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Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp. Fiscal 2023 Fourth Quarter and Year End Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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.

Good morning, and welcome to MSG Sports fiscal 2023 fourth quarter and year-end earnings conference call. Our President and COO, David Hopkinson, will begin this morning's call with an update on the company's strategy and 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 forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. 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 will now turn the call over to David.

Thank you, Ari, and good morning, everyone. As we look back on fiscal 2023, I'm pleased to say it was another exceptional year for MSG Sports, highlighted by strong financial results and exciting seasons, including playoff appearances from both the Knicks and Rangers. For full year fiscal '23, we reported revenues of $887 million, a new record for the company, as well as adjusted operating income of $115 million. Growth was broad-based with every key revenue category, including tickets, suites, marketing partnerships and media rights exceeding fiscal 2022's record-level results. These results are a testament to the strength of our marquee sports franchises and the enthusiasm we continue to see from our fans. They also reflect the sustained demand from corporate partners for our valuable team sponsorship assets and premium hospitality offerings at The Garden. As we embark on a new fiscal year, our strategy for the business remains unchanged. We are focused on capitalizing on the strong performance of our teams, while at the same time, executing superbly on the many opportunities we see to grow our business. That includes: maximizing ticket revenue through increases in both ticket yield and average per game attendance; introducing new premium hospitality of products to meet robust ongoing corporate demand; building on our strong relationships with our fans, which benefits almost every revenue line across our company; expanding our marketing partnerships business with our premium inventory; and benefiting from continued contractual growth in media right. We will also continue our opportunistic approach to capital allocation, which this past year included our first ever return of capital since becoming a pure-play sports company in fiscal 2020. So, with positive operating momentum heading into fiscal '24 and numerous growth opportunities ahead, we are well positioned to create long-term value for our shareholders, and we remain as confident as ever in the value of owning two of the most recognized franchises in professional sports. Both the Knicks and Rangers had strong regular season this past year, resulting in playoff opportunities for both teams. For the Rangers, we are encouraged to see the team in the playoff for the second consecutive year. The team has since had a productive off-season, including naming Stanley Cup winning Peter Laviolette as the team's new head coach and adding several talented players in the draft and free agency. For the Knicks, the season concluded with the team advancing to the Eastern Conference semifinals. And with a number of key players secured under long-term contracts, we are looking forward to building on last year's success in the upcoming '23-'24 season. And it's clear our fans are excited to, following another season of their unwavering support. In fact, average paid attendance and average ticket yield were both up this past regular season as compared to fiscal 2022, which drove substantial ticket revenue growth year-over-year. And while season tickets, which comprise a significant majority of our ticket revenue, certainly had a lot to do with it, we were also pleased to see average tickets sold per game for individuals and groups, not only exceed the prior year, but also the pre-pandemic fiscal '19. As we look forward to next season, we're already seeing this ticket momentum carry forward. For example, the average combined season ticket renewal rate for the Knicks and Rangers upcoming seasons has climbed to approximately 93%, which is on a larger renewable base than last year and also reflects season ticket price increases for both teams. And our fans have continued to demonstrate their excitement to root on their favorite teams in-person beyond ticket sales. This includes through food and beverage and merchandise per capita spending, where we saw high single-digit percentage increase as compared to fiscal 2022, which if you recall, had exceeded pre-pandemic levels by a double-digit percentage. On the merchandise front, we continue to showcase bespoke offerings, some of which is exclusively available at The Garden. We completed another successful year of collaborations with Jeff Staple, with the Rangers and with Kith with the Knicks. And it's clear that these offerings are resonating with fans as merchandise revenue in the regular season hit new highs in fiscal 2023. We will continue innovating our products and potential partnerships in the year ahead. As we do with merchandise, when it comes to our fans, we are always looking for fresh ways to deepen our connections with them while also creating opportunities for new fans to join our community. That includes our FanFirst program, which is aimed at leveraging innovative technologies to get tickets directly into the hands of our fans. We piloted this program during the playoffs and intend to roll this initiative out more broadly this coming year. It also included special events this past season, such as our playoff watch party at The Garden during the next second round against the Miami Heat, as well as Ranger's open practice at the arena, both of which welcomed thousands of fans. On a similar note, we've been increasing fan engagement outside The Garden, including across our digital platforms. We launched our first ever podcast this past fiscal year, hosted by legendary Rangers goalie, Henrik Lundqvist, while continuing to enhance our social media presence through compelling content and a diverse roster of influencers. In total, we added over 1.7 net new social media followers this past year, bringing the Knicks and Ranger's combined following to over 18 million as of the end of the fiscal year, an increase of more than 10% for fiscal 2023. Turning to marketing partnerships. Looking back at fiscal 2023, we continue to benefit from sustained sponsorship demands for our valuable assets. We saw robust renewal activity from existing signature partners, including Verizon and Spectrum. And we also welcomed the new partners to our roster, including signature partner HUB International as well as MSC Cruises. In fact, MSC Cruises became our first official global partner of the Knicks, demonstrating the international appeal of the Knicks brand. As we build on this momentum, we'll continue to pursue other valuable sponsorship opportunities, including potential global partners for the Knicks and Jersey patches for either team. Robust corporate demand has also extended to our premium hospitality business, where we once again saw record revenues for the year. Our strong renewal rates and new sales activity have positioned us well for fiscal '24, with the majority of our suites under multiyear agreements. And in partnership with MSG Entertainment, we expect to further capitalize on that demand with the addition of two new event level suites for the upcoming seasons. Turning to media rights. In fiscal '23, we benefited from ongoing contractual escalators from our local and national media rights fees. At the same time, fans continue to show their enthusiasm to watch their favorite teams live with strong viewership trends across traditional media. For example, the NBA playoffs, which were aired on ABC, ESPN and TNT, were the most watched post season for the league in the past five years. And on the NHL side, this year's post-season was reported as the most watched ever on cable for the league. So it's clear enthusiasm to watch live sports remain strong. And with the upcoming NBA media rights renewals after the 24/25 season, we remain bullish on the opportunity ahead. With the positive momentum we've seen in our business, the growth opportunities in front of us and the record level franchise transactions we see across the professional sports landscape, we remain extremely confident in the underlying strength of our iconic franchises and our ability to drive long-term shareholder value. With that, I'll now turn the call over to Victoria.

