Good morning. My name is Teressa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Sports Corp Fiscal 2021 Second Quarter Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Thank you. I would now like to turn the conference over to Ari Danes, Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to MSG Sports fiscal 2021 second 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.

Thank you, Ari, and good morning, everyone. I'd like to begin by saying that we're excited to have both the Knicks and Rangers back in action. Even though the season started later than usual, and our fans can't be at The Garden in person, we know they are enjoying watching their teams compete again. And while the COVID-19 pandemic still presents operating challenges in the near term, we are paying close attention to the vaccine rollout and what it means for the return of normal operations. Since our last earnings call, there have been a number of positive developments for both our company and the leagues. The NHL and NBA completed their 2019 seasons. The success of each league’s return to play clearly demonstrated the shared commitment and strong working relationships that both the leagues have with their teams, players, and partners. This was followed by the 2020 NHL and NBA drafts, during which both the Rangers and Knicks made key additions to their rosters. The Rangers used their number one overall pick to select Alexis Lafreniere, a dynamic forward with the potential to become an all star player for the team. And the Knicks finished the draft welcoming two talented first round picks. Forward Obi Toppin, who last season was named College Basketball Player of the Year, and guard Immanuel Quickley, who was named the 2019-2020 SEC Player of the Year. The Knicks and the Rangers each have a talented, young core, and strong leadership in place, and we look forward to watching them progress over the 2021 season. We are also excited that the teams have returned to the world's most famous arena for the first time since March. With December marking the start of the NBA’s 72-game regular season, and January the start of the NHL’s 56-game season. And while home games at The Garden are currently being played without fans due to government restrictions, we're working towards safely welcoming guests back into the building as soon as possible.

Thank you, Andy, and good morning, everyone. I'm going to begin by discussing our November debt refinancing and providing an update on our company's liquidity position. As Andy mentioned, in November, we enhanced our financial flexibility and increased our borrowing capacity by completing a $600 million debt refinancing. As part of the refinancing the Knicks increase the availability under their senior secured revolving credit facility by $75 million to $275 million, while the Rangers increase the availability under their revolver by $100 million to $250 million. In addition, both teams extended the maturity dates of their facilities to November 2023. As a reminder, the Knicks and Rangers facilities were previously set to mature in September. 2021 and January 2022, respectively. The Knicks also entered into a new $75 million unsecured revolving credit facility, which also matures in November 2023. As part of this refinancing, the Knicks previous $15 million, unsecured revolver and the $200 million delayed drawn term loans with MSG Entertainment were extinguished. At the end of the quarter, we had $380 million of total debt outstanding, consisting of $220 million drawn on our Knicks senior secured revolver and $160 million on our Rangers facility. Turning to our liquidity; as of December 31, we had $290.8 million of liquidity comprised of $70.8 million of cash and cash equivalents and $220 million in borrowing capacity under the team's revolving credit facilities. Our quarter end cash balance of $70.8 million represented a net increase of $47.2 million compared to our September 30 balance of $23.5 million. This net increase was primarily due to local and national media right fees related to the 2021 NBA and NHL seasons, a combined $30 million draw on our Knicks and Rangers senior secured revolvers, and the $30 million from the NBA that Andy mentioned. These inflows were partially offset by a number of items, including our normal operating expenses, such as compensation for our teams, as well as our corporate and administrative staff, payments to MSG Entertainment under our various commercial agreements, and debt related payments, including non recurring amounts for our recent refinancing. I would note that our quarter end cash balance did not include the approximately $30 million that we may look to access from the NHL recent debt grades. As of December 31, our deferred revenue balance net of billed but not yet collected revenue was $206 million, as compared to approximately $127 million as of September 30. The increase in this balance was primarily due to local and national media rights payments for the 2021 seasons, and the $30 million from the NBA. This deferred revenue balance as of December 31, was primarily comprised of local and national media rights, tickets and suites, which will be addressed through games played and if necessary through make goods credits or refunds.

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

Your first question comes from John Janedis with Wolfe Research.

Hi, thank you. Andy you've talked about private equity investments in NBA teams, and I think liquidity position is well appreciated. But can you talk about the potential willingness to bring in a minority partner to further bolster the balance sheet that COVID drags on longer than expected or to at least establish what could be perceived as normalized value for the equity?

