Sphere Entertainment (SPHR) 14 Aug 202020 Q4 Earnings call transcript

Good morning. My name is Christie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the MSG Entertainment Fiscal 2020 Fourth Quarter and Year-End Earnings Conference Call. Later, we will conduct a question-and-answer session. [Operator Instructions] Thank you. the to turn Relations. Danes, now will call Ari over Investor I go sir. Please ahead,

Christie. welcome call. Thank fiscal morning, Good you, and quarter year-end XXXX to and earnings conference fourth Entertainment's MSG

morning's questions. remarks, Our Lustgarten, Officer. and for the operations. the by of will President, This Chief Mark we After up review an followed call a financial will this Financial Company's by Andy be will our update open call begin FitzPatrick, on prepared with our results EVP our

that, If are have in earnings Investor the Investors XXXX. website. Litigation we events a and and not results adjusted within AOI, may you now it Andy. actual income of any turn call a section X include of operations, to X and operating release, income of perceptions factors. in These that disclaims meaning guarantees financial analysis in such Company therein. forward-looking any cautioned with statements note financial are forward-looking discussion involve contained the it results, of sections and take this a differ the financial the Risk results corporate I'll and during and the the entitled Company the Securities financial Securities today's Reform discussion do community of discussed provide industry as Exchange and business, forward-looking contain call. of update of reconciliation Act described may copy various well that statements of including a constitute may Private Pages Commission, statements developments, On obligation in our is materially of of uncertainties, which risks and or statements of any the Company's non-GAAP And operations and today's statements available performance Today's operates, Please release, The the that over of those the measure. consolidated following. forward-looking of a factors the to that as the statements future or and condition, filings its and with result not operating earnings condition Factors to and operations management's as from be

you Good the we've many few across for the months, know mid-March, no one all anticipated. over thank it Christmas been Spectacular year ever. Through impressive experiencing run us. celebrated heard the we and times word its an that The joining I but highest unprecedented truly have has could morning, are unprecedented past Company. momentum grossing

track Group of on year, a events its growth. and number generating way strong the was deliver business to record year-over-year booking for Tao Our was on to

then Company steps minutes spend difficult shareholders. and addition, outlook And on hit, resilience the the our we're company these circumstances, changing despite of we sale for of Sphere transaction. full preparing stage I'd to for like has only details successfully few completed for by the Company, environment, confident the of for that these we impacted sets And and how creation world. Entertainment assets, we followed the to global times. to in weather May. of taking the value MSG MSG the in our Forum a $XXX own but the difficult current believe its spinoff business talking in pandemic our are March, April, remain about MSG the our the ahead Entertainment spinoff not Even the Forum, speed establishing in million our the the sale with long-term finalizing Vegas, and Las COVID-XX at strength position In the of in and

venues, we Tao our for last Christmas weekend. that cancellation We its the the we temporary a all and Boston week, This investment including moving and into time the start. Group followed factors, Calling was of due Day it of and canceled. just not of mid-March, decision. the worth the began was very entertainment to nightlife uncertainty doors from few in show scheduled closure takes pandemic. And was when months of considered Taking has shutdown which risk. would Music was a announced continued of significant the tough Festival, the venues closed a season's number Our Memorial of this entertainment, the our forward by been to dining, Spectacular each felt mount when and It level out traditionally this the show account, production

operations. make some staff today, and have for to operating venues. corporate the On eliminated forced we workforce support difficult, performance reduce to our reducing we March, our at future. its manager efforts ensure same time, very recently them the our a Given discretionary significantly cutting go-forward Last financial been These expenses across we of At including rate line measures, took are company we reduce in Tao our basis. all its positions decisions, by million staff. employees approximately week, reduced of $XXX essentially run where continuing is actions event-level additional a review and we've spending spending of while corporate venue XX, our ended and May business made all to to our departments. healthy on

