Good morning. Thank you for joining us for the Madison Square Garden Sports Corp. Fiscal 2024 Second Quarter Conference Call. I will now hand the call over to Ari Danes from Investor Relations. Please continue.

Thank you, operator. Good morning and welcome to MSG Sports' Fiscal 2024 Second Quarter Earnings Conference Call. Our President and COO, David Hopkinson, will begin this morning's call with an update on the company's strategy and 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 forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. 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 David.

Thank you, Ari, and good morning, everyone. With the '23, '24 NBA and NHL seasons now more than halfway complete, I'm pleased to say that our positive operating momentum from last year has carried forward into fiscal '24. This momentum is reflected in our fiscal second quarter results, with revenues of approximately $327 million and adjusted operating income of $37 million. While reported results reflect nine fewer Knicks and Rangers home games at the Garden versus the prior year period, per game revenues across nearly every key category, including tickets, suites, food and beverage, and merchandise were up compared to the fiscal '23 second quarter. These results highlight the sustained enthusiasm we continue to see from our sales and partners and the strength of our marquee sports franchises. It also reflects our ongoing success in executing on opportunities to grow our business, including maximizing ticket revenue through season ticket renewals, increases in ticket yield and sell-through, introducing new premium hospitality products, and forging deeper relationships with our fans. We also continue to benefit from contractual growth in media rights. With these successful initiatives and numerous avenues for growth ahead, we believe we are very well-positioned to create long-term value for shareholders. Now let's discuss our business in more detail. Both the Knicks and Rangers have had strong starts to their seasons. In December, the Knicks qualified for the quarter finals of the NBA's first-ever in-season tournament. This was followed by a significant trade for OG Anunoby, Precious Achiuwa, and Malachi Flynn, and we've been very pleased with how the team has performed since then. More recently, we were proud to see Julius Randle and Jalen Brunson selected as 2024 NBA All-Stars. And for the Rangers, just this past weekend, Igor Shesterkin, Vincent Trocheck, and our head coach, Peter Laviolette, represented us in the NHL All-Star game. With a couple of months left to go in the regular season, both teams are in playoff contention, and we look forward to watching the remainder of the seasons unfold. Complementing strong team performance has been the sustained enthusiasm from our fans. As you know, season tickets comprise the significant majority of our ticket revenue. And this season, our average combined renewal rate was above 94%. This is particularly notable, as it takes into account a larger renewal base than last year and season ticket price increases for both teams. Combined with group tickets and individual tickets, we saw year-over-year increases in both average ticket yields and average paid attendance on a per game basis in the fiscal second quarter. The enthusiasm from our fans has also been evident at the arena, with food and beverage and merchandise per capita spending up almost 10% as compared to the fiscal '23 second quarter. In addition to our in-arena success, we continue to look for ways to drive deeper fan engagement and build the next generation of fans, including through original merchandise offerings as well as exciting fan experiences and digital content. On the merchandise front, we continue to focus on introducing compelling offerings that our fans value. Whether it's this year's third jersey for the Rangers, their special edition jersey for next week's outdoor stadium series game, or our exclusive one-off collaborations like with Siegelman Stable for the Knicks and global rock-band kits for the Rangers. Our innovative initiatives this season have generated tremendous fan interest. We also saw robust fan interest when we welcomed thousands to the Knicks '23, '24 season tip-off event at the Garden in October. In addition to watching the Knicks practice, this free event included a celebrity basketball game and Knicks alumni meet and greets. It also demonstrates how we've been leveraging opportunities to create engaging content for our broader fan community on our digital platforms. In total, content covering our season tip-off event generated more than 29 million impressions, including over 18 million video views on social media and digital platforms. We'll continue to look for unique avenues to deliver compelling content to our digital platforms that highlight our players and teams in an effort to forge stronger connections with both our avid and casual fans. Turning to marketing partnerships, we've also brought in a number of new marketing partners so far this season, including Beyond Meat, Pfizer, NEXEN TIRE, and Oura Ring, amongst others. At the same time, we continue to benefit from our existing agreements with our strong roster of core marquee and signature partners. And this past fall, through our sponsorship sales representation agreement with MSG Entertainment, we began a new relationship with Oak View Group and Crown Properties Collection that presents new opportunities to expand our sponsorship business over the long term. In terms of premium hospitality, this fiscal year, we are seeing record suite revenues driven by strong new sales and robust renewal activity as well as the addition of new premium products at the arena. In October, the Garden opened two new event-level suite products, which have been very well received. The first, an event-level suite, has already been licensed through the multiyear agreement. And the second, which is a luxury club space, is nearly sold out. We are pleased with our momentum in premium hospitality and remain poised for continued growth in this area of our business. Turning to media rights, we continue to benefit from increases in local and national media rights fees due to ongoing annual contractual rate escalators. At the same time, we continue to see enthusiasm from audiences for live sports. The NBA's viewership across ESPN, ABC, and TNT remains strong. And with the NBA's national media rights agreements coming up for renewal after the '24, '25 season, we remain optimistic about the media rights opportunity ahead. At the local level, both Knicks and Rangers have seen robust viewership trends this season with local ratings for both up double digits compared to the same time last year. Before I turn the call over to Victoria, I'd like to touch on the recent third-party valuations across our leagues. In December, Sportico published its annual ranking of NBA team valuations, with the average team value up 33% from last year. That same month, Forbes released its updated NHL team valuations, with average team values increasing 29% year-over-year. These rising third-party valuations reflect not only the scarcity of these assets, but the strong underlying business fundamentals and significant growth opportunities for both of our leagues, all of which reinforces our confidence in the value of owning these two iconic sports franchises. We are pleased with how our business is performing and remain confident in our ability to deliver long-term shareholder value. With that, I will now turn the call over to Victoria.