Thanks, John. Yes, I did mention private equity, the NBAs made some rule changes. As you know, in terms of our point of view, we're not going to comment on hypotheticals on the sale of stakes right now.

Okay. In the past, you guys have also talked about the impact of no fans for a full season. Can you talk about to what extent that changes are not due to the shortened seasons?

Victoria, do you want to take that question?

Yes, sure, John. Hi, good morning. So, you're at as we're currently operating in an environment where fan attendance at The Garden is restricted by government mandates. And the fan restrictions will have a greater impact on our financials this year as compared to the impact of just the shortened seasons. But with that said, in terms of the impact of fewer games this year, I can certainly give you a little color, so from a revenue perspective, we currently expect a reduction in local media rights fees for the Rangers side as we have a minimum threshold of games that must be delivered to MSG networks for broadcast on an exclusive basis. So, if those thresholds are not met, there'll be a pro rata reduction in our local media rights fees. I also note that we currently don't anticipate a reduction in local media rights fees on the Knicks side. Also, in a shortened season, it reduces camera-visible sponsorship and signage opportunities. But on the other side, on the expense side, we would anticipate additional reductions in per day costs under our arena licenses such as day of game expenses. And also, we would expect reductions for certain other team operating expenses. Yes, and just noteworthy is right to the extent revenues on a league wide basis are impacted by the shortened seasons. We could see reductions in other areas, including player compensation.

Your next question comes from Brandon Ross with LightShed Partners.

Hey, Andy, you mentioned earlier your excitement around potential mobile sports betting legalization in New York. Could you unpack some of the opportunities for MSG, and maybe help us understand how incremental sponsorship or an on-site sports book would break down as opportunities between MSGS and MSGE?

Thanks Brandon. Happy to take you through it. We've -- I mean we've been focusing on this for a long time, and we think this is a tremendous opportunity for our company. I know you looked across the border in New Jersey, the Meadowlands, which opened in 2018 has been one of the largest, if not the largest sportsbook in the country. Much of the research I've seen would suggest that New York State will be the largest market for sports gaming once legalized. Obviously, we're extremely encouraged by Governor Cuomo's recent announcement regarding sports gaming here, but there’s lots of questions as to what regulations are going to be. And there are lots of different flavors as we look to places where it is legal. So, just to take it from the highest level, I mean, we like it just from what it does for fan engagement during programming and the ability to derive extra eyeballs which therefore drives sponsorship just on its face. On top, and, of course, implicitly, the media rights that would come from having increased engagement, we think there's also upside in -- or big upside for sponsorship official partners. And there's many other ways to make money. I mean, if you look at Washington, they have they have a sports book in their building. It's just a question of how do the regulations play out, but I know there's a big opportunity for us in terms of how it would play between what's the opportunity here, it's -- there's lots of ways to make -- to everybody -- both companies would benefit if there was a sportsbook, but it's a -- there - this is a big opportunity. It's just a question of exactly how to commercialize it.

Yes, you just mentioned media rights. And at the local level, is there anything that would be available to you at sports besides what you've already kind of licensed out to MSG Networks?

Do you mean in terms of rights?

Yes, in terms of like what are the additional opportunities for MSG Sports on the media front or is that really more of an MSG Network?

Well, I mean, look, we have a long-term rights deal with networks, and networks will have many ways to monetize the rights. As always being a rights holder -- owning sports, it’s a unique asset in these times. We love being a sports rights holder. The leagues are obviously -- when their rights agreements will come up will have an impact on sports, but there still is an opportunity, right? We have game visible signage, we have official partnerships. So, there are lots of ways to generate incremental revenue even if it's not directly from the rights fee this second.

Got it. And then staying on the rights fees, the NHL deal is obviously coming up in surprise. There hasn't been an announcement yet. Maybe if you could comment on how and when you see that playing out, and then more generally, as an NBA and NHL team owner, how you think about the future of national and local sports rights, especially with cord cutting and kind of younger demos being on other platforms and shying away from full-length games. Do you think the model needs to be adjusted some?

