Good morning. My name is Christy and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Madison Square Garden Company Fiscal 2017 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I’d now like to turn the call over to Ari Danes, Senior Vice President of Investors Relations for the Madison Square Garden Company. Please go ahead, sir.

Thanks, Christy. Good morning and welcome to the Madison Square Garden Company’s fiscal 2017 second quarter earnings conference call. Our President and CEO, Doc O’Connor will begin this morning’s call with a discussion of the Company’s operations. This will be followed by a review of our financial results with Donna Coleman, 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 investors section of our corporate website. Please take note of the following. Today’s discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties. And that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors. These include financial community perceptions of the company and its business, operations, financial condition and the industry in which it operates. As well as the factors described in the Company’s filings with the Securities and Exchange Commission, including the sections entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. Lastly, on Page 4 of today’s earnings release, we provide consolidated and combined statements of operations and a reconciliation of operating income to adjusted operating income. I would like now introduce Doc O’Connor, President and CEO of the Madison Square Garden Company. Doc O’Connor: Thank you, Ari, and good morning, everyone. For the FY2017 second quarter, we reported robust top-line and adjusted operating income growth,…

Thank you, Doc, and good morning, everyone. I would like to start by highlighting that financial results for both the fiscal 2017 and fiscal 2016 second quarters reflect MSG’s results on a standalone basis, including the Company’s actual corporate, general and administrative costs. Furthermore, this represents the first quarter since our spin-off that MSG Networks – from MSG Networks where the year-over-year results of MSG are fully comparable in this regard, on a total company basis. With that said, let’s turn to results for the second quarter, as compared to the prior-year period. For the fiscal 2017 second quarter, the company generated total revenues of $445.2 million, an increase of 8%, and adjusted operating income of $96 million, an million, an increase of 17%. At MSG Entertainment, second-quarter revenues were $192.5 million, an increase of 6%. This increase was primarily due to higher revenues for the Christmas Spectacular production, and higher overall event-related revenues at the Company’s venues, as well as an increase in venue-related sponsorship signage and suite-rental fee revenues. With respect to the Christmas Spectacular, we drove a strong year-over-year increase in revenues this holiday season. As Doc mentioned, we again sold over 1 million tickets to the Christmas Spectacular, which represented a low single-digit percentage decrease versus the 2015 holiday season, due to seven fewer scheduled performances this year. Partially offset by an increase in average per-show paid attendance. More notably, we drove a high single-digit percentage increase in average ticket prices, which led to the meaningful increase in revenue for the production. We believe eliminating third-party brokers, which shifted us even further to a predominantly direct-to-consumer model, played a large part in the price improvement. In terms of event-related revenues, growth this quarter was led by the Forum, and to a lesser extent, by an increase…

Thank you, Donna. Christy, can we open up the call for questions?

Sure. [Operator Instructions] And your first question comes from Michael Morris of Guggenheim.

Hi, thank you, good morning. A couple of additional questions on the TAO investment and partnership. I guess first it seems like the restaurant and nightclub business can be a bit more volatile than kind of your traditional business based on the popularity of you know, the venue or the brand. And I’m curious if you could share any more about how TAO venues have been trending relative to the results we saw that you share with us for the past year. And also maybe a little more detail on why you want to be there. I think Doc you mentioned the possibility of new hospitality experience. Can you expand on that a bit? Why are these businesses stronger together? Thanks. Doc O’Connor: Okay. Well, I’ll take the volatility issue first. First of all, we don’t believe that the TAO Group is just another restaurant business. We think that they’ve cracked a code on hospitality, dining, nightlife experiences in a completely unique way. So we believe that they’ve, in large part, transcended the restaurant and nightlife experience business. With that being said, I think they’ve also demonstrated that their brands are in fact durable. Take TAO as an example, which is their flagship and their first business was launched in 2000 over 17 years ago, and it remains today one of the highest grossing restaurants in the U.S. Further to that, we are opening a new TAO restaurant in the next few months in Los Angeles, the second biggest market in the U.S. So we believe that that brand alone not only has shown durability but will sustain that durability, and will, in fact, likely grow. Marquee, their first nightclub brand, was launched in 2003. And that brand has weathered and been nimble overall of those years, to change and…

Yes, that was great. Thank you, Doc

Thanks Mike. Christy, we’ll take the next caller.

The next question comes from Brandon Ross of BTIG.

Hi guys. Thanks for taking the questions. First, I want to say with your multi-night concert strategy, I’m surprised you didn’t mention your upcoming 13-night Phish run. That should be a boon to next Q1, right? Doc O’Connor: The only reason I didn’t mention that Brandon, is that it is often our what? Is it…

July and August. Doc O’Connor: July and August. So not in this fiscal year.

Right. Anyway, I have two questions. First on TAO, just thinking about the risk factors in that deal, are there any of the restaurants or clubs that contribute a disproportionate amount of the revenue or EBITDA to the total group. I think in the past, we’ve seen some pretty lofty numbers associated with the Marquee and TAO properties in Las Vegas. And then secondly, on your forum like music venue expansion strategy. Just wanted to get an update, where you stood with that. Are there any markets that are of particular interest right now? And how do you see that venue expansion evolving over the next year or two? Thank you. Doc O’Connor: I’ll let Donna answer the first part of your question.

