Manchester United plc (NYSE:MANU) Q2 2022 Earnings Conference Call March 1, 2022 8:00 AM ET Company Participants Corinna Freedman - Head of Investor Relations Richard Arnold - Chief Executive Officer John Murtough - Football Director Collette Roche - Chief Operating Officer Victoria Timpson - Chief Executive Officer of Alliances & Partnerships Phil Lynch - Chief Executive Officer of Digital Products & Experiences Cliff Baty - Chief Financial Officer Hemen Tseayo - Chief Strategy Officer Conference Call Part ...

[Management's Discussion and Analysis of Financial Condition and Results of Operations](index=3&type=section&id=Management's%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations) This section analyzes the company's financial performance, highlighting revenue recovery, operating expense changes, liquidity, debt, and cash flows [General Information and COVID-19 Impact](index=3&type=section&id=GENERAL%20INFORMATION%20AND%20COVID-19%20PANDEMIC) Manchester United saw significant revenue recovery in 2021/22 due to fans returning to full-capacity stadiums, despite some match postponements from the Omicron variant - The company has developed a leading global sports brand with a community of **1.1 billion** fans and followers, attracting major global sponsors like adidas, TeamViewer, and Tezos[5](index=5&type=chunk) - For the 2021/22 season, Old Trafford stadium welcomed back fans at full capacity, a significant change from the prior period where matches were played behind closed doors[6](index=6&type=chunk) - The Omicron variant surge in December 2021 resulted in the postponement of two Premier League matches (one home, one away)[6](index=6&type=chunk) [Results of Operations](index=4&type=section&id=RESULTS%20OF%20OPERATIONS) The company's results for the three and six months ended December 31, 2021, show Matchday revenue recovery, offset by lower Broadcasting revenue and increased operating expenses [Three months ended 31 December 2021](index=4&type=section&id=Three%20months%20ended%2031%20December%202021%20as%20compared%20to%20the%20three%20months%20ended%2031%20December%202020) Total revenue for the three months ended December 31, 2021, grew 7.3% to £185.4 million, driven by Matchday revenue, offset by lower Broadcasting revenue and increased operating expenses Financial Performance for the Three Months Ended Dec 31 | Metric | 2021 (£ millions) | 2020 (£ millions) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **185.4** | **172.8** | **7.3%** | | Commercial revenue | 64.4 | 62.6 | 2.9% | | Broadcasting revenue | 86.4 | 108.7 | (20.5)% | | Matchday revenue | 34.6 | 1.5 | 2,206.7% | | **Total operating expenses** | **(179.7)** | **(138.6)** | **29.7%** | | Employee benefit expenses | (97.7) | (81.7) | 19.6% | - Matchday revenue surged by **£33.1 million (2,206.7%)** as all eight home games were played in front of a full capacity crowd, whereas all ten home games in the prior year quarter were behind closed doors[13](index=13&type=chunk) - Employee benefit expenses increased by **19.6% to £97.7 million** due to investment in the first team playing squad[14](index=14&type=chunk) - Exceptional items of **£10.0 million** were recorded, which included compensation to the former men's first team manager and coaching staff for loss of office[16](index=16&type=chunk) [Six months ended 31 December 2021](index=6&type=section&id=Six%20months%20ended%2031%20December%202021%20as%20compared%20to%20the%20six%20months%20ended%2031%20December%202020) Total revenue for the six months ended December 31, 2021, increased 10.7% to £311.9 million, driven by Matchday revenue, offset by lower Broadcasting revenue and higher operating expenses Financial Performance for the Six Months Ended Dec 31 | Metric | 2021 (£ millions) | 2020 (£ millions) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **311.9** | **281.8** | **10.7%** | | Commercial revenue | 128.8 | 122.3 | 5.3% | | Broadcasting revenue | 129.7 | 156.3 | (17.0)% | | Matchday revenue | 53.4 | 3.2 | 1,568.8% | | **Total operating expenses** | **(333.8)** | **(262.1)** | **27.4%** | | Employee benefit expenses | (186.2) | (153.6) | 21.2% | - Matchday revenue increased by **£50.2 million (1,568.8%)** as all thirteen home games were played in front of a full capacity crowd, compared to all fifteen home games being played behind closed doors in the prior year period[24](index=24&type=chunk) - Broadcasting revenue decreased by **17.0%** primarily due to playing nine fewer home and away games across all competitions, following the completion of the 2019/20 season competitions