There are lots to unpack there. So let me try to start at the top and tell me, Brandon, so I think let me start at the highest level, right, I think at the highest level, as I mentioned, right, we have -- MSG and we have 15 almost 16 years left with MSG Networks on our media deals. The league sell their rights for the league level, both the NHL deals coming up very shortly, as you mentioned but the NBA is coming up a few years after that. But as everyone knows, the media landscape is constantly evolving. And the paradigm, the distribution patterns going to change, right? I don't know. Or it's or may I just it's not -- that's not something I can opine on. But I do know is right, what's fundamental value of live sports, we feel really good about that. There's going to be a market for that. And as there's more platforms that come into line, I mean, the one thing we know is content is king. And there's nothing like live sports for premium content. So I know there's going to be platforms and the more platforms that are out there, the more buyers and there's more value in our product. So and then once you have in the fact of legalized gaming, and what's the impact that that's going to have on media rights, it just I feel very good about our long term nature of being a sports right holder. In terms on the shorter term with the NHL, I mean, I'm not at liberty to discuss their current negotiations. I could say that it's expiring at the end of the season. I love being a sports right holder; ratings have been up this year. And everyone's focused on what legalized as I said, legalized sports gaming, and it impact on media rights. And so when the NHL has more information, we'll be -- we feel very good about where the future is of all the media rights holder, but I can't give you much more on the NHL itself.

Next question comes from the line of David Karnovsky with JP Morgan.

Prepared remarks on how to pandemic and some of the results in fallout to the New York City area may impact the current earnings and future cycles it.

Hey, David, could you start over again. I missed the beginning here, you cut out for a second and I didn't hear, where you start your question. I'm sorry.

Sure. It's just that can you just comment on how the pandemic and maybe some of the resulting fallout to the New York City area may impact the current or even future cycles for suite sponsor and all.

So we -- I mean, right now, we're working with all of our partners. We generally have long-term deals with both suite holders as well as sponsor agreements. We believe in being very -- we believe in being consumer friendly. So we're working with all of our partners right now. Obviously, New York is in a different place today than it was a year ago. But hopeful on the rebounds, feel the city getting more lively every single day I'm here. And our partners, we're very focused on staying very close to our partners and thinking long term. And so while we're currently focused on this season, it's hard to take a really long term point of view, but I feel very good about long term and our long term relationships, and the way the partners, how we've been able to both suite holders and partners, as they've been working with us during these difficult times.

Okay, then maybe as a follow up to John's first question. Do you expect an untimely NBA or NHL might be open to PE firms taking, controlling interest in teams? And if so, how much that further impact team values overall in your view?

Okay, the league's have a -- it was pretty public have a pretty detailed voting process about who can buy both minority stakes as well as controlling stakes. And it's very hard for me to comment on any further than that. I'll note that the recent changes are focused on approved certain predictable approved T funds to own minority stakes in multiple teams. Not obviously you control stake in multiple teams, but minority stakes. This which we believe will help drive team valuations. So can't give you much more than that.

Your next question comes from the line of

Great, thanks so much for the question. Andy, one for you on a reopening. I'm curious if you could share some insights with respect to talks you've had with local or state regulators regarding the prospective timeline of a reopening for The Garden to fans? And specifically, I'd love to hear your thoughts to the extent you're able to share on any specifics with respect to disease incidence or vaccination thresholds are being considered. And if it's more likely than not that capacity will be phased once a reopening occurs. And Victoria, just as a quick housekeeping, could you shed some light from an accounting perspective in terms of how the revised CBA for the NHL and NBA might affect the accrual of player compensation throughout the year? And cash flows for this year and years going forward? Thanks so much.

