Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.

[Operator Instructions] We would like to remind everyone that this conference call is being recorded. I will now turn the call over to Corinna Freedman, Head of Investor Relations for Manchester United..

Thank you, Grant. Hello, everyone and welcome to Manchester United's second quarter 2021 earnings call. Our call is being recorded and webcast and a replay of this call will be available on our site for 30 days.

Before we begin, and as a matter of formality, we would like to remind everyone that this conference call will include estimates and forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.

Any such estimates or forward-looking statements, should be considered along with the cautionary note included with our earnings release as well as additional risk factor discussions in our filings with the SEC.

With us today on our call this evening; Ed Woodward, our Executive Vice Chairman; Richard Arnold, our Group Managing Director; Cliff Baty, our Chief Financial Officer; and Hemen Tseayo, our Director of Corporate Development. I will now turn the conference call over to our Executive Vice Chairman for opening remarks.

Ed?.

Thank you, Corinna and thank you everyone for joining us. While our focus today is on the second fiscal quarter is also an opportunity to reflect on what's been an extraordinarily challenging year for Manchester United for football and of course the society as a whole.

It's almost 12 months since the pandemic began to tighten its grip on the UK and we were required to close old traffic for supporters. As I've said before, their absence has only highlighted the importance of fans to the fabric of football. We can't wait to welcome them back.

However, while Matchdays have not been the same, we are proud to play that part in keeping football going to maintain a precious source of entertainment and community for fans around the world.

I want to pay tribute in particular to our coaching, medical and support staff who enabled this hectic schedule of matches to continue in very difficult circumstances. The past year has tested our clubs resilience and values and I'm pleased with how we performed in both respects.

Since the start of the pandemic, the club and our foundation have together provided over £5 million of charitable support to good causes in our local community and beyond. This reflects our commitment to being a positive force in society and a source of pride for our fans.

It also reflects the dedication of all of our employees and robustness of our finances fueled by our commercial business and responding to this once-a-century-level crisis. In Europe, we continue to play an active role through the ECA in discussions on the future of UEFA's European club competition after the current competition cycle ends in 2024.

While many details are yet to be resolved, we look forward to seeing the full final proposal from UEFA that we anticipate will include a greater involvement of clubs in the governance and control of the competition.

And of course, a new format with greater appeal for fans and which crucially will continue to go hand-in-hand with thriving domestic leagues. Demand for live football remains strong and we feel very confident about the long-term prospects for our support. In the near-term our focus remains on preparing to return the fans to Old Trafford.

We're seeing some positive examples around the world of live events with reduced capacity crowds delivered safely with social distancing.

The successful rapid rollout of vaccines and falling rate of infections in the UK, makes us optimistic about the government's road map out of the lockdown including plans for the gradual reopening sports dairy spectators beginning this spring.

Initially this will be with limits on capacity, we're hopeful of crowds ramping back up to full capacity next season. As we look beyond the pandemic, we feel more confident than ever about the power of sports that United inspire across generations, cultures and ideologies.

Football in particular is playing an active role in the campaign against racism and other form of discrimination that still sadly pose a challenge for our game and our society today. We as a club will continue to be at the forefront of those efforts. In summary, I'd like to reiterate this club's strong underlying fundamentals.

Return of our fans to Old Trafford enabled by strong vaccine deployment in the UK and the easing of lockdown restrictions is no doubt a light at the end of the tunnel in the near-term. And while we're pleased about this season's on-pitch progress and the strength of our current squad, we are as equally bullish on our long-term prospects.

Our best-in-class digital operations, increased fan engagement, enduring sponsor partnerships that facilitate investment in the playing squad, the strength of our Academy and most importantly our self-sustaining operating model will all enable this club to emerge in this crisis in a stronger relative position.

In a moment, I'll hand over to our Group Managing Director, Richard Arnold, to update you on our key business activities and provide an operational overview. But a final comment, I would like to extend my thanks to all our teams both on and off the pitch, for their hard work and sacrifice through this quarter and through the whole of 2020. Thank you..

Thank you, Ed, and thank you to everyone for joining us today. As we reflect on the past year, few understood that the outset of the pandemic, the full ramifications of the exponential spread of this virus or the huge social and economic impact the global lockdown measures would impose.

To echo Ed's sentiment, this past year has tested all of our resilience. And we are eager for the continued widespread vaccination rollout, which will help save lives and steadily but surely, but is all back on a path toward normality.

At the same time, we recognize that not everything will revert to the way things were before and that the pandemic has created an opportunity for us to rebuild better.

