Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp Fiscal 2026 First 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. 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 2026 First 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 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 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 4 and 5 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.

Thank you, Ari, and good morning, everyone. We're several months into fiscal 2026, and I'm pleased to say we are off to a strong start. We continue to see broad-based strength across our business, most notably for bookings, and this season of the Christmas Spectacular, both of which I will discuss in more detail shortly. And in light of the demand we're seeing, we are increasingly confident in our ability to drive solid growth in revenue and adjusted operating income this fiscal year. That confidence in both the near and longer term outlook for the business was behind our decision to repurchase approximately $25 million of our Class A common stock this past quarter as we continue to deliver on one of our core capital allocation priorities. Now let's review some first quarter operational highlights. During the quarter, our venues welcomed over 900,000 guests across 140 events. That includes a new record for the number of concerts in any quarter at the Garden, as we hosted a number of sold-out multi-night runs and welcomed new headlining acts to the arena this past quarter. From a consumer demand standpoint, the majority of concerts across our portfolio of venues were again sold out during the first quarter. In addition, food and beverage per caps at concerts at the garden were up while per caps at our theaters were down as compared to the prior year quarter, which we primarily attribute to the mix of events. Looking ahead, we are booking events at a steady pace and remain on track to grow the total number of events at our venues in fiscal 26. This reflects our expectations for growth in concerts this year, including at the Garden. On the family show front, Cirque du Soleil's Twas the Night Before will begin its holiday season run at the Chicago Theater and the theater at Madison Square Garden next month. And in terms of marquee sports, next week we welcome UFC Back to the Garden, which will be followed next month by the return of the Garden Cup, marking the second consecutive year of tennis at the arena. With regards to the Knicks and Rangers, the teams recently began their 25-26 seasons at the Garden. This fiscal year, the cash component of the arena license fees will be $45 million and will continue to grow at 3% each year through fiscal 2055. And while still early, we are seeing positive momentum across our share of food, beverage, and merchandise sales at Knicks and Rangers home games. Turning to the Christmas Spectacular, the 92nd holiday season kicks off later today with 215 shows planned for this year's run. This compares to 200 performances last year. We continue to embrace new technologies, and this year's production will utilize Sphere Immersive Sound, the cutting-edge audio system we recently installed at Radio City. The introduction of this technology is the next evolution in the venue's nearly 100-year legacy and will elevate the audio experience for artists and guests alike. Guests will experience the Christmas Spectacular with a new clarity and purity of sound that fully envelops the audience. And the system rolls out in January for all future events. In terms of advanced ticket sales, we continue to pace ahead of where we were at the same time last year. And based on the demand we are seeing, we anticipate once again welcoming over one million guests to the Christmas Spectacular this holiday season. We also continue to expect higher per show revenue, which combined with the increased number of shows puts us on track to deliver another year of record revenues for the production. Turning to our marketing partnerships business, as you know, around this time last year, we made the decision to bring our sponsorship sales effort back in house. With our internal sales teams now largely in place, we believe we are well positioned to capitalize on upcoming opportunities in fiscal 26 and beyond. And in terms of premium hospitality, we continue to see strong new sales and renewal activity for our suites. We also recently completed the renovation of several Lexus-level suites and are seeing the benefit of incremental revenue from these enhanced spaces. Now let's turn to take a look at our financial results. For the fiscal 26 first quarter, we reported revenues of 158.3 million, an increase of 14% versus the prior year quarter. This reflected an increase in revenues from entertainment offerings and to a lesser extent, higher food, beverage, and merchandise revenues. The increase in revenues from entertainment offerings primarily reflected growth in the number of concerts at the company's theaters and at the garden, as well as higher per concert revenues. In addition, revenues from other live entertainment and sporting events increased year over year, primarily due to an increase in the number of events at the Garden. The increase in food, beverage, and merchandise revenues mainly reflected higher F&B sales at concerts due to higher per concert revenues, as well as the impact of more concerts at our venues. F&B sales at other live entertainment and sporting events also increased year over year. First quarter adjusted operating income of $7.1 million increased $5.2 million as compared to the prior year quarter. This primarily reflects the increase in revenues partially offset by higher SG&A and direct operating expenses. I would also note that the first quarter operating loss results include a non-cash impairment charge of $13.8 million related to the company's operating lease at Two Penn Plaza. Turning to our balance sheet, As of September 30th, we had $30 million of unrestricted cash, while our debt balance was $622 million. This reflected $602 million outstanding under our term loan and $20 million drawn on a revolving credit facility. Since the end of the quarter, we have paid down the full $20 million revolver balance, and we continue to expect to generate substantial free cash flow as we progress through the year. This reflects the following expectations for fiscal 2026. 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 incremental spend related to certain suite renovations at the garden, as well as enhancements at the Beacon Theater and Radio City Music Hall, where we recently installed Sphere Immersive Sound. As I mentioned earlier during the quarter, we repurchased approximately 623,000 shares of our Class A common stock for $25 million. Following these repurchases, we have approximately $45 million remaining under our current buyback authorization. And going forward, we will continue to explore ways to opportunistically return capital to shareholders. So in summary, we're seeing positive momentum across our business. We are increasingly confident in the company's trajectory this fiscal year. And we believe we are well-positioned to drive long-term value for our shareholders. I will now turn the call back over to Ari.