MSGS - Earnings call transcript Q4 2021 | Madison Square Garden Sports Corp.

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Operator

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 speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank turn Relations. now over Ari to I the Investor Danes, would conference Please go sir. ahead,

Ari Danes

Good Christy. fiscal year-end quarter you and XXXX and call. conference Thank earnings morning fourth Sports welcome to MSG

up Treasurer. on we will and President morning's call an Financial This the review by CEO, Chief be Lustgarten, of will results and the Our Mink, begin our our operations. company's EVP, After financial Andy questions. call remarks, this with followed open our a prepared will update for with Officer Victoria

If Discussion from not XXXX. the any such it that operates the Please And we statements Today's forward-looking a performance and Management's statements may and actual The future company its do and Exchange Securities consolidated financial results, Private are of our Andy. any developments and and that, of call. income factors. therein. I Investors community Commission, have now you to and operating Securities following. On update today's statements to These of well a or reconciliation the statements business, Act AOI, obligation results include adjusted various and financial contain of results materially today's during turn in that will the cautioned of sections website. earnings is discussed earnings in section as Risk four not pages be measure. over of events constitute of uncertainties Litigation in are Reform condition and non-GAAP this and a may involve copy risks or forward-looking call release, income take to with as a operating any financial filings of that corporate Investors the which Factors the may with the those perceptions of note forward-looking statements of as and operations five operations, of provide available release, the that contained including industry Analysis of result within it in the company's disclaims company financial the forward-looking statements operations factors discussion meaning guarantees described entitled of and the the and condition differ

Andy Lustgarten

morning this took for am with August, Last focus be refinancing safeguard and environment series you joining balance a business Good of and of including on also sports you professional through challenges year. thank happier last served versus was and to the as powerful sheet. a I our expenses today's industry same reducing difficult much faced, business our us. pandemic. navigating debt to value in despite franchises. period the We time actions, speaking the our And of the operating our significant reminder

the the our rata $XXX fee, Seattle expansion ever of example, results franchise. million pro for our share highest fourth included an NHL For quarter Kraken

In national represents agreement deal. addition, the NHL media which prior rights from increase a completed the a new significant

will in the discuss the see And ownership little stakes NBA in we this interest substantial months. on side, acquisition recent We later. a of

public of just market above. enterprise in professional but no involving Warriors of Knicks Lakers This over which for team there in the $X franchises State the sports transactions the and liquidity press valuations most the comparison largest Golden interesting also reflect nation's and market. to with to current of the includes company only the value is two not for according $X our iconic billion Rangers, minority Los example, been an the For reports, stakes billion have Angeles that,

It starts towards a reasons to is a feel number our passionate make the normal. taking our as York focus proof And curb is headed of our confident the we month, steps about It's indoor woods Our know shot large that's events the also are we fan their of out with we company we we positive must market that have market we for now a upcoming all pandemic. on at of in not way cheer show for while one us. Earlier regard seasons. on City completely with person. return help where announced pandemic, to a for wants this who the vaccination to New to think impacts guests proactive teams is base and of the least which where

vaccinated. we highest than this as and comfortable capacity available already two games. game home XX,XXX the fans, we to continue sold at tickets revised more used first during engage XX,XXX safely This to additional for round all rates games we with country more that XX% saw included market the for with the feel being vaccinations. three tickets create attendance in of NBA that fully seats require learnt one which most series events first and playoff for through have firsthand those XX% protocols We to vaccination next with in has the our have our of Our the than surveys then over nearly Knicks'

preparing seasons, NHL. crowds look as NBA we the So towards and for both full and capacity we the XX-game full are upcoming seasons for

resigning being last of exciting and the Improved Knicks last the named Most NBA Player. build both significant on All-Star, two completed time Knicks, was winning year season to an Julius with and number with Coach players, the new the The a Evan also a success, Year members For roster. forward multiyear season's Julius earlier while welcomed league's Walker Kemba an contract this four team extension and Thibodeau of Tom Aiming team Fournier. Randle month All-Star from this

