MSG Networks (MSGN) 5 Feb 212021 Q2 Earnings call transcript

Good morning. My name is Angie, and I will be your conference operator today. At this time, I would like to welcome everyone to the MSG Networks Inc. Fiscal 2021 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remark, session. speakers' the will question-and-answer be After [Operator you. Instructions] Thank the like to now would conference to I Relations. turn over Investor Ari Danes, go Please sir. ahead,

up Second Company's Company's and Networks morning's Greenberg, call morning, to discussion Quarter this XXXX Conference of a the Good and be the will begin Call. This we Company's EVP, the followed Bret with Richter, remarks, and questions. by President welcome The will for prepared with Financial CEO, operations. call a Treasurer. Officer results will their review Andrea open of Fiscal financial MSG After Chief

the Factors and be any call. and Securities update disclaims as the filings Securities and do of that cautioned during may discussion from a developments condition Investors of release, in that include factors. of result involve obligation the section community you perceptions Company Company's actual with and statements Investors statements Act operates Risk not any forward-looking those performance contained that condition as such contain the including operations, financial Please Reform it meaning which of statements the risks the may factors it Company's of the statements various or management's Private in today's XXXX. of any of guarantees corporate and website. that the forward-looking differ statements constitute If materially earnings results Company not the the events described have entitled of Commission, forward-looking take within business, operations and and in a may The are this uncertainties its industry and discussion These financial future the is of of are in therein. as Today's Exchange Litigation well and sections the financial available note copy and forward-looking analysis discussed results results, to following.

of X Pages call. operations release, operating to today's financial income. and discuss statements income earnings measures certain reconciliation On Lastly, on we non-GAAP we operating provide a X adjusted will of today's consolidated of and

In provided now release, to to by earnings the the addition, With will Andrea. I call provide net activities cash of free over on Page a cash that, X turn reconciliation flow. of operating we

this and Thank teams. seasons our XX our our face to so XX-game way schedule pandemic. viewership regular the continue across Ari, In viewers our teams good and all our again back morning. reception ensure far you, NHL for the the are watch year, now NBA and But their in telecasts. and favorite adapted we underway, season Knicks, of NHL been team, through platforms. filled of with December, NHL last season, to fiscal the regular our Halfway And the effects very XXXX/'XX month, start the of colleagues NBA's environment for seen with our is proud to we we've able we're We've live returned NBA welcomed pleased with game with their once schedule. game the the strong have

focused strength including challenges also our our value calendar three renewals these our end the company's daily in agreement we've live the to and of tackle of believe we our producing this five years, with continue, we As the content. affiliations speak sports renewed all of current distributors, over of last on of the We live top the XXXX. most near objectives. relationships recent however, strategic about environment, remain end, that to games To longer-term our

our no season preseason in programming telecasts this offerings. far for and content to partners advertisers and The innovative sports from create five our had NBA results. of brands financial quarter. integrate into work both live and only and our NHL regular our with their NHL and the to demand advertising delayed revenue so with strong start NBA that seasons the opportunities our regular telecasts to season, Turning we've impacted said, second four are That continuing

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opportunities. provide will our and and as sponsorship data expect new additional of this viewers launch We deepen with well other as create app connection insights us with the and revenue

how we continue of will sports market. the potential our learnings throughout best to Our as to gaming mobile leverage significant explore important be

revenue. discussed a Results for and accruals lesser Frontier, affiliate a this the reflected which in subscribers, potential affiliate rebates, quarter of to last to decline Turning impact extent, quarter. we

have of to have fiscal to partners. the turn will now all have X.X%, excited back decline a environment, content approximately we decrease approximately compared the closing, in for improvement subscriber value teams results. past In on we take compelling Excluding call And our operating you Frontier, challenging over of our first will networks. year resulted events year-over-year our X.X% Bret, quarter in through on the I while our who to are competing focus rate an maintained the for was our quarter. financial our delivering and creating the our

you, Andrea, and good Thank morning, everyone.

