That said, I would say the more challenging periods during the year that we see as opportunities, are primarily addressing the NBA and the NHL playoff windows for the Knicks and the Rangers. Those windows implicate the spring and can linger into the summer at a time when artists are more focused on playing outdoors. But that said, we continue to work with our artists where we have good relationships, strong relationships. And they are willing to book dates during the playoff windows, subject to change. And this is going to help us drive additional utilization in the future. Finally, in the summer, we're continuing to have success by increasing the number of concerts. And again, this has to do with The Garden and where it sits in the heart of Manhattan. So we see that trend continuing. We plan to expand upon it to increase our utilization. So with The Garden being our largest venue, we really believe that utilization increases are important and we're confident in our ability to continue to grow this utilization. Again, led by The Garden.

Great. Thank you.

Thank you.

This concludes our question-and-answer session. I will now turn the call back over to Mr. Ari Danes for some closing remarks.

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.