in the prior year period[23](index=23&type=chunk) - Employee benefit expenses increased by **21.2% to £186.2 million** due to investment in the first team playing squad[26](index=26&type=chunk) [Liquidity and Capital Resources](index=8&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity is supported by operating cash flow, player sales, and borrowing facilities, with £87.4 million cash and £100 million undrawn facilities, covering key requirements - Primary cash requirements stem from player transfer fees, capital expenditure, interest payments, employee expenses, and dividends[32](index=32&type=chunk) - As of December 31, 2021, the company had cash resources of **£87.4 million** and access to **£100 million** in undrawn revolving facilities[33](index=33&type=chunk) - A semi-annual cash dividend of **$0.09 per share** was paid on January 7, 2022[34](index=34&type=chunk) [Cash Flow](index=10&type=section&id=Cash%20Flow) For the six months ended December 31, 2021, net cash inflow from operating activities decreased, with investing activities resulting in an outflow and financing activities providing an inflow Summary of Cash Flows for the Six Months Ended Dec 31 | Cash Flow Activity | 2021 (£ millions) | 2020 (£ millions) | | :--- | :--- | :--- | | Net cash inflow from operating activities | 32.1 | 61.3 | | Net cash outflow from investing activities | (83.4) | (90.7) | | Net cash inflow from financing activities | 28.4 | 59.2 | | Net (decrease)/increase in cash | (22.9) | 29.8 | - Net capital expenditure on intangible assets (primarily player registrations) was **£77.9 million** for the six-month period, a decrease from £86.6 million in the prior year[44](index=44&type=chunk) - Financing activities included a **£40.0 million** drawdown on revolving facilities and a dividend payment, compared to a £60.0 million drawdown in the prior year[45](index=45&type=chunk) [Indebtedness](index=11&type=section&id=Indebtedness) The company's principal debt includes $425 million senior secured notes, a $225 million term loan, and £100 million drawn revolving facilities, with all debt covenants met Principal Indebtedness as of Dec 31, 2021 | Instrument | Outstanding Principal | Maturity Date | | :--- | :--- | :--- | | Senior Secured Notes | $425.0 million | June 25, 2027 | | Secured Term Loan Facility | $225.0 million | August 6, 2029 | | Revolving Facilities (Drawn) | £100.0 million | April/July 2025 | - The company was in compliance with its consolidated EBITDA covenant of not less than **£65 million** as of December 31, 2021[48](index=48&type=chunk)[53](index=53&type=chunk) [Off Balance Sheet Arrangements & Contractual Obligations](index=13&type=section&id=OFF%20BALANCE%20SHEET%20ARRANGEMENTS) The company's off-balance sheet arrangements include £122.4 million in contingent transfer fees and £989.0 million in total contractual cash flow obligations as of December 31, 2021 - The maximum additional amount payable for contingent transfer fees was **£122.4 million** as of December 31, 2021[60](index=60&type=chunk) Summary of Contractual Obligations as of Dec 31, 2021 | Obligation Type | Total Contractual Cash Flows (£'000) | | :--- | :--- | | Debt obligations | 674,612 | | Lease obligations | 5,639 | | Purchase obligations | 308,778 | | **Total** | **989,029** | [Interim Consolidated Financial Statements](index=15&type=section&id=Interim%20consolidated%20financial%20statements) This section presents the interim consolidated financial statements, including profit/loss, comprehensive income, balance sheet, changes in equity, cash flows, and detailed notes [Interim Consolidated Statement of Profit or Loss](index=15&type=section&id=Interim%20consolidated%20statement%20of%20profit%20or%20loss) For the six months ended December 31, 2021, the company reported a net loss of £16.9 million, primarily due to increased operating expenses and unfavorable net finance costs Profit or Loss Summary for the Six Months Ended Dec 31 | Metric | 2021 (£'000) | 2020 (£'000) | | :--- | :--- | :--- | | Revenue | 311,901 | 281,822 | | Operating profit/(loss) | (4,761) | 21,373 | | Net finance (costs)/income | (17,126) | 19,723 | | **(Loss)/profit for the period** | **(16,941)** | **33,558** | | Basic (loss)/earnings per share (pence) | (10.39) | 20.60 | [Interim Consolidated Statement of Comprehensive Income](index=16&type=section&id=Interim%20consolidated%20statement%20of%20comprehensive%20income) For the six months ended December 31, 2021, the company reported a total comprehensive loss of £16.1 million, including a net loss of £16.9 million, partially offset