Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp Fiscal 2024 Fourth Quarter and Year-End Earnings Conference Call. I would now like to turn the call over to Ari Daines, Senior, Vice President, Investor Relations and Treasury. Please go ahead.

Thank you. Good morning and welcome to MST Entertainment's Fiscal 2024 Fourth Quarter and Year-End Earnings Conference Call. On today's call, Mike Groh, our EVP and Chief Financial Officer, will provide an update on the company's operations and review our financial results for the quarter. 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 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 four and five 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 Mike.

Thank you, Ari, and good morning, everyone. Fiscal 2024 marked our first full year as a standalone live entertainment company, with our results reflecting strong performance across our businesses, including bookings, the Christmas spectacular production, and our premium hospitality offerings. In fact, the positive operating momentum we experienced throughout fiscal 24 led us to increase our guidance twice during the year. And with revenues of $959 million, and adjusted operating income of $211.5 million, our full year results came in above the high end of our ranges. As we look ahead to fiscal 25, we remain focused on executing on our strategy of increasing venue utilization, growing per event profitability, building on the success of the Christmas Spectacular, and expanding our sponsorship and premium hospitality businesses. We believe that this strategy along with robust ongoing demand for our live entertainment offerings, positions us to deliver a high single to low double-digit percentage increase in adjusted operating income in fiscal 25. So with a strong year behind us and a positive outlook for the year ahead, we remain confident that our business is well positioned to generate long-term value for our shareholders. Let's now review some key operational highlights from our fiscal fourth quarter and full year. Fiscal 2024 was another busy year of events for our venues, as we hosted approximately 6.3 million guests at over 960 live events. The majority of these events were driven by our bookings business, where we saw robust growth in the number of events held at our venues versus the prior year. This growth was driven by the concert and family show categories and included a record high for the number of concerts in a year at both the Garden and at Radio City Music Hall. The world's most famous arena ended the year on a particularly strong note with robust year over year growth in the number of concerts in the fourth quarter. This reflects our efforts to increase venue utilization within the Nixon Rangers playoff window, as well as our success in attracting acts that are headlining the garden for the first time. Consumer demand also helped drive this growth as customers continue to demonstrate their willingness to spend on experiences across our venues. the majority of concerts were once again sold out in the fourth quarter. We also saw higher overall per-cap spending on food, beverage, and merchandise at concerts in the fourth quarter as compared to the prior year period. Looking ahead, our bookings calendar continues to fill up, and we expect to again increase the number of events at our venues in fiscal 25, primarily driven by growth in concerts, family shows, and special events. Turning now to the Christmas Spectacular production. During fiscal 24, we sold over 1 million tickets across 193 performances and generated nearly $150 million in revenue, a new record for the beloved production in its 90th season. We are currently on sale with 197 shows for the 2024 holiday season and expect revenue growth for the production to be driven by the increased number of shows as well as by higher per-show revenue. This year's production will feature new technology and immersive elements as we continue to explore ways to enhance the experience for our guests. In our fiscal fourth quarter, both the Knicks and Rangers finished their exciting regular season and playoff runs. In total, they played 11 additional home games at the Garden as compared to the prior year quarter. In terms of our agreements with MSG Sports, For fiscal 25, the cash component of the arena license fees that we receive will be approximately $44 million and will continue to grow 3% each year through fiscal 2055. Given the strong performance of both teams this past season, we expect to see positive tailwinds across our revenue and profit-sharing arrangements with MSG Sports in fiscal 25. That includes our share of food, beverage, and merchandise, sweets, and signage at Nixon Rangers home games. Turning to our marketing partnerships business. As you know, last year we transitioned our sponsorship sales effort to Oak View Group's Crown Properties Collection. I'm pleased to say that we are off to a strong start to fiscal 25 in terms of new deals. We expect to have more to share in the coming weeks and believe this business is positioned for growth this year. During fiscal 24, We saw strong demand for our premium hospitality offerings, including the two new suite products we introduced earlier in the fiscal year, an event level suite and a luxury event level club space. And given this demand, we are continuing to expand the capacity of the event level club space. Along those lines, we are also in the process of renovating a number of our event and Lexus level suites, which we anticipate will drive incremental revenue this year. So as we look to fiscal 25, I'm pleased to say we expect another year of growth in this area of our business as well. Before I discuss our fiscal fourth quarter financial results, I have a couple of points regarding presentation and comparability. First, I'd like to remind you that last quarter we revised our definition of adjusted operating income as it relates to the arena license fees with MSG Sports. We are no longer removing the non-cash portion of the arena license fees in our reconciliation of operating income to adjusted operating income, which is reflected in the financial results we reported today for all periods presented. You may recall that the ARENA license fees are recognized on a straight-line basis over the life of the 35-year agreements, which equates to approximately $68 million a year. For fiscal 2024, this $68 million was comprised of approximately $43 million of cash revenue and $25 million of non-cash revenue. Second, the company completed its spinoff from Sphere Entertainment on April 20th of last year. As a result, our fiscal fourth quarter results are not fully comparable on a year-over-year basis. Results for the prior year quarter are based on carve-out accounting for the first 20 days of April, and therefore, last year's fourth quarter results do not reflect all of the SG&A expenses we would have incurred had we been a standalone public company for the entire period. Turning now to our financial results. For the fiscal 2024 fourth quarter, we reported revenues of $186.1 million, an increase of 26% as compared to the prior year period. This reflected growth across our three revenue categories, entertainment offerings, food, beverage, and merchandise, and arena license fees. The increase in revenues from entertainment offerings primarily reflected more concerts at the Garden in our fourth quarter compared to the prior year period. The increase in food, beverage, and merchandise revenues primarily reflected the impact of additional Nixon Ranger games at the Garden versus the prior year quarter, as well as higher sales at concerts and other live entertainment and sporting events at our venues. Fourth quarter adjusted operating income of $13.1 million increased by $12.4 million as compared to the prior year quarter. These AOI results include $2.5 million of non-cash arena license fees in the current year quarter as compared to $1.5 million in the prior year period. The increase in AOI primarily reflects higher revenues, partially offset by an increase in direct operating expenses and, to a lesser extent, higher SG&A expenses. And as I mentioned earlier, fourth quarter SG&A expenses are not fully comparable on a year-over-year basis. Turning to our balance sheet. As of June 30th, we had approximately $33 million of unrestricted cash, while our debt balance was approximately $626 million. Looking ahead to fiscal 25, we currently expect our company to have another year of substantial free cash flow generation. This is underscored by the following expectations. a high single to low double-digit percentage increase in adjusted operating income, ongoing net interest payments related to our national properties debt, which totaled $51 million in fiscal 24, our current status as a minimal cash taxpayer, and capital expenditures, which will include both maintenance capex as well as some incremental spend related to Christmas spectacular enhancements and suite renovations at the garden, both of which I discussed earlier. In terms of capital allocation, we remain focused on our dual priorities of opportunistically returning capital to shareholders and paying down debt. As a reminder, we continue to have approximately $110 million remaining under our current share repurchase authorization. In summary, fiscal 2024 reflected the strength of our business and the robust demand we saw for our assets. And as we look to fiscal 25, We believe we are well positioned to deliver robust AOI growth for the year. With that, I will now turn the call back over to Ari.