Q2 2021 Madison Square Garden Sports Corp Earnings Call

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Excuse me, ladies and gentlemen, this is the operator your conference will begin momentarily. Please standby. Thank you for your patience.

[music].

[music].

Good morning, My name is Teresa and I will be your conference operator today.

At this time I would like to welcome everyone to.

Madison Square Garden Sports Corp, fiscal 2021 second quarter earnings Conference call.

At this time.

All lines have been placed on mute to prevent any background noise and after the speaker's remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question press the pound key.

I would now like turn the current turn the conference over to Dennis.

Dennis.

Investor Relations. Please go ahead Sir.

Thank you.

Good morning, and welcome to MSG Sports fiscal 2021 second quarter earnings Conference call.

Our president and CEO, Andy Lustgarten will begin this morning's call with an update on the company's operations.

This will be followed by a review of our financial results with Victoria Index, our EVP and Chief Financial Officer and Treasurer.

After our prepared remarks, we will open up the call for questions if.

And you do not have a copy of today's earnings release, it is available and the investors section of our corporate website.

Please take note and the following.

Today's discussion may contain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Investors are cautioned that any such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties.

And that actual results developments and events may differ materially from those and the forward looking statements as a result of various factors.

These include financial community perceptions of the company and its business operations financial condition, and the industry and which it operates.

As well as the factors described and the company's filings with the Securities and Exchange Commission and.

Including the sections entitled Risk factors, and management's discussion and analysis of financial condition and results of operations contained therein.

The company disclaims any obligation to update any forward looking statements that may be discussed during this call.

On pages four and five of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income or non.

Non-GAAP financial measure.

And with that I'll now turn the call over to Andy.

Thank you Ari and good morning, everyone.

I'd like to begin by saying that we're excited to have both the Knicks and Rangers back and action.

Even though the season started later than usual and our fans can't be at the garden and person. We know they are enjoying watching their teams compete again.

And while the COVID-19 pandemic still presents operating challenges and the near term.

We are paying close attention to the vaccine rollout.

And what it means for the return of normal operations.

Since our last earnings call there have been a number of positive developments for both our company and the leagues.

The NHL and NBA completed their 2019 seasons.

The success of each leagues returned to play clearly demonstrated the shared commitment and strong working relationships that both the leagues have with their teams and players and partners.

This was followed by the 2020, NHL and NBA drafts during which both the Rangers and Nyx.

Key additions to their rosters.

The Rangers used their number one overall pick to select Alexi lafreniere.

A dynamic forward with the potential to become an all star player for the cheap and.

And the Knicks finish the draft welcoming two talented first round picks.

Forward Ob top and who last season was named college basketball player of the year.

And guard Emmanuel quickly.

Who was named the 2019 'twenty SEC player over the year.

The Knicks and Rangers each have a talented young core and.

And strong leadership in place and we look forward to watching the progress over the 2021 season.

We're also excited that the teams have to return to the world's most famous arena for the first time since March.

With December marking the start of the NBA and 72 getting and regular season and January start of the NHL and 56 games season and.

And while home games at the Garden are currently being played without fans due to government restrictions, we are working towards safely welcoming guests back into the building as soon as possible.

In addition to watching select markets, where the NBA and NHL are hosting games with reduced fan attendance. We're also following developments and New York State.

Including the Buffalo bills hosting limited crowds for their two playoff games were obviously interested and what the success of these events could mean for the Knicks and Rangers fan attendance when the time is right.

Until that happens we are seeing a number of signs that illustrate just how eager our fans are to cheer on their teams and person.

For example, even with the current uncertainty and a fan friendly refund policy, we have a combined Knicks and Rangers average season ticket renewal rate of approximately 75% and.

And for those who have not renewed we are optimistic that and many will reconsider once we are through the pandemic.

Nevertheless between renewals by your existing customers and us.

Sale of season ticket packages to new customers.

