Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp Fiscal 2025 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. 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 MSG Entertainment's fiscal 2025 fourth quarter earnings conference call. On today's call, David Collins, 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 David.

Thanks, Ari, and good morning, everyone. During fiscal 2025, we again benefited from strong demand across our portfolio of entertainment assets, which resulted in full-year revenues of $942.7 million, along with adjusted operating income of $222.5 million, a 5% increase on a year-over-year basis. In addition, we repurchased approximately $40 million of our Class A common stock during fiscal 2025, delivering on one of our core capital allocation priorities. As we enter the new fiscal year, we see a number of avenues for growth across our business, which include continuing to increase the number of events at our venues, driving growth in per event profitability, building on the success of Christmas Spectacular, and growing our sponsorship and premium hospitality businesses. And when combined with the strong consumer and corporate demand we continue to see, we believe our company is well positioned to drive solid growth in revenue and adjusted operating income in fiscal 26. Now let's review some key operational highlights from this past year. During fiscal 25, we hosted nearly 6 million guests at over 975 live events. The majority of these events were delivered by our bookings business, where we saw modest growth in the number of events held at our venues compared to the prior year. This growth was led by special events, family shows, and marquee sporting events. The number of concerts at our theaters also increased versus fiscal 24, while the number of concerts at the Garden was down year over year. Highlights in the special events category included multi-day takeovers for Saturday Night Live's 50th anniversary special and the Tony Awards, both of which were held at Radio City. In our family show category, we welcome back the Westminster Dog Show, to the Garden for the first time since 2020. Our sports booking business delivered another strong year, featuring marquee college basketball matchups, UFC 309, and the return of professional tennis to the Garden. On the concert front, the Garden's year-over-year decrease in events included the impact of the end of Billy Joel's residency, while the growth across our theaters reflected our success in attracting a number of multi-night runs from both first-time and returning acts. At Radio City, we set our new record for the number of concerts. From a consumer demand standpoint, the majority of concerts at our venues continue to sell out this past fiscal year, including in our fiscal fourth quarter. In addition, during this past quarter, food and beverage per caps at concerts at the Garden were up, while per caps at our theaters were modestly down as compared to the prior year quarter. Looking ahead to fiscal 26, we expect to grow the number of events at our venues on a year-over-year basis. We plan to again host a wide range of events across concerts, special events, family shows, and marquee sports, with our anticipated growth in total events primarily driven by an increase in concerts, including a return to growth in concerts at the Garden. Turning to the Christmas Spectacular production, during fiscal 25, we sold approximately 1.1 million tickets across 200 performances and generated over $170 million in revenue, a new record for the production in its 91st season. We are currently on sale with 211 shows for the 2025 holiday season and expect revenue growth for the production to be driven by the increased number of shows as well as higher per-show revenue. Turning to our agreements with MSG Sports, in fiscal 25, the Knicks and Rangers played a combined 97 home games at the Garden, compared to 103 games in the prior year. This decrease reflected fewer home playoff games at the Garden during our fiscal fourth quarter. However, we did see growth on a per-game basis in our Knicks and Rangers shared revenue streams, including sweets, food, beverage, and merchandise, and we expect this to carry forward into fiscal 26. In addition, the cash component of the arena license fees will be approximately $45 million in fiscal 26 and will continue to grow 3% each year through fiscal 2055. Turning to our marketing partnerships business during fiscal 25, we welcomed several new partners, including Lenovo and its subsidiary Motorola, as well as the Department of Culture and Tourism, Abu Dhabi. In addition, we reached multi-year renewals with Verizon and Pepsi. As you know, earlier in fiscal 25, we made the strategic decision to bring our sponsorship sales effort back in-house. Since then, we have made progress in building out our internal team, and we believe we're well positioned to capitalize on upcoming opportunities in fiscal 26. Turning to our premium hospitality business, during fiscal 25, we saw another year of strong demand for our premium hospitality offerings. We also benefited from our expanded event-level club space, as well as from a number of event and Lexus-level suites that were renovated at the start of the fiscal year. Following this successful initiative, several more suites are in the process of being renovated, which we believe will again drive incremental revenue. So as we look to fiscal 26, I'm pleased to say we expect another year of growth in this area of our business. Now let's turn to our financial results. For the fiscal 2025 fourth quarter, we reported revenues of $154.1 million, a decrease of 17% as compared to the prior year period. This mainly reflected a decrease in revenues across our entertainment offerings and food, beverage, and merchandise revenue categories. The decrease in revenues from entertainment offerings primarily reflected a decrease in event-related revenues from concerts. This was mainly due to a decrease in the number of concerts at the garden, as well as lower per concert revenues, primarily due to a mixed shift at the garden from promoted events to rentals, partially offset by an increase in the number of concerts at our theaters. In addition, revenue subject to the sharing of economics with MSG Sports pursuant to the arena license agreements decreased year over year, primarily due to the impact of fewer Knicks and Rangers home games during the fourth quarter. This was partially offset by an increase in revenues from other live entertainment and sporting events, primarily due to higher per-event revenues. The decrease in food, beverage, and merchandise revenues primarily reflected the impact of fewer Knicks and Rangers games at the Garden as well as fewer concerts at the Garden, partially offset by an increase in the number of concerts at the company's theaters as compared to the prior year quarter. Fourth quarter adjusted operating income decreased $14.4 million to a loss of $1.3 million as compared to the prior year quarter. The decrease in AOI primarily reflects lower revenues and to a lesser extent higher SG&A expenses partially offset by a decrease in direct operating expenses. Now turning to our balance sheet, as of June 30th we had approximately $43 million of unrestricted cash while our debt balance was approximately $609 million. During the quarter, we refinanced our credit facility. This refinancing extended the facility's maturity for a new five-year term ending June 2030 with a modest improvement in the borrowing rate and no change to the term loan or revolver capacity. Looking ahead to fiscal 26, we currently expect our company to have another year of substantial free cash flow generation. This reflects the following expectations, solid growth in adjusted operating income, ongoing net interest payments related to our national properties debt, which totaled $45 million in fiscal 25, our status as a full cash taxpayer, and capital expenditures, which will include both maintenance capex as well as some incremental spend related to enhancements at Radio City Music Hall and the Beacon Theater and certain suite renovations at the Gardens. As I mentioned earlier, during fiscal 25, we repurchased approximately 1.1 million shares of our Class A common stock for $40 million. Following these repurchases, we have approximately $70 million remaining under our current share repurchase authorization. And going forward, we will continue to explore ways to opportunistically return capital to shareholders. In summary, fiscal 2025 reflected strong demand for our entertainment assets. And as we look ahead to fiscal 26, we are focused on organically growing the business and remain confident in our ability to deliver long-term shareholder value. With that, I will now turn the call back over to Ari. Thank you.