by other comprehensive income Comprehensive Income Summary for the Six Months Ended Dec 31 | Metric | 2021 (£'000) | 2020 (£'000) | | :--- | :--- | :--- | | (Loss)/profit for the period | (16,941) | 33,558 | | Other comprehensive income, net of tax | 875 | 19,036 | | **Total comprehensive (loss)/income** | **(16,066)** | **52,594** | [Interim Consolidated Balance Sheet](index=17&type=section&id=Interim%20consolidated%20balance%20sheet) As of December 31, 2021, total assets were £1,365.9 million, with £812.3 million in intangible assets and £87.4 million cash, while total liabilities reached £1,119.1 million Key Balance Sheet Items | Metric | 31 Dec 2021 (£'000) | 30 June 2021 (£'000) | | :--- | :--- | :--- | | **Total Assets** | **1,365,858** | **1,260,310** | | Intangible Assets | 812,252 | 754,467 | | Cash and cash equivalents | 87,434 | 110,658 | | **Total Liabilities** | **1,119,113** | **987,798** | | Borrowings (Total) | 582,237 | 530,236 | | **Total Equity** | **246,745** | **272,512** | [Interim Consolidated Statement of Changes in Equity](index=19&type=section&id=Interim%20consolidated%20statement%20of%20changes%20in%20equity) Total equity decreased by £25.8 million from June 30, 2021, to December 31, 2021, primarily due to the £16.9 million net loss and £10.7 million in dividends paid - Total equity decreased by **£25.8 million** during the six-month period, from £272.5 million to £246.7 million[76](index=76&type=chunk) - The main contributors to the decrease in equity were the **net loss for the period (£16.9 million)** and **dividends paid (£10.7 million)**[76](index=76&type=chunk) [Interim Consolidated Statement of Cash Flows](index=20&type=section&id=Interim%20consolidated%20statement%20of%20cash%20flows) For the six months ended December 31, 2021, the company reported a net decrease in cash of £22.9 million, with operating inflow offset by investing outflow and financing inflow Cash Flow Summary for the Six Months Ended Dec 31 | Metric | 2021 (£'000) | 2020 (£'000) | | :--- | :--- | :--- | | Net cash inflow from operating activities | 32,069 | 61,271 | | Net cash outflow from investing activities | (83,402) | (90,690) | | Net cash inflow from financing activities | 28,483 | 59,180 | | **Net (decrease)/increase in cash** | **(22,850)** | **29,761** | [Notes to the Interim Consolidated Financial Statements](index=21&type=section&id=Notes%20to%20the%20interim%20consolidated%20financial%20statements) The notes detail accounting policies, revenue disaggregation, exceptional items, intangible assets, borrowings, debt covenants, and significant contingent liabilities [Basis of Preparation and Accounting Policies (Notes 2 & 3)](index=21&type=section&id=Basis%20of%20preparation%20and%20Accounting%20policies) The interim financial statements are prepared on a going concern basis, supported by £87.4 million cash and £100 million undrawn revolving facilities - The financial statements are prepared on a going concern basis, with management concluding the Group can meet its obligations for at least 12 months following the report date[83](index=83&type=chunk)[86](index=86&type=chunk) - As of December 31, 2021, the Group had cash resources of **£87.4 million** and access to **£100 million** in undrawn revolving facilities[84](index=84&type=chunk) [Revenue from Contracts with Customers (Note 6)](index=24&type=section&id=Revenue%20from%20contracts%20with%20customers%20(Note%206)) Revenue is disaggregated into Commercial, Broadcasting, and Matchday streams, with Broadcasting being the largest contributor at £129.8 million for the six months ended December 31, 2021 Revenue by Component for the Six Months Ended Dec 31 | Revenue Stream | 2021 (£'000) | 2020 (£'000) | | :--- | :--- | :--- | | Commercial | 128,773 | 122,314 | | Broadcasting | 129,755 | 156,302 | | Matchday | 53,373 | 3,206 | | **Total** | **311,901** | **281,822** | [Exceptional Items (Note 8)](index=26&type=section&id=Exceptional%20items%20(Note%208)) Exceptional items totaled £10.0 million, primarily comprising £9.1 million in compensation for a former manager and £0.9 million for a pension scheme deficit - A **£9.1 million** charge was recorded for compensation paid to a former men's first team manager and coaching staff for loss of office[113](index=113&type=chunk) - An additional **£0.9 million** was charged related to a deficit in the Football League pension scheme, based on the latest actuarial valuation[113](index=113&type=chunk)[114](index=114&type=chunk) [Intangible Assets (Note 17)](index=34&type=section&id=Intangible%20assets%20(Note%2017)) As of