Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United Fourth Quarter 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, Allison. Hello, everyone, and welcome to Manchester United’s fourth quarter of fiscal 2021 earnings call. A press release containing our financial results was issued earlier this morning and can be accessed on our Investor Relations website.

This call is being recorded and webcast and a replay of this call will be available on our website 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 disclosures included with our earnings release as well as additional risk factor discussions contained in our filings with the SEC.

With us today on our call this morning, or this afternoon, if you are in the UK, is 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 welcome everyone, and thank you for joining us today. As we review our financial results for the 2021 fiscal year, there’s no doubt that those 12 months are among the most challenging in the history of Manchester United.

While the financial impact from the pandemic is visible, our continued underlying strength is also clear to see, and everyone associated with the club could be proud of the resilience that we’ve shown through these most testing of times. We said during the depths of the pandemic that the club would emerge in a stronger relative position.

And I believe that we’re now seeing that borne out as we build towards recovery from a very solid foundation. The most important part of this recovery is of course the return of fans to Old Trafford, and it’s been fantastic to see in here the stadium full for the first time in almost 18 months.

The amazing atmosphere during the opening home games of the season demonstrates the fans are the lifeblood of the game, and we’re so glad to have them back. I’m also delighted to say that we expect to see -- continue to see full capacity crowds at Old Trafford, both Premier League and Champions League games this season.

On the pitch, the team has made a strong start in the league and everyone in the club is feeling excited about the rest of the campaign. We significantly strengthened the squad over the summer, the addition of Ronaldo, Varane, Sancho and Heaton.

These signings have demonstrated our continued ability to attract some of the world’s best footballers to Old Trafford and our firm commitment to helping Ole deliver success on the pitch. Furthermore, we recently sold Dan James to Leeds for a fee of £25 million, plus add-ons.

We’ve been clear in our strategy to build a squad with a blend of top class recruits and homegrown talent, comprising a balance of youth and experience, with the aim of winning trophies and playing attacking football the Manchester United way.

As part of this, we’ve continued to strengthen our recruitment and scouting processes, and we’ve also increased our investment in the academy to ensure that this success is sustainable. While sport building is a constant process, we’re more confident than ever that we’re on the right track. Same is true of our women’s team.

We just made a positive start to the season under our new head coach Marc Skinner. And we’re firmly committed to continuing to build our presence in the women’s game. Our optimism about on-field prospects goes hand in hand with the confidence and our robust operational business model to enable continued investment in our football teams and facilities.

It’s not an accident that we’ve been able to invest this summer at a time when many clubs have been retrenching. This reflects a strong commercial model we’ve built over many, many years and showing that our spending is always underpinned by revenues that we generate ourselves.

However, while we’re confident in our relative strength, it remains clear that football, as a whole, faces major financial challenges, caused by years of material inflation and wages and transfer fees, exacerbated by the impact of the pandemic.

We are committed to working with the Premier League, ECA and UEFA to promote greater financial sustainability at all levels of the game. Global demand for live football is as strong as ever, as evidenced by the robust levels of recent domestic and international broadcasting rights deals and record engagement with our own club content.

We also remain optimistic regarding the remaining upcoming international rights renewals, notably in North America this autumn, given increased interest in live sports or OTT providers, coupled with the growing appeal of the sport.

There is significant potential for further growth as the world digitizes, and Manchester United will continue to be at the forefront of that expansion.

And no club can succeed on its own, we want to be part of a healthy, vibrant, domestic and European football pyramid, working together with our governing bodies, and most importantly, the fans to preserve and enhance the magic of our game.

As a club, we are committed to those objectives, and we look forward to pursuing them in the months and years ahead. I’ll now hand you over to Richard for an update on our commercial activities. Thank you..

Thank you, Ed, and thank you to everyone for joining us this morning. The fourth quarter marked the beginning of the return to normality in club operations as the UK took incremental steps towards reopening and began to tentatively emerge from the global pandemic.

As Ed highlighted, it’s a tradition of the club’s ability to adapt and overcome extraordinary circumstances. This is a result of the sustainability of our operating model, combined with the enduring appeal of Manchester United, a club that has stood for resilience and excellence for nearly a century and a half.

Though a full reopening of the UK was ultimately delayed a few weeks into July, our Megastore operations resumed with the April 12th opening of nonessential shops across the country and Old Trafford welcomed back 10,000 supporters for our last home match of the season on May the 18th against Fulham.

