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…

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. This – to me sports gaming – or us 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 – and even longer 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 that – 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, et cetera, right? So those are all assets that we control and own. Second, official partner designations. That has tremendous amount of 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, et cetera 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…

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?

All right. Thanks, Brandon. So let's start at the top. So let's just lay some simple facts, right? We have a very long-term local media contract with annual escalators, which we think are strong for both teams that are not subject to any economic changes based on distribution, right? And I'd say, we have the utmost confidence in our partner in MSG Networks' ability to drive distribution and drive value, right? So taking a step back so that's from the team point of view. Taking a step back, I think, at a macro point of view, we strongly believe in the value of professional sports content, especially, premium sports content like the Knicks and Rangers. If you take any point in time of the history since sports media rights have been created, if you've been an investor in it you've succeeded. It's been a great investment over any sustained period of time. Can there be hiccups in any some short order? Sure. But when you take a long-term view about what sports media rights are it is a great asset to own. Right now we have a long-term partner who holds those rights, but I love being the granter of those rights. And when you take a look again just to make the point about the great long-term investment look at the latest NHL deal very strong deal out of the NHL. We expect a very strong deal out of the NBA when their rights come up. And so yes, the landscape is evolving. Yes there's some noise in the market right now. But having those rights and the ability to exploit it there's going to be more than enough ways to monetize our content. And so we feel very good about it. I would -- to get to your…

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. And I was wondering if you could remind us or help us think about the buckets of financial upside from good team performance. I know most of the tickets for bulk teams are sold in advance but -- and sponsorships locked in. But what are the other buckets that could really accelerate financial performance from the teams playing well?

So I'm going to split that in -- your question Brandon into two parts: short-term, long-term. Short-term, there's always -- as we've talked about in the past, we're very focused on having a direct relationship with our customer and going after the high volume of sellers. So, we do sell independent tickets and we very much variably price those tickets. So there is upside in our independent tickets -- individual tickets as team performs in any single season. But let's take a more macro point of view and what it would look like of sustained team performance, because I think that's really what your question is and how that could impact -- positively impact value, right? So let's just start. Let me remind you we have a number of revenue streams that are fixed and contractual: media rights, both set from our leagues and our MSG network, set escalators, our suite and our sponsorships, those are locked -- the ones are currently signed or locked also long-term set with escalators. Obviously, there's ability to sell incremental sponsorship and open up new categories or new -- or find new assets to sell. We've mentioned about how the leagues focus on releasing new assets for us. So again, we're able to go and monetize those and that will be impacted by team performance. But over time and again, I guess I would say, in the short order is obviously there's playoff performance and during the playoffs. Playoffs are very valuable in terms of incremental gate. And actually, if you go deeper in the playoffs you earn -- it's big pieces of incremental revenue but that also has a long-term impact, because as team performance not only do you increase from that year's playoff, but you have follow-on benefits from increasing season ticket renewals. And as you know, historically, we only reevaluate ticket prices after a playoff run. So again, further upside as teams perform. The other place that's both affect us today is our -- in individual suite sales. But over the long-term when suite licenses or sponsorship deals come up, we're able to drive different prices through both of those types -- through both of those either renewals or new sales club memberships as well, I'd say, the same. So to conclude, I'd say look, we've got a number of -- this business we feel very strong about this business. We have a number of fixed revenue streams that provide a really strong ballast for our company and its performance in any given year. But with sustained team performance over time, I could think certainly accelerate revenue growth -- a new revenue growth for this 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 maybe 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. So let's -- there's a few questions in there. I think I want to move through it in a -- try to answer them on. If I missed one John, just jump in and let me know. Let's start with the NHL patch, because I think it ties into your question about what are our opportunities in categories. What's great about an NHL patch or any single -- any type -- any time a league opens up some premium new inventory, it's not only the revenue you're able to drive from that actual asset or that inventory. It's what you're able to do with the whole partnership. So, I'll give the example of Squarespace and the Knicks jersey patch. We're able to generate a nice -- have a nice partnership through both -- through the patch or the sale of the patch, but it enabled us to open up a whole new category, a signature partner and sell a whole number of other assets and drive our rate card there. So, it's not only about the actual inventory. It's about what you're able to do with the inventory. And what we find is when you have the premium inventory, you're able to go and create new partnerships based around ownership of that premium inventory. So the NHL patch, when it comes online next year, we'll drive revenue there. But our expectation is we will be selling it this year, some time through the year to get into place next year. We could reach a partner earlier and start selling some assets around that. Obviously the big piece of it will be when the patch opens up next season, but there is opportunity this year. I'm not promising that we're going to reach it, because we do want to figure…

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.