Thank you, David, and good morning, everyone. I would like to start by reviewing our fiscal 2024 second quarter financial performance and then provide an update on our balance sheet. Results for the fiscal second quarter reflect preseason play and the start of the '23, '24 regular seasons for the Knicks and Rangers. In aggregate, we hosted 32 pre- and regular season games across both teams as compared to 41 games last year, which impacted the year-over-year comparability of results. I'd also note that our fiscal third and fourth quarters will reflect nine additional home games in total as compared to the prior year periods. Turning to our results for the fiscal second quarter, total revenues were $326.9 million as compared to $353.7 million in the prior year period, which reflected the impact of fewer home games at the Garden versus the prior year, partially offset by increases across nearly every key revenue category on a per game basis. Event-related revenues of $122.4 million, which mainly consists of ticket, food, beverage, and merchandise revenue, decreased 14% year-over-year, while suites and sponsorship revenues of $69.3 million also decreased 14% year-over-year. National and local media rights fees of $122.5 million increased 4%, primarily due to the impact of contractual rate increases on our local and national media rights deals. Adjusted operating income decreased $27.4 million to $37 million, primarily due to the decrease in revenues and to a lesser extent, an increase in direct operating expenses partially offset by lower SG&A expenses. AOI for our fiscal '24 second quarter includes $9 million of noncash arena license fee expense as compared to $12.2 million in the prior year period. The increase in direct operating expenses primarily reflects higher team personnel compensation as well as higher revenue sharing expenses net of escrow. This was partially offset by lower arena license fee expenses due to the nine fewer regular season games played at the Garden during the current year period and other net cost decreases. The decrease in SG&A expenses was primarily due to lower employee compensation, a result of executive management transition costs recognized in the prior year period and lower other general and administrative expenses. As we look ahead, we continue to expect our business to deliver revenue growth in fiscal '24, excluding the impact of the playoffs. Our AOI will reflect the growth in revenues, along with higher team operations expenses and league-related costs. Turning to our balance sheet, as of December 31, our cash balance was approximately $38 million and our debt balance was $360 million. This was comprised of $275 million under the Knicks' senior secured revolving credit facility, $55 million under the Rangers' senior secured revolver credit facility, and $30 million advanced from the NHL. Our cash and debt balances both reflect a total of $40 million of repayments under our senior secured revolving credit facilities during the quarter. Regarding liquidity, as of December 31, we had $233 million of liquidity, comprised of $38 million of unrestricted cash and cash equivalents and $195 million in borrowing capacity under the team's revolving credit facilities. Based on the momentum we've seen in fiscal '24 and the opportunities ahead to drive long-term growth, we remain confident in the trajectory of our business. And with that, I will now turn the call back over to Ari.

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

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

Hi. Thanks for the question. First, regarding your RSN distribution, your partner MSG Networks has a significant debt maturity approaching in October. I'm curious if you see a potential role or opportunity for you in that situation, considering it is their largest cost item. Secondly, about the Sphere jersey patch agreement, are there any additional details you can share, such as financial aspects, deal length, or how it compares to your previous partnership? Thank you.