We've said many times that the pandemic and global boards have accelerated trends that were already in motion, and this is no doubt through the impact that this has had on our operations as a club, whether it be providing a more flexible and modern workplace or by deepening our digital connections with our fans and followers.

Despite the uncertain backdrop and the profound absence of our supporters at Old Trafford this season, we're proud of the way we've responded to the crisis with resilience and adaptability. While the ongoing global pandemic remains a significant headwind, we quickly pivoted and transformed many aspects of our business.

The results of which, we expect, will generate benefits for many years to come. As Ed briefly touched on, we're humbly proud of the positive difference we were able to make in our communities in 2020. As Chairman of our foundation, I'm really proud of the work that has been accomplished.

We supported our community with approximately £5 million in contributions, including direct nations, fundraising efforts and payments to our casual staff. We believe that nearly 93,000 unique people benefited from our efforts, across the NHS, local schools and food banks in 2020.

We've also recently opened Old Trafford for use by the NHS as a training center for hundreds of volunteers that are taking part in the national vaccination program. And we will continue initiatives of this kind to help our communities for as long as the pandemic continues.

We will also remain committed to advancing, diversity and equality in our club and in our sport. The club was one of the founding signatories of the FA's Football Leadership Diversity Code.

Our commitment to diversity spans all areas of our club, and our aim is to achieve appropriate representation of all underrepresented groups in society, including the LGBT+ community and those with disability.

To that end, we're pleased to announce that the final construction of our £11 million upgrade of our accessible facilities was completed at the end of 2020. And Old Trafford will be better equipped than ever to welcome back all of our fans.

As you all may be aware, last week, the government released its four-step roadmap for the easing of the national lockdown. If plans proceed according to the current schedule, crowds of up to 10,000 people will be allowed to return to football stadiums in the UK after May 17, with all restrictions ending from the 21st of June.

It is our understanding that this would mean a return to normal operations at Old Trafford. Obviously, this will continue to be subject of circumstances in the UK. In parallel, we're establishing protocols to deal with testing, passports and ongoing distancing. We know that our season ticketholders, members and other fans, are very eager to return.

And we expect our supporters, will treasure these shared experiences now more than ever before. We look forward to sharing more details on our plans on our next earnings call, including our plans for next season when we hope to return to full capacity. Moving now to our business update. Turning first to our digital and media operations.

Given the absence of Matchday supporters, we continue to prioritize digital initiatives to drive engagement as part of our ongoing club wide digital transformation.

The rate of that acceleration has increased and we've continued to invest not just in platforms and technology, but we have also further strengthened our leadership team in digital marketing and CRM.

In social media we continue to broaden our geographic and demographic reach as we launched a club presence on several new and growing social media platforms this quarter. Our women's team launched in July 2018 has recently surpassed 1 million followers on Instagram amassing a bigger following the nine Premier League men's clubs.

On our own platforms we have developed and launched several new mobile app enhancements and features. Specifically our Gamify predictions and streaks functionalities which have significantly increased our mobile app usage this quarter and more users are now logged into our mobile app than ever before.

More compelling and personalized data-led engagement has benefited in a superior end-to-end fan experience a strong engagement in turn drove strong traffic to our e-commerce channels. I think it's useful to note that e-commerce merchandise sales for the 6-month period have already surpassed the entire prior season.

In fact all three of this season's men's kits achieved record launch day sales and we are also enjoying record sales of our women's kit. And this momentum is continuing into the current quarter as we achieved record e-commerce sales in January. While these stats are impressive we believe we are only just getting started.

And we see significant open runway to continue to drive traffic and conversion as well as diversify our geographic reach and product mix. On a gross basis we are seeing that these sales have helped to offset the revenue loss of the Megastore which was closed on December 31 part of the latest lockdown.

We expect the store to reopen for the fans on April 12 in accordance with the time line communicated by the government. Turning to our sponsorship operations. We believe the market continues to stabilize and we're seeing a flight to quality across the industry.

Since the first quarter we've signed renewal deals with two of our global partners and continue to support all of our partners with new and exclusive interactive digital events. In mid-December we took our #ILOVEUNITED supporter and partner programming to India virtually via a multi-platform broadcast featuring local hosts and influencers.

This event generated 24 million MU impression -- channel impressions and 223000 supporters streamed the event live. We also recently held an #ILOVEUNITED USA fan event last weekend with 23 of our partners activating across the event hosted by high-profile United supporters and featuring Ole and our recent U.S. signing Tobin Heath.