term. and the construction but our to we venue, the April, revised outside better on continued of were cash pandemic the that a MSG our also due effects enabling we control. work, COVID-related resumed extended have as Las Sphere In lengthened the impacts in on have temporarily of and Vegas. to our ongoing impact now timetable, the us processes suspended to our construction Our in review schedule, And near operations, preserve

we now previously we spending. approximately expect spend of what anticipated 'XX, to fiscal half For

will pace, tough but art Las made bringing these We but believe measured a and allow proceed will also conserve and successfully more actions at cash challenging calendar of times. our the will pandemic push to new given us these our We about our Company, the this impact the thoughtful Sphere we committed our continue schedule Vegas, of decisions, are some XXXX. to navigate the be that to going expect in state liquidity. into to Las the opening venue on We of remain MSG Vegas

Prior As our demand had to for billion again no customers industry the Group. events live onset of one but we growth to we to supply experiences XX, we relatively people related from it's are the $X.X a is hand, continue on in small in dynamics safe do and approximately the to amount each aside and experiences. essentially everyone COVID, community share to we else, debt, have day, in steady Like June of Tao more so. were cash that from learning of we thing these favorable benefiting will include gather that from and rising once believe

things back, they do back when expectation Our is will quickly. bounce bounce that

the impacted calendar of to example, rescheduled XXXX. our For in venues events have majority be to or been expected are

have In we for this number events of year. 'XX fact, booked for twice currently did at XXXX we calendar the than time last

to holders road, who option rescheduled acts. take the were choosing want tickets. these offered are it to on to the For most the for and a highlight pent artists to does up will can't that their place, on want ticket refund, see shows, demand these And hang for assure fans we events who while from be you while

been started the and addition, has encouraged five initial by Tao cities recently venues at in In reopening response. we've reduced capacity,

Company. a desire be Arena, When have anchored reason of will the experiences happens, It New Knicks the ahead Madison license the every April, agreement Garden is Square in believe venue fully XX-year to stream the the to Garden starts Rangers. to When own, along of rights the for will uncertain, will the two road entered sports, by In reopens, well-known that associated we part franchises of into the these home Garden with our of and shared revenue be that with contractual venues, arena games significant our While business with portfolio provide growing ready. host innate property. a return. a agreements iconic most development professional York we our

years venue the able remain industry-leading And Garden, this confident property forward to to own we Hulu, we're goes Music positions we reopen Radio production a Beacon, expect Radio although Hall to for and and it year's back their has Spectacular, canceled, that City welcoming remarkable has rest regain consecutive guests a The the to same are holiday Hall. and doors. at Christmas a XXXX will of the look theaters for to tradition season. for played once City that Music our been the portfolio, addition the come, Chicago In we for XX years the holiday

Company. Calling And experiences are Tao group will dining, premium innovative that some also and opportunity we fans, and MSG and industry, create England's to a hospitality and hospitality continue I'd premier creation, end in content view will the all growth believe outdoor thanking which continue operations, most bringing together partners, by for remain venue our of New to finally, support. of like transformative festival. the employees, our as nightlife in We expertise entertainment, continued to their Boston music our Sphere, creating we shareholders for

of venues confident share and doors been memorable moments some For decades, can a gather our to once and for and that guests been they reopen, safe the that to there's we've the can hard sports environment most backdrop experiences. extremely be unforgettable in entertainment, our in have working ensure secure where when again

executive finance us as Financial in I'd and Cable, in spent after long-term than over am get And Services. more Warner with served that, XX back role to with I'll Time at Chief a who quick where us Financial he'll XX Mark of of FitzPatrick, experience, turn ensuring Officer. a Prior call roles, that, play the Chief running, seasoned confident finish, new Officer Officer, Deputy years to he Chief held I to Residential to senior up variety finance the like moment Mark. Before a the key helping including success our including of recently a most where take he of joined Company. is that our I Financial WeWork, April. Mark years introduce Mark

and and Andy, its this joining with because that MSG iconic joined morning, executive confident achieving inspired forward Company am our uncertainty. Entertainment, on I I I'm brands weather very to you, with team Company good will and long-term Thank marquee for look by I I the goals. this of the vision was venues working excited everyone. a future, period about

recent results I few as our next additional briefly details in and segment discussing as liquidity minutes, our the cash provide go-forward reporting. outflows, Over well on will

possible. you we by let's our to as the liquidity as to to actions position we soon return have business are current So, ready preserve flexibility, implemented so walking start and through