watching Fox for to was all-around both the and signed forward bring a highly to who it's led teams President best several is both Gerard Adam and depth. team Adam talented continue We expected roster and contract now upcoming NHL's the are Chris goaltender, this skilled the Manager Gallant. players Shestyorkin, Coach and month, For by added defenseman. and as season. new the develop Drury award part past This also Morris winning Igor Trophy of season four-year General Head past look to recognized physicality compete this Rangers,

decision renewal believe we Rangers we XX% upside to-date there as consideration, We made seven the we that Knicks the unchanged. while continue will next of is to an the looking in prices In remain ticket revenue fan grateful note value. our report the average pleased ticket market, after over add at I of Knicks years in raise to and season, to season ticket for was approximately terms time also would for Rangers are prices time that first secondary season ticketing, careful remain to tickets. combined for and season rate had support

of also sales to brand We new encouraged season very ticket by been packages which customers been have have strong.

online team's last NFT a through channel our a XXXX best directly which For This is Knicks fans. month, we five the new and generated with Another home way interest another and tremendous with small season, on we games season which focused past providing sold to engage the during merchandise. example, connect launched website and of launched us fans out, with Knicks the pilot Rangers

also important business, fan enables learn insights who to us always marketing we partners These looking offer for our to to addition the robust fan In merchandise. we of fans, a are for engagement. fans driving direct to addition we more process, our The selection are which, become now enhance more experience. with interactions our the have in our more more greater a streamlined able

able have with reasons we our lasting is to long one the As companies that partners' drive finding you the are know, we world-class form of because been to committed solutions business. relationships

Chase, Partner, our Entertainment, recently JPMorgan through for a Marquee renewed our we with relationship MSG fact, multi-year period. In

expect We our meaningful have existing to company. to are ongoing for and months share more mobile ahead. and another is gaming with partners The sports news positive also having new marketing in legalization the opportunity of discussions potentially

it has business, are And mobile could offer ability our while in know, gaming in await already you partners our process, impact we exposure approved outcome about York. application of mean sports for our excited unrivaled and to we market. the been including gaming As the state's New what

sports times expect which also higher will Turner agreements, value. the in continue in significantly deals us fan Disney and leaders programming, in two deals the with two which including rights, The to heard past than viewership have starting sports league's will properties, Sports our benefit ESPN across reflected being increased in returning help new while could media which media addition several and we drive reach that say the platforms. WarnerMedia, and we profile. on NHL NHL drive will which This be completed the linear streaming national results NHL's rights aligned the believe engagement increase expanding the XXXX NHL's turn seven-year viewership. to to gaming prior raise year, This You with and include several fiscal further in

XXXX-XXXX XXXX-XXXX Rangers media the increased Disney the growth. season, long year, local and WarnerMedia past compared both deal we the us providing XX% season NHL's season. you and deal ratings Canadian of landscape through last the averages. with the As Networks years XX%, term runs regular local know, significant media the agreements Communications to a Rogers fans. MSG And And Televising the Rangers approximately NBA's even and our with with Knicks how ratings through our reach runs the games have visibility majority this the as remaining, XX with U.S. is while reason's with evolving while increased rights reminder, Knicks

we see where Another area esports. increased is viewership

of I of Legends, in the in have to Gaming in future saying esports XX% that remain build competitive watched has excited viewers term we among XX and long the value of end continue reasons presence our a Logic for seen that today League shareholders. by term our in growing most This year. to invest engagement games, XXXX we Counter are which long opportunity. to why average monetization one level just company's Our about concurrent our on compared is as continued and remain confident the to last games will such ability in Team so far Twitch, top increase

and once to people always, professional XXXX-XXXX I our over again together. that for past shareholders with I year. turn would to us the to live to proving there's like back and will the forward thank Victoria. look this that, employees, nothing through helping partners seasons We call fans, As And sports bring like

