Madison Square Garden Entertainment Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2027 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 Danes, Senior Vice President, Investor Relations and Treasury. Ari, please go ahead.

Thank you and welcome to MSG Entertainment's fiscal 2027 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'll 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 turn the call over to David.

Thank you, Ari, and good morning, everyone. I'm pleased to report that we're off to a strong start in fiscal 2027. For our first quarter, we generated revenues of $217 million in adjusted operating income of $34 million. These results represent significant year-over-year increases as we continue to benefit from robust ongoing demand for our offerings. This past quarter, that strength was most notably reflected in our bookings business. And looking ahead, we anticipate that demand will also drive another record-setting run for the Christmas Spectacular along with robust growth in revenue and AOI for the full fiscal year 27. That confidence in our outlook for the business also led us to repurchase approximately $25 million of our Class A common stock this past quarter as we continue to look for opportunities to return capital to our shareholders. Let's now review some key operational highlights. During the quarter, we hosted over 1.3 million guests across 160 live events. This reflected broad-based booking strength from concerts, performing art shows, to special events. That included the start of Harry Styles' 30-night residency during the quarter, which helped us deliver a new record for the number of concerts in any quarter at the Garden. It also reflected a number of other unique events across our venues. That included Les Mis, Multi-Night Run, and the return of the New York Philharmonic at Radio City Music Hall. both utilizing the venue's groundbreaking audio technology, Sphere Immersive Sound. In terms of consumer demand, the significant majority of our concerts were again sold out during the quarter. In addition, combined food, beverage, and merchandise per cap spending at concerts was up a double-digit percentage year over year. Looking ahead, we remain on track to grow the total number of events at our venues in fiscal 27. This includes our expectations for growth in concerts this year at the Garden and our theaters. With regards to the Knicks and Rangers, the team began their 26-27 regular seasons at the Garden last month, with the Knicks returning as defending NBA champions. I would also note that last week the Rangers business became a standalone public company after completing a spinoff from the Knicks business. The spinoff did not impact our arena license agreements with either team. This fiscal year, the cash component of the arena license fees from those agreements will be $47 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 93rd holiday season kicks off later today with 231 shows planned for this year's run. This represents the most shows ever in a season and compares to 215 performances last year. This year's production features several new elements, including the addition of a new Rockettes number. It also integrates multiple onstage cameras to give audiences different perspectives of the Rockettes in real time as we leverage immersive technology to continue enhancing the experience. Based on the demand we are seeing, we anticipate welcoming over 1.2 million guests to the Christmas Spectacular this holiday season, and we are confident we are on track to deliver another year of record revenues for the production. Turning to marketing partnerships, we are seeing the positive momentum from fiscal 26 carry over into this new fiscal year. And in terms of premium hospitality, we are again seeing strong new sales and renewal activity for suites at the garden. We also recently completed the renovation of several event and Lexus level suites and are benefiting from the incremental revenue driven by these enhanced spaces. Lastly, on the Penn Station redevelopment, we continue to work towards definitive agreements with the master developer on the potential transfer of the Infosys Theater at Madison Square Garden as part of their plans. We will keep you updated as we have more to share. Now let's turn to our financial results. For the fiscal 27 first quarter, revenues were $217.1 million, up 37% year-over-year. This primarily 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 as well as food, beverage, and merchandise primarily reflected the increase in the number of concerts at the Garden during the quarter 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 company's venues and higher per event revenue. These increases were partially offset by fewer concerts at our theaters. First quarter adjusted operating income of $34.3 million increased $27.2 million as compared to the prior year quarter. This primarily reflects the robust increase in revenues partially offset by higher direct operating and SG&A expenses. Turning to our balance sheet, as of September 30th, we had $194 million of unrestricted cash, while our debt balance was approximately $571 million. With respect to fiscal 27, we continue to expect to generate significant free cash flow on an underlying basis. This will primarily be driven by our substantial and growing adjusted operating income, partially offset by ongoing net interest payments related to our credit facilities, which totaled $32 million in fiscal 26, our status as a full cash taxpayer, capital expenditures, which will reflect some incremental spend related to technology investments across the company and select suite renovations at the garden, and the timing of working capital, including the partial reversal of the balance of our cash due to promoters due to the timing of events. You can see the start of that reversal in today's reported cash balance. As I mentioned earlier during the quarter, we repurchased approximately 314,000 shares of our Class A common stock for $25 million. Since our spinoff in 2023, we have repurchased approximately 6.4 million shares for $230 million. And going forward, we'll continue to explore ways to opportunistically return capital to shareholders. So in summary, we are off to a great start this fiscal year. We remain confident in both the near and long-term outlook for our business and our ability to drive shareholder value. Before I turn the call back to Ari, I would like to take a moment to congratulate Josephine Vaccarello, who was recently named president of MSG Entertainment. Josephine, who has been with the company for nearly 30 years and previously served as Executive Vice President of Live, now oversees strategy and operations of multiple areas of our business. We look forward to having Josephine join us on future earnings calls. With that, I'll now turn the call back over to Ari.