This event was viewed by nearly 6x the amount of viewers of our India event with 1.4 million live streaming via Facebook YouTube the web and our app. Turning to China. United was the most engaging football club on China's native Weibo and WeChat platforms for the 2021 season this quarter.

On Weibo, Manchester United is currently the most followed football club on the platform. We also launched on the Douyin platform simultaneously with our global TikTok launch in November. And we've earned nearly two million followers and over 17 million likes in the brief three months since launch becoming the fastest-growing football club on the app.

Offline, we remain on track for late March early April opening of our first experience center in Beijing, the Theater of Dreams experience center with our partner Harves. And finally though we continue to expect near-term challenges there remains much to be optimistic about.

We will continue to relentlessly pursue the many growth opportunities that remain for our club. And we are excited about the potential to deepen our community engagement, via our own platforms as well as launch on new and emerging platforms. which we expect will drive engagement to the next-generation of supporters.

Ultimately, the strong commercial engine of this club inspired by our commitment to deliver the engagement that our fans demand, drives a virtuous cycle and fuels our ability to continuously and sustainably, reinvest in the team, fortifying our Club's future, not just over seasons, but over decades.

And with that, I will now turn the call over to our CFO, Cliff Baty, to review the results, the details of our results and discuss our financial outlook.

Cliff?.

Thank you, Richard. I'll first talk to our fiscal year results, which continue to be impacted by the COVID-19 pandemic and related lockdown. Given this uncertainty, we will not be providing any forward revenue or adjusted EBITDA guidance today.

As a reminder, year-on-year comparisons relative to fiscal 2020 have been impacted by our return to the Champions League and the number of games played in the year. Total revenues for the quarter were £172.8 million up £4.4 million versus the prior year, due to the impact of the Champions League revenues relative to the Europa League.

Adjusted EBITDA was £70.3 million, down just £1.8 million than the prior year quarter.

Turning to the key items and the results, total commercial revenues were £62.6 million, sponsorship revenues of £37.8 million, £7.3 million lower than the prior quarter, due primarily to a one-off credit in the prior year, together with lower revenues owing to our share sponsor extension.

Merchandising and licensing revenues were £24.8 million, 2.7% below the prior year figure, which reflects a significant contribution in our -- significant reduction in our Megastore trade due to COVID impacts, offset by increased e-commerce royalties and wholesale revenue.

Broadcasting revenues increased by £44 million to £108.7 million, due to the Champions League revenues, compared to the prior year Europa revenues. In addition, all six group stage games were played in the second quarter of this season. Matchday revenues for the quarter were £1.5 million, being membership fees and property income.

10 total matches were played at Old Trafford with no fans in attendance, including three Champions League matches. Moving down the income statement, operating expenses excluding depreciation and amortization increased by 5.6% versus prior quarter.

This includes total wages which were up 15.2%, primarily due to higher player wages for participation in the Champions League. Other operating expense for the quarter decreased by, £4.6 million, reflecting the impact of played matches behind closed doors.

Depreciation and amortization costs were £36.1 million, an increase of £1.2 million versus the prior year. Net finance income for the period was £19.7 million, an increase of £4.4 million due to foreign exchange gains on the unhedged portion of our U.S. debt. As we have mentioned in previous quarters, our cash interest cost in U.S.

dollars, remain broadly consistent year-on-year.

Turning now to our balance sheet, at the end of December, net debt was £455.5 million an increase of £64.3 million over the prior year, reflecting the impact of COVID through a loss of Matchday revenues, resulting in a drawing down £60 million of our available £200 million credit lines during the quarter.

At the 31st of December, we had just over £80 million of cash on the balance sheet. Finally, we expect player cash CapEx for FY 2021, to be at approximately £110 million with amortization of £127 million.

Looking forward to the current quarter, it's worth noting that we'll be lapping the early stages of the pandemic and the initial cancellation matches which occurred beginning March 12th last year. We therefore expect to play an additional five premier league matches in the current quarter versus the prior year.

In closing, I'll reiterate the sentiment of Ed and Richard, we are well positioned to weather the current uncertainty and optimistic for the future.

And with that, we're now ready to take your questions, Operator?.

Question-and:.

We will now being the question-and-answer session. [Operator Instructions] Our first question today will come from Laurent Vasilescu with Exane BNP Paribas. Please go ahead..

Hey guys, this is Xian on for Laurent. A couple for me. First, on the retail side, down only 3% as you mentioned. I thought that was pretty impressive considering the retail Megastore was closed. You mentioned e-commerce was strong.

Can you help dimensionalize a bit, how big e-commerce is for you guys? And how big was the decline in the Megastore?.

Rich, do you want to take that?.