due was reflecting million, absence of These with Let's and affiliate a current the start primarily the with $XX.X the potential in NHL telecast prior with nonrenewal schedule in in NBA a nine offset favorable a in quarter start for for year quarter. affiliate year results X.X% by decrease adjustment period. decline were reflecting the decreases $X.X million Affiliate the of revenue advertising seasons, year discussion by million NBA revenues and resulted prior XXXX second second our the the rebates; as unfavorable period. impact the or of of accruals impact higher of $XXX.X with XXXX XX% million the in the $XX.X revenue, quarter, in recorded recorded affiliate regular compared affiliate quarter; which partially fiscal Frontier. a telecasts $X.X the adjustments the the of financial subscribers; million $XX.X decreased in year compared primarily million Total to This of primarily NHL NBA driven prior and delayed rates. XXXX fiscal decreased

decrease accruals compared the in XXXX as this million expect million a in the $XX XXXX to expenses year impact four quarter NHL fees XX% season quarters lesser quarter seasons. shortened result production-related regular similar the other and or rights shortened recorded expense, The a start and in a well potential level due lower to to to as of extent, we we as NHL costs. of with each in for expense our rights NBA currently amount Direct decreased second of the NHL operating and a record delayed XXXX fee of seasons, programming NBA As fees prior affiliate rebates at next quarter. $XX the reflected the the and the of primarily decline

In the seasons. of a year-over-year reflected costs delayed also and production-related basis on addition, in decrease start the the programming

of primarily seasons. as would expense shortened as a teams result were the fiscal NHL We XXXX expect our lower -- expected for in full compared fees that to fees of year rights if have the level be XXXX, playing with season

the expenses. in As decrease $XX.X X% in and a variety expenses prior year XX% a Adjusted offset the quarter SG&A was to of a by This decrease period. largely of approximately based for flow cash $X.X was million. or expenses decreased Reported advertising expectations operating to revenues the marketing million decreased income forward change. primarily factors, million and of $XX.X lower $XX.X free operating year, due direct from decline expenses. SG&A $XX.X may due or million the million and primarily on which are advertising lower reminder, as commissions prior these compared with sales

Turning to the sheet. balance

total and and As undrawn. while of $XXX.X $X.X outstanding debt equivalents was our billion, revolver was XXXX, were approximately XX, December cash $XXX cash total million million,

average interest million, X.X%. Our XX to decreased $XX.X adjusted months operating quarter decreased and million leverage the $XXX.X our X.Xx was by income. Net debt net to at for trailing quarter rate approximately ratio end

principal of agreement. $X.X fiscal During made million credit a accordance of the payment with the second we quarter, mandatory in terms our

payments. for For in months, mandatory credit $XX.X facilities the million provide our principal next XX

Ari. Finally, the remaining now over to I $XXX the have during we on shares capacity of authorization. with and repurchase share our turn any back regards quarter buybacks, buyback share currently to not million did will call

for now questions. Thanks, We like Bret. open call up the would to

[Operator question from Morris comes first Guggenheim. with Our Instructions] Michael of line the

on this have app. I affiliates, and two then announcement One free-to-play of the gaming questions. on one

job And at rate you sort But rate some number affiliate hard factors particular There's you in quarter. first of sequentially. increases price the that concern one guys guess that to is slowing a seeing? them. of So you're talk of price of see just the mentioned sort growth the you the kind of puts I of in about a of the of on affiliate your increases all quarter, did being relative in pricing takes detail. and positive Bret, of good could maybe enumerating it's maybe still and there's fees,

could free-to-play broader of sort then could, potential you sponsorships? see particular? if a the questions those? out in are And there. business? of what revenue of you it is couple would looks like. possibly percentage that have how existing a is you that like interactively? there's gaming with if this it. And toward And of also, the gaming I app, have engaging Does way? about I Like engagement step be, step a this the impact Appreciate playing share users products the can it do of to there your along what talk One potential guess anything pacing kind What's But a out? that appreciate you I'd the So on with

one the first. Bret, second I'll take

ahead. Go Okay.

