Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp. Fiscal 2022 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s remarks, 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.

Thank you, operator. Good morning and welcome to MSG Sports Fiscal 2022 First Quarter Earnings Conference Call. Our President and CEO, Andy Lustgarten will begin this morning's call with an update on the company's operations. This will be followed by a review of our financial results with Victoria Mink, our EVP, Chief Financial Officer and Treasurer. 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. On pages 4 and 5 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 Andy.

Good morning and thank you for joining us. As you know, when we became a stand-alone sports company, we announced in keeping with the cadence of our business that we would conduct earnings calls for the fiscal second and fourth quarters only. While that remains our plan going forward, given the still fluid operating environment due to the pandemic, we thought it was important to provide an update on our business, including some positive signs we're seeing across the company, which we expect will be reflected in our results over the balance of this fiscal year. This positive shift is being driven by both consumer and corporate demand, which is continuing to improve in a number of areas. I'll take you through more details shortly, but these areas include season tickets, per caps for food beverage and merchandise, suites and marketing partnerships. We are not out of the woods yet. There remain lingering effects of the pandemic and select areas of softness in the business. However, we are as confident as ever, both in our fundamentals and that we are on the path back to normal operations. At the center of it all, are two tremendously valuable assets: the Knicks and Rangers, iconic franchises with dedicated fan bases that play in the largest media market in the world. As we discussed on our last earnings call, there have recently been several precedent transactions across our leagues that highlight the robust value of professional sports teams. These include minority stake sales, with no public market liquidity, involving the Los Angeles Lakers and Golden State Warriors at reported valuations of $5 billion and above. And since we spoke last quarter, there have been additional data points, specifically for our company. Last month, Forbes published its annual list of NBA team valuations, with the Knicks leading the league at $5.8 billion. In addition, Sportico recently released its NHL team valuations, listing the Rangers as the second most valuable franchise at nearly $1.9 billion. These two valuations, when combined, are obviously well in excess of our current enterprise value of just over $5 billion, and speak to the enormous and still untapped value of our marquee assets. Let's now turn to our business operations. The NBA and NHL 2021-2022 regular seasons are underway with both the Knicks and Rangers having signed a number of key players to new contracts. Since our last call this includes the Rangers reaching long-term extensions with Mika Zibanejad and Adam Fox. We're extremely happy with the composition of our rosters and the direction of both teams. After the disappointment of two shortened seasons due to the pandemic, both teams are scheduled to play full seasons this year with no capacity restrictions at The Garden and the response from our fans has been tremendous. We are extremely pleased with where we are on season tickets, which is the significant majority of tickets sold for both the Knicks and Rangers. The teams have a combined season ticket renewal rate of 94% and have also experienced strong sales for new customer season ticket packages. The pandemic's impact on international tourism has, however, had a lingering effect on our group and individual tickets, which make up a minority of our overall ticket sales. We're hopeful this will be mitigated by the loosening of international travel restrictions into the US, which took effect this week. Closer to home, we see other possible tailwinds for ticket sales. Office occupancy in New York City, while still very low, has increased significantly in the past 1.5 months. And according to a recent survey of major city employers by the partnership for New York City, it is expected to improve substantially by January. In addition, the percentage of adults in New York State that have received at least one vaccination dose is now nearly 90% and rising. The CDC's recent approval of vaccinations for children could bring more families back to games. So we think all signs are pointing in the right direction. And we're also seeing particular strengths in other areas. For example, the enthusiasm we've seen from fans who have been eager to watch their team in person has been terrific. Not only are they bringing an incredible amount of excitement to The Garden, they're spending. And while it's still early in the season this has led to strong double-digit percentage increases in food and beverage and merchandise per caps compared to pre-pandemic levels. We've also seen this enthusiasm extend to corporate hospitality as our suite-holders have started to entertain again at The Garden. In fact, so far this season average suite usage for the Knicks and Rangers is back to nearly 85% of historical levels. This renewed interest in corporate hospitality has also helped accelerate activity around suite renewals and new sales. Our team has been working hard to return suite revenue to pre-pandemic levels and we're pleased to say that on a go-forward run rate basis, we've achieved that goal. Another proof point of corporate confidence has been engagement we're seeing by our marketing partners. They've been extremely supportive over the past 20 months. And as we make our way back to normal operations, we are pleased to find the readiness to embrace existing partnerships while also adding new ones. As we mentioned on our last earnings call, this past summer we renewed our marquee partnership with JPMorgan Chase. Since then, we've also successfully renewed deals with a number of our existing signature marketing partners; Lexus, Anheuser-Busch and Squarespace, while also adding a new signature partner to our roster: Infosys, a global leader in digital services. In addition, we continue to complete other important marketing partnership deals, including our recent extension with Kia and our announcement that Benjamin Moore has joined as an official partner and helmet sponsor of the Rangers. We applaud the NHL and NBA for their ongoing efforts to introduce new marketing partnership opportunities. In addition to the NHL helmet sponsor, last year also brought the introduction of a second NBA practice jersey patch and virtual signage on the court for the NBA and on ice for the NHL. The NBA has also expanded international sponsorship rights, increasing the number of sponsors a team can have, while the NHL has approved the jersey patch for teams starting next season. We're actively in the market now for much of this new inventory. The league's efforts also extend to embracing new sponsorship categories such as sports gaming. Just this week, we completed an agreement with BetMGM, which represents our first significant partnership related to mobile sports gaming in New York State. This expansive multiyear deal, which was done in partnership with MSG Entertainment includes deep integration with the Knicks and Rangers, as well as across MSG Entertainment's portfolio, most notably at the World's Most Famous Arena. And this announcement is just the beginning. BetMGM is our first major sponsor in this important category. Although we don't expect them to be our only partner, as we begin to realize this tremendous opportunity in this space, it represents for our company. As you can see, we are experiencing real momentum across our business, driven by the strong desire of our customers and partners to fully engage with our assets and with each other. We also see substantial upside opportunities across nearly all of our major revenue lines, as our on-court and on-ice performance improves over time. And while challenges remain as we continue to navigate this unique environment, we believe strongly in the value of our brands, the incredible energy and excitement of our games, and the enduring connection between our franchises and their fans. We are confident in our ability to drive long-term value for our shareholders. And with that, I'll turn the call over to Victoria.