Hi, David. Thanks for the questions. With respect to MSG Networks, if we take a step back, we all know the media landscape is evolving, but we believe strongly in the value of live professional sports content, especially in the case of premium content like the Knicks and Rangers. We are also fortunate that we operate in the nation's largest media market, so that benefits us and MSG Networks. So we have the long-term local media contracts in place with MSG Networks, the agreements that provide exclusive local distribution of all of our live content, including the digital, and they're a great partner of ours. We are supportive of what they're doing on the distribution front, including their new direct-to-consumer offering MSG+. I think you know MSG+ allows sports fans in our market that do not currently subscribe through a traditional linear TV package to access live Knicks and Rangers games. So, look, we believe having sports rights has proven to be a great investment, especially over the long term and we remain confident in that as we continue to look ahead. Your question on Sphere and the Patch, we don't discuss the specifics of any individual marketing partnership detail of any deal. So we are not going to share any details on that, but what I will tell you is that we're proud of this agreement, which brings together two globally recognized sports entertainment brands. And we think this creates an exciting partnership, right at the intersection of sports and entertainment.

Thank you.

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

All right. I'll spare you my trade deadline questions, but your stock still trades at a pretty sharp discount than PMV. I know you're bullish about the values of sports teams in the future. But right now, there's a pretty big gap to close. And you definitely have tools to help close that gap. In the past, you've talked about minority sales. And last year, you did a pretty successful buyback, do you intend to employ any of these tools in the near future? And just generally, how do you think about closing that gap in short order?

Sure. Thanks, Brandon. Yes, we feel confident, and as I mentioned earlier, those third-party valuations strongly support our belief. We agree that our current stock price does not accurately represent the value of our assets, which are quite rare and are backed by strong business fundamentals. Our goal is to maximize ticket revenue through season ticket renewals, improving ticket yield, selling more tickets, and maintaining growth in premium hospitality through both renewals and new sales. We're also introducing new premium offerings like two event-level suites. Additionally, we've established a new partnership with Oak View Group and Crown Properties Collection to enhance our sponsorship inventory and grow our sponsorship business over time. We are focused on building more direct relationships with our fans, which leads to better results in all areas of our business. Our media rights are strong and continue to grow annually, and we mentioned an upcoming renewal in the NBA after next season. We remain very confident in the value of our teams. Regarding a minority stake sale, while we wouldn't dismiss the possibility, there's nothing to report at this moment. Victoria, would you like to discuss capital allocation?

Sure. Good morning, Brandon. So when it comes to how we think about capital allocation and the sort of the disconnect between our stock price and the values, our priorities remain the same. First, we want to maintain appropriate liquidity to fund our operations and invest in our core business. Second, we want to make sure we have a strong balance sheet. And to that extent, we have been prioritizing debt pay down, given the high interest rate environment that we are in, including the $40 million of repayments under our senior secured revolving credit facilities that we did during this fiscal second quarter. But third, we plan to be opportunistic about our uses of our cash flow and we will keep all options open, right? As you mentioned, last year, we did return $250 million to shareholders through the $173 million cash dividend and the $75 million accelerated share repurchase program, that leaves us today with still approximately $185 million remaining under our share repurchase authorization. And that first-ever return of capital to our shareholders was really a reflection of the strength of our business and the confidence in the value of the sports franchises, as Hop was talking about. And we are pleased to see that positive operating momentum has carried forward. So we feel really good about our business and the opportunities ahead to continue to drive long-term value for our shareholders.

Excellent. Thank you so much.

Your next question comes from the line of Logan Angress from Wolfe Research. Your line is open.

Thanks for taking the question. I guess, first, on demand, you mentioned per caps and per game revenues a little bit. I'm curious to what extent are you seeing the Knicks and Rangers benefit from strong demand for live entertainment more broadly. And I guess, if you could dig in a little bit more into specific per caps or specific kind of revenue sources that are seeing sort of the biggest tailwinds? And then in terms of costs, can you provide any more color on the cost forecast for this year? And do you expect the revenue growth you mentioned to outpace growth in costs? Thank you.