June First, billion as Andy of mentioned, our on cash of had sheet as XX. investments balance we $X.XXX and short-term

people include promoters. of majority significant tickets, deferred most date, revenue we or and expected to opted on sponsorships been Our balances are events. events approximately for have $XXX These and revenue refunds. events. rescheduled in provided to rescheduled requested, ticket have collections due suites, amounts calendar for To these be A future tickets reflect if But that their to related to cash hold XXXX. million deferred to have to is

suites sponsorships, constant partners, good. of to address we discussing credit as In are terms non-cash and make our dialogue in means, such ways these and obligations via with

we necessary, provide will refunds. if However, cash

of and as that million a in hold June, reminder, we terms Townsquare financial loan Currently, a $X shares In net we we for monetize certain X.X outstanding, term and Media, million DraftKings I and DraftKings recently $XX to to suspend in debt own XXXX. calendar approximately of debt, equity portion it DraftKings over covenants interest it million to matures only able like note our of our Media. of million. And both is Tao's and shares through also of of in May amended would proceeds bank holdings X.X Townsquare was were XXXX.

outflows our to expected cash turn let's for fiscal Now, XXXX.

its a approximately XX reduced that reduce we will March, management series all marketing, In staff for recently, alliance venue cost-saving a corporate and cut liquidity. of our Tao third-party spending virtually our ended May, we and preserve its positions, to spending, As providers. it associated with all implemented the training, eliminated significantly Andy reduced and end workforce. At and of mentioned, and support nearly reduced financial our these we've note down including annual as Since T&E, measures non-essential March, we've portion additional fiscal on open should event-based back that business an XXX will of revenue. significantly workforce the divisions year. associated of And I operations to to fill eliminated support this positions Overall, by our our recovers, had these operating our venue our full-time intended employees. actions week, positions, X,XXX bring we and last expenses. and we our

operating average forward of will fluctuate basis. note in month $XX fiscal compares on an This XXXX. cash the costs those refunds I Vegas, monthly collections we revenue our would promoters. While excludes in rate reflects that working capitalized the including our and fourth to going less MSG revenue adjustments, estimate our also capital to burn experienced SG basis, a to severance It approximately capital cash related and of that Las Sphere content spending cash burn month-to-month expenditures, on it will excludes rate be operational direct due operational and we a million to that expenses. on our and $XX deferred technology. related a construction of and including potential approximately million It quarter the

In terms timetable we that in MSG earlier Vegas. lengthening Sphere, construction the of Andy noted Las our were

result, a expect to now fiscal approximately half previously in we of spend we anticipated XXXX. As what

nearly incurred costs is includes XX and approximately of estimate from $X.XX that paid June cost MSG $XX million billion. our approximately XX, costs accrued Through million, disclosed, previously As $XXX were is the not to Las received million net in which $XX venue as Las construction Vegas June project the Vegas of for were date Sands. of Sphere

and I finance we continually Las continue to liquidity know bolster you debt financing up to Finally, position MSG our help further want - $XXX in to Sphere pursue million that to options Vegas. of actively potential

briefly business to performance. turn Let's our

our are please that of financials. Sports. reflect standalone various date fiscal our and on XX based - XX through of the and the April inclusive company start, was agreements results spin-off, which I MSG XXXX the note fiscal results XXXX the Before intercompany was between on company basis, a April After carve-out

fourth was not true - a fiscal and Second, revenue the and the mix operating financial diversified streams. XXXX, our Xk the especially impact of potential indication of of of quarter, assets due COVID-XX, to