Thank you, Andy, and good morning everyone. I'll start by very briefly touching on our fiscal first quarter results. Total revenues for the quarter were $18.8 million, as compared to $57 million in the prior year quarter. We also generated an adjusted operating loss of $28.1 million, as compared with a loss of $17.8 million in the prior year period. I would note that year-over-year comparability for the fiscal first quarter was impacted by the NHL and NBA's return to play in the prior year period. Additionally, we held two preseason games in the current quarter versus none in the prior year period, as the 2019-'20 return to play last year also caused delayed starts to the 2021 seasons. More detail on our first quarter financial results can be found in our Form 10-Q, which we filed yesterday after market close. In terms of liquidity, we continue to prudently manage our balance sheet. As of September 30, we had $278.6 million of liquidity, comprised of cash and cash equivalents and available borrowing capacity under our existing credit facilities. And our total debt outstanding at quarter end was $385 million. Looking ahead, the balance of the fiscal year will primarily reflect the financial results of the 2021-'22 seasons for the Knicks and the Rangers. And as Andy discussed, we are seeing positive momentum across virtually every revenue line of our business. Ticket, food, beverage and merchandise sales have been strong, while suites and sponsorship revenue have essentially returned to pre-pandemic levels on a go-forward run rate basis. In addition, media rights revenue this fiscal year on the NHL side will reflect a significant increase as a result of the league's new national media rights agreements with Disney and WarnerMedia. In summary, we feel very good about the trajectory of our business for the remainder of fiscal 2022 and I believe our company is on the path back to normalized results. With that, I will now turn the call back over to Ari.

Thank you, Victoria. Operator, we would now like to open the call for questions.

Your first question comes from the line of David Karnovsky with JPMorgan.

Thank you. I just have one. In light of the better outlook today, is there any update you can provide on some of your thinking about capital allocation? Where would you need the business to be to consider share repurchases? Thank you.

Hi Dave, it's Victoria. Thanks for the question. We've talked a bit about this before. And of course, our number one priority is to ensure the health of our company and to protect our assets. So, as you know, we took on additional debt last year to strengthen our liquidity position. But now that our business is turning the corner, we've started to pay that down a bit and we're considering paying down more debt in the near term. But looking ahead, we are very encouraged by the positive signs we're seeing across our business. And we do feel really confident about our long-term outlook. And over time, we'll look at all options for utilizing our free cash flow.

Okay. Thank you.

Our next question comes from the line of Ben Swinburne with Morgan Stanley.