Victoria Mink

round and would the quarter year. the by March the remind fourth and fiscal timing fiscal also I the Andy quarter NHL performance NBA seasons touching on and the would the provide start NBA update XXXX liquidity fourth as NBA sheet. the was quarter fiscal Thank XXXX and shortened on our the that and Results participation of last NHL as you I you of Knicks good financial for XXXX-XXXX morning of XXXX like everyone. of regular in reflect suspensions playoffs. our fourth the to an well first balance then seasons in impacted by

prior of the year local As a League result, year season impact as as million a were total of as distributions suspensions revenues in for to and period. increased quarter as in the fees the result the $XXX.X XXXX-XXXX $X timing seasons. the rights well prior regular negative the XXXX-XXXX compared media the period, of million

revenue the games distributions fees signage Knicks as were Knicks XX with the of rights In capacity Kraken season playing home the impact well to as operating reflects a improved from playoff to higher increase $XX.X quarter The to NBA due the higher extent decreased lesser as loss year The seasons the sharing by the operating of the and increase loss expense, current fan no of the year ticket-related during The NHL impact suspensions revenues well during period. in as million offset games the addition, XXXX-XXXX at direct was operating the reduced an negatively revenues, XXXX-XXXX a mainly SG&A by team in reflects at total impacted regular playoff NHL other current period. as prior was net year league compensation This timing three in the games related in schedules. reflects recognition team the the payments increase expenses of period NBA Adjusted direct increase and while the XXXX seasons and increases revenues loss in the Rangers as Garden escrow in expenses. home expansion year Seattle fee in This NHL quarter. $X.X the and as and million. XX% across to operating media regular and season partially associated on regular of current combined quarter NBA local NHL of prior compared the and reflected benefited in a expenses. the of sponsorship shortened well the expenses

to full arena due also attendance capacity note restrictions license This season quarter's as as arena related results fees fees with XXX% due at costs. playoff including which compensation and I expenses expenses employee overhead team to benefits teams, in related Garden. were as by a related that The sales well severance include company's compared would fees significantly lower and at offset playoff and partially the was the related MSG corporate increase sponsorship reduced license to to expenses. executives, SG&A the service Entertainment, agreements related primarily to representation higher were

inclusion spin in April X are we a prior certain the did therefore overhead accounting of as expenses comparable the which through fourth items MSG the XXXX-XXXX As following season corporate a year operations. period longer dates well results reminder, as the Entertainment spin for impact for as that of but not discontinued off. they meet NHL including of spin-off the April Results discontinued XXXX, from XX, the suspension, reflects quarter was the not operations NBA and through incur for date no the which directly criteria the include number

and company's position turning our balance Now, sheet. to liquidity

As of cash of and available capacity million had $XXX.X million $XXX comprised under $XX.X and liquidity borrowing facilities. of cash we XX, of of June existing equivalents credit million

the quarter-end million expenses balance. XX Entertainment March such represented of primarily well This net as payments was rights and the NBA senior and net well staff, Rangers and equivalents and MSG revenue. of to due commercial the ticket to as repayment facility. of sponsorship related local to under million corporate $XX.X normal agreements were of $X.X seasons, and outflows our our compared largely expansion Seattle media Our as compensation to million credit national decrease secured as Kraken for our a by including various our operating as the the offset $XX a for teams, cash seasons, a off season Knicks XXXX decrease fees NHL related administrative cash playoff number revolving and on to payments ticket sales items, NHL These XXXX-XXXX fee

company's our senior the secured $XX June the credit advance of comprised at million. of facility to Rangers was under XX result partial Knicks revolving debt debt reduced Rangers a the $XXX at As million The credit was repayment, outstanding NHL. and total and revolving quarter-end million from facilities $XXX balance

approximately approximately As was our this deposits, through The revenue was of collections of as yet due addressed of collected deferred offset deferred rights by but season as of revenue, of local revenue tickets comprised $XXX the net of media not recognition and XX. played credits to to primarily national increase suites, as million in balance to build revenue balance during XX, of extent ticket partially will the and June $XXX million XX primarily June The and/or refunds. balance necessary March compared and quarter. make-goods, which be through games was the

over $XX revenue that, deferred With now NBA. I will to Ari. balance addition, the included In from million call back turn the

Ari Danes

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

Operator

first [Operator question Morgan Instructions]. Stanley. of your Ben And is from Swinburne

