Madison Square Garden Sports Corp. Q2 FY2022 earnings call

• Business recovery: Despite the omicron variant briefly slowing progress, per-game revenues were above pre-pandemic levels, including suite, sponsorship, F&B, and merchandise per-caps. Total revenues for the fiscal year were expected to exceed the last full pre-pandemic year. - Fan and partner response: Strong season ticket sales, with individual and group sales closing the gap to pre-COVID levels despite omicron, and high fan engagement leading to strong F&B and merchandise per-caps. - Partnerships: New partnerships in mobile sports gaming (BetMGM, Caesars Sportsbook), blockchain (Coinbase, Socios). NBA and NHL jersey patch expansions creating new inventory opportunities. - Team valuations: Knicks and Rangers are highly valued, with Knicks at $6.1 billion and Rangers at $2 billion, exceeding the company's enterprise value. - Balance sheet: Refinanced Knicks and Rangers senior secured revolving credit facilities at lower rates, extended maturities, and extinguished an unsecured revolver, improving financial flexibility with $360 million in total debt and $249.8 million in liquidity.

For the fiscal second quarter, revenues were $290 million and adjusted operating income was $56 million. National and local media rights fees represented $112.3 million of revenue, which was a return to normal levels. Ticket-related revenue was in line with pre-pandemic levels on a per-game basis, while suites and sponsorship were above pre-pandemic levels. Sponsorship results also reflected new partnerships in sports betting, which was expected to be a significant contributor for the rest of the fiscal year with further growth anticipated in fiscal 2023.

• Total revenues for the fiscal year, including and excluding media rights growth, were expected to exceed the last full pre-pandemic year. - Sponsorship business was expected to continue growing, with new categories and inventory opportunities. - Media rights fees were expected to continue growing, with upside potential in NBA and NHL renewals. - Digital opportunities like NFTs were seen as a way to engage fans and drive revenue.

• Pandemics: Ongoing risk of variants impacting business operations and fan attendance. - Regulatory changes: Impact of legal and tax code changes on sports betting partnerships and related revenues. - Market perception: Disconnect between stock price and asset value, requiring careful capital allocation.

Q: How to narrow the gap between stock price and asset value?

A: Maintain financial flexibility, continue strong operating performance with sponsorship and media rights growth, and evaluate capital allocation including debt reduction.

Q: Thoughts on NHL rights renewal in Canada?

A: NHL is a premium asset in Canada, and owning such rights in a premium market will deliver value.

Q: Sports betting sponsorship opportunities?

A: New York had a massive sports betting launch, with MGM and Caesars as partners, and potential for more premium, limited partnerships to reach fans through various channels.

Q: Financial impact of playoffs?

A: Playoff runs drive incremental revenue with fixed costs (player salaries, arena lease) already paid, leading to significant incremental revenue, and long-term benefits in ticket renewals, pricing, and media rights.

Q: NFT partnerships and revenue?

A: NFTs drive fan engagement and revenue, with existing partnerships like Socios and Coinbase, and potential for further growth as blockchain evolves.

Q: Sports betting revenue cadence?

A: Limited revenue in the quarter due to partial year, but expected to increase as the year progresses, with potential for further growth despite restrictive gaming laws in New York.

Q: Sustainability of per-cap spending growth?

A: Focus on new ideas, brands, and customer experience in F&B and merch to sustain growth, building on pent-up demand and fan passion.

Q: Sports betting data IP revenue?

A: League rights govern stats and IP, but team-level integration and virtual signage offer opportunities for revenue growth.

Q: Sports betting kiosks impact?

A: Hypothetical, but changes in laws and rules could further drive the business, with potential for revenue sharing through lease agreements.