Madison Square Garden Sports Corp.

Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2025 Third 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 Gaines, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2025 third quarter earnings conference call. On today's call, Lee Weinberg, our SVP, Business and Financial Operations, will provide an update on the company's operations. David Collins, our EVP and Chief Financial Officer, will then review the company's 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 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'll now turn the call over to Lee. Thank you, Ari, and good morning, everyone. As we near the end of our fiscal year, I'm pleased to say that we continue to see strong consumer and corporate demand for our live entertainment offerings, which is reflected in today's results. For the company's fiscal third quarter, we reported revenues of $242 million and adjusted operating income of $58 million. both representing solid growth on a year-over-year basis. This reflected our success in attracting a wide variety of special events, family shows, and marquee sports to our venues, robust ongoing demand for our premium hospitality offerings, and the conclusion of this year's record-setting Christmas Spectacular Run in January. And while our businesses experienced a year-over-year decline in the number of concerts at our venues this quarter, we remain on track to grow the overall number of bookings events this fiscal year. So putting it all together, I'm pleased to say that we continue to pace toward mid-to-high single-digit ALI growth this year. In addition, we continue to deliver on one of our core capital allocation priorities, opportunistically returning capital to shareholders. We have repurchased approximately $40 million of our Class A common stock to date this fiscal year, including $15 million during the fiscal third quarter. David will share more details on our buyback activity shortly. Let's now take a look at operational highlights from the quarter. Across our portfolio of venues, we hosted more than 1.5 million guests across 195 events held during the quarter. As I mentioned earlier, these results reflect our success in attracting a wide variety of live entertainment and sporting events to our venues. On the special events front, in February, we hosted Saturday Night Live's 50th anniversary special at Radio City Musical, which is also set to host the Tony Awards next month. In our family show category, we welcomed back the Westminster Dog Show to the Garden for the first time since 2020, and we were pleased to say the event will return next year for its 150th anniversary. And in our sports booking business, The Garden had a busy quarter of college basketball, including St. John's, as well as a sold-out WWE event. With respect to our concerts, we saw a year-over-year decrease in the number of events that are staged during the quarter. This was driven by a lower number of concerts at our theaters, as well as at the Garden, which includes the absence of three Billy Joel performances that took place in the prior year quarter. From a demand standpoint, the majority of concerts at our venues continued to sell out during the quarter. In addition, food and beverage per caps at concerts at the Garden were up, while per caps at our theaters were essentially unchanged as compared to the prior year quarter. Turning to the Christmas Spectacular... The show's 91st holiday season concluded in January with a record-setting run, generating over $170 million in total revenues across 200 performances. Fifteen of those shows took place in the third quarter, with results reflecting year-over-year growth in co-show attendance and average ticket prices. We are currently on sale for the 2025 holiday season, and following this year's success, we believe the production is well-positioned to deliver continued growth next fiscal year. On the marketing partnerships and premium hospitality front, this year has been highlighted by several notable sponsorship announcements, which, most recently, included a multi-year renewal with Pepsi. And in terms of premium hospitality, we have also seen strong new sales and renewal activity for seats at the Garden this year, including our now sold-out, expanded, event-level club space. I would now like to introduce David Collins, our new EDP and Chief Financial Officer, to take you through our financial results.

Thanks, Lee, and good morning to everyone. I'd like to start by saying how pleased I am to be here today. MSG Entertainment is a world-class organization with an incredible portfolio of assets, and I really look forward to working with the team to achieve our long-term goals. Now let's review our fiscal third quarter financial results. For the fiscal 2025 third quarter, we reported revenues of $242.5 million, an increase of $14.2 million, or 6% as compared to the prior year quarters. The majority of this growth came from a $14 million or 10% increase in revenues from entertainment offerings. This primarily reflected growth in event-related revenues from other live entertainment and sporting events due to higher per-event revenues and an increase in the number of events year over year. We also saw strong growth in suite license fee revenue, including amounts that are subject to the sharing of economics with MSG Sports. In addition, revenues from our Christmas Spectacular production increased year over year, primarily due to higher per-show ticket revenue and, to a lesser extent, five additional performances in the quarter, both as compared to the prior year period. Per-show revenues for the Christmas Spectacular were up by a double-digit percentage year over year, mainly reflecting the increases in average attendance and ticket prices that Lee had mentioned earlier. The overall increase in revenues from entertainment offerings was partially offset by a decrease in event-related revenues from concerts. This mainly reflected lower per-concert revenues, primarily due to a mixed shift at the Garden from promoted events to rentals and a decrease in the number of concerts at our venues. Aside from revenues from entertainment offerings, we also saw a modest increase in food, beverage, and merchandise revenues for the quarter, which primarily reflected higher food and beverage sales at other live entertainment and sporting events, mostly offset by lower food and beverage sales at concerts. In addition, arena license fees and other leasing revenues were modestly lower year over year, primarily due to the Knicks and Rangers playing two fewer home games during the fiscal third quarter, mostly offset by higher other leasing revenues. Third quarter adjusted operating income of $57.9 million increased $19.3 million, or 50%, as compared to the prior year quarter. The increase in AOI primarily reflects the increase in revenues, as well as lower direct operating expenses and selling general and administrative expenses. I would also note that third quarter operating income results include a non-cash impairment charge of $9.7 million related to the company's operating lease at 2 Penn Plaza. Now, turning to our balance sheet, as of March 31st, we had approximately $89 million of unrestricted cash and our debt balance was approximately $613 million. As Lee mentioned earlier, fiscal year to date, we have repurchased approximately 1.1 million shares of our Class A common stock for $40 million. That includes approximately 436,000 shares repurchased in March at an average price of $33.70 per share for approximately $15 million. Following these most recent repurchases, we now have $70 million remaining under our current buyback authorization. Going forward, we will continue to explore ways to opportunistically return capital to shareholders. With that, I will now turn the call back over to Ari.