Okay.

sports expanded gaming the we app for expect is -- this be this our new announcement company. Our initiatives what morning, in step to and first several the

remind to of at our we've forefront Just these the platform you interactive several years. integrating into last games mobile the that been for

of of and So the and we're our companies number stats we live live Go. are offer one a only streaming that sports national and games interactive RSN, games alongside limited MSG

when taken, an ago So interactive MSG first next this say, is is we the relook in step And a MSG years see launched of to I'd this a the in -- as step launch what interactive two application was networks. modules. and we wholesale Go

as we prior total in saw last watched. control did, increase applications minutes we frequency and the interactive a a season season in fact, far As do, study that and group. statistics, these tune using fact, And conduct as

I year. minutes number played, and game. we expected at games four hundred versus looked matching And about at a that user by anybody's from increased of increased five And the called games, prior minutes. of if tuned Cannon. total by behavior know the So watched which one that the we user given to looked we don't games over season saw the for a it's it of our Shirt the that into several is

and we're that to going on build success, look seen to we've So success.

to and thanks regards revenue, With the affiliate question. for

few to times been we've I the reiterate last a and dissect want to things we've handful think of trend, asked several I over years, said. quarterly the

that items When items we out that I trends. and we economic our we've foremost, noted be to needed provisions can impact course, have are significant, importantly, that were the thought back them directions. in contracts both over certain first adjustments highlight years, if and last though, quarterly go could were of pulled trend what think quarter, call you And that variety are this for of But the sort But of that a the them affect other can quarter. primary we several they impact the trend. out. did affiliate there the like of that

a think anything is given regards the as move single use quarter, a to for to today. what kind out unfortunately, there's sort in And I the is important think of I and widen we more quarter going further of both don't request the this in So ways. while that quarter, we've do pull-forward rate specific that pull of lens not it not point, to seen isolating terms with that we're

next Quadrani Your Alexia of with question from JP comes the line Morgan.

a be your allowed book, some follow-up Can with might about app on how topic your maybe game of and to rights change. how naming can sports its And that would live actual the just agreements allowed the something just on say the offers free-to-play we the you horizons? in to New aggressive even of if then just you a would what speak Maybe to MSG and network gaming, sports you're Andrea, of cable saw your of with comments. consider potentially leagues bit for staying into allow team Connecticut And integrating through the coverage? kind and Fox what's little that? by out the legalizing, talk Networks ever like similar context to licensing Sports York

Sure.

We what name of or we terms in our our what channels. agreements courts name in day we have no restrictions given

certainly opportunities and networks our interactive So we and to have into into sites And apps. the integrate our gaming all rights sports explore do that. we will games and to

season. going we're great are potential sometime mobile obviously very Jersey, hopefully, gaming. to back. a We as But just We've online. will success legalized Connecticut they York control we New and don't look come that there's New now that. So tremendous some it, viewership looking at FanDuel, from we've integration. it. got games, to seeing our doing come where next And and online take of leading advertisers do significant our having think continuing and we're games. We're program and to ways DraftKings looking games our and features. optimize network to within I betXXX, ways to at We're to been up create our features outside mean We

As we've New hopefully, evolves gaming. that sports the how We'll Go integrate talked to first about, MSG continue into gaming we see legalize Connecticut, games. interactive with free-to-play were and to mobile as York

we've I opportunities. got So of lots think

All considered move table forward. are we them are of of and the being all as them on

John Your Janedis next Research. comes question from of the with Wolfe line

These are popular topics.

launching deeper app So the can Andrea, talked I'll you go it, little this just back about, rationale the broadly being maybe just step. to then integrating And some app, versus a into ask first the more into the you behind call follow-ups. dig the it app?