December 31, 2021, intangible assets totaled £812.3 million, including goodwill and player registrations, with £144.3 million in additions and £72.5 million in amortization Intangible Assets Breakdown as of Dec 31, 2021 | Asset Type | Net Book Value (£'000) | | :--- | :--- | | Goodwill | 421,453 | | Registrations | 385,505 | | Other intangible assets | 5,294 | | **Total** | **812,252** | - Additions to player registrations in the six-month period amounted to **£144.3 million**[144](index=144&type=chunk) [Borrowings (Note 26)](index=39&type=section&id=Borrowings%20(Note%2026)) Total borrowings as of December 31, 2021, were £582.2 million, including senior secured notes, a term loan, and drawn revolving facilities, with all debt covenants met Borrowings Breakdown as of Dec 31, 2021 | Instrument | Amount (£'000) | | :--- | :--- | | Senior secured notes | 312,318 | | Secured term loan facility | 164,734 | | Revolving credit facilities | 100,000 | | Accrued interest | 5,185 | | **Total** | **582,237** | - The Group has **£100 million** in outstanding loans and **£100 million** in borrowing capacity under its revolving facilities[177](index=177&type=chunk) [Contingent Liabilities and Contingent Assets (Note 31)](index=45&type=section&id=Contingent%20liabilities%20and%20contingent%20assets%20(Note%2031)) The company's contingent liabilities include £122.4 million in potential transfer fees and ongoing discussions with UK tax authorities regarding player-related tax matters - Maximum potential contingent transfer fees payable were **£122.6 million**, dependent on conditions such as player appearances, team success, and individual awards[196](index=196&type=chunk)[197](index=197&type=chunk) - The Group is in active discussions with UK tax authorities over player-related tax matters, which represents a potential future liability[199](index=199&type=chunk)

[Overview and Highlights](index=1&type=section&id=Overview%20and%20Highlights) This section details key management changes, new commercial partnerships, and significant expected growth in international Premier League rights revenue [Key Highlights](index=1&type=section&id=Key%20Highlights) The company announced a new CEO, Richard Arnold, and is actively searching for a permanent manager, while securing a new training kit partnership and anticipating a 30% growth in international Premier League rights revenue - Richard Arnold was appointed as the new Chief Executive Officer, effective February 1, 2022, with Ralf Rangnick serving as Interim Manager for the remainder of the season[1](index=1&type=chunk) - A new principal training kit partnership was announced with blockchain partner, Tezos[1](index=1&type=chunk) - The new Premier League rights cycle, commencing in 2022/23, is expected to grow international revenues by **30%**, with total international rights anticipated to exceed UK domestic rights for the first time[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Richard Arnold outlined a clear vision for winning and strengthening fan engagement, while CFO Cliff Baty highlighted robust Q2 revenue growth despite COVID-related match postponements - CEO Richard Arnold emphasized a clear vision and strategy to win, fostering a culture of excellence and strengthening the role of fans[2](index=2&type=chunk) - CFO Cliff Baty noted robust revenue growth of **7.3%** for the second fiscal quarter, despite the postponement of two matches due to COVID-19[2](index=2&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) This section provides a comprehensive overview of the company's Q2 fiscal 2022 financial results, including revenue, EBITDA, net loss, and net debt analysis [Key Financials Summary](index=2&type=section&id=Key%20Financials%20Summary) For the second quarter of fiscal 2022, total revenue increased by 7.3% YoY to £185.4 million, primarily driven by a massive recovery in Matchday revenue, while Adjusted EBITDA decreased by 17.6% to £57.9 million, and net debt rose by 8.6% to £494.8 million Q2 & Six Months Fiscal 2022 Financials (£ million) | Metric | Three months ended 31 Dec 2021 | Three months ended 31 Dec 2020 | Change | Six months ended 31 Dec 2021 | Six months ended 31 Dec 2020 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | 185.4 | 172.8 | 7.3% | 311.9 | 281.8 | 10.7% | | Adjusted EBITDA | 57.9 | 70.3 | (17.6)% | 69.1 | 91.1 | (24.1)% | | (Loss)/profit for the period | (1.4) | 63.9 | - | (16.9) | 33.6 | - | | Basic (loss)/earnings per share (pence) | (0.86) | 39.17 | - | (10.39) | 20.60 | - | | Net debt | 494.8 | 455.5 | 8.6% | 494.8 | 455.5 | 8.6% | [Revenue