Madison Square Garden Entertainment Corp.

Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp Fiscal 2022 First Quarter Earnings Conference Call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 on your telephone. If you should require any further assistance please press star 0. I'd now like to turn the call over to Ari Gaines, Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2022 first quarter earnings conference call. Our president, Andy Lustgarten, will begin today's call with a discussion on the company's entertainment and token segment. 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 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 5 and 6 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, Ari.

And good morning, everyone. First quarter of fiscal 22 behind us, we are now seeing encouraging signs that our markets are beginning to turn the corner following the challenging past 20 months. Vaccination rates, already high in the New York area, continue to rise. And the CDC's recent approval of vaccines for children should drive rates even higher. Office occupancy, while still very low in New York City, has increased significantly in the last month and a half. Forecast to improve. International tourism to the U.S., which has been pretty much non-existent, is starting to open up this week. And in Las Vegas, we see one of the city's biggest pre-pandemic staples, corporate conventions, beginning to return. We believe these milestones could help propel our business, which is already experiencing promising momentum in a number of areas. Our venues are starting to get busy again. and they're operating without any capacity restrictions. Concert touring is ramping up. The Nixon Rangers have returned to the Garden and are scheduled to play four regular seasons. And the Christmas Spectacular is back, with this year's run kicking off last week at Radio City. This momentum has also carried over to Tau Group, which delivered another quarter of strong results this year. again led by robust performance in Las Vegas. So while we're not fully back, what we are seeing is that when there are experiences that consumers find valuable, they're not only going out, but they're going out and spending more than they did before the pandemic. This has been reflected in double-digit percentage increases in F&B and merchandise per caps at our events, as well as in average check sizes at TAO compared to pre-pandemic levels. This demand for premium live experiences plays to our strength, which we think will help continue to drive our business. We're also very encouraged by the activity we're seeing with marketing partnerships and premium hospitality as companies are back to finding ways to reconnect with consumers. Finally, we've made important progress on our construction of MSG Sphere in Las Vegas, which we continue to believe will launch an exciting new chapter for live entertainment. first focus on our bookings business. While we hosted a number of concerts at our venues in July and August, as expected, concert touring began to truly return in mid-September, followed by a very busy October. We expect this ramp-up to continue through the remainder of December quarter, and we look forward to a packed schedule for the second half of fiscal 22. And while the industry as a whole has recently experienced some pandemic-related cancellations and postponements that have affected future event schedules, we are grateful that our event calendar has only been modestly impacted for the balance of this fiscal year. In fact, the number of concerts at our venues scheduled in the second half of fiscal 22 is significantly ahead of how we were pacing two years ago for the second half of fiscal 20. And this robust pipeline of concert bookings is being met by strong consumer demand, as tickets continue to sell extremely well for newly announced shows, with many selling out. With regard to productions, last season marked the first time the Christmas Spectacular was canceled in 87 years, which made last week's debut of the 2021 season all the more special. As you know, we scaled down the number of shows this season, understanding this year would be unique due to the pandemic. Our advance ticket sales started slow, especially groups in international, which historically are among the first customer segments to buy. That said, leading up to the show's preview performances last week, we saw overall ticket sales increase significantly week over week for several weeks in a row. percentage increased so far as we look forward to the show's official opening night this evening. In addition, some of the pandemic-related factors that have impacted sales to date are now headed in the right direction. Help ticket sales later in the show's run. These include international tourism, which began to open up this week, and the recently approved vaccine for children, obviously a positive for a family show. We are really excited about opening our doors for those who want to celebrate the holidays at Radio City Music Hall. I look forward to welcoming hundreds of thousands of guests this season, which we believe is a significant first step to the show's full return over time. Cow Group is another part of our business that is clearly benefiting from people's desire to gather again. Cal's ability to ramp up operations quickly to meet the public's demand led to impressive results for the second consecutive quarter. We select markets such as Las Vegas, even outperforming pre-COVID levels. Venues not yet being fully staffed is also reflected in Cal's strong ALI margins, which we expect will normalize over time as we continue to make progress on the hiring process. And while we also believe TAO will face increased competition as the industry continues to come back, we feel good about the long-term trajectory of the business. TAO's acquisition of Hakkasan created a global powerhouse across more than 20 domestic and international markets. TAO is now focused on optimizing. The team has been evaluating their existing portfolio, including possible lease extensions, rebrandings, and in select instances, closures. At the same time, Tao has also returned to focusing on its venue expansion efforts, with a robust pipeline of planned openings through Calendar 22. Tao recently debuted a new venue in Mexico City, with others set to follow in several markets, including Miami, Los Angeles, and Las Vegas. As you can imagine, we're incredibly pleased to see people embracing the return of live entertainment, and that includes companies, which are now re-engaging with the industry in meaningful ways. There are clear signs that corporate hospitality is making its way back. To help our partners, we took a customer-friendly approach, pausing their obligations for the last year through September 30th, which obviously meant minimal suite revenue in the first quarter. At the same time, we continue to work on new sales and renewals, which are now ahead of expectations. And on a go-forward, run-rate basis, we're pleased to say that suite revenue has returned to pre-pandemic. Our marketing partnership business has also had an exciting few months. Last quarter, we renewed our valuable marketing partner, JPMorgan Chase. This was followed by multi-year extensions with longtime partners, Lexis and Anheuser-Busch, both part of our signature roster. We then expanded by welcoming Infosys, a global leader in next-generation digital services and consulting. We are pleased with the terms of these comprehensive agreements, which involve a number of MSG Entertainment's assets, including MSG Networks, as well as MSG Sports, which our marketing partnership group also represents, giving our sponsors access to a broader platform. These deals have helped set the tone for our discussions with other existing and potentially new marketing partners, including in the mobile sports gaming space. Yesterday, New York State awarded licenses to nine operators, a significantly higher number than had initially been expected. On the heels of this positive news, this morning, we announced our first significant partnership related to mobile sports gaming in New York with BetMGM. We've talked before about how our portfolio of assets uniquely positions us to help sports gaming operators grow their business in the nation's largest market. Our expansive multi-year agreement with BetMGM utilizes our unique portfolio to provide the gaming operator with unparalleled exposure to millions of consumers. This includes our regional sports networks, digital apps, out-of-home signage, and Madison Square Garden Arena. And through our relationship with MSG Sports, the New York Knicks and Rangers franchises. We are just getting started in terms of growing the sponsorship category. Our discussions with other mobile sports gaming operators have also meaningfully progressed over the past several months. And with New York State's licensing process now complete, BetMGM is our first partner in this category. We certainly don't expect it to be our last, as we are increasingly confident about how impactful this revenue opportunity will be for our company. And lastly, we continue to make important progress on the construction of MSG Sphere at the Venetian, as we push towards our expected opening in calendar 2023. Since we last spoke, we have completed concrete pours for the venue's domed roof and started installation of a steel framework that will eventually support the interior LED media display plane. At 160,000 square feet, which is larger than three football fields, this display will play an important role in our ability to create immersive experiences at unparalleled scale. Over the next several months, work will continue on the venue's interiors as well as the exterior, including the pedestrian bridge that will connect the MSG Sphere to the Venetian Expo. I will end by reiterating that the ramp up we're seeing across our entertainment business reflects a strong desire of people to be together, especially for premium live experiences. There's still work to do, there are still challenges, but the fact that our assets are uniquely positioned to fill the demand has made us very optimistic about where we're headed in fiscal 22. And as we get back to doing what we love, We're also incredibly excited about the progress we've made on MSG Sphere. The beginning of our company's next chapter. With that, I will now turn the call over to Andrea.