And we're very pleased with the level of interest we are seeing and are grateful to our loyal fans.

We have a strict fan and first policy.

Which and the current environment has been about providing knicks and Rangers ticket holders with significant flexibility. This.

This includes pausing season ticket payments and requiring only a minimal deposit to maintain season ticket member status.

We continue to be thankful for the support of our fans, who despite not being able to have 10 games have remained passionate about their teams and.

Just one example, after launching the Rangers new 2020 statue of Liberty retro jerseys in November.

<unk> became one of the best selling jerseys and the league.

And while it is still early and the seasons, we've been pleased with the local and national ratings to date.

Which we believe creates opportunities for our lease is national media rights come up for renewal over time.

As a reminder, b and he chose U S National media deal expires. After this season and its Canadian deal and.

And after 'twenty five 'twenty six.

The N b as media agreements expire after 'twenty four 'twenty five.

And while we remain confident that the fundamentals of our business are strong we have to.

Taken steps to further strengthen our balance sheet until regular operations can resume.

In November we completed a $600 million debt refinancing, which enhanced our financial flexibility through and extended maturity schedule and increased borrowing capacity Victor.

Victoria will provide more detail shortly.

As of December 31, we had over $290 million and liquidity between cash on hand, and availability under our credit facilities.

Our quarter end cash balance included $30 million from the MBA, which had provided to each team following the leagues $900 million private placement and December.

Last month the.

And HL completed its own debt raise of $1 billion and order to provide additional liquidity to leagues and teams and we may look to access our portion which is approximately $30 million to further enhance our cash position.

The NBA and NHL and <unk> ability to raise these amounts on attractive terms during such an uncertain period and he's a great illustration of the confidence and the long term outlook for both leagues.

It's also a reminder of the significant value of professional sports franchises.

Even in this environment the scarcity of the teams and.

Along with their strong fundamentals has continued to drive substantial interest in these assets.

And as evidenced by the recent transaction for the Utah jazz.

Furthermore, the NBA recently approved widening the pool of potential investors by allowing private equity funds to own interest and multiple teams, which should be positive for team valuations.

The NBA and NHL have also been great partners as we continue to pursue creative solutions to satisfy our marketing partnership commitments.

We've worked closely with both leagues to create new inventory.

And opportunities for our partners this season.

And we're very pleased with the demand we're seeing for these assets.

For example, we.

We've placed Lexus and key and vehicles on the arena floor at the Knicks games and welcome Chase as our first ever Rangers helmet sponsor.

We've also added new arena signage as well as virtual signage on the court and ice all of which can be seen clearly by television audiences during Knicks and Rangers games.

And finally.

We were happy to name North well health and the first Ranger practice Jersey sponsor.

On the esports front our teams have continued to compete throughout the pandemic as interest and fan engagement and the sports gross.

And we remain excited about the long term opportunity.

We are also incredibly encouraged by the recent developments around the potential legalization of mobile gaming and New York State.

And we remain bullish about the impact this could have on our fan engagement sponsorship media rights and ultimately the value of our teams.

In conclusion as we navigate through this challenging time, we are confident and the strength of our business and are optimistic about the future of our company.

We believe the vaccine rollout offers a light at the end of this tunnel getting us closer to the day when we could safely welcome fans back to cheer on their teams and person until then I'd like to thank our fans partners employees and shareholders for their continued support and with that I'll turn the call.

Over to Victoria.

Thank you Andy and good morning, everyone and go.

And to begin by discussing our November debt refinancing and providing an update on our company's liquidity position.

As Andy mentioned and November we enhanced our financial flexibility and increased our borrowing capacity by completing a $600 million debt refi.

Financing.

As part of the refinancing the next increase the availability under their senior secured revolving credit facility by $75 million to $275 million, while the Rangers increase the availability under their revolver by $100 million to $250 million.

In addition, both teams extended the maturity dates of their facilities to November 2023.

