Ed Woodward – Executive Vice Chairman Cliff Baty – Chief Financial Officer

Brian Paturzo – Jefferies Omar Sheikh – Credit Suisse Alex Mees – JP Morgan

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] We would like to remind everyone that this conference call is being recorded. Before we begin, we would like to inform everyone this conference call will include certain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Any such estimates or forward-looking statements should be considered in conjunction with the Company’s note in our earnings release regarding forward-looking statements and risk factors discussed in our filings with the SEC. Manchester United PLC assumes no obligation to update any of the estimates or forward-looking statements. I’ll now turn the conference over to Ed Woodward, Executive Vice Chairman of Manchester United. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us today. With me on the call again are Cliff Baty, our CFO; and Hemen Tseayo, Head of Corporate Finance. We’re approaching the end of a compelling season. Our first with Jose Mourinho as manager and one which I believe we made tremendous progress both on and off the pitch. It’s been an incredibly busy season, which will see us play 64 matches including an astonishing 9 matches last month. This will be the second busiest season in our history. In the league, we set a new club Premier League record of 25 matches unbeaten within a single season, we won The FA Community Shield and the EFL Cup, and obviously we’re delighted to reach the final of Europa League where we will face Ajax in Stockholm, next Wednesday. It’s the only major trophy we’ve never won. Off the field, we’re pleased to announce today that our performance has been stronger-than-expected and are increasing our guidance to record revenues of GBP 560 million to GBP 570 million and EBITDA to GBP 185 million to GBP 195 million. Turning to our commercial business. In sponsorship, we’ve announced 2 global partnerships. The first with Uber. The first partnership of its kind, which involve global campaigns, creating exclusive experiences for Uber riders and drivers around the world and the creation of a dedicated Uber zone at Old Trafford. And the second is with Aladdin Street, the world’s first dedicated premium Halalan Toyyiban focused e-marketplace. Aladdin will work with us to generate brand awareness and compelling engagement projects with our followers via the club’s digital platforms as well as one-to-one fan events and campaigns worldwide. Turning to media. Our media business continues to drive global audiences in massive scale. On the social front, the club has exceeded over 140 million followers across Facebook, Instagram, Twitter, and the others. Let’s put that into context. In Q3, Manchester United accounted for roughly 50% of all of the interactions generated by all 20 Premier League clubs on Instagram, Facebook, and Twitter. The Premier League teams, all 20, had a total of 510 million likes, comments, shares, or retweets, and Manchester United accounted for 250 million of these. Moreover, the club is featured at the Facebook’s F8 conference and highlighted during the keynote as the launch partner for their new augmented reality products. Regarding our MUTV direct-to-consumer launch, we continue to utilize our owned and operated channels to drive awareness, downloads, and subscriptions, and plan to aggressively market these products with both above-the-line and below-the-line campaigns including digital outdoor and traditional marketing outlets. We view our summer tour as a significant opportunity as we’ve retained the live game rights for all matches including the games against Real Madrid and Barcelona. Today, the highest converting markets include the U.S., Canada, India, Australia, and Japan. Finally, on the media side, you may have noticed that towards the end of February, we appointed Phil Lynch as our CEO of media. Having previously worked at Sony Pictures and most recently at Yahoo!, as the Global Head of Content and Media Partnerships, Phil will be responsible for overseeing the club’s digital media strategy, the management and operations of MUTV, as well as the club’s digital media partnerships and direct-to-consumer products. In retail, merchandising and product licensing, strong performances delivered year-on-year growth from all channels. Stadium resale through the megastores posted a record turnover for both the third quarter and the nine months year-to-date, setting new turnover records in six out of nine months, including all of the last five, with store trading up over 25%. Growth has been driven by pre-conversion through an enhanced product offer, which has targeted a broader consumer base. Key drivers have been the improvements in the mono-branded apparel range, the success of the dual-branded partnerships, particularly TAG Heuer, Columbia and New Era and the performance, of course, of the rest replica business. E-commerce has also posted a record turnover for the year-to-date with business up over 10% driven by the introduction of a U.S. specific site operated by Fanatics and growth in mainland European markets with France and the Nordics leading the way. We’ve also extended our partnership with Fanatics for the further year through May 2018. Finally, on the wholesale side, our partnership with adidas is delivering year-on-year growth, bucking industry norms where first year sales are typically boosted due to a change in kit manufacturer. This goes to highlight the global strength of our brand, the effectiveness of our partnership, and the scale of the opportunity we have before us. Our new away kit was launched on the 10th of May, and we’ve been trialing an exclusive 10-day sale window for both adidas and the Manchester United retail channels. On the venue side, this has also been a record-breaking season in two areas. Firstly, for our membership products, we have over 180,000 memberships sold, 27% up year-on-year, beating our previous record of 155,000 memberships, which we achieved 14 seasons ago. And secondly, our match-by-match hospitality products with 20% growth year-on-year and the revenue is 15% higher than the previous record, which we achieved in the 2012, 2013 season. Looking ahead to 2017, 2018, the season tickets for next season have already sold out on Sunday, the May 7, just 2 days after renewal deadline for season ticket holders and it was 3 weeks earlier than ever before. Also seasonal hospitality, which is our Executive Club, has now also sold out, again around 3 weeks earlier than ever before. Sell-out of these 2 seasonal products gives us a great platform to focus on match-by-match sales of the full 2017, 2018 season. We also announced Tour 2017 presented by Aon. We’ll be playing 5 games in 5 cities including 2 games against MLS sides, taking on Los Angeles Galaxy at the StubHub Center on the July 15, followed by a match against Real Salt Lake at Rio Tinto Stadium 2 days later, before taking part in the ICC tournament where we play City at NRG Stadium on the July 20, Real Madrid at Levi’s Stadium on the 23, 3 years after record-breaking U.S. soccer attendance of over 109,000 at The Big House in Michigan. And then finally, playing Barcelona on the July 26 at FedEx Field. Visiting North America will give the team the best possible preparation for the new season, using top class training facilities and playing in some great stadiums. Given all the records we’ve broken this year, we’ll watch closely to see if we break our tour attendance record. With that, I’ll hand the call over to Cliff.

