Good morning. Thank you for standing by and welcome to the Madison Square Garden Entertainment Corp, Fiscal 2025 First Quarter Earnings Conference Call. 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 2025 first quarter earnings conference call. On today's call Mike Grau, 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 Security 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 Mike.

Thank you, Ari and good morning, everyone. With our new fiscal year underway, we expect our portfolio of assets and brands to continue benefiting from demand for shared experiences. In our bookings business, the Garden recently saw a record number of concerts for our fiscal first quarter. Last month, we welcomed back the Knicks and Rangers to the world's most famous arena for the start of their '24/'25 regular seasons. While later today, the Christmas Spectacular will kick off its 91st holiday season. Lastly, in our marketing partnership business, we recently announced a number of notable agreements, while we also remain encouraged by the level of corporate demand for our premium hospitality offerings. Let's now review, some first quarter operational highlights. During the quarter, our venues hosted nearly 800,000 guests at over 120 events. But as you saw in this morning's earnings release, our bookings business saw lower concert-related revenues year-over-year. This reflected lower per concert revenues, primarily due to a mix shift at the Garden from promoted events to rentals, which all else being equal generates similar AOI, but lower revenues on a per event basis. It also reflected fewer concerts at our theaters. These decreases were partially offset by growth in the number of concerts at the arena, including an increase in the number of acts headlining the arena for the first time, which is one of our strategies to increase utilization. The increase in the number of concerts at the Garden is also noteworthy, since the prior year quarter included residencies from Phish and Dave Chappelle, as well as two additional Billy Joel concerts. From the demand side, consumers continue to demonstrate their desire for in-person shared experiences, with the majority of concerts across our venues once again, sold out during our first quarter. In terms of…

Thank you, Mike. And with that, operator, can we now open up the call for questions?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Peter Henderson from Bank of America. Your line is open.

Yes, good morning and thank you for taking the question. So, Mike you mentioned that you've seen some slowing in the concert bookings in recent weeks. Maybe you could discuss the causes in your mind for that slowing? And just also provide updated thoughts on concert bookings for the Garden as well as for the theaters for the next quarter as well as for the remainder of the year? And then finally, just where you stand on concert bookings now relative to this point last year for fiscal 2Q, 3Q, and 4Q? Thanks.

Sure Peter, good morning and thanks for the questions. So, you're right bookings have certainly slowed a little bit since we last spoke in August. Maybe I'll talk about it at the arena level and then at the theater level. At the arena we have a tough year-over-year comp given the 11 extra Billy Joel shows in the prior year and that's something we thought we would overcome. And right now maybe a little less bullish in that regard. What we're seeing is a couple of things. One is we have seen a little bit of a spike in cancellations. Each of these cancellations has a little story around it. Sometimes it's artist's health like Aerosmith and Steven Tyler. Other instances like Black Keys and Jennifer Lopez, we had shows that were selling very well. In fact in most instances sold out. But elsewhere the tour was selling poorly and so they canceled the entire tour. We are seeing a little bit more in cancellations than we've seen historically. But I think the biggest driver is just what we're seeing is like a shortage of supply, especially, in the spring or what would amount to our fiscal third quarter. We took a look in the New York DMA at the announced show – announced arena level shows this year for that quarter versus the actual shows the prior year and it's down 50% plus in the New York DMA. This is not something unique to the garden. And given the booking windows I think those numbers are fairly well developed. There is just a scarcity of supply in the spring for arena level shows. Some of that I do think is timing because when we take a look at our bookings right now for fiscal 2026 for the back half…

Thank you.

Your next question comes from the line of David Karnovsky from JPMorgan. Your line is open.

Hi. Good morning. Doug Warwaha [ph] for David. First with the Christmas Spectacular, can you dig in a bit more on ticket sale trends and how you're thinking about the opportunity to potentially add more shows? And then I guess a little bit different from the last question separate to concerts artists Knicks and Rangers, how does the booking pipeline look for content like family shows or other sporting events?

Sure, Doug. Thanks for the questions. So I will take them in that order. In terms of the Christmas show sales back in August we talked about the fact that we were up 16% year-over-year. And when I say year-over-year I mean the tickets sold at this point versus the same point last year. But at that point in time we were only like 10% of the way to our goal. We're now pushing up against halfway to our goal and we continue to be up 15% year-over-year. We've sustained that and I think it has a little more weight given that we again are halfway to our goal. We're right about there. And again the variance is about half rate half volume. So really very robust sales very encouraging signs. We've sustained the momentum that we were seeing in August. So that gives us reason to believe that we have upside here compared to our initial expectations. We have added two shows on sale since initially going on sale and we'll continue to monitor the demand. And if demand warrants and if the economics make sense we do have opportunity to add a couple more shows in that regard. The current expectation as we mentioned in our prepared comments over one million guests similar sell-through on more shows. And I would say over the longer term we continue to see a lot of opportunity with the Christmas show across ticket yields where we're priced below comparable entertainment options if you think of a Broadway show as a comparable entertainment option. And even on sell-through and overall volume we're still not yet at pre-COVID highs. We think there's long-term runway with the Christmas show as well. In response to your second question when we talk about bookings other than concerts…

Great. Thank you.