As a reminder, the Knicks and Rangers facilities, where previously set to mature in September 2021, and January 2022, respectively.

The Knicks also entered into a new $75 million unsecured revolving credit facility, which also matures in November 2023.

As part of this refinancing the next previous $15 million unsecured revolver and the $200 million delayed draw term loans with MSG entertainment were extinguished.

At the end of the quarter, we had $380 million and total debt outstanding consisting of $220 million drawn on our Nic senior secured revolver and $160 million on our Rangers facility.

Turning to our liquidity.

As of December 31st we had $298 million of liquidity comprised of $78 million and cash and cash equivalents and $220 million and borrowing capacity under the team's revolving credit facilities.

Our quarter end cash balance of $78 million represented a net increase of $47 $2 million compared to our September 30th balance of $23 $5 million.

This net increase was primarily due to local and national media rights fees related to the 2021, NBA and NHL seasons.

A combined $30 million draw on our Knicks and Rangers senior secured revolvers and the $30 million from the NDA that Andy mentioned.

These inflows were partially offset by a number of items, including our normal operating expenses such as compensation for our teams as well as our corporate and administrative staff payments.

Payments to MSG Entertainment.

<unk> commercial agreements and debt related payments, including nonrecurring amounts for our recent refinancing.

I would note that our quarter end cash balance did not include the approximately $30 million that we may look to access from the NHL as recent debt raise.

As of December 31st our deferred revenue balance net of billed but not yet collected revenue was $206 million as compared to approximately $127 million as of September 30th.

The increase and this balance was primarily due to local and national media rights payments for the 2021 seasons and the $30 million from the NBA.

This deferred revenue balance as of December 31st was primarily comprised of local and national media rights tickets and suites, which will be addressed through games played and if necessary through make goods credits or refunds.

I will now touch on our fiscal second quarter financial performance.

Results for the quarter was significantly impacted by the COVID-19 pandemic.

Both the NBA and NHL seasons began later than usual and as Andy mentioned Knicks and Rangers home games are currently being played without fans in attendance.

As a result total revenues for the quarter were $28 8 million a decrease of $264 million on a year over year basis.

Revenue decreased across every major revenue line item, including tickets local media rights fees National Media and league distributions suites and sponsorship and signage.

Adjusted operating income decreased $38 million to a loss of $19 million.

This was due to lower revenues, partially offset by a decrease and direct operating expenses and to a lesser extent lower SG&A expenses.

Similar to revenues the decrease and direct operating expenses, mainly reflects the delayed start to the season and the impact of home games being played without fans in attendance.

This was reflected and declines across team compensation and other team operating expenses as well as revenue sharing expense.

I would note that these results include significantly reduced arena license fees due to attendance restrictions at the garden.

The decline and SG&A expenses was primarily due to lower corporate overhead costs and.

And as a reminder results for the prior year second quarter are not directly comparable as they include certain corporate overhead expenses that we no longer and car. Following the spin offs of MSG entertainment, but which did not meet the criteria for inclusion and discontinued operations.

With that I will now turn the call back over to Ari.

Thank you Victoria, we would now like to open the call for questions.

As a reminder, if he would like to ask a question Press Star then the number one on your telephone keypad again net of start and the number one we will pause for just a moment to compile the Q&A roster.

And your first question comes from John and this weighted Wolfe research.

Hi, Thank you and you've talked about private equity investments and NBA teams and I think the liquidity positions well appreciated but can you talk about the potential willingness to bring and the minority partner.

Further bolster the balance sheet up COVID-19 drags on longer than expected or to at least establish what could be perceived as normalized value for the equity.

Thanks, John.

Yes, I did mentioned private equity the MBA has made some rule changes.

As you know, but in terms of our point of view.

We're not going to comment on hypotheticals on a sale of our stakes right now.

Okay.

And separately in the past you guys have also talked about the impact of those fans for fall season can you talk about to what extent that changes or not due to the short and seasons.