As fourth million revenue comparison, the XXXX, the with $XXX In we call use with million. have a we quarter. billion to manage million would segments. Prior an operating XXXX $XXX and that time in in the revenue also was reported the [ph], the income business. fiscal result, in revenue fourth And the million first operating quarter, of run to full-year our This $XXX two with like I was loss adjusted was including fiscal achieved $XXX questions, $X adjusted only opening of operating $XX quarter. loss overview of segments to million for is fourth $X.XX these for million, our

things. file on which XXK, week, to expect Our we next provides detail additional these

record-high agreements revenues approximately maintenance the to Networks. include Marina and MSG portfolio year events nearly agreement revenue Music multi-year the Networks. Sports to and Spectacular our guests and License business live is which It entertainment segment. which in with our MSG segment million; Sphere; Christmas the last Radio XXXX. Sports, performance our This Agreement, arrangements MSG fiscal generated season Rockettes XX-year the first Either MSG Our [indiscernible] is million both events our venue, XX-year of related welcome sales $XXX sales X over with Calling last Festival; sponsorship and Boston City advertising MSG with the - including X,XXX features starring the our production, our

of and segment transition with the our MSG cost MSG agreement Network. includes net services Finally, corporate of functions Sports our the also

and a call the in challenging value opportunities over conclusion, Group we will period growth flexibility to Tao shareholders. our nightclub confident while controlling venues turn that, second creation In fiscal entire this navigate is to Group. With Tao we industry now million Tao and long-term select revenue to Group XX over to ahead, the and Group and through developing around that for the remain generated venues. expand continues Ari. operates its and deliver features world markets. The segment this interest In I financial back entertainment, is Tao Hospitality, in globally road face recognized Our $XXX - the which in uncertain unprecedented Hospitality from our have popular Today, dining XXXX,

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

Instructions] [Operator is from Partners. Brandon Ross Lightshed Certainly. your first And of question

Hey, doing? of guys, are you couple how A questions.

to New events XXXX, Sphere? of And with received then, the and First, a I markets, profile York, York impairment York? cities hard entertainment return get the been changing I hit going see going guess job by a more you New as this outlook do pandemic Vegas the forward in the for other Vegas, on your for wanted starting New have the have from you planning how guess signal long-term? are follow-up. that the the And the permanent and with I cuts you've issues did? Is for you permanent in then that obviously

go thanks. back to follow up. We'll Brandon, Hey, then we'll two with these and start your

Vegas. top at the start Let's with

our has you this our discussed. this - one of long-term. running our [ph] timing, is world. both we've it out best if that We the and I'm revenue the have the What right? not entertainment No. project tell our I'll not is as the think We because. So We've in changed AOL changed best market - best, think for moved projections

I state business which We will multiple attractions think before, take And think going a the employees. our happens, that market We of experiences we've will to But sponsorship be day people opportunity. has of it's get very both we think of year-round, we as believe change most is to our utilized live play to view our think advantage venue And we're, roaring. back a part of the safe, need going events. new is the and terms on come will, a year will technology once feel changed; not immersive in we and the it bullish to about in going this - strategy. in our that times key the way the entertainment. is portfolio talked consumers, our believe artists, art venue

right of bullish. feel come the back, people live all and we U.S. both once think pandemic experiences safe fighting roaring are while to very York, feel and are Vegas So now, going New through

a can New all is was the of been country. in message. New moving the the pandemic and it's York York, the center over the of in - epicenter But we similar Now, start. hotspot - see, the as The

New the through back of been York, many of history. of that's live pudding, in offered new the and me think to refund earlier, where bookings, rescheduled Fans as specifically, once proof have XXXX when going reopen. That's made I of have we once all we XX% does their a twice safe and it to to resilient are be best And we the ability to fans bookings artists New come say want up we their events And this year. I for the size tickets, me? has strong. last then course tells to its difficult times here. be cities the of over want What which to tickets. the mentioned The they was keep both Yorkers that events to feel chose coming time backlog that

we're So running. able we will back rushing that be both feel really York to Vegas once New open and strong come and