Analysis](index=3&type=section&id=Revenue%20Analysis) Total revenue for Q2 was £185.4 million, with Matchday revenue surging by 2,206.7% due to the return of fans, Commercial revenue growing 2.9% from retail, and Broadcasting revenue falling 20.5% due to fewer games played Revenue Breakdown for Q2 FY2022 vs Q2 FY2021 (£ million) | Revenue Stream | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Commercial | 64.4 | 62.6 | 2.9% | | Broadcasting | 86.4 | 108.7 | (20.5)% | | Matchday | 34.6 | 1.5 | 2,206.7% | - Commercial revenue growth was driven by a **17.7% increase** in Retail, Merchandising, Apparel & Product Licensing, while Sponsorship revenue decreased by **6.9%** due to the expiry of a training kit deal[10](index=10&type=chunk) - The surge in the Omicron variant in December 2021 resulted in the postponement of two Premier League matches (one home, one away)[5](index=5&type=chunk) [Operating Expenses and Other Financial Items](index=4&type=section&id=Operating%20Expenses%20and%20Other%20Financial%20Items) Total operating expenses for the quarter increased by 29.7% YoY to £179.7 million, driven by higher employee benefit expenses and other operating costs related to full-capacity matches, alongside £10.0 million in exceptional compensation costs - Total operating expenses rose **29.7% YoY** to **£179.7 million**[11](index=11&type=chunk) - Employee benefit expenses increased **19.6%** to **£97.7 million** due to investment in the first team playing squad[12](index=12&type=chunk) - Exceptional items of **£10.0 million** were recorded, which includes compensation to the former men's first team manager and certain coaching staff for loss of office[15](index=15&type=chunk) - Net finance costs were **£7.5 million**, compared to net finance income of **£19.7 million** in the prior year quarter, due to unfavorable foreign exchange movements[17](index=17&type=chunk) [Cash Flow and Net Debt](index=5&type=section&id=Cash%20Flow%20and%20Net%20Debt) In Q2, the company experienced a net cash outflow from operating activities of £31.5 million, a significant shift from the prior year, leading to a decrease in cash and cash equivalents and an increase in net debt to £494.8 million - Net cash outflow from operating activities was **£31.5 million** for the quarter, compared to a **£1.0 million** outflow in the prior year quarter[19](index=19&type=chunk) - Net Debt increased to **£494.8 million** as of Dec 31, 2021, up from **£455.5 million** a year earlier[21](index=21&type=chunk) - The company drew down **£40.0 million** on its revolving credit facilities during the quarter[20](index=20&type=chunk) [Consolidated Financial Statements](index=9&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated profit or loss, balance sheet, and cash flow statements for the period, highlighting key financial positions and movements [Consolidated Statement of Profit or Loss](index=9&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) For the three months ended December 31, 2021, the company reported an operating profit of £5.4 million, significantly down from £48.5 million in the prior year, resulting in a net loss of £1.4 million compared to a £63.8 million profit previously Consolidated Statement of Profit or Loss (Three Months Ended Dec 31, 2021; in £ thousands) | Item | Three months ended 31 Dec 2021 | Three months ended 31 Dec 2020 | | :--- | :--- | :--- | | Revenue | 185,440 | 172,850 | | Operating profit/(loss) | 5,405 | 48,469 | | Net finance (costs)/income | (7,472) | 19,702 | | (Loss)/profit before income tax | (2,067) | 68,171 | | (Loss)/profit for the period | (1,402) | 63,828 | [Consolidated Balance Sheet](index=10&type=section&id=Consolidated%20Balance%20Sheet) As of December 31, 2021, total assets were £1.366 billion, slightly down from the prior year, while total equity decreased significantly to £246.7 million, and total liabilities increased to £1.119 billion Consolidated Balance Sheet Summary (in £ thousands) | Item | As of 31 Dec 2021 | As of 31 Dec 2020 | | :--- | :--- | :--- | | Total Assets | 1,365,858 | 1,381,600 | | Total Equity | 246,745 | 405,579 | | Total Liabilities | 1,119,113 | 976,021 | | Non-current borrowings | 477,052 | 471,026 | | Current borrowings | 105,185 | 65,114 | [Consolidated Statement of Cash Flows](index=12&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) For the three months ended December 31, 2021, the company reported a net cash outflow from operating activities of £31.5 million, an outflow from investing activities of £18.7 million, and an inflow from financing activities of £39.6 