Thank you, David, and good morning, everyone. In a moment, I'll discuss our financial results for both the full year and fourth quarter and then provide an update on our balance sheet. Before I do so, I would like to note that we have revised our definition of adjusted operating income as it relates to the arena license fees with MSG Entertainment. We are no longer adding back the non-cash portion of the arena license fees in our reconciliation of operating income to adjusted operating income, which is reflected in the financial results we reported today for all periods presented. As you know, the arena license fees are recognized on a straight-line basis over the life of the 35-year agreements which equates to approximately $68 million in annual rent expense. In fiscal 2023, this $68 million of expense was comprised of approximately $42 million of cash expense and $26 million of non-cash expense. We will continue to provide the non-cash component of the arena license fee on a quarterly basis as part of our discussion of results of operations. Turning to our financial results. For fiscal 2023, we generated total revenue of $887.4 million and adjusted operating income of $115 million, which as David mentioned earlier, included growth in every key revenue line. Now turning to our fiscal 2023 fourth quarter. Our results for the quarter continue to reflect robust demand for our teams as they completed their '22-'23 regular seasons followed by playoff appearances from both the Knicks and the Rangers. I would like to remind you that the prior-year quarter reflected extended timing of the '21-'22 NHL regular season, which impacted both game count as well as certain revenues and expenses being recognized over a longer timeframe in the prior fiscal year. In total, there were eight fewer Knicks and Rangers regular season home games played in the current year quarter than the prior-year period. In addition, there were two fewer playoff home games this year as compared to the prior-year period. These factors affected year-over-year comparability, and as a result, total revenues for the quarter were $126.9 million as compared to $175.2 million in the prior-year period. Event-related revenues of $70.2 million, which mainly consists of ticket, food, beverage and merchandise revenue, inclusive of the playoffs, decreased 29% year-over-year, while suites and sponsorship revenues of $20.3 million, also inclusive of the playoffs, decreased 41% year-over-year. These decreases reflect the fewer games played at The Garden during the current year period. In addition, the decrease in event-related revenues also reflects lower average per game playoff revenues for the Rangers, primarily a result of the team advancing to the Eastern Conference finals in the year-ago quarter. In addition, national and local media rights fees represented $28.6 million of revenue this quarter. This reflected a $3.3 million decrease as compared with the prior year period, primarily due to the timing of the NHL '21-'22 season. This was partially offset by the impact of contractual rate increases on our local and national media rights deals. Adjusted operating income decreased $37.3 million to a loss of $7.8 million, primarily due to the decrease in revenues, partially offset by lower direct operating expenses. AOI for our fiscal '23 fourth quarter includes $1.4 million of non-cash arena license fees expense as compared to $3.7 million in the prior-year period. The decrease in direct operating expenses included lower arena license fee expenses and other team operating expenses, both primarily due to fewer regular season games played at The Garden during the current year period, as well as a decrease in net provisions for lead revenue sharing expense net of escrow. These decreases were partially offset by higher net provisions for certain team personnel transactions. As we look ahead, we believe our business is poised to deliver revenue growth in fiscal '24, while we expect AOI to also reflect higher team operations expenses and league-related costs. Turning to our balance sheet. At the end of the quarter, we had $325 million of total debt outstanding comprised of $235 million under the Knicks' senior secured revolving credit facility, $60 million under the Rangers' senior secured revolving credit facility and $30 million advanced from the NHL. Our quarter-end cash balance of approximately $40 million represented a net decrease of $25 million compared to our March 31 balance of $65 million. Our cash and debt balances both reflect a total of $55 million of repayments under our senior secured revolving credit facilities during the quarter, which brought our total debt paydown in fiscal 2023 to $140 million. With regards to liquidity, as of June 30, we had $270 million of liquidity comprised of $40 million of unrestricted cash and cash equivalents and $230 million in borrowing capacity under the team's revolving credit facilities. Based on the momentum we're seeing heading into fiscal 2024 and the opportunities to drive long-term growth, we remain confident in the trajectory of our business. With that, I will now turn the call back over to Ari.