I am happy to. Thank you. So let's start with the reopening. Governor Cuomo in the state has needed -- have always been clear, but have been increasingly clear on the importance of reopening the economy, both here in New York State as well as New York City. He just recently, I'm sure you follow this, but he recently permitted the Buffalo Bills to host 25% -- to host fans in a pilot for their two playoff games. It was a pretty -- it was regarded as a wide success. In addition, I mean, this pattern so far has been limited opening and then as he moves -- as he moves towards a fuller capacity. I'm very -- we're very happy with the recent move to announce the restaurants are now able to have host 25% capacity starting February 14. That comes on the heels of the -- the reduced levels of positivity rates here in New York State. So I'm in New York City. And I expect that the things that I'm going down will continue to see capacities increased. In addition, he announced that or the state announced that gatherings such as wedding receptions or parties can increase their capacity to 150 people, assuming protocols are followed starting in March. So that's another move and positive moving towards capacity increases. And so yes, he definitely when reopening with health and safety of everybody. The vaccine rollout is clearly critical towards getting this economy fully reopened. And the governor has been very vocal and very focused on delivering the vaccine as fast as possible. I saw last night even mentioned that there is going to be a further amount of vaccines distributed here in New York over the next three weeks. And so that should even further drive vaccine rollout here in New York. But in terms of our opening, I mean, look, the thing that's most important to us is the safety of our fans, our athletes, our employees. So we're going to do this in a phase measurement way. And we continue to maintain and contacted and there's been an open dialogue on what the possible protocols are, including testing. And we really are focused on just getting the stock open, safe, and so that everyone can be enjoyed and have a great experience.

Okay, and then, David, your question was around the mechanics around the CBA. So first, let me start with the NBA. So the amended collective bargaining agreement for the NBA includes more flexibility. So it's new terms added as a result of COVID-19 to ensure that the players still ultimately receive the approximately 50% of the league wide revenues, right. So for example, while the escrow is remains the same at 10%, player compensation can be reduced by up to 20%, in a season inclusive of the escrow. And now the salary cap and the luxury trigger, or for the 2021 seasons are flat with last year with the 2019-20 season and the CBA lays out a minimum of 3% and a maximum of 10% annual increases in the salary cap through the remainder of the CBA. So, and then on the NHL side the amended CBA includes a four year extension. So it now expires in September 2026. So, obviously, that gives us some additional visibility. The NHL amendment also includes more flexibility, also adding new terms as a result of COVID-19. So for the NHL, for example, the salary cap for 2021 was also kept flat with last season. And they'll only be modest average annual increases throughout the 2025-26 season. And in addition, the players also the NHL has agreed to defer a portion of their 2021 salaries and signing bonuses. So with new maximum escrow recovery rates also having been established. So with the same mechanism in place to achieve, the players ultimately receiving the 50% of league wide revenues. So when you think about the two leagues, the mechanisms are a little different but the end results is generally the same with the players, ultimately receiving the 50% of league wide revenue.

Your next question comes from Ben Swinburne with Morgan Stanley.

Thanks. Good morning. Victoria, could you help us think about sort of the cash flows over the next couple of quarters into the end of the fiscal year, particularly around your deferred revenue balance? I am just thinking if you have refunds as we move through the rest of the season, but also whether you're going to be pulling in some cash from season tickets. Anything you can tell us about kind of the puts and takes around cash flows through the end of the fiscal year would be great. And then, Andy, I want to ask you about the Knicks. So congratulations on Quickley, it looks like a steal in the draft. I'm just wondering what you guys are doing, to try to maximize fan engagement during the pandemic, obviously, everyone's wishing they were there at the games. But the team seems to have really picked up in interest level and excitement. And I'm wondering what you guys are doing specifically to try to maximize fan engagement during this tough period, anything you can share would be great. Thanks.

Thanks Ben. Let me -- why don't I answer that question first and talk about cash flow second, so I can step in flows. So we've definitely had to shift a little bit how we communicate with our fans. We've been -- we've made -- it actually happens to tie with what we've been pushing anyway for the last couple of years. So we've been slowly getting better and better. We've been very focused on social media. And how do we connect with people? That obviously right now, it's very hard to connect people, people in person. But how do you connect groups of people? So we've done many small roundtables with our either retired players, or current players or coaches that communicate directly with our fans, we've been very focused on increasing the access. So I was really proud of our team during the NHL draft, we made a trade in the first round to get a second first rounder, and our team was right there. And there's a great video. I don't know if you've seen it, where Jeff Gordon is going, yes, we got it. And we got that moment on camera. We're bringing people behind the scenes. And our players have really welcomed it and really want to connect with their fans. And so we've been doing a really, we've been very focused on how do we connect people, give people more insight of what's going on. And I think it's been pretty successful. And I think and it shows also in our ratings, and our users and our interactions and all those and everything seems to be trending in the right direction. I'd also say that we're focused on other unique types of ways to connect with people such as we have a partnership with…

