Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by. And welcome to the Madison Square Garden Entertainment Corp Fiscal 2022 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's remarks, 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. I would now like to turn the call over to Ari Daines, Senior Vice President of Investor Relations and Treasury. Please go ahead.

Thank you. Good morning and welcome to MSG Entertainment's fiscal 2022 second quarter 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, David Burns, 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 five and six 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. On our last call, we spoke about the momentum we were seeing across our business and markets. In our second quarter, this translated into positive AOI at our entertainment segment for the first time since the start of the pandemic. as well as strong results at Tau Group for the third consecutive quarter. And while the emergence of Omicron dampened what otherwise would have been an even stronger financial result, for example, resulting in a shortened holiday run for the Christmas Spectacular, all signs for our business are pointed in the right direction. Our booking schedule continues to fill up, with calendar 22 having the potential to be a standout year, Guests are clearly spending for experiences they value, which plays to our strengths. Our sponsorship business has come back quickly and is now on pace to exceed pre-pandemic levels on a go-forward basis. And Cal Group is well positioned for further expansion on the heels of robust demand in key markets, such as New York and Las Vegas. Let's spend a few moments discussing the second quarter. As anticipated, our venue started to get busy again in October, with concert touring ramping back up, the Nixon Rangers starting their seasons, and marquee sporting events returning to the garden. We were also thrilled to welcome back the Christmas Spectacular in November. To give you a sense of how busy we were, on an overall basis, we hosted nearly 300 events and welcomed approximately 1.7 million guests into our venues. and our guests continue to spend for these premium experiences. For example, we hosted numerous sold out events, including one of the highest grossing nights ever for the UFC at the Garden. At each of our venues, contribution on a per concert basis was either above or in line with results for the fiscal 2020 second quarter, our last full pre-pandemic period. The Christmas Spectacular launched with solid demand, with ticket per caps well ahead of the 2019 production, and F&B and merchandise per caps at our venues increased double digits compared to pre-COVID levels. Unfortunately, the onset of Omicron slowed some of this momentum as a number of booked events were canceled or postponed. In addition, due to increasing operational challenges from the pandemic, we made the difficult decision to cancel the final two weeks of the Christmas Spectacular, a period that typically includes among the highest grossing performances in a show's run. It's clear that fans were excited for the return of the Rockettes. Ticket demand, including day of sales, remained robust right up until the final performance. In fact, before canceling those last two weeks, we were on pace to sell nearly 700,000 tickets across 160 shows. And while we wanted to make it through the entire season, we are proud to have hosted more than 400,000 people at just over 100 performances. The enthusiasm we saw throughout the run reinforces the important role the show plays during the holiday season and gives us great confidence for next year's production. Looking ahead, we are encouraged by what we're seeing in the operating environment as the Omicron wave continues to recede. The percentage of ticket buyers attending our events, which understandably took a dip in late December, continues to recover and is now approaching pre-Omicron levels, showing consumers sustained desire for lived experiences. And we are ready to meet that demand. Our concert booking schedule for calendar 2022 remains strong and is currently pacing nearly 50% ahead of where we were at this point two years ago for 2020. Turning to marketing partnerships. Since the start of the fiscal year, we've not only renewed several marquee and signature partners, but we've also welcomed new ones. In November, we announced agreements with BetMGM and Caesar Sportsbook, both expansive multi-year deals that leverage our assets across our portfolio. And with Mobile Sports Gaming now live in New York, partners are seeing firsthand the value we provide in helping to drive their business. And we anticipate further opportunities to increase our exposure in this exciting area. We have also started to make real inroads in the blockchain category, recently completing a new partnership agreement with Coinbase that provides significant exposure within our portfolio, including MSG Networks and through our representation agreement, MSG Sports. Moving now to TAO Group. The business continued to see strong demand during the quarter in its two anchor markets of Las Vegas and New York, with average check sizes meaningfully above 2019 levels. Consistent with our entertainment business, Tao's results for the quarter would have been even stronger had it not been for the onset of Omicron, which temporarily impacted both demand and operations near the end of the quarter. On recent earnings calls, we've talked about our expectation for TOW's margins to normalize over time as staffing levels increase. Today's results reflect the impact of TOW's progress staffing back up at its venues as well as at the corporate level. In addition, some of the margin reduction relative to our fiscal first quarter reflects a seasonal shift in TOW's revenue mix from beverage to food sales as nightlife activity typically slows leading into the holidays as well as some inflation in cost of goods sold. In a normal year, we would have benefited during the quarter from high-margin corporate holiday events in New York and London. But due to the lingering effects of the pandemic on office occupancy, as well as Omicron, that was not the case this year. Looking ahead, Tao Group is continuing to make progress on its growth plans. With a slate of exciting new venue openings, These include LAVO in West Hollywood, which is set to open in coming weeks, and the highly anticipated reopening of a fully renovated TOW Beach in Las Vegas, as well as a brand new venue in Miami, both scheduled to open this spring. As we've discussed before, Las Vegas is a key market for us, with more than a dozen TOW venues in its entertainment capital. It is also the location of our first MSG Sphere. We continue to make significant construction progress on MSG Sphere at the Venetian and remain on track to open the venue in calendar 2023. We are now approaching the midway point of the building, the Exosphere, the 366 foot tall spherical structure that surrounds the venue. The Exosphere will ultimately be covered with approximately 580,000 square feet of fully programmable LED lighting. forming the largest LED screen on Earth and creating an impactful display for artists, partners, and brands. Inside the venue, we are building a steel framework that will support MSG Sphere's 160,000-square-foot interior LED display plane and multilayered audio system, enabling the immersive technologies that will make MSG Sphere a first-of-its-kind in entertainment destinations. In summary, we continue to be energized by the positive momentum we are generating across our business and by our ongoing progress with MSG Sphere, which sets the stage for our company's next chapter. We are optimistic about the road ahead and are confident in our ability to generate long-term shareholder value. Before turning the call over to Andrea, I'd like to take a moment to welcome our new CFO, David Burns. David joined last month, and after Andrew's remarks, we'll review our financial results for the quarter. David is a seasoned executive with more than 30 years of finance experience, including at ViacomCBS, where he most recently served as Executive Vice President of Corporate Finance. I'm confident that David's breadth of financial and operating experience will prove valuable in ensuring the long-term success of our company. We'd also like to thank Mark Fitzpatrick for his contributions during his time as CFO and wish him well in his future endeavors. And with that, I will turn the call over to Andrea.