Victor do you want to take that question, Yeah, sure John and good morning.

You're right as you know we're currently operating in an environment, where fan attendance at the garden is restricted by government mandate and the fan restrictions will have a greater impact on our financials. This year as compared to you know the impact of the just the shortened seasons, but with that said in.

And the impact of fewer games. This year I I can certainly give you a little color.

And so you know from a revenue perspective, we currently.

We expect a reduction in local media rights fees for the Rangers side as we have a minimum threshold of games that must be delivered to MSG networks for broadcast on and exclusive basis.

So you know if those thresholds are not met there'll be a pro rata reduction and our local media rights fees.

I guess I you know I also note that we currently don't anticipate a reduction and local media rights fees on the Nic side.

Yeah, and also and a shortened season, it reduces camera visible sponsorship and signage opportunities.

Yeah, but on the other side on the expense side, we would anticipate additional reductions in you know for example costs under our arena licenses such as day of game expenses and you know also we would expect reductions for certain other team operating expenses.

And just.

Noteworthy is right to the extent revenues on a league wide basis are impacted by the short and seasons, you know, we could see reductions in other areas and see.

Including player compensation.

Okay, great. Thank you.

And your next question comes from Brandon Ross with <unk> partners.

Hey, Andy.

You mentioned earlier your your excitement around potential mobile sports betting legalization in New York.

Do you want attack some of the opportunities for MSG, and maybe help us understand how incremental sponsorship or and onsite sports book would breakdown as opportunities between M. S. G S and MSG.

Thanks Brendan.

No.

And to take you through it.

I mean, we've been focusing on this for a long time and we think this is a.

And then there's opportunity for our company.

And note if you look across the border and New Jersey, Meadowlands, which opened in 2018 has been come one of the largest if not the largest sports book and the country.

Once the research I've seen would suggest that New York state will be the largest market for sports gaming and once once legalized.

Obviously.

We're extremely encouraged by Governor Cuomo's recent announcement.

Regarding our sports gaming here, but theres lots of questions as to what what.

And what regulations are going to be.

And there's lots of different flavors as we looked at places where that where it is illegal.

So just just to take it from the highest level.

We like to just from what it does for fan engagement.

During programming and the ability to drive extra eyeballs, which therefore drives sponsorship just on its face.

And on top and of course and implicitly the media rights that would from come from having increased engagement.

We think there is also upside and a big upside for sponsorship official partners.

And there's many other ways to make money I mean, if you look at Washington training, and Washington, and they have and they have a sports book and are building.

It's just a question of how does how does the regulations play out but.

But I know theres, a big opportunity for us in terms of how it would play between.

What's the opportunity here and there's lots of ways to make to everybody both both companies.

Would benefit if there was a sports book, but it's.

This is a big opportunity and it's just a question of exactly how to commercialize it.

You just mentioned media rights and at the local level is there anything that would be available to you at sports.

And that's what you've already kind of licensed out to MSG networks.

Do you mean in terms of rights.

Yeah in terms of like what what are the additional opportunities for MSG sports on the media front.

Or is that rail and more of and MSG networks.

Well I mean look we are we have a long term rights deal with networks and.

And networks will have many ways to monetize.

Rights as always being a rights holder.

And sports, it's a union it's a unique.

The unique asset and these times, we love being and sports rights holder.

The leagues will obviously when their rights when their rights agreements will come up a little over impact on sports.

But theres still has opportunities right. We have game visible signage, we have official partnership so there's lots of ways to generate <unk>.

For mental revenue, even if it's not directly from our rates and the second.

Got it and then staying on the rights fees and <unk>.

Total deal is obviously coming up.

Price there hasnt been and announcement, yet maybe if you could comment on how and when you see that playing out and then more generally as and NBA and NHL team owner, how you think about the future of national and local.

Sports rights, especially with cord cutting and kind of younger demos being on other platforms and shying away from full landscape do you think the model needs to be adjusted.