Thank you, Ed, and hello, everyone. I’m going to review our results for the third quarter of fiscal 2017. As usual, unless I mention otherwise, all figures are in U.K. pound sterling. As mentioned last quarter, year-over-year comparisons throughout fiscal 2017 will be materially impacted by 3 themes. The impact of non-qualification to the Champions League, the new domestic and international Premier League deals; the cadence of matches on a quarterly basis. Total revenues for the period grew by 3.1% to GBP 127.2 million, primarily as a result of the growth in broadcasting revenues despite playing 1 fewer home Premier League game during this period. Adjusted EBITDA for the period was GBP 30 million, 33.2% below last year’s third quarter due to increased staff cost and operating expenses. As with previous announcements, we’ve included both adjusted profit and adjusted earnings per share as we believe in assessing the true comparative financial performance of the business, it is useful to strip out the distorting impact of items that are unrelated to the underlying business, and then to apply a normalized tax rate of 35% for both the current and prior periods and we’ve provided a reconciliation of this in the earnings release. The result of the quarter was a GBP 3.8 million loss compared to a prior-year profit of GBP 13.7 million, primarily due to increased amortization costs following the investment in players over the summer. Turning to the key items of note in the financial statements. Commercial revenues were up GBP 0.7 million, with growth in sponsorship, retail, merchandising, apparel and product licensing revenues being partially offset by decline in mobile and content revenues. Broadcasting revenues increased GBP 3.6 million, primarily due to the new Premier League domestic and international broadcasting rights agreements, partially offset by playing 1 fewer Premier League home game compared to the prior year. Match fee revenues were down GBP 0.5 million, again due to 1 fewer Premier League game, offset by 1 additional domestic cup match as well as the share of gate receipts from the EFL Cup final. During the quarter, total operating expenses, excluding depreciation and amortization, were up 23.8% with total wages up 18.3% due to new player acquisitions. Operating expenses were up 37.7%, primarily due to increases in gate share costs as a result of playing the 1 additional domestic cup home game, foreign exchange losses plus an increase in travel costs. Net finance costs for the quarter were down by GBP 0.3 million. Turning to the balance sheet. The cash balance of GBP 152.7 million was up GBP 48.5 million over the prior year and the increase in net debt of GBP 17.6 million to GBP 366.3 million was entirely driven by the impact of foreign exchange movements on a U.S.-denominated debt. Our long-term debt remained unchanged in U.S. dollar terms. Owing to progress of the team in both domestic cup competitions and in reaching the Europa League final, together with low staff costs, we would now expect full year results to be above our previously stated guidance of fiscal 2017. As Ed has highlighted earlier, we now forecast revenue between GBP 560 million to GBP 570 million, and adjusted EBITDA of GBP 185 million to GBP 195 million. With that, I’ll hand back to the operator, and we’re ready to take your questions.

Yes, thank you. We will begin the question-and-answer session. [Operator Instructions] And the first question comes from John Janedis with Jefferies.

Hi, this is actually Brian Paturzo on for John. So first question is, assuming you fail to win the Europa League and you finish outside of the top four, can you remind us how the adidas penalty will impact your results in fiscal 4Q and also in fiscal 2018?