Yeah. So I think the first thing to understand is that there's a difference in the gross versus net reporting between the -- what goes through the Megastore where we report the gross retail passing through to consumers, whereas, for the e-commerce we report the licensed share of net profit as revenue, so a difference in mechanism.

In terms of the drop that's been offset by both the explosion and the scale of the license profit as well as wholesale that's the sale by us to our e-commerce license partner, a product that's offset the reduction.

So whilst the gross numbers are broadly the same year-on-year that translates -- in total that translates to a smaller reduction than you would expect purely from the closing of the Megastore..

Okay, got it. Thanks. And then second on broadcasting rights. As you think about it longer term, I think there was an article recently about the NFL potentially getting double the fees.

I was wondering, how you're thinking about the growth profile for the broadcasting revenue? And maybe if you can break it out between maybe domestic broadcasting rights versus international? What -- how are you thinking about potential growth rates over time?.

Let me start with that and then maybe Cliff if you jump in. I mean, yeah. The NFL is the best example I think to point to in terms of premium sports league. And I think the way we think about the growth that we expect to come, I think it's likely to be less -- a lower rate of growth than we've experienced the last two cycles in the U.K.

right sales, but set off that reduction of growth is covered by still big growth that we're seeing on the international side. So the cycle 2021-2024, that the premier league has been selling during COVID as well as a couple of deals just at the start has seen some good growth rates.

So I can't really -- I don't really want to put a number on year-on-year growth. There is positivity that we're hearing with regard to the deals as they come through even during COVID. And I think that's the same as the NFL at least in terms of positivity despite the environment that obviously they're selling the right to.

Cliff, I don't know if there's anything to add on that?.

No. I think you mentioned, I mean, we had the net deal you mentioned that, which happened just before COVID, which again shows the appeal of the premier league across international. But otherwise nothing..

Okay, very helpful. Thank you guys..

Our next question will come from Randy Konik with Jefferies. Please go ahead..

Yeah. Thanks a lot. You touched on China a little bit in the remarks. Can you just give us some perspective -- added perspective on how you're thinking about monetizing the region in a deeper way? Obviously you talk to -- give us those great statistics on the engagement of your team, club versus everyone else.

So I was just curious on -- update on the different -- the partnership you have over there what's going on? What's the latest there? And just any other areas of monetization you're thinking about to really capitalize on the strength you have for the brand and the team in China?.

Yeah -- everyone. Yeah, so three main monetization routes that we are actively both pursuing and participating in. The first, obviously, with such an important part of our family of fans in China is the benefit that comes and the attractiveness of our rights to sponsors.

So that engagement translates into an ability to engage with those fans and higher sponsorship revenues. Secondly, the integrated partnership we have with the Alibaba group, with the content distributed on YouTube, as well as the work that we're doing to pass that traffic into Tmall on an integrated ecosystem basis drives e-commerce revenues.

And then finally the in-market experiential work that we're doing particularly with Harves obviously will drive – and that's – we're opening the first of those this spring with a further four sites identified and 14 sites contracted.

So a big expansion of that in terms of its reach across the country and very excited about what that can bring for us in terms of fan engagement and sponsor driving..

That was super helpful. The one thing that, we're seeing at least in the US market, I'm sure it's around the world is the traditional media companies or FOX, or what have you. They're trying to do more – I guess, selling more like Netflix-like content, which means less commercial or what have you.

So are you seeing disproportionately more interesting – your different kind of sponsor side different brands out there that want to get more exposure to your brand and the live exposure you get across the world.

Just give us some more thoughts there? And any type of, how do the ordinary demand that you're seeing from – within the sponsorship commercial segment?.

Yeah. That's a good question. So I mean, I think, there are a couple of items that set us apart, in what I would say is a unique way globally.

The first is the scale of the fan base and the passion of the engagement and that translates into partners looking to activate with it particularly in a digital setting a very deep engagement level with our fans and that translates to get deep engagement to sponsors and successful commercial engagement.

And that is a huge multiple of the typical advertising you see in a digital setting. So that itself is very powerful.

And then further to your previous question, we're able to offer that engagement and commercial success not only in a western digital ecosystem but in – as strongly equally strongly, if not more so in the Chinese digital ecosystem and that – there's obviously a distinct subset.

So that is unique in terms of being able to offer that strength on a genuinely global basis. And that attracts partners that are seeking to be successful in that way, and in that market and that tends to be the large and powerful fast-growing global company..

Super helpful. Thanks, guys..

Thanks, Randy..

Grant?.

There being no further questions, this will conclude our question-and-answer session. And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect..