Madison Square Garden Sports Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Sports Corp Fiscal 2022 Third 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. To ask a question during this session, you will need to press star 1 on your telephone. I would now like to turn the call over to Ari Daines, Investor Relations. Please go ahead.

Thank you. Good morning and welcome to MSG Sports Fiscal 2022 Third 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 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 four and five 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 will now turn the call over to Andy.

Good morning, and thanks for joining us. As we near the completion of our fiscal year, we are thrilled to be here today discussing the strong operating momentum and financial results we are seeing in our business. As you know, at the time of our last call, we are coming off the height of the Omicron variant, yet another example of the ever-changing environment we have continued to face throughout the fiscal year. Thankfully, the impact from Omicron was relatively short-lived, and as you can see in today's results, our business has proven to be resilient, performing exceedingly well when faced with another challenge. For the fiscal third quarter, we delivered exceptionally strong performance, including revenues of $338 million and adjusted operating income of $81.5 million, driven by robust consumer and corporate demand. In fact, our total revenues, as well as our per-game revenues across tickets, sweets, sponsorship, food and beverage, and merchandise, were well above results both the fiscal 2019 third quarter, which was the last full third quarter prior to the pandemic, and the fiscal 2020 third quarter, prior to the suspensions of the 19-20 seasons due to COVID. And based on our current trajectory, We continue to expect total revenues for this fiscal year, even excluding growth in media rights and the impact of the playoffs to exceed our last full pre-pandemic year pro forma for the spinoff. We're incredibly proud of how we've successfully navigated our business through the uncertainties created by the pandemic and believe the challenges we have faced have made us a stronger organization. And as I will discuss in more detail shortly, we see numerous opportunities on the horizon to continue driving sustained growth for our business, as well as generate long-term value for our shareholders. Looking at our business in more detail, last month, both the Knicks and Rangers completed full regular season schedules with no capacity restrictions at the Garden. For the Knicks, fan enthusiasm remained high right through the end of the season, keeping the building packed for the team's final stretch of home games. For the Rangers, the first round of the Stanley Cup playoffs kicked off Tuesday with the team taking on the Pittsburgh Penguins, and we're looking forward to tonight's pivotal game two. As we look into the future, with many of our core players under multi-year contracts and several young, talented players continuing to develop, we anticipate success in the years ahead. Both franchises are fortunate to have fan bases that are among the most dedicated and loyal in all of sports. and this has been on display throughout the pandemic. The percentage of ticket holders attending games after dipping in late December and early January due to Omicron saw an overall improvement into February and essentially returned to pre-Omicron levels in March. We saw the same momentum in average tickets sold per game and ended the quarter on a high note, with March at the highest level for any month this season. And looking ahead, while still early, the enthusiasm is already extending into next season, with both season ticket renewals and sales of season ticket packages to new members both off to a strong start. In fact, the average combined season ticket renewal rate is already above 85% and rising. Based on our current trajectory, we now expect to see solid growth in ticket revenue next year as we benefit from the introduction of new ticket inventory and the increase in ranger season ticket prices, as well as greater sell-through with the continued improvement in tourism and office occupancy. The enthusiasm from our fans has created an exciting environment inside the garden, which has contributed to sustained strong guest spending levels. During the third quarter, we again saw double-digit percentage increases in F&B and merchandise per caps, compared to pre-pandemic levels. Engaging with our fans remains a priority, and we've continued to focus on building a more direct relationship with them while innovating how we deepen that connection, including through our social media channels and unique team products. For example, over the last eight Knicks games, we launched an NFT initiative featuring collectibles that could only be purchased while inside the garden. We've also been partnering with niche fashion brands to enhance our merchandise offerings, such as Kith and Jeff Staple. In fact, our exclusive one night only Rangers and Staple capsule collection drove one of the highest merchandise per caps of the season, demonstrating one of the novel ways we can connect with our fans while also driving our business. We also continue to engage with fans by offering original and compelling content on our team's social media channels, which added approximately 700 1,000 net new followers across both teams' channels this year. Demand for corporate hospitality, even in the face of the pandemic, has also been strong and is only increasing. As I mentioned earlier, per-game suite revenue this quarter is now above pre-COVID levels. And while the average usage of our suites for Knicks and Rangers games took a temporary step back due to Omicron in December, Levels started trending up again in the back half of January. And when we ended the quarter in March, we're at the highest monthly levels for the season, exceeding average pre-pandemic levels. The strong momentum in suite usage and sales came despite New York City office occupancy rates that, although improving, are still meaningfully below pre-pandemic levels. But as employees return to the office in greater numbers, we anticipate an equally strong return to corporate entertaining which we are well positioned to capitalize on going into next season. We've also seen continued growth in marketing partnerships, driven by our ability to strengthen relationships with existing partners while expanding into new categories and taking advantage of new inventory. It starts with mobile sports gaming, where during this quarter, we welcome DraftKings as our third major partner in a multi-year agreement done in partnership with MSG Entertainment. Mobile sports betting now represents our largest revenue category in marketing partnerships on a run rate basis. And as we move into fiscal 2023, we will see the full impact of these three new partnerships in our results. We've spoken before about the significant exposure we offer our partners. And with BetMGM, Caesar Sportsbook, and Giraffe Kings representing over 50% of the mobile sports wagering handle in New York in March, we are excited to continue helping them reach new audiences. Companies and other emerging industries also continue to recognize the value we provide in connecting with consumers. As you know, last quarter, we signed deals with Coinbase and Socios. We continue to see incremental opportunities across the blockchain space and are actively exploring potential new partnerships. But sports betting and blockchain aren't the only areas of growth in new sectors. For example, during the quarter, we officially welcomed both DoorDash and Future, a digital fitness coaching company to our slate of marketing partners. Another avenue of sponsorship growth is a new marquee inventory created by the leagues. For example, the NHL's introduction of a jersey patch beginning next season provides us with an opportunity to either deepen our relationship with an existing partner or engage a new company eager to build brand awareness by developing a broader program with one of the most recognizable franchises in professional sports centered around this new premium high visibility asset. The introduction of the NHL jersey patch follows the 2017 debut of the NBA patch, which as we noted on our last call, has only continued to increase in value, highlighted by several recent significant deals across the league, including in Brooklyn and in LA. The leagues have done an outstanding job in opening additional opportunities, including the NBA's decision to increase the number of permitted international sponsors for teams next season, and the NHL's new digitally enhanced dashboards, which also launch next season, and will create significant incremental exposure for our partners during Rangers telecast on MSG networks. As we look to maximize the value of this new inventory, we will take a deliberate approach to the sale process, and we see a bright future ahead for our marketing partnership business for the upcoming fiscal year and beyond. This adds to the list of growth opportunities we've highlighted before, including playoffs and media rights. A playoff run by either team generates significant incremental value. And with the Rangers now in the first round of the NHL's postseason, we expect a boost to our results in the fiscal fourth quarter. The benefit will also extend beyond this fiscal year, as we expect the buzz associated with the playoffs to increase demand for tickets, suites, and sponsorship next year. On the media side, we've seen a significant lift from the NHL's new U.S. media rights deal, which started this season. And with the NBA's national rights coming up in just a few years, further upside potential is possible. In closing, as I'm sure you're aware, I recently stepped down as president of MSG Entertainment, enabling me to focus my full attention on leading and growing MSG sports. With the season management team we have in place, we are more excited than ever about the future. And with two of the most iconic franchises in professional sports, which continue to have untapped value and numerous catalysts for growth ahead, I'm confident our business will continue to thrive and generate long-term value for shareholders. With that, I'll now turn the call over to Victoria.