Yes, great. Thank you, Andy. Yes, Ben, let me just take a step back, right, with $290.8 million in available liquidity at the quarter end including a cash balance of $70.8 million and then the $220 million capacity under our Knicks and Rangers facilities. We feel confident in our liquidity position, and some of the cost reduction measures we've taken to date that we've talked about. I think also, one of the items mentioned in our prepared remarks is that we may also look to access our portion of the NHS recent $1 billion private placement which would be approximately $30 million. So that's not reflected in our December 31 cash balance or liquidity. So we are feeling good about our liquidity position. And as I had indicated, talking about the CBA is part of this cash provided by the league is to assist with the timing of payments as it relates to player compensation and recovery. So we feel like we're in a good position there as well. But when you think about deferred revenue, I think what's important to remember, particularly at December 31, is we've received a lot of the national and local media rights cash in advance and so we would expect to record revenue and earn that as the seasons play over the next two quarters. But in general as Andy has said, we have a very fan friendly approach, but we hope to earn the deferred revenue through games played or make goods and then to an extent, if necessary through refunds.

Your last question is from David Joyce with Barclays.

Thank you. Two questions, please. First on the COVID impacts, given that you've got some variability in the lease expense, how should we think about what that would look like in normalcy kind of a period? And also related to Covid, are there any like expenses that you've just take out of the equation going forward? Or can you discuss the expenses that will be required for the new thing like air purification and cleaning? And then a second question is on the sports gaming aspect. What is the status of the league's trying to participate in the sports betting handled via legally inserting the integrity fee concepts into the state legislation process? Thank you.

Thanks David. Victoria, do you want to start with talking about revenue expenses?

Yes, sure. Let me touch on the COVID impacts. I think you explicitly referenced the arena license agreement first so let me just touch on that. Yes, our arena license fee payments to MSG Entertainment have been impacted by both the seasons starting later for the year through December 31 starting later than usual, with only the Knicks playing a few games to date, through December and no Rangers games and obviously the restrictions on fan attendance during those games. So the arena license fees for the games were currently playing are at an 80% reduction due to these attendance restrictions at The Garden. But of course, the situation remains fluid. And, really, we're just if we have the opportunity to welcome fans back into the arena at some point this season, which would be great. Our license fee payments would change accordingly. And then I think you sort of mentioned overall, just some of our expense impacts as it relates to COVID. We've talked a bit both last quarter and a little bit this quarter better various revenue impacts on in arena tickets, suites food, beverage et cetera and some reductions that we would be anticipating because of the NHL shortened season. But specifically on the expense side as compared to a normal season, right, we're seeing expense reductions for player compensation. A revenue sharing expense, league assessments, we talked about the leagues amending the CBA to ensure that players are still only receiving about half of the league wide revenues. And we do have lower day of game costs and lower marketing expenses. I think that's the bulk of the types of savings that we're seeing across the board as it relates to COVID. But obviously, getting fans back in the building is really what we're looking forward to.

And I'd note, at least what I think about it, even one fan is marginal revenue because we have to put on the events already. The events are already on. So every dollar -- every time we have a ticket sale or any revenue, it's actually it's profitable. That your question about what changes do we need to make because marginally profitable. The questions we've had to change to make it effective are like we -- remember, we have a relatively new building, we built our building. And so we have a lot -- our filter system is pretty strong. There's a lot of -- we're not starting from scratch, and yes, there might be some additional costs. But we've been thinking about it very carefully. And if we are able to have fan safely, there will be, it'll be a positive revenue and marginal profit related to those fans. In terms of your question around the integrity fee, I mean, look, I can't really comment on legal matters. But as I said, and I'll keep on saying that we believe sports gaming provide a number of growth opportunities, both for the leagues and for the teams, including media rights as I noted, the NHL is coming up soon, as well as the NBA in few years as well as sponsorship opportunities. And I'm sure there's other ways to commercialize. So but I can't comment specifically on the integrity thing.

And I would like to turn the call back over to Ari for closing remarks.

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

Thank you, ladies and gentlemen for your participation. You may now disconnect.