Ben Swinburne

between it about talked obvious MSG you the disconnect assets Sports your value and price. to the Andy, wanted back morning. of Good come sort in the to stock at your remarks. prepared Hi. I of

that and team investors, one have anything a is stock terms try where then that concern is recombining a MSG to sports consider remind that is I separate what And Board why the think, was is first address the decided proactive you there steps I Board you what sort management fairly a company between that and the past. follow-up, of Entertainment. is? lot. you as taking of know obvious in just thinking the have Thanks also publicly hoping again place? to worth the delta in are the to concern and I And in could with that. think revisit might Sports us addressed the I

Andy Lustgarten

Ben. Thanks Sure.

just be me let really start clear. So and

play sports no Entertainment follow-up, our Entertainment have with an Entertainment. impacts rationale We of will different public two we completing a it It's spin-off intention a And still growth forward believe MSG I to really merging was that worked MSG we and be in and a long we MSG reinforced has believe operating Warriors, right. separate The recent transactions had look, really very year Kraken and the I what as two our incredibly Rangers last we drive really tremendously your of And real thing mean, shows hard really in it no it's has This and Lakers the or to we of lifetime of on leagues two leagues, And But MSG our different companies Sports, that, the the company. MSG We plans. for Sports' very and through one have the the something are teams. pandemic growth. interesting been it. been the teams. operate which leverage, holds. that and been And of did note I profiles. company. asset been impact by ever of its is really the value some future significant this why transaction the around focused own an has that two on is straightforward very Knicks the separate at MSG NHL, both in growth think terms ever And rules excited with health transactions company we value we this before. the has NBA story. with in nobody's the most independent have about have flexibility year, for

going. are direction. We this moving we right right the healthy But the down near do, things to about debt in are quarter. the term on fourth we During feel are And about need started We watching be during we we feel on and we the our right, and market. decisions operate to which what now. year, as they pay we leverage how took we about some in we think do where additional period good like think

that I say options table flow to term on are helping the would so drive in our using basis, free cash value. a And the on all and long

Ben Swinburne

Great. Thank comments, you Andy. for the

Operator

you. Thank

question of John next Your Wolfe Research. Janedis from is

John Janedis

give could some mobile gaming opportunity. Andy, just on you you. us the Thank more color

the to time changed? expect that? York And benefits? the Over it few past New is you any on Is level has on see the the to do kind size of relevant months, confidence line when state tax loose there your of

Andy Lustgarten

Sure.

business. it have allows home great simply I love it. it what be There I I So fan believe broken and that the right. venue. start great is values. record the here term, It's We think with will been we sports experience for iceberg, for the betting engagement. for will does in tip But and on just long consumer at impact for It's media the of a

So let me about here. talk ability is the what market

they forecast New the We when The minimum, even some state State There's some let been to there there of be But lot the That select it with minimum I always of And That's still me are not think if confidence is But the thrilled they York at noise clear, it's significant come important. and gives together, that be you maximum. has can a minimum. process consortiums rules. two may undertaken. because a operators. more the just of consortiums reach XX% the BetMGM that us not. the going look you the There's competition. other FanDuel, review far have I and had our the have. and some may one to around who of the DraftKings, really biggest and four as rate, know the four about platforms that floor be how And to I states. can we to some out mean, three, players in are they billion if think Bally deliver When this better neat the they a what than facts can to consortiums, reach whereby one we market. tax with going tactics we is of eyeballs. and mean, sports there's you I year fans competing applications, of believe of reach $X.X or anybody don't think

into that there's been value far. some way, can't So tell which means that baked that includes drive have play models their so with to business, we by they public as billion the from for what's $X.X that they marketing business to

exactly really multiple it of a both but with competition we are think I going that way might close that to good bigger as this service. be new plays me, the there to with major reach And going business. to all to longer which be multiple and more there feel out, entrants for to there's operator, means we of that any established operators. term say as sounds about like question provide feel might little It's be think good in people we I the a how our So be the about consortium, here lot I entrants. are very well that we will

John Janedis

Okay. Thanks a lot.

