Madison Square Garden Sports Corp.

Good morning. My name is Christy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Sports Corp. fiscal 2021 fourth quarter and year end earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to Ari Daines, Investor Relations. Please go ahead, sir.

Thank you, Christy. Good morning, and welcome to MSG Sports Fiscal 2021 Fourth Quarter and Year-End 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 investor 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. I'm much happier to be speaking with you in today's operating environment versus the same time last year. Last August, our focus was on navigating our business through the pandemic. We took a series of actions. including reducing expenses and refinancing debt to safeguard our balance sheet. And despite the challenges our business and industry faced, this difficult period also served as a powerful reminder of the significant value of professional sports franchises. For example, our fourth quarter results included our pro rata share of the Seattle Kraken $650 million expansion fee, the highest ever for an NHL franchise. In addition, the NHL completed a new national media rights agreement, which represents a significant increase from the prior deal. We'll discuss this more a little later. And on the NBA side, we've seen substantial interest in the acquisition of ownership stakes in recent months. For example, there have been transactions for minority stakes with no public market liquidity involving the Los Angeles Lakers and the Golden State Warriors. that according to press reports, reflect team valuations of $5 billion and above. This is an interesting comparison to the current enterprise value of just over $4 billion for our company, which includes not only the Knicks, but also the Rangers, two of the most iconic franchises in professional sports in the nation's largest market. Our focus now is on the upcoming seasons. And while we know we're not completely out of the woods with regard to the pandemic, we feel confident for a number of reasons about where our company is headed as we make our way towards a return to normal. It starts with our market, where we have a large and passionate fan base who want to cheer on their teams in person. It's also a market that's taking proactive steps to help curb the impacts of the pandemic. Earlier this month, New York City announced that all guests for indoor events must show proof of at least one vaccination shot, which we think is a positive for us. Our market already has one of the highest vaccination rates in the country. And through surveys, which we've been used to continue and engage with our fans, we've learned that over 85% feel most comfortable at events that require vaccinations. We saw this firsthand during the next first round playoff series, as we sold all available seats for our three home games. This included more than 15,000 tickets for the first game, and with revised NBA protocols to safely create additional capacity, more than 16,000 tickets for the next two games, with nearly 90% of those in attendance being fully vaccinated. So as we look towards the upcoming seasons, we are preparing for full capacity crowds and full 82-game seasons for both the NBA and NHL. For the Knicks, last year was an exciting season with Tom Thibodeau winning NBA Coach of the Year and forward Julius Randle being named both an All-Star and the league's most improved player. Aiming to build on this success, earlier this month, the Knicks completed a multi-year contract extension with Julius, while re-signing a number of key members from last season's roster. The team also welcomed two significant new players, four-time All-Star Kemba Walker and Evan Fournier. For the Rangers, Adam Fox was also recognized this past season, winning the NHL's Norris Trophy Award as the best all-around defenseman. Adam is part of a talented roster now led by President and General Manager Chris Drury and Head Coach Gerard Gallant, This past month, the team signed its highly skilled goaltender, Igor Shosturkin, to a four-year contract and added several new players who are expected to bring both physicality and depth. We look forward to watching both teams continue to develop and compete this upcoming season. In terms of ticketing, for next season, after careful consideration, the decision was made to raise next season ticket prices for the first time in seven years. while ratings and season ticket prices will remain unchanged. I would also note that in looking at the secondary market, we believe there's ticket revenue upside over time as we continue to add value. We remain grateful for our fan support and are pleased to report that, to date, we've had an average combined renewal rate of approximately 94% for the Knicks and Rangers season tickets. We've also been encouraged by sales of season ticket packages to brand new customers, which have been very strong. Last season, we began requiring the use of digital ticketing as part of our COVID protocols, which we also found provided benefits from our operation perspective, and it's something we intend to continue utilizing for the upcoming seasons. In addition, we've remained focused on finding other innovative ways to engage our fan bases. For example, last month, the Knicks launched a small NFT pilot, which focused on five of the team's best home games during the 2021 season, and which generated tremendous interest and sold out. Another way we connect with our fans is through merchandise. This past season, we launched a new online website, providing us with another channel to engage directly with Knicks and Rangers fans. In addition to a more streamlined process, we are now able to offer our fans a more robust selection of merchandise. The more direct interactions we have with our fans, the more we learn, which in addition to driving our business, enables us to enhance the fan experience. These insights also become important for our marketing partners, who are always looking for greater fan engagement. As you know, one of the reasons we've been able to form long-lasting relationships with world-class companies is because we're committed to finding solutions that drive our partners' business. In fact, through our relationship with MSG Entertainment, we recently renewed our marquee partner, JPMorgan Chase, for a multi-year period. We're also having ongoing discussions with existing and potentially new marketing partners and expect to have more positive news to share in the months ahead. The legalization of mobile sports gaming is another meaningful opportunity for our company. As you know, mobile sports gaming has already been approved in New York, and while we await the outcome of the state's application process, we are excited about what it could mean for our business, including our ability to offer gaming partners unrivaled exposure and impact in our market. You've heard us say several times that we believe sports gaming will help drive fan engagement and viewership. This could, in turn, benefit media rights, which continue to increase in value. This past year, the NHL completed two new seven-year national media rights deals with Disney and WarnerMedia, which, in addition to being significantly higher than the prior deals, align the NHL with two leaders in sports programming, which we expect will drive increased viewership and further raise the NHL's profile. The agreements, which will be reflected in our results starting in fiscal 22, include the NHL's return to ESPN, while also expanding the league's reach across several Turner Sports properties, including linear and streaming platforms. As a reminder, the NHL's Canadian deal with Rogers Communication runs through the 25-26 season, while the NBA's U.S. deal with Disney and WarnerMedia runs through the 24-25 season. And as you know, the Knicks and Rangers local media rights agreements with the MSG networks have 14 years remaining, providing us with significant long-term visibility and growth. Televising our games is how we reach the majority of our fans. And even with the evolving media landscape this past year, the Knicks' local regular season ratings increased approximately 45%, while Rangers' ratings increased 17%, both compared to last season's averages. Another area where we see increased viewership is esports. Our Counter Logic Gaming team continue to have competitive presence in games, such as League of Legends, that are among the top 10 most watched games on Twitch, which so far in 2021 has seen a 35% increase in average concurrent viewers compared to last year. This growing level of engagement is just one of the... reasons why we continue to invest in esports and remain excited about the long-term monetization opportunity. I'll end today by saying that we remain confident in our company's future and our ability to build long-term value for our shareholders. As always, I would like to thank our employees, fans, partners, and shareholders for helping us through this past year. We look forward to the 21-22 seasons and proving once again that there's nothing like live professional sports to bring people back together. And with that, I'll turn the call over to Victoria.