Thanks. Good morning. Andy, could you talk a little bit about sort of sports betting as it relates to your two marquee franchises and sort of the opportunity there? Not just what you've signed with BetMGM but looking longer term, do you see this as an evolving space for the leagues that have historically been a bit reticent about embracing sports betting? Do you think this becomes a bigger and bigger part of the business and revenue profile of the teams over the longer term? And then maybe just taking another quick crack at the balance sheet. Is there sort of a right debt level for this kind of business? I know the leagues are involved in approving leverage or have at least a role to play there. But I don't know if there's any kind of framework you could think we could think about for the optimal capital structure for a business like this just to pick up on the last question. Thank you.

Thanks, Ben. Well, let's start with your sports gaming question. So I'll start and I start every time with the same comment because I think it's super important. To me, sports gaming reflects two points: one, today; and two, tomorrow. And what I mean by that is as gaming continues to take adoption it will drive viewership and engagement. Viewership and engagement pays off today with some ticket prices but long term with what we're able to do through with our sponsors and eventually long-term with our media deals. So it's a very valuable tool in an inventory of driving engagement and enthusiasm for the sport. Second, today. So today, obviously, New York just opened us granted the nine operators their licenses. BetMGM is our first partner as we mentioned. We feel really good about that partnership. As a sports team, we have lots of ability to drive revenue out of those sports partners. So specifically here at MSG Sports, the two teams have been on all premium signage, so on-court, on-ice, courtside rotation. Some of our other premium assets patches, helmets, stickers, etc., right? So those are all assets that we control and own. Second, official partner designations. That has tremendous value both in market and depending on who our operators could even be international value. But even – the thing that seems to be even more driving the gaming interest in us is our access to our consumers, both through in-venue and through direct relationships digitally, etc., and database. So of course, not surprisingly, that's the largest group of people – the people who are most likely to game and so hence the most likely – the most interested of a gamer – of a gaming company. So there's lots of opportunities for our sports team to drive revenue. Through our relationship with MSG Entertainment, we also share in unique exposure right here at the arena. So to remind you, all fixed arena signage and all entitlements are shared very robustly between the two entities between MSG Sports and MSG Entertainment. And again, MSG Entertainment being able to represent across the network, the arena MSG Entertainment as well as MSG Sports, we're able to offer our partner a much larger package an offering than anybody else can. And I believe it's going to be reflected in what we're able to generate in this category because we're going to be able to deliver customers and interest like nobody else can in the largest market or it's forecasted to be the largest market. So that's why we've seen – we think we've been off to a fast start. We've had a lot of interest from the other eight remaining gaming partners or licensors. And we think this is going to be a really big opportunity for our company, both as I said, in the near term as well as in the long term.

Got it.

Ben, it's Victoria. Let me follow up on your second part of your question there. So we're not going to provide guidance on the leverage target. But let me just remind you just two quick points. I mean first of all, the amount of debt that we can incur is capped by the leagues. That's sort of the first point. And I think, the second point is just as a reminder, we are looking at paying down some of the debt in the near-term as we just closely track how the business continues to perform.

Got it. Thank you.

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

Hi. Good morning. I know we've discussed this a lot yesterday in the MSG e-call, but there's lots going on with RSNs now with especially with the MSG and Comcast dispute and all the rhetoric out of the leagues with potential alternative local broadcast models. And I wanted to ask you Andy how you see the RSN ecosystem playing out over the next several years and what do you think the impact will be on your teams? And then more specifically is there a scenario where you see needing to renegotiate your deal with networks? And what are your overarching goals as the RSN business takes on new models?

Thank you, Brandon. Let’s begin with some key points. We have a long-term local media contract with annual increases that we believe are beneficial for both teams and are not affected by economic changes in distribution. We have great confidence in MSG Networks' ability to enhance distribution and create value. Looking at the broader picture, we strongly believe in the significance of professional sports content, particularly high-quality sports content like the Knicks and Rangers. Historically, investing in sports media rights has proven to be lucrative, and while there can be short-term challenges, viewing it from a long-term perspective shows it's a valuable asset. We currently have a solid partner with those rights, and I'm eager to be the supplier of those rights. The recent NHL deal exemplifies a strong agreement, and we anticipate a similar outcome for the NBA when their rights become available. While the market is changing and there is some uncertainty, possessing these rights and the means to leverage them will provide numerous opportunities to monetize our content. We are optimistic about this. Regarding the Knicks and Rangers, our objective is to enhance distribution to boost revenue from sponsorship and ticket sales driven by that distribution. As for renegotiation, we firmly believe in the value of owning rights. Any modifications to a contract would need to go through the leagues and our independent Board. We are confident in our rights and the associated fees. Although I can't comment on other leagues, we believe that both the NBA and NHL recognize the importance of regional sports networks and are focused on finding a way forward to safeguard the entire ecosystem, including the leagues, teams, and their networks. In summary, we are pleased to be a rights holder.