Operator

you. Thank

question LightShed next with Partners. Your is Ross Brandon from

Brandon Ross

like Knicks the tickets about have meaningful Could a a guys. interested entertainment? both and those questions. bit specifically from prepared demand Hi there's How Rangers. whether remarks for are taking for consumer It corporate follow-up. are your little Thanks sounds pretty corporates suites? to then looking? you the talk demand And And I for returning in

Andy Lustgarten

Brandon. Thanks Sure.

that's a we get lines. again, then I customer things never quite a thing to all would year in will But no be to look, the take to nimble would We through had we being be to business specifically, never on view we your operate. right. ways nimble. we going have that operated has of So will across focused this map I tell our little you am stayed questions we one we one, I more during of been friendly. that had a thought was a thought ways And and bit pandemic

So started, when of was our ticket. what's thing the with consumer across look it first you I as a lines view business friendly, noted

XX% came to during and speed, consumer to going fast, buyers to preference we a playoffs, gave quickest periods back of that these of in ticket blind to terms us way, to even came lot acting are But the moved confidence. from and we the it the when be went is XX% back. So zero what

were the hospitality something for during realized holders corporations be So events during on. really corporate a not about we having we pandemic is we honest that number were that same period, example, focused of to suite looked and the when

our to start suite a will suite suite take and went so And We to buy this which their to buyers their X, and that during we offered coming them period. the allowed October. October again postpone contract out we ability be year them off,

of the we But a point of the when towards started XX%, back So people more playoffs when was season, getting increase. uptake. the started lot for started were confident, we to uptake little there at a of not as feeling the the the

new our In worked we partners. terms bit sales, coming now little other leagues Partner. during us. they We a wanted as but slower signed, deliver with business to very our start looking forward, little they little are Chase going partners Obviously, new were assets that along. to It's and our opportunities. Marquee with had us. a we here. are stay defrost, focused this found It of than the slower with to be the our renewals less than our which ticketing was us as to premium and a But And business And with took is we sponsorship we period.

have a of the other right are as that horizon partners that some on well coming near number as renewals We got are in. new

this feel to feel business. good about So we and the pre-pandemic to back going I working team are we about speed back to that really good the pretty really So get come levels, all-in-all,

Brandon Ross

on Well, me. you question. and you answered with the My got sponsorship follow-up

So thanks.

Andy Lustgarten

Brandon. Totally,

Ari Danes

Brandon. the will Thanks caller. Christy, you next take

Operator

JPMorgan. of Karnovsky Certainly, your from David question is next

David Karnovsky

on you. Maybe questions. follow-up to Hi. Ben's Thank

through the a minority there franchises, of discovery sale as willing realized have out form positions and now. are private equity there price you of NBA Some the noted, in buyers now

wanted just would for ask if something next entertain ever that's you I So Rangers. the to you core

Andy Lustgarten

should what just the am It's earlier, speculate start, hypotheticals. So what our to better going reasons one to let The also highlight just said I franchise of or me was primary not right primary I do. we split values. sports reason But on not I reinforce the for

been transactions now feel we lot very we reflected price. in have it's those of the in right our and value the appropriately don't think just just a stock mindful We of of in confidence teams current And leagues.

David Karnovsky

do Okay. ticket indoors, talk I Thank And City just impact would like you. this And that to assuming for expect attendance hasn't overall or know forecasts? how can even you they vaccine the mass something back on you But mandates done maybe expect how you to requirements impact yet. demand? bring

Andy Lustgarten

and I Sure. here I with think quickly in we could seasons, New dime. which David. on season operating we to NHL. expect very turn from on learned I to, say am full have benefit and we operate happy and I NBA and having York nimbly have But be to very both what this and is, Look, flexible start a will very are actually to focused the coming for we and

expecting are a We it safe that always making focused our and on full are we for capacities environment customer.