Thanks, Victoria. Operator, can we now open up the call for questions?

[Operator Instructions] And your first question comes from the line of David Karnovsky from JPMorgan. Your line is open.

Hey, thank you. David, we're seeing a number of sports teams kind of rethink their local distribution. They're taking control of DTC, some are adding broadcast to bring on more reach. Your contracts are locked up, I think through 2035. There's obviously going to be a lot of change before then and probably well more cord cutting. How do you think about the need or opportunity to restructure kind of local delivery of your content over the next few years? Thanks.

Hi, David, thanks for the question. Good morning. Look, as you identified, if we take a step back, we all know the media landscape -- pardon me, is evolving. But we believe strongly in the value of live professional sports content, especially for premium content like the Knicks and Rangers. We also operate in the nation's largest media market, which benefits us and our local media rights distributor MSG Networks. As you mentioned, we have long-term local media contracts in place with MSG Networks. And those agreements provide exclusive local distribution of all of our live content, including digital. MSG Networks is a great partner of ours, and we're supportive of what they're doing on the distribution front, including their recently launched direct-to-consumer offering, MSG Plus. So that allows sports fans in our market that do not currently subscribe to a traditional linear TV package to access live Knicks and Rangers games. So, we believe having sports rights is proving to be a great investment, especially over the long term, and we remain extremely confident in that continued value as we look ahead.

Okay. Thank you.

And your next question comes from the line of Brandon Ross from LightShed Partners. Your line is open.

Sure. Thanks for taking the question. I just wanted to ask about your willingness in the past to sell minority stakes in the team. I was wondering where that stood. And maybe what the challenges have been for you to get something done there that would result in there not being a transaction at this point?