million, resulting in a net decrease in cash and cash equivalents of £10.6 million Consolidated Statement of Cash Flows (Three Months Ended Dec 31, 2021; in £ thousands) | Item | Three months ended 31 Dec 2021 | Three months ended 31 Dec 2020 | | :--- | :--- | :--- | | Net cash (outflow)/inflow from operating activities | (31,493) | (1,039) | | Net cash outflow from investing activities | (18,657) | (37,255) | | Net cash inflow from financing activities | 39,568 | 59,588 | | Net (decrease)/increase in cash and cash equivalents | (10,582) | 21,294 | [Supplemental Information](index=7&type=section&id=Supplemental%20Information) This section explains the company's use of non-IFRS financial measures, such as Adjusted EBITDA and Adjusted profit, and provides their reconciliations to IFRS equivalents [Non-IFRS Measures and Reconciliations](index=7&type=section&id=Non-IFRS%20Measures%20and%20Reconciliations) The company utilizes non-IFRS measures like Adjusted EBITDA and Adjusted profit to offer a clearer perspective on underlying performance, with Q2 Adjusted EBITDA at £57.9 million and Adjusted profit at £7.4 million - The company uses non-IFRS measures such as Adjusted EBITDA, Adjusted profit/(loss), and Net debt to provide insight into its operating performance and financial condition[25](index=25&type=chunk)[27](index=27&type=chunk)[30](index=30&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (Q2 FY2022; in £ thousands) | Description | Amount | | :--- | :--- | | (Loss)/profit for the period | (1,402) | | Adjustments (Tax, Finance, Amortization, etc.) | 59,349 | | **Adjusted EBITDA** | **57,947** | Reconciliation of Net Loss to Adjusted Profit (Q2 FY2022; in £ thousands) | Description | Amount | | :--- | :--- | | (Loss)/profit for the period | (1,402) | | Adjustments (Exceptional items, FX, etc.) | 10,739 | | Adjusted income tax expense | (1,966) | | **Adjusted profit for the period** | **7,396** |

Manchester United plc (NYSE:MANU) Q4 2021 Results Conference Call September 17, 2021 8:00 AM ET Company Participants Corinna Freedman - Head, IR Ed Woodward - Executive Vice Chairman Richard Arnold - Group Managing Director Cliff Baty - CFO Conference Call Participants Xian Siew - Exane BNP Paribas Randy Konik - Jefferies Operator 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 list ...

Manchester United plc (NYSE:MANU) Q2 2021 Earnings Conference Call March 4, 2021 4:30 PM ET Company Participants Corinna Freedman - Head-Investor Relations Ed Woodward - Executive Vice Chairman Richard Arnold - Group Managing Director Cliff Baty - Chief Financial Officer Conference Call Participants Xian Siew - Exane BNP Paribas Randy Konik - Jefferies Operator Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United Earnings Conference Call. At this time, all pa ...

[Report Highlights](index=1&type=section&id=Report%20Highlights) Manchester United reported strong Q2 FY2021 financial results, driven by operational and strategic developments including squad strengthening, digital engagement growth, and anticipated fan return Key Financial Indicators | Indicator | Value | | :--- | :--- | | **2Q Fiscal 2021 Revenues** | £172.8 million | | **2Q Fiscal 2021 Adjusted EBITDA** | £70.3 million | | **2Q Fiscal 2021 Operating Profit** | £48.5 million | - The club anticipates a staggered return of fans from May as UK lockdown measures ease[1](index=1&type=chunk) - Squads were strengthened with the addition of **Amad Diallo** (men's) and **Maria Thorisdottir** (women's)[1](index=1&type=chunk) - **Mason Greenwood** signed a new contract until **2025**[1](index=1&type=chunk) - Digital engagement growth led to **record e-commerce sales** for all three 2020/21 Men's kits[1](index=1&type=chunk) - The club's **TikTok launch** in November achieved the **fastest growing following** of any football club on the platform[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Executive Vice Chairman Ed Woodward expressed confidence in a return to normality, highlighting the club's resilience and on-pitch progress across all teams despite pandemic challenges - Management is confident in a path towards normality, including the return of fans, due to the rapid rollout of vaccines in the UK[2](index=2&type=chunk) - The club has demonstrated 'tremendous resilience' through the pandemic, supported by its strong commercial business[2](index=2&type=chunk) - Management is optimistic about the future, citing the progress made by the men's team under **Ole Gunnar Solskjær**, as well as the thriving Academy and Women's team[2](index=2&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) Q2 