Good morning. My name is Samaria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Entertainment Corp. Fiscal 2021 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to MSG Entertainment's fiscal 2021 first quarter earnings conference call. Our President, Andy Lustgarten, will begin today’s call with an update on the company's operations. This will be followed by a review of our financial results with Mark FitzPatrick, our EVP and Chief Financial Officer. 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.

Thank you, Ari, and good afternoon, everyone. We are now several months into our first full year as a standalone entertainment company. While our business continues to be impacted by COVID-19, we are encouraged by the recent news about a vaccine and what it could mean for our future reopening. When that day comes, we are confident that the strength of our assets and the pent-up demand for live entertainment will drive a quick recovery of our business and that we are well-positioned to create long-term value for shareholders. Until then, we are also confident that our company can navigate the current environment. Our focus this fiscal year is on a number of key initiatives that we believe will position MSG Entertainment for long-term success. These include preserving our company's strong liquidity position, making continued progress on the construction of MSG Sphere in Las Vegas, and ensuring we're able to reopen our doors quickly to artists and guests when the time is right. Our five entertainment venues have been closed since mid-March due to the pandemic. Since then, our top priority has been maintaining the strength of our balance sheet to protect our core business. On our last earnings call, we noted that we were actively pursuing debt financing, and we've delivered on that goal, completing a $650 million raise. This transaction, coming at a time when our venues are closed, underscores the value of our assets and the expectation that we will bounce back quickly once we're able to reopen.

Thank you, Andy, and good afternoon everyone. Today, I will review our first quarter financial results and then provide more details on our recent debt financing and our go-forward pro forma liquidity position.

Thank you, Mark. Can we open up the call for questions please?

Our first question will come from Brandon Ross with LightShed Partners. Please proceed with your question.

Hello, everyone. First wanted to ask, what do you think your post-pandemic cost structure is going to look like? As you guys went through and cut, I think it was $100 million of run rate expenses, did you find opportunities to maybe make some permanent reductions and run leaner in the future?

Thanks, Brandon. It's Mark. I'll take that one. As Andy noted, we did take significant actions this summer to reduce our expenses by $100 million. We strongly believe that our business will bounce back quickly once we can safely reopen our venues. Therefore, we do expect some expenses will return as we ramp up the business to full operations. However, we've been using this opportunity and this time to think about how we can more efficiently operate our business and permanently reduce our expense base. While we do believe some of the $100 million in cost savings will be permanent, at this stage, it's too early to try and quantify it for you.

Okay. Got it. And maybe another one for you Mark. You upsized your debt deal from $500 million to $650 million even though you have plenty of liquidity and a fairly low burn rate. A couple of things. One is can you remind us of what the interest rate was on that debt? And is there anything to read into you fortifying your balance sheet further?

Sure. Currently, the interest is at about 7% given where LIBOR is. I think we just took advantage of the strong investor demand and took advantage of that to upsize the facility. We believe it reflects the strength of our assets and the belief that we can return safely to reopen our venues and that our business will bounce back quickly. While we are very encouraged by the recent vaccine news, we thought it would be prudent to further bolster our balance sheet to protect our core business in these uncertain times.

Great. And then just one more. Las Vegas Sands is supposedly hoping to sell its Vegas assets, I guess taking the Las Vegas out of the sands. What do the change of control provisions look like on your Sphere agreement with them?

Hey, Brandon, it's Andy. Sands has been a great partner. We can't speculate on what will happen with the business. However, the ground lease has no change of control, and we don't expect the agreements to be impacted by ownership changes.

Your next question will come from John Janedis with Wolf Research.

Thank you. I guess you guys kind of led to this one. But on a practical level, what does the vaccine news over the past week or so actually mean? Does it impact when you can start selling tickets or host events at the Garden? And to what extent do local governments dictate that timeline?

Hey, John. So obviously, we're very excited by the vaccine news. It makes us feel bullish about the future. But obviously, we need to see it in action, and we need to get the venues up and running. The most important thing to us is the health of our patrons, our artists, our players, and our employees, so we're going to have to be very safe. We will continue to work with federal and local officials, including both New York City and state, to work on an opening plan. But what I can tell you is that we're feeling really good about, as I mentioned earlier, our back half of the calendar is going to be great; it's just a question of when exactly those doors open and we can safely re-welcome our fans back in the building.

That's helpful. Is there a limit in terms of the lead time you need for going on sale for ticketing?

We've had events go on sale within the same week, which is rare. The larger question pertains to the touring business, which generally involves longer lead times. You need to book the tour in advance, get the artist on board, and prepare everything, which can take several months. However, we're somewhat different from a typical venue because we host one-off events and collaborate directly with artists. These types of events can happen much faster than a standard tour. While I can't provide an exact timeline, once we are prepared, we will be ready to proceed.

Thank you.

Thanks John. We'll take one last caller.

All right. Your last question for the call will be coming from David Karnovsky with JPMorgan. Please proceed with your question.

Hi. Thank you. Just wonder how you're thinking about the long-term impact of your return profile specifically from pension market if that sees a reduction due to events maybe shifting to a virtual footprint? And then how does that affect the Sphere and maybe how many of that would affect Las Vegas as well?

So, thanks David. Look, I think over the long term, we're very bullish about what Las Vegas means in terms of being an entertainment market. It is one of, if not the entertainment capital. We want to be there, and we feel really good about its long-term prospects. As you know, we pushed back the timing of our opening, which I think favors us because it gives more time for the vaccine to flow through and for people to feel good about coming back together again. We'll be there ready to open and ready to grow with both the city and the entertainment business. I think on the TAO side, again, TAO is an institution in Las Vegas and has been doing pretty well even in the current environment. So, we feel very good about the long-term prospects of the Las Vegas market and our long-term business model.

Okay. And then maybe just a similar one but shifting to New York. Would you anticipate any of your long-term shifts in demand for the Christmas Spectacular as a result of changes to visitation in this region? And can you maybe say what percentage of tickets are sold to destination for us or for visitors from outside the U.S.?

Sure. So, I'll say, look, this Spectacular has had around almost a million people a year for the last 10 years. It's been a holiday tradition for over 90 years; its brand has never been stronger. Typically, those visitors come from a mix of New York City, the Tri-state area, domestic tourism, and international tourism, and the mix changes. But we believe that on a long-term basis, we see demand. I mentioned earlier we posted a video of last year's rehearsal, which had over 100 million views on Facebook. We started to sell group tickets for next year. The demand is strong, and we just feel very good about the long-term health of both live entertainment and, more importantly, this fabulous brand.

Okay. And then maybe I'll just throw in one more as a follow-up to John's. But can you discuss the likelihood that you'll have fans in some limited capacity in NHL or NBA games either in the general arena or in suites at some point this season? Is it possible to have that even prior to full vaccine distribution?

It's a challenging question to answer directly as the guidelines are constantly evolving. Currently in New York, no fans are permitted to attend, even outside of the city. However, we are focused on finding ways to safely and effectively bring fans, players, and our employees back. We will continue to collaborate with local officials to determine how to achieve this and get people in as soon as we can, while ensuring safety is our priority. It's difficult to provide a precise timeline, but we remain optimistic that progress is being made.

Okay. Thank you.

And this will conclude the Q&A portion of today's call. I would now like to turn it back over to Ari Danes for closing remarks at this time.

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

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.