Our café, museum and tour also resumed operations during the quarter. Following increased crowds for preseason fixtures and the full Old Trafford for our opening two home games, it’s our current assumption that we will continue to welcome full capacity crowds for the balance of the current season.

However, we know that this remains subject to public health circumstances and associated regulations in the UK as the pandemic evolves. Nevertheless, we’re encouraged by the success of multiple largest scale sporting events held this summer in the UK, including the opening four rounds of premier league matches this season.

To that end, beginning 7th of June, in anticipation of a full return of fans, we commenced the sale of season tickets for the ‘21-’22 season. We experienced a very brisk sell-out once again this year. Executive club suites and boxes have also sold out.

And our membership program, generally a good leading indicator of ticket demand, both in the UK and internationally, is experiencing another year of record signups. It’s also important to note that this strong demand was in place before the start of the season. Care for our staff has been a priority for us through the pandemic.

As has been documented, we made the decision not to furlough staff and to pay goodwill payments to casual Matchday staff, who would have been impacted by games being played without fans. As Matchday operations normalized, we believe this has helped ensure that we have maintained our Matchday staffing levels.

We’ve also recently committed to paying all club employees, including our casual staff, above the UK real living wage, with the change effective beginning this season. The health and safety of our staff and supporters will remain paramount for us. And while our protocols have altered in coordination with government guidelines, we will remain diligent.

We expect to continue to refine our Matchday protocols for a more contactless fan experience, building on our recently launched mobile ticketing capabilities and car park automation, amongst other initiatives. Behind the scenes, we will continue to maintain appropriate COVID protocols to ensure that our players and support staff remain protected.

As our Matchday operations normalized post-pandemic, our sponsorship activity also continues to ramp up, contributing directly to our ability to invest on the pitch. During the quarter, we announced our new principal shirt partner TeamViewer in mid March, and we officially launched the partnership on July 1st.

In just the first six weeks of our partnership, we surpassed all recent partner launch impressions globally. And whilst I’ll touch on a few highlights from our new kit launch in a few moments, I’d like to take this opportunity to thank our sponsorship team for completing this sponsorship partnership during the pandemic.

No small feat, given the macro challenges and headwinds, and it’s a significant testament to the strength and power both of global sport and the global appeal of Manchester United. For the full fiscal year, we renewed three global partnerships, as we continue to deliver significant value to our partners, despite the absence of physical events.

In the fourth quarter, we took steps towards the resumption of typical partner activations, hosting our first physical partner event since the onset of the pandemic. This was a hybrid I Love United event in China with both physical and virtual activations for partners and fans.

We expect to continue to offer hybrid events, including digital components to our partners, post-pandemic, given their success and appeal. This particular event was coordinated with the official public grand opening of our Theatre of Dreams entertainment center in Beijing in May. To-date, feedback from the opening has been very positive.

Our Harves partnership is expected to deepen our engagement with fans in China by offering our supporters in China interactive museum, restaurant, retail and other entertainment. We expect additional locations to open in China in Shenyang and Changsha, followed by Shanghai later in fiscal ‘22.

Turning now to our digital media operations, given the absence of Matchday reporter supporters through May, we continue to prioritize online initiatives to drive engagement as part of our ongoing club-wide digital transformation.

The rate of acceleration has increased and we continue to invest, not just in our platforms and technology, but we’ve also further strengthened our team in digital marketing, and added additional resources to our CRM and data analytics.

Through social media, we continue to broaden our ability to interact and communicate with our fans around the world. With club’s presence on several new and growing social media platforms this quarter, we ended with 175 million social connections and 158 global digital interactions, up 38% on the prior year.

On our own platforms, we continue to iterate our mobile app, with enhancements in new features driving a 31% year-on-year increase in daily active users. We also recently launched a new functionality to screen our club podcast directly within our app, and this podcast has become the number one official football club podcast on Apple.

Once again, this quarter, we know that our improved engagement trends drove strong fan traffic to our e-commerce channels. E-commerce sales for the full year surpassed the prior season with increases in both, unique visitors and average order value.

In fiscal year 2021, our 2021 kit launches set multiple e-commerce records with all three of our previous year kit setting those sales records. With the rollout of our new ‘21-’22 home kit, featuring the new shirt partner TeamViewer this season, we surpassed these prior record levels once again.

Overall, we’re confident that the learnings and enhanced capabilities that we developed this year to better provide our supporters with content and access throughout the pandemic will continue to help fans around the world to continue to feel more connected than ever to their club.