And Great. rental to then, pricing. wanted venue about ask

you or had with contract promoters? to shows backlog the on for And signed For risk this rescheduled changes shared were booked there the venue cuts big you've that rental of on any you been dates that XXXX, pricing have XXXX? taken that have from the

pricing. can of law is simple when your can supply what out on you twice you demand; as and think high, figure economics, about So supply

changed I So We we the haven't answer pricing feel very no, good at about all. future. the guess simple is

Great, thanks.

you. Thank

Wolfe Your John is question Research. of Janedis from next

the separately, costs, pushed on that majority back reduced or one the an running? those delay? color guys. road for Thank those cost get $X.X $XXX of Sphere and Sphere. the then do Vegas, million on you how given the you. come permanent the of you give potential cost. a rate way, the increase and the beyond on what thanks One Is back the in Sphere. us or for down are indefinitely? think two, was on on run to above And And update about extent billion the $X.X the hoping up do as of getting I the you had London I by And timing Good and the could morning.

with going don't Why start and Mark? pass John, off? over London you question. to - to hey, I I the first then doing, how I'm don't are start I'll Why

currently We as Development in would process, a to - the towards So approval be the planning we Legacy planning of the autumn this will London working XXXX. evolve. getting see are we planning And design with don't permission continue process work see we the through our and Corporation. timeline earliest

we So, to committed straight but of in and have more terms I have timeline, intend approval, it [ph] planning can are filled, anything going we London, the designs post-Vegas. we open you it's tell to bringing you any have our give to after to London don't be - we Once on but once to to our opening Vegas.

cost that? of I your on to want answer part think other cuts. Mark, question the you is

Sure. Hi, John.

I I Vegas was want overall just think on make sure the second correct? to Is just I'm… question the Call. that

think were of One up of second or reduction? cost back two those, I Vegas assume, the come on and as a back on costs. I and run-rate you get running? the the million costs there be of the guys permanent would pieces piece $XXX those Are

the with release today, saw the start One, our of comfortable cost. we I with billion still total $X.X we're costs. I'll in Sure, think Vegas

with headcount preserve then, the permanent billion - we're to in I And my overall, terms out the We are we're to could able for potential the mentioned that took of the be ensure with and operations comprehensive we're what we able of - eliminate. spend associated cash, $X.X to comfortable time, at spraying future. actually are drive and still be to spending our we we we $X.XX to still the look of as think to to that, increases over speech, find We We different any billion. comfortable may some cost eliminate it offset time the healthy in of some costs, reevaluate But aspects a we'll decisions spending billion. difficult made think going our but $X.X the lower. your

reduced we So our workforce our spending and across departments. all

of of think We there's as efficiencies some think the into business it base. all our we'll cost to those we don't our will and comes go-forward able spending be return. return embed back, will As obviously

going make forward we cost of continue our we're like every company, profitability that other So the reduce to focus on it increase business. sure can and to and our base going

we're the costs. in of excited our So, terms lowering about future overall

Thank you.

you. Thank

of next Belton question is Evercore. Your from John

just this on Sphere thanks. have Vegas Hi, one I project. Las

that So the few and project. that able like the longer remaining over it events looks last project may months, to with associated that you given self-fund CapEx no be fully

So view how the strategy in strategic line? You've about to the capital your financing about venue down those changed? debt for the an options How several looking is array raise the pertain other options Vegas projects on like might spoken thinking of and Equity you at Sphere past as Partners. financing, to they quarters are potential joint need Las ventures you and

this Mark, that answer I'll Sure, question. is

First, balance cash in June we prepared million sheet I'll remarks, our in And remind over we $XXX as on we billion of mentioned you have debt. just to in $X.X our raise as XX. that another plan

of Sphere the able spread over expenditures for we've calendar addition, to time. we're so the MSG the longer in capital period Secondly, a changed