Hum.

A lot to unpack there. So let me let me let me try to start that back up and tell me and I don't know yeah, that's right Brandon.

So I think I should let me start at the highest level and I think at the highest level.

As I mentioned right we have.

And just almost 16 years left with MSG networks on our media deals.

We sell their rights for the league level, both the NHL deal is coming up very shortly as you mentioned with the MBA is coming up.

Few years after that.

And.

But as everyone knows and media landscape is constantly evolving.

And did it.

The paradigm the distributor distribution patterns and a change right.

I don't I don't know, what or where it may I just it's not that's not something I can opine on what I do know is what fundamental value of live sports.

We feel really good about that theres going to be a market for that.

And as there's more platforms that come into line I mean, the one thing. We know is content is king and Theres nothing like live sports for premium content. So I.

I know theres going to be platforms, and the more platforms that are out there and more buyers and theres more value and our product.

So and.

And then once you have and the fact of legalized gaming and what's impact because that's going to have on media rights.

I feel very good about our long term nature of being as forthright holder and terms on the shorter term with the NHL.

And I'm not I'm not.

At Liberty to discuss there.

Current negotiations.

I could say that that's expiring at the end of the season.

I love being and sports rights holder.

Ratings have been up this year and everyone's focused on what legalized as I said legalized sports gaming and and it's packed on.

Media rights and so.

When when the NHL has more information.

And will be.

And we feel very good about what were the futures of all being and media rights holder, but I can't give you much more on the NHL itself.

Understood. Thank you.

And your next question comes from the line of David Karnofsky.

J P Morgan.

Prepared remarks on how the pandemic and.

Some of the result and fallout.

New York City area and May impact, the current and future cycles a day.

And could you just could you start over again I missed the beginning you cut out for a second here and I didn't hear what you started your question I'm sorry sure. It's just.

Can you just comment on how the pandemic and maybe some of the resulting fallout for the New York City area and <unk>.

Current or even future cycles for sneaking sponsor and all.

Okay.

So are we.

We.

I mean right now we're working with all of our partners.

And we generally have long term deals with both.

Sweet holders as well as sponsor agreements.

We believe and being very.

We believe and and being consumer friendly and and so we're working with all of our partners right now.

Obviously, New York is it and a different place today than it was a year ago.

But I'm hopeful on the rebounds.

And I feel the city getting more lively every single day I'm here.

And.

And.

Our partners.

We're very focused on staying very close to our partners and thinking long term and so.

Well, while we're currently focused on this season and it's hard to take a really long term point of view, but I feel very good about long term and our long term relationships and the way the partners, how we've been able to both suite holders and partners and they've been working with us.

During these difficult times.

Okay, and then maybe it's a follow up to John's first question do you expect and time, the NBA or NHL and might be open to p/e firms, taking controlling interests and teams and if so how much that further impact he and values overall in your view.

Okay.

<unk>.

It was pretty public have a pretty.

Detailed vetting process.

About who can buy them.

Both minority stakes as well as controlling stakes and it's.

Very hard for me to comment on.

Any further than that.

I will note that the recent changes are focused on.

Approved certain.

P funds to own minority stakes and multiple teams.

Not obviously, you control stake and multiple teams, but minority stakes.

Which we believe will help drive.

Team valuations so.

Can't give you much more than that.

Okay. Thank you.

And your next question comes from the line and David Beckham bearing Berg.

Great. Thanks, so much for the question.

Andy one for you on reopening and I'm curious if you could share some insights with respect to talks you've had with local or state regulators regarding the prospective timeline of a reopening for the garden.

To fans and specifically I'd love to hear your thoughts to the extent you're able to share on any specifics with respect to disease incidence or vaccination thresholds that are being considered and then.

It's more likely than not the capacity will be phased once a reopening occurs and Victoria just as a quick housekeeping could.

