Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2024 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ 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. Please go ahead.

Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2024 first quarter earnings conference call. On today's call, Dave Byrnes, 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 Investors 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 Dave.

Thank you, Ari, and good morning, everyone. We are now several months into our first full year as a stand-alone company. And based on a number of positive signs across our business, we are increasingly confident in our ability to deliver robust revenue and AOI growth for fiscal 2024. On the bookings front, our calendar continues to fill up and the Garden, the theater at MSG and the Beacon Theatre are all now pacing to exceed our concert goals for the year. At the same time, advanced ticket sales for the Christmas Spectacular remained strong, and we've added more shows to the upcoming holiday season run. And our premium hospitality business is tracking ahead of our expectations for the year, an example of strong ongoing corporate demand for our live entertainment offerings. We have also made meaningful progress on our commitment to return capital to shareholders. During the quarter, we repurchased $3.5 million of our Class A shares. This brings our total share repurchases since the completion of our spin-off last April to approximately 10% of Class A shares outstanding. I'd also note that in September, Sphere Entertainment sold the remainder of its retained interest in MSG Entertainment and no longer owns any of our Class A shares. With the continued strength we see across our unique portfolio of assets and brands, coupled with our focus on operational excellence, we remain confident in our ability to generate long-term growth and shareholder value. Now let's review our operational highlights from our fiscal first quarter. During the quarter, we hosted 130 events and welcomed more than 800,000 guests across an array of live entertainment events. On a year-over-year basis, our bookings results for our first quarter reflected a difficult comparison with the prior year period, which benefited from over 30 concerts that…

Thank you, Dave. Operator, can we open up the call for questions please?

[Operator Instructions] And your first question comes from the line of Peter Supino from Wolfe Research. Your line is open.

Hi, good morning. Two, if I may. First, last quarter you mentioned that you had visibility into about 70% of the targeted events across your portfolio and 90% at the Garden. So could you update us on how much visibility you have into bookings for 2024 now that you’re in the fifth month of the year? And then the other question is about 2024 supply. Now that you have more visibility into it, could you provide any additional color on what double digit event growth looks like across your venues or by event type, residencies and concerts and corporate events, et cetera? Thank you.

Sure. Thanks, Peter. As we mentioned on our August call, we mentioned that we had visibility into over 70% of our concert bookings goal for the year. We have made significant strides since then. We now have visibility into over 90% of our goal. At the Garden, we’re on track to exceed our concert expectations for the year and we expect another record year for concerts at the Garden. At the theaters, we’re now 90% of the way to our concert goal for the year, and we’re pacing ahead of our expectations at the theater, at MSG, and at the Beacon Theatre. As far as other areas of our bookings business, we will be hosting the 56 Surface Cirque du Soleil holiday shows at the theater at MSG and in Chicago next month. And we’re pleased with how advanced ticket sales are shaping up on the search shows. Cirque did not run a holiday show at our venues last year. In terms of special events, the bulk of our special events business takes place in fiscal fourth quarter. We still have some work to do in this area, but we expect that portion of our business to grow this year also, so we feel really good about our bookings calendar for the remainder of fiscal 2024. As far as your second question, which was the makeup of our anticipated double-digit event growth. I’d say bookings event growth for this fiscal year is expected to be driven primarily by concerts and family shows, to a lesser extent, special events and we anticipate growth at the Garden as well as across our theaters. I mentioned we’re on track for a record year of concerts at the arena and to exceed our goals at the theater here at the Garden and the Beacon family show. I just mentioned, Cirque, that will – Cirque will be a significant driver of growth in the family show category. So we anticipate fairly broad-based bookings growth in this fiscal year.

Thanks very much.

Your next question comes from the line of Stephen Laszczyk from Goldman Sachs. Your line is open.

Great. Thank you very much. Maybe first on the Christmas Spectacular, you mentioned advanced sales were trending strong. Could you maybe talk a little bit more about what you’re seeing on the advanced ticket sales particularly in the group market, which I think you called out last quarter is expected to come back stronger this year. And then more broadly, I’m curious you would need to see out of demand over the next few weeks to maybe add more shows above the 187 you have slated today. Thank you.

Sure, Stephen. To date, the overall tickets sold for the Christmas Spectacular are pacing up high teens as compared to the same time last year. Again, with six additional shows on sale this year versus the prior year. This is really being driven by healthy demand from both individuals and groups. The group ticket sales are currently pacing well above the overall high-teen percentage average. And you’ve heard us say this before, the increase in group sales is particularly encouraging as this category has seen a lagging recovery coming out of the pandemic. As far as individual ticket sales, we continue to see growth from both domestic and international tourists as tourism continues to make a more complete return post-pandemic. We’re also seeing growth in individual sales among local residents and it’s just across the board. Given the demand we’re seeing, we’re now expecting approximately one million guests for this year’s show that will bring us back to pre-pandemic levels of attendance. All of this reflects a sell-through rate of over 90% compared to a mid-80s sell-through rate last year. And to your point, we’re actively monitoring ticket sales, depending on how demand continues to unfold, we may add more shows towards the end of the run, so we feel really good ahead of the shows opening next week.

