Madison Square Garden Entertainment Corp.

Good morning. My name is Christy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Entertainment Corp. fiscal 2021 fourth quarter and year-end earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Ari Daines, investor relations. Please go ahead, sir.

Thank you. Good morning and welcome to MSG Entertainment's fiscal 2021 fourth quarter and year end earnings conference call. Our President, Andy Lustgarten, will begin today's call with a discussion on the company's entertainment and TAO Group segments. This will be followed by an update from Andrea Greenberg, President and CEO of MSG Networks. Our EVP and Chief Financial Officer, Mark Fitzpatrick, will then review our financial results. 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 investor section of our corporate website. Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties. and that actual results, developments, and events may differ materially from those in the forward-looking statements as a result of various factors. These include financial community perceptions of the company and its business, operations, financial condition, and the industry in which it operates, as well as the factors described in the company's filings with the Securities and Exchange Commission, including the sections entitled risk factors, and management's discussion and analysis of financial condition and results of operations contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On pages 6 and 7 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 Andy. Thank you.

And good morning, everyone. While we're clearly operating in a very fluid environment, we successfully navigated through one of the most challenging times in our company's history and remain cautiously optimistic about the road ahead. Looking back at fiscal 2021, we saw a number of positives. And I'm proud of the role we played in helping to shepherd the return of live entertainment in New York as our venues hosted the city's first large-scale events since the start of pandemic. Cal Group did their part as well, helping to bring back the critically important hospitality industry while returning to profitability in the June quarter. And with the acquisition of Hakkasan Group in April, We believe Cal is well positioned to build on its track record of success. We also continued to make meaningful progress on our next chapter, MSG Sphere in Las Vegas, heading toward the venue's opening in calendar 2023. And in early July, our acquisition of MSG Networks created a company with greater scale and revenue diversity, as well as enhanced financial flexibility. This was all accomplished during a very difficult year when our performance venues and Tau Group properties were largely closed or operating with significant restrictions. And both the Christmas Spectacular and Boston Calling music festivals were canceled. We've talked throughout the year about the important steps we took during this uncertain period. including reductions in our spending, lengthening our construction timetable for Amnesty Sphere in Las Vegas, and completing a $650 million debt raise. These actions strengthened our balance sheet while protecting our core entertainment business. And while conditions have improved, we continue to monitor what's happening in our markets. This includes New York City's announcement earlier this month that while venues can continue to welcome people at 100% capacity, all guests who are dining indoors or attending indoor performances are required to show proof of at least one vaccination shot, which we think is beneficial for our businesses. We operate in the New York market, which already has one of the highest vaccination rates in the country. And our research indicates that our fans in this market prefer attending vaccinated events. We saw this firsthand during the fourth quarter, starting with the sold-out Knicks playoff games, where we hosted nearly 90% vaccinated crowds, as well as across a number of concerts, which were sold at 100% capacity to all vaccinated audiences. Looking forward, we've begun to staff up in anticipation of what we envision could be a busy year ahead. While we're mindful of what's happening with the Delta variant, including the cancellation of certain shows around the country, we think the vaccination policies that are increasingly being adopted by cities, including New York, as well as companies in our industry, will be helpful. We currently expect concert touring to begin ramping back up in late September. leading to a strong concert booking schedule on a full year basis. In fact, fiscal 2022 is currently pacing ahead of fiscal 2020, which, as you may recall, was slated to be a record bookings year for a company prior to the onset of the pandemic. In addition, we continue to see enthusiastic levels of consumer demand through strong sales as new shows get announced. And Christmas in New York is back. Last month, we announced that tickets are officially on sale for the 2021 season of the Christmas Spectacular production. We are pleased with the early sales for this season's 163-show run and are looking forward to the production's return. We also recently entered into a long-term lease renewal with favorable terms for Radio City Music Hall, which extends our lease until 2038. with an option to renew for an additional 10 years. We are pleased to have worked with Tishman Spire on this agreement, which is a win-win for all parties involved, as it ensures this landmark venue remains home of the Christmas Spectacular for many years to come. Turning to Tau Group. Fourth quarter results include the impact of the Hakkasan Group acquisition. which created a global leader in premium hospitality with over 60 venues across five continents. The acquisition expands Tao's U.S. presence in major entertainment markets such as Las Vegas, Southern California, and Miami, while providing an instant international foothold in destinations like London and the Middle East. This increased footprint also provides local expertise to support further expansion. Another area where Hakkasan will help drive the business is through its expertise in licensing, which TAO intends to utilize alongside its owned and managed venue models as it continues to pursue growth opportunities. The easing of capacity restrictions in the fourth quarter helped drive strong results for TAO, with a majority of its revenue and AOI generated in the month of June. In addition, the best performing market for the quarter was Las Vegas, where Tao's presence, which has significantly expanded with the Hakkasan acquisition, will be important to MSG Sphere at the Venetian. We made meaningful progress on MSG Sphere this past fiscal year, achieving a significant milestone in June when we completed the structural steal for the main venue. Over the next 12 months, We intend to complete the roof concrete and the venue's exterior facade as we continue to make progress on the interior build-out and pedestrian bridge. We also plan to move forward with building MSG Sphere's exosphere, the spherical structure that will surround the venue and eventually be covered with 580,000 square feet of fully programmable LED lighting. This impactful exterior display is just one of the ways customers will interact with MSG Sphere content. Inside the venue is where we will use state-of-the-art technologies to create first-of-their-kind immersive experiences. And this coming year will increase our focus on developing this content for Sphere. Before I turn things over to Andrea, I'd like to spend a moment on the emerging opportunity around mobile sports gaming. New York State's application process is expected to conclude by early January. Many of the leading online sports betting operators are participating in the process, which creates a competitive market that we believe bodes well for us. From entertainment and media assets that reach millions to potential fixed venue-based opportunities that include the Garden and Cal locations, We believe we're one of the best positioned companies to help partners succeed in connecting with consumers. We continue to be in active discussions with many of the potential market participants and are increasingly bullish about this opportunity for our company. In summary, while we know we're in a fluid environment, we're optimistic about the year ahead due to the strong pent-up demand we saw at our entertainment and town businesses in June. which has continued so far this summer, our progress with MSG Sphere in Las Vegas, and the powerful platform we've created with MSG Networks, which brings together our entertainment and media assets and positions us well for future opportunities. With that, I will now turn the call over to Andrea.