Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2022 Fourth Quarter and Year-End 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star one. I would now like to turn the call over to Ari Daines, Senior Vice President, Investor Relations, Financial Communications, and Treasury. Please go ahead.

Thank you. Good morning, and welcome to MSG Entertainment's Fiscal 2022 Fourth Quarter and Year-End Earnings Conference Call. David Burns, our EVP and Chief Financial Officer, will begin today's call with a discussion of the potential spinoff transaction as well as an update 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. David 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 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 will now turn the call over to David.

Thank you, Ari, and good morning, everyone. This past fiscal year demonstrated the resiliency of our business and the robust demand of our portfolio of live experiences, while we continued to make significant progress on our company's next chapter, MSG Sphere. And as we look forward, we remain focused on ensuring that our company is well positioned to drive ongoing growth and value creation for our shareholders. With this objective in mind, Yesterday, we announced that our board of directors approved the exploration of a potential spinoff that would separate our businesses into two publicly traded companies. The first company would include a valuable portfolio of assets highlighted by Madison Square Garden, the Christmas Spectacular production, and MSG Networks. This company is expected to generate substantial free cash flow and benefit from the attractive growth profile of the live entertainment business. The second company would be comprised of MSG Sphere and Tau Group, two businesses with global brands and significant long-term growth opportunities. If we proceed with the transaction, we expect that MSG Entertainment shareholders would receive a tax-free pro rata distribution equivalent in aggregate to an approximately two-thirds economic interest in the live entertainment and media company. The remaining one-third stake would be retained by MSG Entertainment. These retained shares would be available for use in a tax-free exchange for MSGE common stock and or to raise capital for general corporate purposes, with any remaining retained shares for use in a follow-on pro-rata spinoff to MSG Entertainment shareholders. At this time, we have not set a timetable for completion of this potential transaction which would be subject to various conditions. We believe this separation would provide both companies with enhanced flexibility to pursue their own distinct business and capital allocation strategies. We also expect the spinoff would provide investors with greater visibility into each company's businesses and growth prospects. This includes the distinct opportunity associated with MSG Sphere, which will begin in Las Vegas. This past year was highlighted by a number of important milestones related to the construction of MSG Sphere at the Venetian. In May, we topped out the venue's steel exosphere, marking the completion of primary structural work on the venue. And following the topping out, the team began work on installing the fully programmable LED exterior, which will be the largest LED screen on Earth, offering a one-of-a-kind canvas on the Las Vegas skyline for partners, artists, and brands. We have conducted an extensive review of project costs and, as a result, have adjusted our construction estimate for the venue to approximately $2 billion, with the increase relative to our prior estimate of $1.865 billion, largely reflecting the impact of inflation and global supply chain pressures. We continue to aggressively manage all aspects of the project and are pleased with our progress to date. Substantial portions of the work are now behind us, and we plan to spend this fiscal year finishing up construction on the venue as we remain on target to open in the second half of calendar 23. Work this fiscal year will include completing the LED exterior, the build out of the interior spaces, and installation of the immersive technology that will enable multi-sensory experiences at an unparalleled scale. To deliver those unique experiences, we have continued to make progress on our content initiatives. In May, we unveiled our MSG Sphere Studios facility in Burbank, which includes a quarter-scale, full-resolution prototype of the Las Vegas screen, as well as demonstrations of Sphere's capabilities, including Sphere Immersive Sound and the Exosphere. Our team is already hard at work with artists and partners creating and testing content and experiences for Sphere. And tonight, we will debut Sphere Immersive Sound at the Beacon Theater with the first of two acoustic performances by Trey Anastasio. This groundbreaking new sound system, which was developed and is being further customized and scaled for MSG Sphere in Las Vegas, will be the world's most advanced concert audio system. We look forward to providing more updates on MSG Sphere as we get closer to the opening in Las Vegas. With that, I'd now like to go through some operational highlights from this past year, starting with our entertainment segment. After the pandemic shut down our business for nearly all of fiscal 21, we were pleased to see our venues busy again this year as we hosted a wide variety of marquee entertainment and sporting events. This included the Christmas Spectacular, which returned to Radio City Music Hall this past holiday season for its 88th year. Despite concert touring only beginning to ramp up this past fall and the Omicron variant temporarily slowing our momentum in the winter, we're proud to have hosted over 4 million guests at more than 700 events in fiscal 22. This reflected the demand we saw from artists and promoters as well as from consumers to return to our venues which was demonstrated in strong ticket sales, including numerous sold-out events and in-venue per-cap spending, which was above pre-pandemic levels by a double-digit percentage this past year. We also saw these strong trends continue through the end of the fiscal year as we hosted more concerts in our fourth quarter as compared to our third quarter, with the number of concert tickets sold exceeding the pre-pandemic fourth quarter of fiscal 2019. Looking ahead, Fiscal 23 will represent our first full year of events at our venues since fiscal 19. Our calendar continues to fill up, and we're in the midst of a busy first quarter highlighted by a number of multi-night runs by some of the world's most popular artists, including a 15-night Harry Styles residency, which puts the garden on track to host a record number of concerts for our first quarter. We are also looking to build on the momentum we saw in marketing partnerships this past year, as our partners sought to reengage with our assets and brands. This was highlighted by the renewal of several signature partnerships, including Anheuser-Busch and Lexus, as well as a number of new multi-year agreements, most notably in the mobile sports betting space with BetMGM, Caesars Sportsbook, and DraftKings. Looking ahead to fiscal 23, we have meaningful visibility into our sponsorship revenue base, and are currently on a path to deliver sponsorship revenue that is well ahead of fiscal 19, our last fiscal year before the pandemic. The same holds true for our premium hospitality business, which also swiftly rebounded this past year. We now head into fiscal 23 with the majority of our suites under multi-year agreements, along with growing interest from companies who are ready to make a full return to corporate entertaining. Turning to TAL Group, which delivered exceptional financial results for the year, as its business also benefited from consumers' desire to gather again. In fact, Tao ended the year on a high note, with quarterly revenue in its fourth quarter at their highest level since capacity restrictions were broadly lifted last summer. This was led by Las Vegas, which saw pool and beach venues open for the season, including the grand reopening of a completely renovated Tao Beach at the start of April. And like our core entertainment business, guests continue to spend as average check sizes exceeded pre-pandemic levels by double digits in the quarter. Looking ahead, Tao has a strong pipeline of new venues planned for fiscal 23, including multiple branded locations at a new Moxie Hotel on the Lower East Side in New York, a waterfront venue planned for Miami, and Stanton Social Prime at Caesars Palace in Las Vegas. So as we reflect on both the quarter and year that we've had, we are proud of the role our company has played in the return of live entertainment. Looking ahead, we are excited for what fiscal 23 will bring, including putting us closer to the opening of MSG Sphere in Las Vegas, as we also explore a potential separation of our businesses, which we are confident would position us well to drive long-term shareholder value. With that, I will now turn the call over to Andrea.