FY2021 total revenue increased by 2.6% to £172.8 million, driven by broadcasting revenue offsetting declines in matchday and commercial revenue, leading to a 32.9% rise in operating profit [Key Financials Summary](index=2&type=section&id=Key%20Financials%20Summary) A summary of Manchester United's key financial metrics for Q2 and H1 FY2021 shows changes in total revenue, adjusted EBITDA, operating profit, and earnings per share Key Financials Summary Table | £ million (except per share) | Three months ended 31 Dec 2020 | Three months ended 31 Dec 2019 | Change | Six months ended 31 Dec 2020 | Six months ended 31 Dec 2019 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | 172.8 | 168.4 | 2.6% | 281.8 | 303.8 | (7.2%) | | **Adjusted EBITDA** | 70.3 | 72.1 | (2.5%) | 91.1 | 106.9 | (14.8%) | | **Operating profit** | 48.5 | 36.5 | 32.9% | 21.4 | 47.5 | (54.9%) | | **Profit for the period** | 63.9 | 35.0 | 82.6% | 33.6 | 36.1 | (6.9%) | | **Basic earnings per share (p)** | 39.17 | 21.27 | 84.2% | 20.60 | 21.96 | (6.2%) | [Revenue Analysis](index=4&type=section&id=Revenue%20Analysis) An analysis of revenue streams reveals significant growth in broadcasting revenue due to UEFA Champions League participation, offsetting declines in commercial and matchday revenues Revenue Stream Performance | Revenue Stream | Q2 FY2021 (£M) | YoY Change | Reason for Change | | :--- | :--- | :--- | :--- | | **Broadcasting** | 108.7 | +68.0% | Participation in UEFA Champions League | | **Commercial** | 62.6 | -11.3% | One-off sponsorship credit in prior year and shirt sponsorship extension impact | | **Matchday** | 1.5 | -95.5% | All matches played behind closed doors due to COVID-19 | [Operating Expenses and Other Financial Items](index=4&type=section&id=Operating%20Expenses%20and%20Other%20Financial%20Items) Total operating expenses increased due to higher employee benefits, while other operating expenses decreased, and net finance income improved due to foreign exchange gains - Total operating expenses for the quarter increased by **5.6%** YoY to **£138.6 million**[12](index=12&type=chunk) - Employee benefit expenses rose **15.2%** to **£81.7 million**, due to contracted player salary increases from UEFA Champions League participation and investment in the first team squad[12](index=12&type=chunk) - Other operating expenses decreased by **18.1%** to **£20.8 million**, primarily due to reduced business activity and matches being played behind closed doors[13](index=13&type=chunk) - Net finance income was **£19.7 million**, up from **£15.3 million** in the prior year quarter, driven by foreign exchange gains on unhedged USD borrowings[16](index=16&type=chunk) [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) As of December 31, 2020, the company maintained £80.6 million in cash and access to £140.0 million in credit facilities, despite a £64.2 million increase in net debt primarily due to lost matchday receipts [Liquidity and Net Debt](index=2&type=section&id=Liquidity%20and%20Net%20Debt) The company's liquidity position includes £80.6 million in cash and £140.0 million in credit facilities, while net debt increased by £64.2 million due to operational impacts - As of **31 December 2020**, the company had **£80.6 million** in cash and cash equivalents and access to an additional **£140.0 million** under its revolving credit facilities[8](index=8&type=chunk) Net Debt Overview | Metric | As of 31 Dec 2020 | As of 31 Dec 2019 | Change | | :--- | :--- | :--- | :--- | | **Net Debt** | £455.5 million | £391.3 million | +£64.2 million (+16.4%) | - The increase in net debt was primarily driven by the loss of 2020/21 season Matchday cash receipts and deferred sponsorship payments, partially offset by increased broadcasting receipts, with a **£60.0 million** drawdown on the revolving credit facility also contributing to borrowings[4](index=4&type=chunk)[20](index=20&type=chunk) [Cash Flow Statement Analysis](index=5&type=section&id=Cash%20Flow%20Statement%20Analysis) Cash flow analysis for Q2 FY2021 shows a net cash outflow from operations and investing activities, offset by a significant inflow from financing activities, leading to an overall increase in cash Cash Flow Summary | Cash Flow Activity (Q2 FY2021) | Value (£M) | Key Driver | | :--- | :--- | :--- | | **Net cash outflow from operating activities** | (1.0) | Lower working capital movements related to Matchday revenue | | **Net cash outflow from investing activities** | (37.3) | Net capital expenditure on intangible assets (player registrations) | | **Net cash inflow