Madison Square Garden Sports (MSGS) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $214.8 million in revenues for Q1 2020, a decrease of 2% year-over-year [35] - Adjusted operating loss was $41.1 million compared to a loss of $9.9 million in the previous year [35] - Total unrestricted cash and cash equivalents were approximately $1.1 billion as of September 30 [41] Business Line Data and Key Metrics Changes - MSG Entertainment revenues were $159 million, a decrease of 2%, impacted by the absence of the MTV Video Music Awards [36] - MSG Sports revenues increased by 1% to $56 million, driven by higher revenues from other live sporting events [38] - TAO Group revenues increased by $2.4 million year-over-year, indicating solid growth despite some elevated costs [101] Market Data and Key Metrics Changes - The company hosted several sporting events, including WWE and Bellator MMA, contributing to the increase in revenues from other live sporting events [39] - The Garden was named Billboard's Arena of the Year for the second consecutive year, reflecting its strong market position [26] Company Strategy and Development Direction - The company announced a full spin-off of its entertainment business from its sports business, aiming for long-term success and tax efficiencies [11][14] - MSG Sphere in Las Vegas is expected to open in 2021, with a focus on immersive shared experiences [17][21] - The company is evaluating opportunities for the London Sphere, with no definitive opening date yet due to planning complexities [22][78] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the live entertainment sector and expects to recover ground lost in Q1 by the end of the fiscal year [25][94] - The potential legalization of gaming is viewed as a significant growth opportunity for the sports business [32][80] - Management is confident in the financial flexibility to fund growth plans, including the MSG Sphere projects [48][62] Other Important Information - The company is winding down Obscura Digital's third-party business to focus resources on MSG Sphere [36] - The Christmas Spectacular is anticipated to have another successful year despite fewer scheduled shows [28] Q&A Session Summary Question: Financing plans for MSG Sphere builds - Management indicated that the entertainment company will start with a strong cash position and may utilize revolvers for cash contributions prior to the spin-off [46][48] Question: Advantages of the new spin structure - The new structure allows for tax efficiencies and maintains 100% ownership for shareholders in both companies, which is seen as beneficial for long-term value [54] Question: Timeline for the London Sphere - The timeline for the London Sphere is uncertain, with ongoing planning processes that may extend into 2020 [60][78] Question: In-venue gaming opportunities - Management is optimistic about the potential for in-venue gaming and is exploring both venue-based and mobile options [80] Question: Updates on the booking pipeline - Management remains bullish on live entertainment and expects to recover from last year's record-breaking quarter [94][95] Question: TAO Group's future openings and costs - TAO Group is evaluating new venue opportunities on a case-by-case basis, with a focus on capital efficiency [102][105]