Could you shed some light from an accounting perspective in terms of how the revised cba's for the NHL and NBA might affect the accrual of player compensation throughout the year.

And cash flows for this year and years going forward. Thanks, so much.

I'm happy to thanks.

David.

So let's start with the reopening.

Governor Cuomo and and the state.

Have you made it.

And I've always been clear, but have been increasingly clear on the importance of reopening the economy. Both here in New York State as well as New York City.

He just recently I'm sure you follow this but he recently permitted the Buffalo bills.

And host 25% to host our fans and a pilot for their two playoff games.

It was a it was a pretty it was regarded as a wild success.

In addition, I mean and pattern so far has been limb.

Limited opening and then as he moves as he moves towards a fuller capacity.

I'm very you know, we're very happy with the recent move to announce.

Restaurants are now able to have post 25% capacity starting.

On February 14th.

That comes on the heels of the cheap the reduced.

Levels of.

Positivity rates here in New York State, So and New York City, and I expect that that things keep on going down and will continue to see capacity has increased.

In addition, he announced that are the state announced.

Net gatherings, such as wedding receptions or parties could increase their capacity to 150 people assuming protocols are followed starting in March. So that's another movement positive moving towards capacity increases.

And so.

Yes, he's definitely wane reopening with.

Health and safety of everybody.

<unk> seen rollout is clearly critical towards getting the economy fully reopens.

And.

The governor has been very vocal and very focused on delivering the vaccine as fast as possible.

I saw.

Last night, even mentioned that there was even and we're further amount of vaccines distributed here in New York over the next three weeks and so that should even further drive vaccine.

Rollout here in New York.

But in terms of our opening I mean look the thing that's most important to US is the safety of our fans.

Our athletes are employer employees. So we're going to do this and a phase measure.

Wei and.

And we continue to maintain and contact it but theres been an open dialogue.

And what the possible protocols are.

<unk> testing and.

And we really are focused and I'm just getting this back open safe and.

And.

So that everyone can be enjoyed and have a great experience.

Okay.

Okay and then.

David Your question was around the mechanics around this the CVA and so first let me let me start with the NDA.

The amended collective bargaining agreement for the N V. A you know includes more flexibility.

New terms added as a result of COVID-19 to ensure that the players still ultimately received the you know approximately 50% of the league wide revenues right. So you know for example, while the escrow.

It remains the same at 10% player compensation can be reduced by up to 20% in our CS and inclusive of the escrow.

And now the salary cap and the luxury trigger for the <unk> 'twenty 'twenty one seasons are flat with with last year with the 2019 and 20 season.

And the C D E and the CDA lays out and you know a minimum of 3% and a maximum of 10% annual increases and the calorie and the salary cap through the remainder.

Of the CBA.

So and then on the N H outside the amended CPA includes a four year extension. So it now expires in September 2026, So obviously that gives us some additional visibility.

DNA tells amendment also includes more flexibility and also adding new terms as a result of COVID-19, so for the NHL for example, or the salary cap for 'twenty and 'twenty one.

It was also kept flat with last season.

And they'll only be modest average annual increases throughout the 'twenty five 'twenty six season.

And in addition, the players aren't for the NHL have agreed to defer a portion of their 2021 and salaries and signing bonuses.

So with new maximum escrow recovery rates also having been established with the same mechanism in place to achieve the players ultimately receiving a 50% of league wide revenues and so when you think about the two leads and the mechanisms are are a little different but the en route.

And is generally the same with the players ultimately receiving the 50% of league wide revenue.

Thank you David Operator, we'll take our next caller and.

Your next question comes from Ben Swinburne with Morgan Stanley.

Thanks, Good morning.

Victoria could you help us think about sort of the cash flows over the next couple of quarters getting through the end of the fiscal year, particularly around your deferred revenue balance and just thinking if you have refunds.

As we move through the rest of the <unk>.

Season.