Thank you, Logan. I will begin by discussing the specifics of demand and its impact on our business. As mentioned in the opening remarks, we have seen increases in nearly every area on a per game basis, with some details to share. Our average season ticket renewal rate exceeded 94%, and this was based on a larger renewable base with season ticket price increases for both teams, making it a significant factor for us. Consequently, we are experiencing growth in overall per game revenue, ticket attendance, and total ticket yield this season. When it comes to suites, we are seeing record revenues driven by strong new sales and solid renewal activity, along with the addition of two new event-level suites at the Garden. In terms of sponsorship, we've added several new partners this year to our established list of signature partners. We are also dedicated to enhancing fan engagement, which is fostering deeper connections with fans and improving our performance across the board. For instance, the third jersey for the Rangers, the special edition jersey we will wear at the NHL Stadium series outdoor game next week, our Siegelman Stable collection with the Knicks, and the merchandise collaboration with KISS are all initiatives that excite and engage our fans. This is reflected in the increase in food and beverage and merchandise per capita spending, which has risen nearly 10% compared to the same period last year. We feel very optimistic about our business for the remainder of this fiscal year and into the future. Victoria, would you like to address the second part of that question?

Sure. Good morning, Logan. Let me talk a little bit about revenue and expenses in this fiscal year. So taking a step back, right, we do expect to again deliver robust revenue growth on a year-over-year basis, excluding the impact of the playoffs. And as you could see in our second quarter results today, we saw higher average per game revenues across tickets, suites, food and beverage, and merchandise. So we are seeing overall positive momentum across our business and expect that to continue for the remainder of the fiscal year. Now while we are not providing more specific AOI guidance, as I mentioned earlier, AOI this fiscal year will reflect the growth in these revenues. But in addition, there will be the impact of higher team operation expenses and league-related costs. So what that really includes is, number one, the impact of our current rosters. So as a reminder, the NHL salary cap saw a modest increase from $82.5 million to $83.5 million. Now while on the NBA side, the salary cap has increased over $12 million to $136 million this season. So in addition to those costs, we are also expecting higher revenue sharing expenses and lower projected luxury tax receipts. But with that, based on the momentum we've seen, we remain confident in the trajectory of our business this fiscal year.

Thanks, Logan.

Your next question comes from the line of Paul Golding from Macquarie Capital. Your line is open.

Thanks so much. Just had a quick question on the ticket sales commentary. You mentioned that combining group and individual, average ticket yields were up in fiscal 2Q year-on-year. I was wondering if you could break that down a bit more for us, just in terms of how group is faring relative to individual in making up that yield comment? And then secondly, just around sponsorship demand, a similar question for year-to-date or balance of the year. Any commentary on the mix? In other words, where you're seeing the strength come through, whether it's signage, ads or otherwise? Thank you.

Sure, thanks, Paul. I'll discuss the tickets first. Our average renewal rate for season ticket packages this season exceeded 94%. This is significant given the larger renewal base and the price increases for both teams. Last year, we renewed over 90%, so we're really pleased with reaching 94%. While a larger season ticket base means fewer individual tickets available for sale, we're still seeing strong demand for both individual and group ticket sales. Average paid attendance for groups has increased compared to last year, and overall, average paid attendance per game is up as well. Consequently, our overall average ticket yield has improved this year. This can be attributed to the enthusiasm from our fans and the ongoing recovery of tourism in New York post-pandemic. We have great momentum in ticket sales, which is also reflected in the demand for suites, with strong interest from corporate partners for suite rentals and long-term licenses. I've mentioned some of the new sponsorships we've introduced this year, including Oura Ring, Pfizer, NEXEN TIRE. Our new partnership with Oak View Group and Crown Properties is expected to further enhance this business in the coming weeks, months, and years.

Operator, we have time for one last call.

Our final question comes from the line of David Joyce from Seaport Research Partners. Your line is open.

Thank you. Going back to the upcoming NBA national rights renewal, which should come with a significant step up, could you please help us understand what are the incremental flows from that new contract comes to the teams versus to the players? And also, are there other structural changes in the rights, be it local or digital or otherwise, that you might expect, perhaps influenced by the issues that some other RSNs are facing? Thank you.

Good morning, David. Regarding the NBA national rights renewal, the current national deals are in effect until the 2024-2025 season, meaning we are discussing the fiscal 2026 period. All teams in the league will equally share any potential increase in national media rights fees. Additionally, players receive roughly 50% of all league revenues, which includes these national media rights fees, so they would benefit from any increase. As Hop has mentioned, the media landscape is changing, but we firmly believe in the value of live professional sports content and expect the NBA to make the most of this opportunity. Concerning local rights, we have long-term contracts with MSG Networks that are set to run through the 2034-2035 seasons, giving us about 11 years left for local game broadcasts.

All right. Thank you.

This concludes our question-and-answer session. I will now turn the call back over to Mr. Ari Danes for some closing remarks.

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

This concludes today's conference call. Thank you for your participation. You may now disconnect.