Spheres, future of terms In no.

a mentioned before, model. including intent venue that and our we've As equity answered explore options debt financing, non-recourse ventures, your Hopefully, question. partners other is joint managed to

you're the moment? So, for those necessarily into at Vegas looking of Las options not any

potentially, now. options make looking sense we're they company always not right for into we financially, consider the Look, those strategically but options, both and currently

much. very thank Got it, you

we'll Christie, the question. next right. All take

is next from Stanley. of Ben Morgan The question Swinburne

two have It's good well. hope to morning. doing questions. good everybody hear Thanks, from I and everyone's

on to a you think of portfolio COVID if next, you about going do haven't situation Spectacular, of think months, the other which like I who the even sweet demand and to the at garden, changes about the going or and the I'm the at was we're out of want about then, think how coming lingering you we're to adjustments long-term. of or to you the could And than reopening sponsorship just back thinking offerings just way this kind we're pressures company dealing the given knows? You up as obviously holding things over the even one switch what, the seeing. know, incrementally you front, this built assets - curious yet Sphere, given this changes various with X, or be Andy, psychologically any, look pre-COVID? going the rather is make make to flipping economic effects given be Christmas and other, reopening XX making

a like look contracts at got and are potential us looks just could sense off helpful. would Anything for as you've there be what sales. know I - the tell you If new you. you demand have visibility, come those us contracts, the but give multi-year you Thank

to Well, Ben, first nice to you this off, morning. speak

Entertainment, of - I'll as our important partners they're first of safety of to our all biggest and events. terms as our mean, tenants the our we That what here sports changes our as start our And started important I Obviously, extremely guests, promoter closely at is they're following Nothing of I on safety the MSG times guests the in our partners. the officials, most start amenities side. number that; In our venues and the making we're leagues thing think terms with are as I many well - is we're the working both we've and with artists, our thing as well for right? our that's with one to the government until working and employees is have and safety, our can should right? point. shown And artists, the leader over, of safe, us protocols.

between as going right everything what need we're I'd So be. venue we're - to our don't But will say modify at what the, we it be and We're and we the do we employees safe. will We our spacing our feel to to it's it sure like. going taskforce we're patrons? to they the ramp-up and a point, come back. make guests, do don't to your have our capacity experience to option - to know still you ways look early. constraints, people artists now, deliver going Will exploring to We'll be best can every - is when as looking know

tough total we a - reason, Show. of the the with take the did know - of we mentioned last you till mentioned in the I weren't terms back, was order. minute very because we this just the mount the events. on in think its I terms can we Rockettes, for In just is just with We enough decision. to uncertainty Obviously, live demand Not coming believe business. In We the the about decision. couldn't and the of Christmas that get We as feel this that appeal. quickly in a made the waited it's until of return we show. risk show of we question the our I'm to think future, the such before, want a saying, we short long-term, people And the And long-term? how good we

you started future. think the if stay on we'll slowly etcetera, open get people but up other to top their this look Yes, to have countries behavior, have about business mask, I at up, really going been a feel there. wearing of the that modified it to demand world, we're long-term and good going has back - across we and the we're

sponsorships demand? Anything sweet and on

still it's it's honest, You be still - early. know, to

Yes.

now. business through long-term. us are long-term great It's our as multi-year. the long-term, got working we're partners, see stuff Right. right And our These We've - value agreements of who view

Okay.

And just Don't these relationships. it, it's about a we the - again, have we when read long-term. deliver, what long-term business long-term - can a into these long anything are good are positive relationships, feel and negative or you

very Got you much. it. Thank

over Ari to any I'll turn or Danes for floor closing you. Thank the additional remarks. With back that,

next you forward Thanks, today. us with you Christy. day. earnings all We speaking call. to for joining look good thank a Have on our And

does Thank today's conclude conference you. call. This

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