But also whether youre going to be pulling in some cash from season tickets and anything you can tell us about kind of the puts and takes around cash flows through the end of the fiscal year it would be great.

And then Andy I wanted to ask you about the next to congratulations on quickly it looks like a steel and.

And the draft I'm just wondering what you guys are doing to.

And to try to.

Maximize fan engagement during the pandemic, obviously everyone's wishing they were there at the games, but the team seems to have really picked up in.

The interest level and excitement and and I'm wondering what you guys are doing specifically to try to maximize fan engagement. During this tough period and you can share would be great. Thanks.

Thanks, Dan Let me wondering why don't I answer that question first and I'll talk about cash flow and stepping up close.

So we definitely have to shift a little bit and how we communicate with our fans. We've been made it actually happens to tie with what we've been pushing anyway for the last couple of years, So we've been slowly getting better and better.

We've been very focused on social media and how do we connect with people.

But obviously right now it's very hard to connect people with people and person, but how do you connect groups of people. So we've done.

Many.

Small round tables with with our.

Either retired players of current players or coaches to communicate directly with our fans we.

We've been very focused on increasing the access so I was really proud of our team during NHL drafts and we made a trade and the first round two to get a second first rounder and.

Our team was right there and there's a great video and <unk> seen it where Jeff Gordon is going yes, we got it and we got that moment on camera and we bringing people behind the scenes.

And our and our players really welcomed it and really want and connected their fans and so we've been doing a really we've been very focused on how do we connect people give people more insight of what's going on.

And I think it's been pretty successful and I and I think and it shows also and in our ratings and our users and our interactions and all of those and it and everything seems to be.

Training and the right direction I'd also say and we're focused on.

Other unique.

Unique types of ways to connect with people such as we have a partnership with kith, where they designed our new Jersey and.

Had a rollout of a line of close of mixed flash chips branded clothes, which sold out and record times for them the NHL and the NHL side, We released our new Jersey called Oh on the Ranger side or Liberty Retro Jersey, which was quickly became one of the <unk>.

Fast selling items, our fastest selling jerseys and the NHL. So we're just trying to stay in touch with our people.

Trying to give them a voice and we're trying to stay connected but obviously, we'd have to do it and different ways and we would've and when we have people and the building.

On the cash flow side I'll, let Victoria comment that there's just one thing I would say is we've had a very fan friendly policy, so far and we allowed people to.

And we haven't been charging People's credit cards. So far this year, we have and we've allowed people to arena remain there and keep their season and take a membership by having a very low amount and the deposits. We believe that's a really important way to treat people during these times.

Many other team just took people's money and rolled into next year, we don't think Thats very fan friendly we didn't give people and they didn't get people and option. We did not take that decision and we won't do that.

I mentioned earlier, we're beginning to get ready for a renewal cycles and so obviously once the renewals start there will be a timing and periodic charging around month, but we haven't announced.

And we haven't started that yet, but it's coming soon and I'll, let Vic.

And on top of it but I just thought it was important to talk about operating losses.

And how we treat our customers because it does tie very close to cash.

Cash flow.

Oh, great. Thank you Andy.

And he hasn't been let me just give and take a step back you know with 291.

$8 million and available liquidity at the quarter and including a cash balance of $78 million and then the $220 million capacity under our and Knicks and Rangers facilities, and we feel confident and our liquidity position and you know some of the cost reduction measures we've taken to date that debt.

We've talked about.

I think also one of the items mentioned in our prepared remarks is that we may also look to access our portion of the N. H L. Recent $1 billion of private placement, which would be.

Approximately $30 million so that's.

And that's not reflected in our December 31st cash balance or liquidity.

And so we are feeling good about them about our liquidity position and you know as I had indicated talking about the C. B as you know and part of this and you know cash.

Abided by the leads us to assist with the timing of payments as it relates to player compensation and and recovery. So you know we feel like we're we're in a good position there as well, but when you think about deferred revenue I think what's important to remember, particularly at December 31st as we you know we've received a lot of the national and.