Hi, Brandon. Yes, so, certainly revenues and AOI vary by venue. But I wouldn’t say we are disproportionately weighted to any single venue. I would note that not surprisingly the New York market, where TAO has 11 venues does represent a meaningful percentage of revenues, and AOI. But of course, as TAO builds out its venue portfolio to other areas, it will certainly diversify the geographic nature of that concentration. Doc O’Connor: And I’ll deal with the venue expansion question. We continue to aggressively explore select markets both domestically and internationally, where we believe we can replicate the success and expand upon the success that we had with The Forum. Las Vegas was the first market we announced. But there are other key markets again as I said, domestically and internationally, where we think we have the opportunity to create large scale music, entertainment focused venues. And then utilize the capabilities of our organization to deliver a differentiated experience for our fans, artists and our various partners. We are pursuing those markets aggressively. We don’t have anything to report, substantively here and now, but we hope to have some news in the future.

Great, thanks very much

Thanks Brandon. Christy, we’ll take the next caller.

Next question from David Miller of Loop Capital.

Hey guys. Congratulations on the stellar results. A couple of questions, Donna I noticed you guys didn’t buy back any stock in the quarter. I would assume that the reason for that is because you were just in the diligence phase and the closure phase for TAO or was there another reason, just wanted to make sure there wasn’t another reason, and then I have a follow-up. Thanks

Sure. No, you are completely correct. We didn’t t buy any stock as we neared our acquisition as TAO. We were in the diligent phase throughout the quarter. And so as you probably read in our press release, we are entering into a 10b5-1 plan, which will allow us to make progress on our buyback program. So we are going to be looking forward to doing that. We still are very committed to the repurchase program.

Okay, great. And then Doc, just as a follow-up to the first question. The morning that the TAO Group announcement was made, when it hit the tape, which was Wednesday of course stock traded down. There was some skepticism going around, clientele or investors or what have you about. What does Madison Square Garden really know about running nightclubs? What does MSG really know about running restaurants? There was just sort of, I don’t know, ethos of skepticism surrounding the deal. What do you say to those investors out there that might be skeptical about your ability to run these assets better than the TAO Group could run themselves. Appreciate the answer thank you. Doc O’Connor: Okay. Well, first of all, I’m not going to debate the stock performance on the announcement with you, but we’ll leave that, it’s longer term than that. But the way I would answer those skeptics is to say that existing Madison Square Garden management is not running the restaurant in nightlife’s business on a day-to-day basis. The TAO Group’s management is going to do that on a day-to-day basis. And the principles of that management team, who remaining with the company and we’ve structured a deal in such a way to incentivize them to stay with the Company long –term. They have decades of experience in restaurant and nightlife operations and brand management and experience management. They’ve launched and sustained these brands, as I’ve said, over the long -term. So, beyond that though, one point I would like to make is that and I didn’t mention this in our prepared remarks or the press surrounding this. But we did extensive diligence on the TAO Group over an extended period of time during this acquisition. And during that diligence, we got exposed to the next…

Thanks, David. Christy, we’ll take the next caller.

Your next question comes from David Karnovsky of JPMorgan.

Hi, good morning. Just to follow-up on TAO, is there any specific data that you can share on the recent trend in same-store sales either for the whole group or maybe some of the more established venues. And then on the 13 new locations, is there any data that you can share on the cadence of venue openings and also maybe the sense for time required to get those locations to free cash flow positive? Thanks.

Just on the first part of your question, we are not right now providing that level of detail and as you know, there really is no financial impact on this quarter in from TAO. However, I would say, that as Doc mentioned the first TAO venue opened in 2000 and since then, we’ve grown to 19 venues and have generated, in 2016, $235 million in revenue and $43 million in pro forma AOI. I would add that for leased venues where TAO Group does fund the CapEx, the payback period has typically been very short and I would also note that we see meaningful growth potential as TAO moves forward into the venue expansion plans. Doc O’Connor: On the specifics of openings, I can take that part, which is there are four Los Angeles venues that are going to be opening within the next two months. Specific dates are not – we are not going to share, at this very moment, but within the next two months. The additional 9 venues that encompass New York City, Chicago and Singapore will come online over the course of the next set of years, but we won’t be any more specific than that right now.

Thank you.

Christy, we’ll take the next caller.

Your next question is from John Janedis with Jefferies.

Thank you. Just had one more follow-up on TAO. I apologize in advance. You talked about building out the 13 new venues, 019. Just for clarification, do you own any of the land? Is it leased? And what are the CapEx needs to run the business? Is that an expense that you are responsible for? Or does the landlord pay for it?

So let me start with the second part of that question. One of the really attractive aspects of the TAO Group is that the business is generally speaking, not very capital intensive. Today a majority of the TAO Group’s venues are released and the rest are the managed model. And essentially, all the venues either have long-term leases or long-term management agreements. Going forward, it’s expected that the new venues the TAO Group will open will primarily be managed venues and that is the benefit of being less capital intensive, because the real estate owner typically covers the majority of the cost of the venue build. So the business plan anticipates the TAO Group or real estate partners will be able to sell fund. But this managed venue model really is very low in capital and provides very good margins for us.