from financing activities** | 59.6 | £60.0 million drawdown on revolving credit facilities | - Overall cash and cash equivalents increased by **£21.7 million** in the quarter, a significant improvement from the **£39.4 million** decrease in the prior year quarter[18](index=18&type=chunk) [COVID-19 Impact](index=3&type=section&id=COVID-19%20Impact) The COVID-19 pandemic significantly impacted operations, leading to closed facilities and lost matchday revenue, though partially offset by increased broadcasting income, with no financial guidance provided due to uncertainty - Operations at Old Trafford, including the Stadium, Museum, and Megastore, remain closed to visitors[5](index=5&type=chunk) - A total of **ten home matches** were played behind closed doors in Q2, compared to nine with fans in the prior year quarter, causing a significant Matchday revenue shortfall[6](index=6&type=chunk) - The Matchday revenue shortfall was more than offset by Broadcasting revenues from participation in the **UEFA Champions League**[6](index=6&type=chunk) - Due to ongoing uncertainty from the pandemic, the Company is not providing revenue or adjusted EBITDA guidance for fiscal 2021[6](index=6&type=chunk) [Financial Statements and Supplemental Notes](index=9&type=section&id=Financial%20Statements%20and%20Supplemental%20Notes) This section presents the unaudited consolidated financial statements, including the Statement of Profit or Loss, Balance Sheet, and Cash Flows, along with reconciliations of non-IFRS measures [Consolidated Statement of Profit or Loss](index=9&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) The consolidated statement details the company's revenue, operating profit, net finance income, and profit for the period for the three and six months ended December 31, 2020 Consolidated Statement of Profit or Loss | £ thousands | Three months ended 31 Dec 2020 | Six months ended 31 Dec 2020 | | :--- | :--- | :--- | | **Revenue** | 172,850 | 281,822 | | **Operating profit** | 48,469 | 21,373 | | **Net finance income** | 19,702 | 19,723 | | **Profit before income tax** | 68,171 | 41,096 | | **Profit for the period** | 63,828 | 33,558 | [Consolidated Balance Sheet](index=10&type=section&id=Consolidated%20Balance%20Sheet) The consolidated balance sheet provides a snapshot of the company's assets, equity, and liabilities as of December 31, 2020, and June 30, 2020 Consolidated Balance Sheet | £ thousands | As of 31 Dec 2020 | As of 30 June 2020 | | :--- | :--- | :--- | | **Total assets** | 1,381,600 | 1,383,466 | | *Non-current assets* | 1,149,933 | 1,158,660 | | *Current assets* | 231,667 | 224,806 | | **Total equity and liabilities** | 1,381,600 | 1,383,466 | | *Total equity* | 405,579 | 351,232 | | *Total liabilities* | 976,021 | 1,032,234 | [Consolidated Statement of Cash Flows](index=12&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The consolidated statement of cash flows outlines the net cash movements from operating, investing, and financing activities for the three and six months ended December 31, 2020 Consolidated Statement of Cash Flows | £ thousands | Three months ended 31 Dec 2020 | Six months ended 31 Dec 2020 | | :--- | :--- | :--- | | **Net cash (outflow)/inflow from operating activities** | (1,039) | 61,271 | | **Net cash outflow from investing activities** | (37,255) | (90,690) | | **Net cash inflow from financing activities** | 59,588 | 59,180 | | **Net increase in cash and cash equivalents** | 21,294 | 29,761 | | **Cash and cash equivalents at end of period** | 80,620 | 80,620 | [Reconciliation of Non-IFRS Measures](index=13&type=section&id=Reconciliation%20of%20Non-IFRS%20Measures) This section reconciles IFRS profit for the period to non-IFRS measures such as Adjusted EBITDA and Adjusted Profit, providing clarity on underlying financial performance Adjusted EBITDA Reconciliation | £ thousands | Three months ended 31 Dec 2020 | Six months ended 31 Dec 2020 | | :--- | :--- | :--- | | **Profit for the period** | 63,828 | 33,558 | | Adjustments: | | | | Income tax expense | 4,343 | 7,538 | | Net finance income | (19,702) | (19,723) | | (Profit)/loss on disposal of intangible assets | (14,278) | (1,683) | | Amortization | 32,459 | 64,002 | | Depreciation | 3,663 | 7,449 | | **Adjusted EBITDA** | **70,313** | **91,141** | Adjusted Profit Reconciliation | £ thousands | Three months ended 31 Dec 2020 | Six months ended 31 Dec 2020 | | :--- | :--- | :--- | | **Profit for the period** | 63,828 | 33,558 | | Adjustments (net) | (19,094) | (20,014) | | **Adjusted profit for the period** | **35,341** | **10,700** |