Great. Thanks for that. And then maybe just on consumer demand more broadly. There’s been a fair amount of concern just given the macro volatility we’ve seen over the last month or so. Could you talk a little bit more about some of the real-time indicators across your business, how they’re tracking in November, and particularly on the ticket sales or maybe even the per cap side over the last few weeks?

Sure. We continue to see strong consumer demand for live entertainment at our venues. On the ticket sales front for our bookings business – in terms of the second half of fiscal 2024, we’re currently on sale with more concerts at our venues than we were at this time last year for the second half of fiscal 2023. And of those on sales, a majority of those tickets are already sold and sell-through on those shows is currently up high single-digit percentage as compared to the second half of fiscal 2023 at the same time last year. It includes a number of sold-out multi-night runs at the arena, Radio City and the Beacon Theatre. In terms of per cap spending, this – the year-over-year comparison in the first quarter is a little noisy because of the Harry Styles, 15-night run at the Garden last year, which did see significant spending from fans on merchandise. So while merchandise per caps for this quarter were down year-over-year, F&B per cap spending was up meaningfully. And with that, if you look at the first quarter relative to last year’s fourth quarter as well as all of fiscal 2023, combined food, beverage and merchandise per caps were up. So we continue to see strong in-venue spending from our guests.

Great. Thank you.

You’re welcome.

Your next question comes from the line of Brandon Ross from Lightshed Partners. Your line is open.

Hey, thanks. I guess as we look at your guidance for the year, clearly increased venue utilization is a big part of it. And as we look out to the coming years beyond 2024, I was wondering if this can continue to be such a big driver for the business. I guess, overall, what’s your true capacity utilization for the venues, especially for The Garden, including load-in and load-out and some of the things that take days away? And then how much of a lever are rental rates to potentially increase the utilization, or on the other side to take advantage of the busy times to maximize your profits?

Sure Brandon. To put the opportunity at The Garden in context, we hosted over 130 bookings events at the arena in Fiscal 2023, plus an additional 96 Knicks and the Rangers games, so a total of roughly 230 events. If you look at that, on a base of 365 days a year and to your point, taking in load-in and load-out days, the venue had an effective utilization of roughly 70%. So there remains utilization upside at the garden. And given the outsized impact of incremental revenue events at The Garden on our revenue and AOI, increasing utilization at the arena would have a noticeable impact on our results. First, we expect to benefit in future years from continued industry growth as an increasing number of artists and acts continue to go on tour. And we'll also continue to leverage our industry relationships to identify new events, potential residencies, multi-night runs and additional marquee sporting events. And we'll continue to be creative in the ways we look to maximize utilization at The Garden. We have a track record of successfully driving event growth at our venues and you've heard us say this stat before. Since 2015 – Fiscal 2015 we've driven mid-single-digit annual growth in the number of concerts at The Garden and across our other venues. And this year we've mentioned we're currently projecting a low-double-digit percentage increase in events in our bookings business for Fiscal 2024, including growth and events at The Garden. In terms of – you mentioned rental pricing, if you're asking whether we consider lowering the rent to help increase utilization, that's not really something we're currently contemplating. The Garden is a premier product and our premier rates reflect that. We believe it's warranted for what we're able to deliver here, the unique location of The Garden in the heart of Manhattan and our ability to maximize ticket sales for artists, including across multi-night runs and residencies as we continue to mention. We certainly don't think our rental rate disadvantages us in continuing to drive utilization. So with The Garden being our largest venue and the most economically significant, we do see increasing utilization as an important opportunity and we're confident that we have the ability to continue to grow this business.

Thank you.

You're welcome.

Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.

Thanks. Good morning. Two questions, Dave. One about kind of efficiency opportunities in the business and at the company; and another, I wanted to ask about sort of the economics of the traditional kind of rental model you guys run versus the residencies that you're also doing? So you had some restructuring this quarter? I don't think investors think about your stock as sort of having kind of efficiency elements to it. It's more of a top line story. So I'm curious if you can talk a little bit about how the company is thinking about opportunities to drive more efficiency on the cost side and any color you might want to add around the restructuring in the quarter that took place? And then you talked a bunch about Harry Styles, you guys have a number of residencies but I think most of the business is a rental model. I was just wondering if you guys have a – if there is a better – if one is better than the other from either returns point of view or profitability point of view as we think about tracking your business over time? Thanks so much.

Sure. Thanks, Ben. The first part of your question focused on efficiencies and restructurings. We obviously had a charge that hit the quarter and it's not really much to say about that other than that we're always looking for ways to improve our cost structure and improve our efficiency moving forward. We feel the actions that we took during the quarter are exactly that and will help us to continue to drive efficiency in the future. You asked the question about residencies and the efficiencies that they bring. There are certainly elements of that for our business. We've talked about the benefit of residencies and multi-night runs to artists as well. They're able to not have to load in and load out as much venue-to-venue and travel. It's appealing for them and it's certainly a benefit to us in terms of our offerings. We've had some success recently in residencies and in the upcoming bookings calendar we have a number of continued multi-night runs scheduled in the rest of the year. So I think there's efficiencies on both sides, both from an artist standpoint and for us as a business to continuing to lean in and drive that business including helping us drive utilization as I just mentioned.