If I may, I’d like to take a few moments to highlight some of the extraordinary work undertaken by our foundation this fiscal year. Whilst we’re proud of our global identity, we remain firmly rooted in our local community.

We’ve spoken in the past about local, national and international efforts that have helped them to address these issues, the issues exacerbated by the pandemic, and we’ll continue to use our platforms to make real life impacts. We’ll also use our platform to campaign globally on important causes and issues, such as racism.

During the quarter, the club, in coordination with all Premier League clubs participated in a week-long worldwide social media boycott to highlight the discrimination that continues to persist in global football.

As part of our ‘All Red All Equal’ initiative, we also launched the ‘See Red’ campaign, which calls on fans to celebrate the ethnic diversity of our players and their contribution to our rich history, and importantly, provided fans with a mechanism to more easily report discriminatory behavior online.

As a club, we remain steadfast in our dedication to help eradicate this toxicity from our sport. With that, I’ll now turn the call over to our CFO, Cliff Baty to review details of our fourth quarter results and to discuss our financial outlook for the upcoming fiscal year.

Cliff?.

Thank you, Richard. I’ll now talk you through our fiscal results, which remain impacted by the COVID-19 pandemic, and I’ll speak to our current expectations for the upcoming fiscal year.

As Richard indicated, though we are hopeful, given current guidelines in the UK, we cannot be certain that our revenues will not be impacted by further COVID-related disruption. And as a result, we are not providing any forward revenue or EBITDA guidance for the upcoming fiscal year. Turning now to the full year results.

I’d like to remind you that year-on-year comparisons have been impacted, both by the absence of fans as well as the completion of the ‘19-’20 season in this fiscal year. Total revenues for the period were £494.1 million.

This was £14.9 million lower than the prior year, owing to the impact of the pandemic, including a full season played behind closed doors. Adjusted EBITDA was £95.1 million, down £37 million from the prior year, due both to reduced revenues and increased wages from champions league related uplifts.

Turning to the key items and the results, total commercial revenues were £232.2 million. The sponsorship revenues were £140.2 million, £42.5 million lower than the prior year due to the impact of no summer tour and COVID-related contract variations.

Merchandising and licensing revenues were £92 million, down £4.3 million, reflecting the closure of the Megastore for the majority of the year, partially offset by strong growth in e-commerce.

Broadcasting revenues for the year were £254.8 million, an increase of £114.6 million, due to participation in the UEFA Champions League and subsequent progression to the Europa League final, coupled with the carryover of 10-season and ‘19-’20 fixtures into July and August of 2020.

Matchday revenues were £7.1 million, a reduction of £82.7 million due to all matches prior to the final home match of the 2021 season being played behind closed doors. The Matchday revenues recognize this year relate mostly to membership fees and ancillary property income. Moving down the income statement.

Operating expenses, excluding depreciation and amortization, increased by £22.1 million. This includes total wages, which were up 13.6%, primarily due to higher contracted player wages for participation in the Champions League, relative to the Europa League the prior year.

The wages figure also includes COVID-related goodwill payments made to staff throughout the year. Other operating expenses reduced by £16.5 million, primarily reflecting the reduction in costs from playing behind closed doors, together with a disciplined approach to any discretionary costs.

Depreciation and amortization costs were £139.4 million for fiscal 2021, a reduction of £5.9 million. Net finance income for the year was a £12.9 million credit, a favorable movement of £38.9 million, due to foreign exchange benefits on the unhedged portion of our U.S. dollar debt.

I would like to highlight our tax charge for the year of £68.2 million, which reflects the non-cash write-off of deferred tax assets and has created an unusually large loss of £92.2 million for the year.

This non-cash accounting write-off is caused by the UK corporate tax rate increasing to 25% from April 23, which is above the prevailing U.S corporation tax rate of 21%. This means, for accounting purposes, we will now need to write off our U.S.

deferred tax assets, as they will not have any economic value, given that the UK rate is higher than the U.S rate. Please note any future increase in the U.S. tax rate to above the UK tax rate could see a formal partial reversal of this accounting non-cash write-off. Turning now to the balance sheet.

At the end of June, cash balances were £110.7 million, up £59.2 million compared to the prior year. This increase in cash reflects the drawdown of £60 million of our revolving credit facility in 2Q of this year. Our year-end cash balance does not reflect around 50% of the seasonal ticket revenues for FY22 that were collected in July.