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

Hey, great. Thank you for taking my questions. Maybe just a follow-up on the new AOI guidance for Mike. Could you maybe talk a little bit about how you're thinking about the swing factors still at play that would either take you to the high end or low end of that guidance range for mid to high singles for the year? And then maybe as a part of that it sounds like there's some added costs related to the shift away from Oak View. Curious if there's any way you could quantify that for us the impact this year and then anything reoccurring on the expense side? Thank you.

Sure. Stephen, in evaluating our outlook we look of course at the upsides and the downsides or the headwinds and the tailwinds if you will. In terms of the challenges we're seeing it's kind of the things we've been talking about the concert bookings -- the pacing of concert bookings and some of that incremental overhead to bring sponsorship sales in-house. And then we do think we have upsides around the Radio City Christmas show, the special events and marquee sports that I just spoke to as well as some kind of one-time OpEx pickups that we experienced in the first quarter. So at a high level, this is kind of where we're seeing some deviations from initial expectations. In terms of what's going to push us to the high end or the low end of our outlook, I think it's just the magnitude of some of these. And the ones I would call out is the pacings of concert bookings the low end of our range we are allowing for some additional headwinds there. But it's just, again, a magnitude question. I think same for the Christmas show. At our high end, we're allowing for a lot of upside at our low end might be a little bit of upside. There's upside there for sure. And then sponsorship revenues, but we'll continue to monitor the pipeline and see what else we can monetize there. In response to your second question, we will be bringing sponsorship sales back in-house. There will be incremental overhead, but we're not going to offer up any specifics around that today.

Great. Thank you.

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

Hey, thanks. Just a follow-up on Stephen's last question about Oak View. Can you just give us any color on why you parted ways with them and how to think about sponsors to sell specifically going forward in the wake of that? Thank you.

Sure. Brandon, listen, we historically have always managed this function in-house. About a year ago, we did make a decision to outsource this to Crown Properties Collection. And one year into the experiment, we've made a decision that we think actually the initial structure was the better one, and that's what's going to benefit us more for the long-term. And so we're going to be bringing it back in-house, there's really no more specifics to speak about in that regard. As far as the outlook for sponsorship sales, we are seeing some decent traction right now. We had new deals announced with Motorola, Lenovo, Department of Culture and Tourism, Abu Dhabi. We had an early renewal with Verizon, an early and expanded renewal with Verizon. So we think we have some good starts there. We have a strong roster of core partners. We think our brands and our assets are pretty unique, certainly want to capitalize on the Knicks and the Rangers and their deep playoff funds last year. So we do feel like this is a destination site for those people who want to spend sponsorship and signage money in this area. We'll continue to monitor our pipeline closely. I think a reasonable outlook for 2025 would be for modest year-over-year growth. And I think over the longer-term, as we bring this back in-house, our expectation is that we can accelerate on that.

Thank you.

Your next question comes from the line of Peter Supino from Wolfe Research. Your line is open.

Hi. Good morning. Wondered about the size of the market for the Garden over the long run. I think a lot of us agree that with streaming, music and social media, it seems like more artists are becoming arena performers faster than ever. Do you see artists moving up out of your theater portfolio faster than years ago? And more broadly, would you comment on the long-term outlook for the supply growth at the Garden as a key driver of long-term growth at that facility? Thanks.

Sure, Peter. Thanks for the question. Listen, this is a strategy that we're actually pretty fond of internally. We think it makes a lot of sense. We leverage the fact that we do have portfolios at various levels. We have the Beacon with the 3,000 seat capacity, Radio City at 6,000 and then the Arena up to 21,000. So we think that positions us kind of uniquely to take artists earlier in their career trajectories and kind of shepherd them or walk them up the ladder, if you will to the point where they're ready to play the arena. And we've had a lot of success with that. More so probably current recently, a lot of the acts that played in the first quarter were first-time artists performing at the arena. Some of the success stories will be Olivia Rodrigo, not a first quarter story, but she played Radio City a couple of years ago and sold-out arena shows in April that were very successful. Noah Kahan, Lake Street Drive also kind of graduated to the arena, if you will, in the first quarter from Radio City. And then we sometimes see an artist like a Sabrina Carpenter, who goes straight to the Arena side show. So I agree with you. I think there isn't a real good pipeline here. I think that's the premise of this strategy is having the venues at the different size points and creating that longer-term pipeline. And I do think that promises to create a little more supply as we move forward. I'd say with these first-timer acts, maybe a little more variability, but that is tempered a little bit. I think our bookings team is just top-shelf and have a really good feel for who is ready to play the arena or not. And it's just a really smart way to build pipeline. And I do think that is a source of long-term growth in terms of supply.