Thanks. And just one more. For the first time in a long time, both the Rangers and the Knicks are off to really good starts. I was wondering if you could remind us or help us think about the sources of financial upside from good team performance. I know most of the tickets for both teams are sold in advance and sponsorships are locked in. But what are the other areas that could significantly boost financial performance from the teams doing well?

I will divide your question into two parts: short-term and long-term. In the short term, we're focused on cultivating a direct relationship with our customers and targeting a high volume of sellers. We sell independent tickets and price them variably, so there is potential for growth in these ticket sales as teams perform well in a season. However, let’s take a broader view on how sustained team performance could enhance value. We have several fixed and contractual revenue streams: media rights set by our leagues and MSG network, suite sales, and sponsorships, which are all secured long-term and include built-in escalators. We also have opportunities to sell additional sponsorships and explore new asset categories. The leagues are actively working on releasing new assets for us to monetize, which will be influenced by team performance. In the short term, playoff performance generates significant additional revenue from increased attendance. Advancing deeper into the playoffs leads to considerable revenue gains, and it also positively influences future season ticket renewals. Historically, we only reassess ticket prices after a playoff run, which indicates further potential as teams succeed. Individual suite sales are also impacted today, and when suite licenses or sponsorship agreements are renewed, we can negotiate higher prices for both renewals and new memberships. In summary, we are confident in our business model, supported by solid fixed revenue streams that stabilize our performance each year. Sustained team performance over time can certainly accelerate new revenue growth for our company.

Great. Thanks so much.

Thanks, Brandon. Operator, we have time for one last caller.

Your last question comes from the line of John Janedis with Wolfe Research.

Thank you. Andy, this may be somewhat related but given your comments on new marketing partners, can you give more color on upside from here? You talked about Benjamin Moore. Are there any other categories where you're underpenetrated? And how meaningful could the jersey patch opportunity be for the Rangers? And would that revenue potentially head next season?

Sure, let's address the questions you've raised. I want to make sure I cover each of them, so if I miss anything, please jump in. To begin with, let's discuss the NHL patch because it connects to your inquiry about our opportunities in various categories. An NHL patch, like any new premium inventory opened up by a league, offers more than just the revenue generated from that specific asset. It also enhances the entire partnership. For example, take the partnership between Squarespace and the Knicks jersey patch. This relationship allowed us to not only generate solid revenue from the patch itself but also to penetrate a new category, establishing a signature partner and selling numerous other assets, which helped drive our overall rate card. It's crucial to understand that it's about leveraging that inventory effectively. When we have access to premium inventory, it opens doors for new partnerships centered around that asset. Once the NHL patch becomes available next year, we expect to generate revenue from it. However, our goal is to start selling it this year to prepare for the next season. We may secure a partner sooner and begin selling related assets. While the main revenue will come when the patch is officially available, there are opportunities this year that we are exploring. We must be cautious and strategic about how we maximize this category and asset, valuing patience in order to optimize revenue—rushing to market can limit our potential returns. Looking at marketing partnerships more broadly, we believe there is significant upside. Our marketing partnership business has already rebounded to pre-pandemic levels, which we are proud of. Additionally, sports betting has pushed us beyond that mark. When we assess various metrics across categories, we can see untapped opportunities—particularly in areas like cryptocurrency, which has proven to be significant for certain teams, including naming rights in Miami. There are also fitness and health companies such as Peloton and Fitbit eager to connect with sports audiences like ours, along with health insurance and home improvement sectors that we have yet to explore fully. We possess several premium assets, including the upcoming NHL patch and international rights in the NBA, which have not been fully optimized. While we currently have a patch partner in the NBA, we believe when that patch becomes available again, there will be a substantial opportunity given recent market movements and deals teams have signed. Our partnership with MSG Entertainment gives us a competitive edge in sales, enabling us to offer a comprehensive solution across networks, arenas, fixed assets, and teams, which helps us drive premium revenues for sports teams. Overall, we feel optimistic about our current position and even more excited for the future.

All right. Thank you.

I'd like to turn the call back now over to Ari Danes, for any closing remarks.

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

Goodbye. Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.