Local media rights cash and advance and so we would expect to record revenue and earn that as.

And you know as the seasons play over the next two quarters.

But in general you know as Andy has said we have the very thin fan and fan friendly approach, but you know we hope to earn the deferred revenue through our games played or make goods and then to an extent if necessary through refunds.

Got it thank you.

Thanks, and then we have time for one last caller.

And your last question is from David Joyce with Barclays.

Thank you two questions. Please first one on the Covid impacts given that you've got some variability and the lease expense how should we think about it.

What that would look like and.

Or we'll see kind of a period and.

Also related to Covid are there any.

Expenses that you've just picking out of the equation going forward.

Or can you discuss the expenses that will be required for the.

Nut and do things like air purification that and cleaning and then a second question is on the.

Sports gaming.

Gaming the aspect what is the status of the leagues trying to participate in the sports betting handles your legal against certain integrity free concepts into the state legislation and the Prost.

Yes. Thank you.

Thanks, David.

Do you want to start with.

Talking about revenue and expenses yeah. So let me touch on the the Covid impacts I think you you explicitly referenced the arena license agreements Ah first and let me just touch on that.

Yeah, our arena license fee payments to MSG entertainment and had been impacted by both the season. Starting later and you know for the <unk> to December 31st starting late later than usual with only the next playing a few games to date to December and you know no Rangers games and.

And obviously the restrictions on fan attendance during those games.

So the original license fees for the games were currently playing are at and 80% reduction due.

And due to these attendance restrictions at the garden.

Of course, the situation remains fluid.

You know and really we're just and if we have the opportunity to welcome fans back into the arena or at some point this season, which would be great. Our license fee payments will change accordingly.

And then I think you and.

You sort of mentioned overall, just some of our yeah, our expense impact as it relates to Covid.

And we've talked a bit.

Both last quarter and a little bit this quarter, you know about our various revenue impacts on and arena ticket suites, you know food and beverage et cetera, and some.

Reductions that we would be anticipating because of the NHL and shortened season, but you know specifically on the expense side, you know as compared to a normal season right. We're seeing expense reductions for a player compensation revenue sharing expense League assessments.

And I talked about the the league's amending the C D A's.

To ensure that players are still only receiving about half of the league wide revenues.

And you know, we do have lower day of game costs and lower marketing expenses.

And I think that's the you know that that's the bulk of the types of savings that where we're seeing across the board as it relates to co pay but obviously getting fans back and the building.

It is really what we're looking forward to.

And I'd note at.

At least the way we're thinking about it even one fan is marginal revenue because we have to put on any event already and now the events are already on so every every day every time, we have a ticket sale or any revenue its actually its profitable.

Your question about what changes do we need to make because.

And marginally.

Marginally profitable.

The questions, we'd have to change to make to make it.

Effective and look we remember we we have a relatively new building, we built our building our and so we have a lot of our filter system is pretty strong there is theres a lot of of.

And where we're not we're not starting from scratch and yes.

Yeah, there might be some are some additional costs, but we've been thinking about it very carefully and.

If we were able to have fans and safely there will be a.

And it'll be a positive.

Revenue and marginal.

Marshall profit related to those accounts.

In terms of your question around.

The integrity C. I mean look I can't really comment on legal matters, but and as I've said and I'll and I'll keep on saying and we believe sports gaming.

Provides a number of growth opportunities.

Both for the leagues and for the teams.

Including media rights as I noted the NHL is coming up soon as well as the NDA and a few years as well and sponsorship opportunities.

And I'm sure there's other ways to commercialize.

But I can't comment specifically on the integrity thing.

And I would like to turn the call back over to Ari for closing remarks.

Thank you all for joining US we look forward to speaking with you on our next earnings call have a good day.

Thank you, ladies and gentlemen for your participation you may now disconnect.

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