very for in positive we City, us. be It's a fans So operate vaccinated. New New in events benefits which mentioned, us actually few again, York, for indoor ways, York as you is to requiring already

a market very has vaccination already our high rate. So

we want a vaccinated our us. this this prefer close have believe. our have very Two, surveys, good very the we whole that's summer, is majority what So and on year, fans whole surveying and consumers for overwhelmingly when of understanding our done event. been And

about at looked And it the more on. us to even playoffs. when we working good make us finally, credence gives feel So then

had I will know Other and who how we to time. So way, having you baseball, vaccinated miserable insight vaccinated. had talked teams went didn't we the The initially, say, give that they sections sports when zones, about failures. that a going little on were started at sale unvaccinated XX% we reason sell inside were tried vaccinated but was XX% we we

were we the really first So of the kind.

vaccinated vaccinated. was And And the selling. the And so a unvaccinated, demand. consumer we started off little we started a little with hearing

it research, it, And it. what ongoing. let's was know honest, clear. really capacity. in again but survey there. the the we you didn't we be we and you So until is were And into said We going was and our drive actually were just We keep blind do very it going flying to did the able we want were to to consumers know pudding hope never the proof

wants demand vaccinated, see market vaccinated look have at you fans. Broadway you this market. other that know we events see when entertainment, the occurred this concerts, or other that the So you And in

And so good. we feel

David Karnovsky

you. Thank helpful. Very

Ari Danes

Thanks David. will caller. Christy, last take we one

Operator

Joyce your is David question final of from Barclays. Certainly,

David Joyce

A you. few Thank follow ups, please.

week On esports when its world. it for from start Roc feeds? the you there sports monetizing some news overlays for or your betting side, was in data esports, other to athlete broadcast the in Nation integrate clients Be revenue generating to starting sources? this Secondly, expect sports pros on do of

then Rangers And update brands? you So us in could or now around And roughly the cap esports billion the what's is could of tax year? light Thank and also just Knicks that, are the luxury you assuming the the $X about what's that Rangers Knicks esports on salary market upside and you. billion the finally, for status $X.X of talk if levels globe, next there? and

Andy Lustgarten

Sure.

probably, I and first question the Let think backwards, me work just then go we take you Victoria, will there? want to

Victoria Mink

Yes. Absolutely and sure.

the David, on let the salary just So you then give information and luxury me threshold. cap tax the

then be which from salary finally, $XXX.X NBA season, X% the flat is So to million and that while increase last year. is seasons, the for the And salary NHL cap million is cap tax $XXX.X a million. threshold last will threshold the XXXX-XXXX $XX.X luxury threshold reflects

Andy Lustgarten

Thanks.

are New is two in questions, are in we the other your to, Jersey actually we just monetizing start I beginning sports of able would betting, right legal. terms that say mobile to for So sense now today,

smaller much now. in at have So a level partners right we now. already space It's the

picks point, be we the be us the operators but picks the non-exclusive, entering until the operators. step working point either it. then I and through and or see think platform state will are might could before or that into deals its exclusive that I next big it when

and everyone's now think many how in space one those right occurs matter know the the operators. minimum four our an following what what tax there's But active will players? trigger I important in the and of the of because opportunity monetize is very point to final terms things level I forced opportunity But two is, are no And timing. here. of do what We

I have got opportunity just know So we here. an

mean of in When space. not come other XX the terms about I would have esports, demo. so that engagement It's of the think say, time XX this pleased way you but up a terms to that with are terms with there In to the so or XX I are in four. spent, of the big XX demos they eyeballs Bally's in in we on average

me to typical business a lagged we we a sport. How have it's got bit because into do turn than said, here. different that really that So okay, monetization has little

that finding the way eyeballs be change ways part that game knowing the worked But so fans is there something needs is, it's of people doesn't in to And the take keep it's here. key and real, the partner, endemic is the through. to it right sport, finding

And so you have to start with the eyeballs.

your feel we I good term about long so think And mean opportunity. covers that's questions. probably really I the

Ari Danes

joining with you And next earnings thank all a us speaking for David. our on We you call. to Have forward Thanks today. look day. good

Victoria Mink

Goodbye.

Operator

everyone. conference you This Thank conclude today's does call.

You may now disconnect.

Madison Square Garden Sports (MSGS) 19 Aug 212021 Q4 Earnings call transcript