Over is can the about long talk pursue term, you to gaming one your there license? appetite, a if

already we -- integrated Sure. Well, into a Pick 'Em 'Em app app. our Pick into a have integrated Game

tune this app. our coming building against makes and to be free-to-play to We've indicated Game that So sense, of and extent extent expand apps. the only on we're of sites to already the our interacting is as interactivity programming, And will network, that allows the to to hope or things aren't into the not opportunities again, may is partners reiterate we're make there but outside us having 'Em we'll who us. looking stand-alone sports are television increases I that increases that to interactivity, all -- length allow that, as we've of at to of creating not that sense. a can on -- this that just And folks tune by on think, 'Em look with our or recruit the into rights minutes they -- my whole gaming Game and started integrate And that host us a seen, And it all it Pick that reach in, folks that reach watched. actually and I that's to Pick execute different expectation linear before, I betting us linear as far increases app. certainly

So as table forward. everything the we is on move

did share basis? you any do the Okay. a there's the distributor? go-forward that guess, a remittances, And changes? of subscriber lag tiering I reflect with understanding kind you And of on changes can referenced in have to And attrition, look just high-level a view Bret, back include any maybe, any X.X% on you terms to did deal carriage any

I'm contract the we of months thing, the respond the say questions. let did going several did Andrea last improvement over would see, X.X% Adam as as I reflect, noted, the some one subscriber to to underlying trend. decline But

with and our of ensure Yes. And And jump no comfortable just the -- we in we're no, any and those I'd in other impact there's have terms protections to we the and those have say, continued terms change wide those terms. from distribution networks. packaging that and respect with carriage renewals,

comes with from question Swinburne Ben Stanley. line next the Your of Morgan

you programming or you're impact. on more you're bit trying your not that get early terms remarks, for about what thinking clear about there's go app, seeing change the give engagement in MSG the then, just AOI Bret, the guys of But going I've or at it's Networks you're and season little planning shoulder And more app, programming in whether you us. I net are were know season seasons. But whether you're I prepared programming the impact it's for if versus a probably to going clarification tell to lot app I kind now kind a specifically? seeing of could this year, NHL the just -- us your back, smaller know pre-COVID? of on on which the a revenue you of very a on behavior? Andrea, noticed think And in of viewing more

$X you the think of million more of quarter, those. said around four in accruals I

the don't you And from NHL specific the and rights think side, missed there. were apologize it. expecting of you I if were Or fiscal the fee I the rights through year? you I reductions On though, rest additional fee are

first We've take pardon me? that. the I'll I'll the Bret, MSG part, seen take Go. --

ahead. Go Yes.

far. We've Go seen minutes average watched, considerable the on increases viewers both so and season MSG across

So we're in is in up about the about XX% more sort individual if on teams, on average, the you Go. Rangers, viewers, and we've And example, watched. than XX% audience got, the for we're MSG of look up minutes at doubled

XXX% So correlation Go what we minutes in a ratings. up our linear we're MSG the up And and is I've past XXX% in and viewers, see utilization strong we're between said that watched. over over

And so season. far, that's bearing this out

ratings the linear decade. Our in at overall, hockey point been they're just generally our to year, in they've the ratings a close this our on this highest season,

add to very tune all-time of Knicks Go, continue viewers audience. this drive season-to-date highs far seeing strong also the our a MSG to in these so season you the when XX% minutes viewers, MSG that we're for unique and So over product. And where strong length bettings and incredible average on of on an appetite versus up XX% are in last year. watched They're up and Go also hockey

far, so good. all So,

to rights, last fourth and too, the regards these circumstances also the the that third And was further -- course, mind early circumstances first are extent let then, rebates are, at course, in had the expect terms the of been rate compared and facts in factors, me XX like of contracts. besides keep we based do to parts last all quarter, and to quarter a particularly give and, increases if the just as and normal that And counts foremost, estimates season. there of time by see on a fourth pandemic. and the We facts of the But Ben, impacted with other little year's game period, make of But course, color. throughout comments the I these rights months. evolving in

yes, parts. normal, expect further lot there So we'd a quarter. are the moving compared in to of third But