Player CapEx for FY21 was £92.2 million further the period. Net debt was £419.5 million, a decrease of £54.6 million compared to the prior year, due to the higher cash balances combined with the impact of the favorable foreign exchange movements on a U.S dollar denominated debt.

In terms of cash liquidity, we have access to £140 million of undrawn committed facilities. Now, turning to our outlook for fiscal year ‘22, we’re now providing any revenue or adjusted EBITDA guidance, given the uncertainties of COVID.

However, we are hopeful, based on the success of the initial two home matches this season with full crowds, that Matchday revenues will be significantly increased, following the return of fans. For commercial revenues, we again do not have a significant summer tour for FY22.

However, we are confident in the future outlook for our commercial operations. In broadcasting, with the start of a new UEFA cycle, we’ve just seen a small growth in prize money allocation to the clubs.

In terms of costs, we’d expect wages to increase by around 20%, which reflects the increased investment in the squad, following the summer transfer window. Other expenses are expected to increase -- are also expected to increase over the prior year with the return of full Matchday operations.

Finally, our current committed net player CapEx in fiscal year ‘22 is approximately £80 million with amortization costs of £150 million. With that, I’ll turn the call back over to Corinna..

Thank you, Cliff. Before we open up the call to your questions, we would like to alert you to a change in our reporting. Starting with fiscal 2022, we will hold earnings conference calls to review the second quarter and fourth quarters. For the first and third quarters, we will issue a press release only.

For the current quarter and for every future quarter, however, we will remain available for your questions, which you can submit via our Investor Relations email address at ir@manutd.co.uk. We sincerely thank you for your continued interest in Manchester United. And with that, I will turn the call back over to our operator for your questions.

Allison?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Xian Siew of Exane BNP Paribas. Please go ahead with your question..

Hi. Thanks for taking my question. So, congrats on signing Cristiano Ronaldo as well.

Can you just talk about his impact on the commercial revenues and -- in terms of maybe shirt sale boost or marketing awareness? And I know you’re not guiding to commercial revenues, but if you think about it versus, I guess, pre-COVID levels, it seems like the momentum is there.

Should we expect that to even be maybe above 2019 levels, or how do we think about it directionally?.

Hi Xian, it’s Cliff. I’ll take the initial finance -- the first finance question you asked, and then I’ll hand over to Richard for the wider impact of Cristiano. I think, in terms of commercials, as was indicated, the best way to look at it, as you’ve referenced, would be our last pre-COVID season, which would be sort of ‘18-’19.

What you’ve got to do is also allow for the fact we have no summer tour, really no effective summer tour for this forthcoming year. So, if you take off the effects of that, which is -- so low-double-digit revenues, we’d be expect to be in a sort of a similar place as we were pre-COVID..

And then, just on the point around the impact of Cristiano and summer signings. Just to make clear, the results that we’re presenting today and description of them do not include any effect related to Cristiano. Obviously, it’s very early in terms of his arrival, and his impact on the pitch is immediate and visible.

We’ll be providing guidance as to where we are or providing an update as to where we are in terms of off-pitch activity and any effects there too in the next results we do. We’re not providing information at this stage in terms of where we’re up to on the current quarter..

Okay. And just one more on -- thanks, that’s helpful, on China. There’s been some recent choppiness, there’s been lockdowns, there’s been some demand issues over there and in other sectors. You touched on and it’s seems like things are going well there for you.

Maybe just help us understand, is there any impact from maybe lockdowns at all? And how you’re seeing engagement with Chinese fans and how that could evolve?.

Yes. So, I mean, obviously, in the year that we’re looking at here, there has been an effective lockdown, in terms of the outcomes received. I think that there are people much better informed than me to give you guidance on exactly how that’s rolled out in the last 12 months.

In terms of where we sit on that year, there are a number of things to allude to. It’s a very large part of our family, obviously, as we’ve alluded to previously, in terms of the number of fans out in China.

And that’s reflected in a number of items, A, the relationship we have with Youku and Tmall in terms of the integrated partnership and how that flows through, particularly, not just in engaging fans from a digital point of view, but also, how that’s then followed up by adidas in terms of satisfying any need that fans have for merchandise, and that’s been very successful for us.

The Harves partnership and the way that that’s been received, and indeed its location, immediately adjoining Tiananmen Square. So, it’s an incredibly important part of the world for us.