Hi, Brandon. Well, as we've said in the past, we would not rule out the possibility of a potential minority stake in either team, but we have no update at this time. We continue to be as confident as ever in the value of our teams. They are incredibly scarce assets with strong business fundamentals, we just talked about, and significant opportunities for long-term growth, which we don't think is appropriately reflected in our current stock price. In fact, our return of capital in fiscal '23 was a reflection of the strength of our business and our confidence in the value of our sports franchises. We also continue to be mindful of the premium valuations at which transactions across the sports ecosystem have taken place, including the Washington Commanders' $6 billion sale, which was the highest ever for a professional sports team, as well as the expanded pools of capital now allowed by our leagues to invest in teams that includes private equity, in both leagues and on the MDA side, additionally, pension funds, endowments and southern wealth funds.

So, do you feel confident that at some point there could be a minority sale?

Yes, we're just not going to speculate on that at the moment, Brandon. Thanks.

Okay.

And your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.

Thanks. Good morning. David, when you think about the revenue opportunities for the business, and you mentioned some in your prepared remarks, I think, including some new suites you guys are adding, what would you -- how would you sort of rank order what you're most excited about in terms of driving the top line, beyond the stuff happening with sort of the national media rights and some of the stuff outside of your control? And then, I just wanted to ask Victoria, it sounded like you -- well, you did say you expect revenue growth in '24, but the AOI commentary was a little less clear. Should we not expect AOI growth in '24? I just wanted to come back to your prepared remarks where you talked about revenue and AOI in the outlook. Thank you, guys.

Thanks, Ben. Look, I'll take the first part when you asked about incremental revenue opportunities. As I get into this, let me say how proud we are to have delivered another year of strong results, including record revenues. As I talked about, the momentum was broad-based with every key revenue lines, that's tickets, suites, marketing partnerships and media rights, all up as compared to fiscal '22's record results. So, we really think this is a testament to the strength of our business and the underlying value of the assets. As we look forward to FY '24 and are working every day on FY '24, we think it will be broad-based. With respect to ticketing, I mentioned earlier, at the moment, our combined average season ticket renewal rate is about 93%. And that's on a larger renewable base than last year and also includes season ticket increase in price for both teams. So, as we think about FY '24, we see an opportunity for a growth in average per game paid attendance and in ticket yield. With respect to sponsorships, we've got strong momentum in both renewals and new sales. We continue to fill our roster out and look to target areas where we're currently -- either areas that are emerging or where we think we're underpenetrated. We think we've got opportunities in professional services, software, retail, travel, just to name a few. And we've got inventory available that will unlock additional opportunities, including patches on the uniforms of each team and international sponsorship opportunities for the Knicks. So, we're focused on maximizing those and ensuring we find the right partners for those premium assets. Our premium hospitality continues to be in high demand, and we're going to benefit this year from the addition of two new event level suites of The Garden, continuing to build on both our renewals and our new sales momentum. And we continue to focus on fan engagement. We work on a number of initiatives to increase our direct relationships with our fans, and that's a priority for us in FY '24, delivering compelling social content, which is good for our fans, drives our sponsorship business, and we'll continue to innovate in some of the merchandise and other fan offerings and events that we can. So, we see a number of significant growth opportunities ahead and it's broad-based across the whole business.

Ben, good morning. It's Victoria. So -- sure, I'm happy to provide a little bit more color. I mean, we're not providing any specific AOI guidance, but just a little more color. So first, just taking a step back, right, as you did hear me say in my prepared remarks in terms of fiscal '24, and we expect to again deliver robust revenue growth on a year-over-year basis. But in addition to those higher revenues, we do also expect our AOI results for the year, to reflect the impact of higher team operation expenses. And that's going to include, number one, the impact of our current rosters. And it's also going to be impacted by higher revenue sharing expense, which includes lower projected luxury tax receipts. And I guess just also worth noting that for the upcoming season, the NBA salary cap has increased from $123.7 million to $136 million. And on the NHL side, it's a modest increase, $83.5 million to $82.5 million.

Thank you, both.

And your next question comes from the line of Devin Brisco from Wolfe Research. Your line is open.

Thanks. I have a question on sponsorships. ESPN's licensing deal with PENN Entertainment to create ESPN BET earlier this month is another proof point that sports betting is still in very early innings. Could you talk about how meaningful that category is as a proportion of your sponsorship dollars and how fast or how big you think that category could be over time?