Partners. Brandon question comes next from the of LightShed line Ross with Your

in like their on direct-to-consumer they're betting what last does take soon. And through said for at see I for their MSGN? RSNs front? guess, Maybe path walk could sports Sinclair New your quarter, potential you? going So equation that on some that for that point mobile of near-term decision-making that you us York you if process Do change call looks to a

Brandon, Adam. it's

yes, jump, take this. I'll I'll So

had on commented we think well, said. I direct-to-consumer as -- we quarter saw yes, what last Sinclair So

For see consumer We're evolve. us, to continuing landscape continuing and the we monitor media developments behavior. to

always sports for maximize direct-to-consumer a and to we course, valuable have asset, whether sense. think think I now if to ultimately Of to road. it live rights. be rights we to down such we won't It's do as to I evaluate. point this innovative the that's the about That intriguing believe makes flexibility think, what and before, professional a something us option in there the we'll local continue the value unique that's, are we allow line have to will and us offerings. about offering, or we But potential We It's new anything of at incremental announce going are going said don't an product. the say offer for as much we're time time. highly

those? it then And even not is Okay. how can Or specifically games, free-to-play monetize the on you monetization? about

Well, and we've first, length said, this increases on on and MSG our seen Go. generally tune interactivity of frequency linear as we've networks how

something that and achieve. that is itself So of we're looking in to

of terms think specifics. a early opportunities, several. there are monetization too little provide It's I to In

hope insight third We launched will There other But opportunities data fees. where sponsorship app. There the pay is us. end models and significant us. clearly, marketing partners that for quarter. of haven't to a opportunity before the for are do yet We are affiliate

that are that create But to ways new -- several consumer improve use primarily, we're to behavior monetize products. can this understand to database to there and a to we app. looking really provide So our look better to

Your Rosenblatt. the Bernie McTernan final line from question comes of with

think or sorry, year? not to operating profits if the stand-alone then just Ben's go -- basis? willing sure this product to on the to be this but this you're will generate question, game the -- that net to level there, or up this? investment or on income launch do of then positive question, you'd And will negative a a I kind on Brandon's NFL to comfortable to And think, follow-up sticking Just with is able on be follow what necessary you free-to-play of shortened NHL game, adjusted is season

think, the in get the think not the investment We're I said, we've question, -- do our to I done BOOM ways, of app specific quarter. increased and app. what The -- said, be tune. monetized investment. in app length the database the including We including can again, launch as we of on of the that third variety from app into tune launch will length and a specifics tune as see going sponsorship frequency we can marketing, whole of to of

So we're be offerings. said, And it We're excited excited. where to as building integrated we've block to a also it's goes. see will what we more think

Should I take the the of impact season? piece on the

Sure. sorry. sure, Sure,

No. Sure.

of right, So, that a this, there's lot into goes course.

we're forward-looking giving look impacts over of throughout net P&L, regards AOI. see several where to the the year, our last I the for guidance. much can contributor seen of not quarters the the to back on pretty in P&L -- any terms But guidance with impact think balance seasons you -- any in or significant we've we're change that to I overall and or provide from going the either know the

the it a scheduling on looking way employees. effects procedures protection affects production overall games, particularly and in it the of number for we've has The affiliate and incremental do course, revenue, changed some affects But our of relationship. Of seen road certain We've, of there's backwards, of savings. regards to with the our course, costs games some revenue. protocols picture change taken rights, the could it the affects we seasons games, advertising a

not continue it's will it's circumstances and Looking to facts evolve. and likely the forward, that potential

additional turn like back Danes the or to floor I to time, this At for closing would remarks. Ari any

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

today's call. participating for you Thank in conference

disconnect time. your at this now may You lines