Your next question comes from the line of Cameron Mansson-Perrone from Morgan Stanley. Your line is open.

Good morning. Thanks for taking the question. Mike, you called out lower per caps. I was wondering if you could elaborate on that. I'm guessing given the demand for Christmas Spectacular that that's not indicative of broader consumer health, but curious if you could provide some more color on those trends? Thanks.

Sure. We did talk about it, but I'll repeat just for the benefit of the question. We did see lower per caps in the first quarter, but it's really a function of the mix of artists playing the venue as compared to the prior year period. There are certain artists, which either based on the nature of the act or sometimes the nature of the show, the length of the show and whether or not they have an intermission that generate very high per caps. And we had a couple of those artists in the first quarter last year that I think we cited Phish and Dave Chappelle in our prepared comments that had just notably higher average per caps. We're up against a tough comp in that regard and that's why food and beverage per caps, food and beverage and merch per caps, I should say, were down year-over-year, but they were actually up versus full year 2024. So I wouldn't read a lot into the decline in the per caps. I think that's kind of a unique dynamic driven by again the mix of shows that we saw in the prior year quarter versus this year quarter. If I look at the month of October alone, already, the food and beverage merch per cap spending at contrast was up as compared to October last year. I think we noted in our comments that early returns suggest the per caps at the Knicks and Rangers games have nice positive momentum. So I would not read anything into that, as far as consumer demand goes. The other factors I would say and these are the kinds of things we talk about when we're talking about consumer demand is sell-through with the majority of our first quarter contrasts sold out, our overall sell-through for first quarter contrast was right about 90% flat even maybe slightly up versus the prior year. And the arena is even higher than that. So certainly no weakness in consumer demand in that regard. And then the other point that you cited in your question is with the Radio City Christmas show, where we're seeing a really increased appetite for ticket sales revenue, both in terms of volume and ticket yield up mid-teens percentage added two shows. So really from our perspective, consumer demand for the shared in-person live experiences remains very strong.

That’s helpful.

Operator, we'll take one last caller.

Your final question comes from the line of David Joyce from Seaport Research. Your line is open.

Thank you. Three questions actually. One is a bigger picture one on, what you're seeing for the general health of the consumer across your various markets and properties. Second question, back to food and beverage and merch. I was wondering why the revenue was down, but the OpEx was still flat year-over-year. And then the final question is, given that you're heading into your strongest cash flow quarter of the year and we haven't had capital returns since a number of unusual opportunities last year related to the Sphere, what are your plans for capital returns going forward? Thank you.

Sure, David. Thank you for the question. In terms of the health of the consumer, I would just revert back to the prior question when we talked about the consumer demand and the strength we're seeing in sell-through, the temporary decline in per caps already reversing in October and the health in per caps of Knicks and Rangers and then the strong demand we're seeing at Radio City Christmas Show. So we don't have really concerns about the health of the consumer or the levels of consumer demand. In terms of your question about food and beverage margins, you're right, revenues were down year-over-year, because some of the factors we cited in response to the previous question kind of the lower concert per caps at the arena due to the tough comp. And despite this the food and beverage direct OpEx was flat. So we definitely saw some margin compression there year-over-year. I think, if we get into the direct OpEx, the COGS is down essentially consistent with revenue. So we're still seeing the same margin on the actual product. Where we're seeing margin compression is on higher labor costs and that's driven by a new collective bargaining agreement which was signed late in fiscal '24 and did drive higher labor costs year-over-year. It's not a surprise to us and that's factored into all of our expectations for the year. We do have some levers here that we can pull to enhance F&B margins and the F&B team is certainly very adept at that. We're constantly monitoring competitive pricing at other venues in the area and that's our main data point in terms of setting our pricing. We are implementing some dynamic pricing. That's something we talk about a lot in terms of the Christmas show, but we're now starting…

And that concludes our question-and-answer session. I will now turn the call back over to Ari Danes for closing remarks.

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

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