Yes, absolutely. Thanks, Devin. You're right. It's early innings, as you said, but we've seen great momentum in our sponsorship business this past fiscal year. Overall, in fact, this was our best year yet in sponsorship revenue. I mentioned some of our significant new sales and renewals, Spectrum, Verizon, HUB, MSC Cruises. But this past year's results also included the impact of our sports gaming partnerships. So, I won't get into specifics, but what I can say is that sports betting is one of our largest revenue categories in marketing partnerships this year and was a big piece of what helps drive growth in fiscal 2023 to a new revenue record. We've got three great partners under long-term agreements. And as the landscape evolves, if New York State regulations around online sports gaming were to continue to evolve or other sports betting-related opportunities were to arise, whether that would be lowering the tax rate for operators or the opening of a downstate casino, we think these would only increase the revenue potential for us. So we continue to see sports gaming as an important sponsorship category for us as we look ahead. And we're pleased with the partnership we've established today.

Thanks. And I have a follow-up question on just how we should think about expense growth for 2024. The color on the salary cap increases was helpful. And I think the new NBA collective bargaining agreement comes into play this season. Could you talk just a little bit more about any impacts from that and how the growth in expenses this year for fiscal '24 might compare versus historical growth?

Sure, Devin. So just a little bit more about in what I indicated earlier to Ben, right, that we are looking at higher operating expenses, again, the current rosters and then some of the lead related expenses being revenue-sharing expense and lower projected luxury tax receipts, and again, and then the increase in the NBA salary cap, and then the NHL cap going to $83.5 million. But just as it relates to the new collective bargaining agreement overall, we don't expect -- we're not anticipating any material impact to our business.

Thanks, Devin. Operator, we'll take one last caller.

And your final question comes from the line of David Joyce from Seaport Research Partners. Your line is open.

Thank you. Two questions, if I could. First is on the playoff revenues. While you did have a couple of fewer home playoff games this quarter [Indiscernible] per playoff game revenue was up maybe 8.5%. Could you dive into that some more, perhaps [Indiscernible].

Hey, David, it's Ari. You're breaking up a little bit. I think we got the gist of the question, though, you're looking for a little bit more detail on playoff revenues for the quarter, Victoria?

Sure. Thanks. Hi, David. So as you know, playoffs can be a significant increment -- significantly incremental to our business, depending on the length of the playoff run. So our playoff tickets are priced at a significant premium to our regular season games, F&B and merchandise per cap spending is typically well above the regular season averages. In this quarter, we hosted eight playoff games at The Garden, as compared to last year, which was 10 playoff home games. So as a result, our playoff-related revenues for the fourth quarter were $56.2 million as compared to $64.8 million in the prior-year period. So this is translating to roughly $7 million of revenue on a per game basis. In addition, approximately $4 million in per game direct operating expenses as well as some additional marketing and administrative costs that are incurred in connection to playoff participation. So it's a positive impact. And I think as we've talked about in the past that a playoff run, we believe, has a positive carry-forward effect into future fiscal period.

Great. That's helpful. Thanks. And if you could also talk about the pacing [Indiscernible].

Sorry, David, you're breaking up on -- can you repeat that question? I heard pacing.

Yes, the pacing on other types of ticketing packages or individual ticketing sales for the upcoming season, how is that pacing?

Sure. We're really bullish on where we are at the moment. As I mentioned in my prepared remarks, the combined average renewal rate of our season ticket packages is 93% right now, and that's continuing to rise. With respect to pacing last year at this time, we were about 91%. So pacing ahead. And I want to remind you, that is on a larger renewal base of tickets and includes season ticket price increases for both teams. Season tickets represent a majority of our ticketing revenue for each team. As we look ahead to individual tickets, group sales, we're still really early in the sales cycle. In fact, we haven't placed individual games or groups on sale for the Knicks yet because the NBA schedule is just set to be released later on today. But we are in the market with the Rangers, and both groups and individual ticket sales are pacing ahead of this time last year. So, we feel we've got really good tailwinds, strong momentum and ahead of our pacing from last year, which was a record.

All right. Thank you very much.

And this concludes our question-and-answer session. Mr. Ari Danes. I turn the call back over to you for some final closing remarks.

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.