I’m really pleased to see that it’s bouncing back and in terms of the economic situation, and great strides have been made there in terms of building on and enhancing the engagement we have with fans..

[Operator Instructions] Our next question today will come from Randy Konik of Jefferies. Please go ahead..

Yes. Thanks a lot. Hi, guys. Back on Cristiano, I know that his arrival and signing is post the quarter-end. So, I understand there’s not going to be a want to quantify things. But, can you potentially give us some qualitative aspects of what his impact has been on a team, perhaps.

I know you gave what the quarter results -- you gave some color on engagement statistics around your app or what have you.

Anything you can kind of give us, if not quantify but like just qualify or talk to what his impact has been around different areas of the metrics you look at, whether it’s website, kit sales, et cetera? Just anything that you can kind of share with us would be very helpful..

Yes. I mean, just to reiterate what I said before, all of the updates we provided date to the quarter and pre-season start, so none of the statistics include any of the post-commencement of the season activities, specifically around Cristiano.

I think, the focus in terms of activity around Cristiano has been incredibly positive, not least on the pitch as much but a place to describe that, the name. In terms of commercial activity, of course, it’s been positive. But indeed you see a similar positive effect for all the signings we’ve seen over the summer.

And again, as I said in terms of the more quantitative update, we’ll be providing that in the next set of results and the next analysis we provide..

Got you.

And then, I mean, as you think about his ability to drive the commercial segment, are you able to disproportionally utilize him and his likeness or whatever you want, if your commercial partners or prospective commercial partners want to use him in trying to sign up with your company, your brand? Like, how do you think about this type of generational star being utilized disproportionately or not relative to other players on the squad?.

I think, in that final line, perhaps you’ve touched on how we view this, which is, again, all of the players that are assigned are signed exclusively for their ability to deliver on the pitch. My job in running the commercial operations of the club is to generate as much income as possible to sustain the virtuous cycle.

And that relates to us a club, us as a team and every single one of our players both individually and collectively in terms of the work we do with them. So, whilst every signing we make, and again some are better known than others, have a positive effect on fan engagement, have a positive effect on the activity we do.

That’s very much putting fuel into a well-run engine. And we’re well-renowned in the sports industry. We’re doing a good job of maximizing the commercial opportunity that comes to us. But, our focus is on signing players to make sure that they deliver on the pitch and then maximizing the opportunity afterwards.

And to single out any one player in terms of their impact, particularly this early after a signing would be wrong..

Okay.

And then lastly, I guess, Cliff, you said definitively that there’s no summer tour for summer 2022, is that finalized that that will not happen? And as we think about just post-2022, I know it’s early, when do you have to make a decision to -- how early do you make a decision to do a summer tour or not? When do the planning stages happen? I’m just curious, just to think about when we try to get back to normal, how long it’s going to be?.

Thanks, Randy. Just to clarify actually, because the -- I was talking about FY22, so for us that runs from the 1st of July just gone to the end of June. So, we’ve already had this summer. And whilst we did play a couple of matches in the UK, et cetera, that’s very, very different from we would class as a typical summer tour.

So, when I’m looking at the commercial revenues for you guys and giving you indication, to the previous conversation, looking at the last pre-COVID sort of commercial area, the numbers that we posted back then and in pre-COVID times, you have to take off sort of that amount from a summer tour, because we didn’t really have one, to get to a sort of underlying view of where commercial might end up.

In terms of planning for next season, which is what -- which would actually be summer, which returns FY23 for us. So, I’ll just hand over to Richard. He can talk a bit more about that..

Yes. And, Randy, the primary objective of pre-season tours is to prepare the team for the forthcoming season. So, that’s something that is planned more typically on a multiyear basis but certainly evolves as we go through the year. As we look ahead to next year and the offseason activity, we are at the point where we’re evaluating alternatives.

But again, we’ll monitor the situation quite carefully in respect to how the pandemic develops and how countries open up in terms of what’s best for preparing us for the succeeding season, in terms of travel versus staying at home to prepare. And there’s pluses and minuses on that in terms of the preseason preparation.

But, we will be factoring in what’s going on with the pandemic. As we sit here now, I think it’s certainly far from certain in terms of whether traveling abroad is possible..

Ladies and gentlemen, this will conclude the question-and-answer session and it will also conclude the Manchester United’s fourth quarter earnings conference call. We do thank you for attending today’s presentation today. And you may now disconnect your lines..