Great. Thank you very much.

You're welcome.

Your next question comes from the line of David Karnovsky from J.P. Morgan. Your line is open.

Hey, thank you. On the Penn Station renovation, I wanted to see if there was any update you could provide there. And just given there have been some press reports about offers for the Hulu Theater. Is it possible to frame the materiality of that venue in terms of revenue and EBITDA? And then a separate question on capital allocation. Dave, you noted priority to pay down debt. Is there a target leverage range you have in mind? And the buybacks, how do you think about that? What governs when you would be in the market to repurchase shares?

Sure. Thanks, David. As far as a potential sale to theater we have nothing to add on today's call. We've said before we are certainly committed to improving Penn Station in the surrounding area. We'll continue to work closely with all of the stakeholders involved in that. We always say that we'll consider options that make strategic and financial sense. We'll continue to do that, but nothing further to add on a potential sale sitting here today? And then your second part of that, as it relates to the AOI of our business, the significant majority of the company's economics are driven, first and foremost, by the Garden and the Christmas Spectacular production. And then the theaters in aggregate follow. So the theater at MSG, obviously, is one of our four theaters in the portfolio. It's one of three here in New York with different capacities. If needed, we believe we have the ability to shift some events from the theater at MSG to other theaters here in New York. Your question on leverage, I'd say first, our capital allocation priorities remain focused on returning capital to shareholders and debt pay down. As we mentioned since the spin, we've repurchased approximately 10% of our Class A shares, roughly $140 million, and we have $110 million remaining under our current authorization. We'll continue to evaluate returning capital to shareholders as we move forward. As far as debt paydown, our balance as of September 30 was approximately $732 million. Since the end of the quarter, we've paid down $35 million of the revolver, and we also expect to fully pay down the revolver by the end of the December quarter. From there, we expect to make our mandatory principal payments. And while we're not setting up a public leverage target, we expect our business to naturally delever as AOI increases over time. So with that, we believe we're well positioned to advance both of our capital allocation priorities.

Thank you.

Welcome. Go ahead we have time for one last caller.

Certainly your final question for today comes from the line of Peter Henderson from Bank of America. Your line is open.

Hi. Good morning and thank you for taking the question. Just wondering, are there any pandemic-related rescheduled shows in your fiscal second quarter through your fiscal fourth quarter for 2024?

Sure, Peter. Thanks. As we mentioned, the prior year first quarter included 30 concerts rescheduled to the period last year from earlier dates due to the pandemic. And the majority of those rescheduled concerts were at the Garden and Radio City, which are our largest revenue-generating venues. The year-over-year decline was also heightened by seasonality of our business with fiscal first quarter being our seasonally quietest in terms of bookings each year and when we look into fiscal second quarter, we had nine pandemic-related schedule shows in the year ago period also. All nine of those were at our smaller venues, the Beacon Theatre and the Chicago theater, so much smaller economic impact on our business, and we had no rescheduled shows in the third or fourth quarters last year. So the vast majority of the tough year-over-year comp from the pandemic-related rescheduling is behind us, and we're confident we're on track to deliver strong results on a full year basis.

That's very helpful. And then just following up, I was wondering if you could provide an update on your sponsorship outlook for the fiscal year. And just sort of related to that, if you can give us a little more color on the OVG partnership and how that will help to drive results.

Sure, Peter. First, on sponsorship, we're in a good place in terms of our core marquee and signature partners. Coming out of the pandemic, we renewed a number of key partners, Verizon, Spectrum, Anheuser-Busch, Lexus. We have one signature partner up for renewal this fiscal year and can't get into the specifics of it, but that deal is essentially done. So you've heard us say our market and signature partners represent the majority of our sponsorship revenue. With that, we have significant visibility into this business for the remainder of this fiscal year. In terms of new sales, we still have some work to do, and we'll keep you posted as we make progress. And you mentioned we're also – we recently announced our new sponsorship arrangement with Oak View Group, and we're working through that transition now. Overall, we continue to have some work to do this fiscal year, but we remain bullish about the sponsorship part of our business over time. And then as far as Oak View Group, while we've had success in growing our sponsorship business, last year's results exceeded pre-pandemic levels and thinking about how to best position our sponsorship business for ongoing growth, we began discussing this new arrangement in place with Oak View. It's under a new entity known as Crown Properties Collection. Oak View Group plans to represent most of the important assets and brands in sports and live entertainment. And Crown Properties will lead global partnership and sponsorship sales for us, including our venues and our live entertainment properties. We will continue to provide expertise and advisory services to Crown as well as retain partnership activation and fulfillment. So again, we believe there will be a top line economic benefit over time from working with a leader such as OVG and I'd also add that part of this arrangement, our sponsorship business will now transition to more of a variable commission-based cost structure, which we find attractive.

And we have reached the end of our question-and-answer session. Mr. Ari Danes, I turn the call back over to you for some final closing remarks.

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.