Okay, thanks. And then maybe separately, with the talk in the press about the Barclays Center looking to potentially move out from hockey in favor of live events and concerts, can you just talk more about the competitive landscape in the New York market? And to what extent this could impact the number of events at The Garden? Doc O’Connor: Well. I’m not going to speculate on what’s going to happen with the Islanders that currently going on in the press. But I will say we’ve lived in a competitive landscape. This company has lived in a competitive landscape in New York for decades. We’ve existed in a competitive landscape with Barclays for four to five years. Only two of which the Islanders have been a factor. We believe that The Garden is The Garden. And I’ll leave it at that.

Okay. I mean maybe one last quickie on TAO. How quickly can you integrate some of the dining experiences into your venues? Doc O’Connor: I don’t necessarily have a timetable on that. And whether, specifically, we are going to integrate these brands into the venues themselves. That remains to be seen. But, as I said, the critical thing is their methodology. You know, I’ve said, again, for all the time that I’ve been here, that the premium live experience is a growth area for us. And these guys are the greatest experts in the world on the premium experience, if you ask my opinion. So we plan to leverage that our expertise in all of our day-to-day operations across all of our venues and all of our entertainment and sports properties. And we believe that expertise will be of great value in driving revenue and profitability growth over the long-term. But it remains to be seen whether you’re going to see a TAO nightclub at any one of our existing venues.

Thank you.

Thanks, John. Christy, we’ll take the next caller.

The next question comes from Ryan Fiftal of Morgan Stanley.

Great, thanks. Good morning. Two if I may? So first I know there are limits on what you can say on NBA-level deals. But is there anything you can say maybe on the directional impact you would expect from the new collective bargaining agreement that was signed? Doc O’Connor: I’m a little mystified to the question. Can you be more specific?

It was my understanding that the NBA was at least in the press that there was a renewal the player collective bargaining agreement? Doc O’Connor: Yes.

So I was just curious, I haven’t seen a lot of details on it. I don’t know if you expect any kind of directional impact on your financials? Doc O’Connor: I’m sorry. Okay. Now I know what you mean. No, we don’t believe there’s any meaningful impact or change with the new NBA collective bargaining agreement.

Okay, great. And then second, you talked about the sponsorship deal you renewed with Lexus. So I was hoping you could elaborate maybe a little more on the trends you are seeing there more broadly. I guess, I’m curious, do you get any sense big marketers are maybe prioritizing this kind of sponsorship deal over other forms of media compared to how they used to. I guess, I’m thinking with as much media fragmentation is there. I would think, should be some rising scarcity value to what you guys offer. And then separately on the same point, you see – the way you see, do you think there is more opportunity from extracting more revenue from your existing sponsors to expansions to the deal or do you think there is more opportunity from expanding into new categories and expanding the roster of sponsors? Thanks. Doc O’Connor: Okay. Well, let me take the second part first. As you’ve seen, we are in the process of renewing many of our long-term signature partners that were first initiated immediately post transformation. And again, to reiterate, the conventional wisdom was that we saw a big lift in value due to the transformation. But actually, what we’ve seen with these first renewals is that there’s significant lift because of the value of our assets and our live sports and entertainment experiences. So there’s substantial growth that we’re seeing in these individual partnerships that we are leveraging. We are also, in addition to the growth that we’re seeing on apples to apples basis, we are, and have been successful at expanding these partnerships in new areas of activations, and new pieces of our portfolio, to effectively expand overall the revenue opportunities. I would going back to your thesis about rising scarcity and the fragmentation of media, yes, we are seeing value with that across the board. And as we expand our portfolio, whether that’s live events like Boston Calling or it’s this new TAO acquisition, we are expanding our portfolio and allowing for and bringing in new partnership opportunities for not only our existing partners but for new partners that we haven’t worked with before. It’s an ongoing effort to increase our partnerships with new brands and businesses and we are succeeding on every level, growing the existing ones and bringing in new partners and seeing a rise in revenue with both.

Thanks for the questions Ryan. Christy, we have time for one last caller.

Sure, your final question is from David Joyce of Evercore ISI.

Thanks, for a change of pace I would like to ask a question on TAO, if we can understand a little bit more about the seasonality, and how it varies by market. And then secondly, can you help us understand the size and square footage of the planned 13 venues that you are going to be opening. Thank you.

Sure. On seasonality, it’s really not dramatic. It does depend on the market. Our recent history indicates that the calendar second and fourth quarter are stronger in the New York market, and in Las Vegas the calendar second quarter is stronger. But when you look at it on a consolidated basis, while the second and fourth quarter are somewhat – the performance is somewhat stronger it is really not as dramatic as you might think. As to the size, the new venues we’ll be opening are really quite consistent with the same size of the venues we currently have. On average, obviously some will be larger and some will be smaller, based on the economics of the specific market, but on average they are consistent.

All right, thank you.

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

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

Thank you. This does conclude today’s conference call. You may now disconnect.