Yes, Cliff, do you want to?

Yes. Hi, Brian. I think, as we mentioned before, the impact of this, so it’s a 30% reduction in the following year’s payments, so receipt of sponsorship next year from adidas will be GBP 70 million if we’re in the Champions League, so that would be 30% of that, so that would be GBP 21 million reduction, but important thing to remember about that is it’s spread out over the remaining life of the contract, so in accounting terms, that is spread out, so we have a two year catch up this year, so it’s about a GBP 4 million hit in fiscal 2017 and then it’ll be a further GBP 2.1 million hit for the life of the contract, which has got another eight years to go.

Okay, thank you. And then just one – second question is, it looks like the summer tour is more robust than last season. Can you talk about the revenue impact that you’ll see from a larger summer tour? And how this compares to last year when you played fewer games?

I can’t – it’s Cliff again. I won’t talk specifics, Brian. I think, yes, you’re right, we’re playing more games. As Ed just mentioned, they have very popular games in North America with a large support, so we would expect to see improved financials from that tour, but I won’t talk in any specifics about revenues that we receive, et cetera. But we’d expect a smaller sort of single-figure digit increase in the sort of earnings from tour this year as opposed to where we went last year.

Okay, thank you.

Thank you. And the next question comes from Omar Sheikh with Credit Suisse.

Good morning, everyone. Just a couple of questions, maybe first for Cliff following on the question about Champions League, maybe if you could just remind us on what the variable cost impact would be if you weren’t to qualify for the Champions League, because presumably that’s an offset for some of the revenue hit that you mentioned? And then just maybe a question for Ed. You’ve touched upon the appointment of Phil Lynch as the CEO of media, and obviously, you had the MUTV app sort of available for a few months now, five months I think it is. Could you maybe talk just broadly about your – the opportunities as you see them for developing the media strategy and what part the MUTV app might play within that, that will be helpful?

Okay, Omar. I’ll take the first, I think you’re referring to – really, the question is what is the impact sort of on an ongoing basis between us being in the Champions League and us being in the Europa League. Clearly, the Champions League has greater revenues, but we do have a design of sort of – an offset within salary costs on our bonus structure which attempts to sort of dampen the impact between being in the Champions League and being in the Europa League. So it’s a single-figure digit. On a normalized basis, we get a single-figure digit EBITDA benefit from being in the Champions League, but I think it’s important to note that Champions League, we’d expect sort of GBP 40 million to GBP 50 million in revenues whereas the Europa League, absent this year, is normally sort of around about the GBP 50 million to GBP 20 million revenues. I think, it would – take a point to note actually this year, we have benefited from the performance of other English teams in the Europa League. We qualified by winning the FA Cup and because only ourselves in Southampton went through into that first round, we got a bigger share of the market pool. And also, really performance of Southampton and Tottenham later on in that competition meant that we picked up a bigger share of that market pool and will do throughout the knockout stages. So we benefited to almost sort of GBP 7 million or GBP 8 million over a normalized UEL Europa League in this season.

And then, thanks, Cliff. I’m Ed. Your second question was around the hiring of Phil Lynch and where we’re in the MUTV app and an overall opportunity and how we see that. I mean, I think, good question. I think the opportunity generally around digital media remains an important one for the club. The MUTV app is just a part of that, and Phil, who has come in since February, settled in quickly and is looking at integrating the web and the app strategies that we have across media and also looking at developing MUTV into next phase of its evolution, which again is important. We do MUTV as the sort of production company, feeding these media channels, and also, obviously our social media footprint, which is large. The learnings have been interesting around the MUTV app. I’m – you’re probably not surprised. I’m not going to go into detail from – with commercially sensitive numbers around where we’re with it, but we’ve learned a huge amount, being happy to say minimal technical bugs as we launched it. One third of subscribers are from the U.S. You heard me list out the main five or six countries, but a large number from the U.S., 3/4 are under the age of 24 – sorry, 34, so a good age range demographic there and about two thirds use Apple iOS devices and the only thing I’d say is, again, we’re tracking very closely what resonates from a content perspective and what doesn’t, and we’re looking to drive the marketing of the app around the summer tour given the – it’s the first time, obviously, we will have live games to be able to push through the channel through this feed, and we’re hoping to get some good feedback on that, but it’s a work in progress. The way the MUTV app integrates into the overall strategy is something we will communicate later this year as we come to market, as we’ve said before, later in 2017 with the relaunched website plus the app that we’re working on with HCL.

Brilliant. That’s very [indiscernible] thanks for that.

Thank you. And we have time for one more question, which comes from Alex Mees from JP Morgan.

Thanks, good morning everyone. Just a couple of questions, if I may. Firstly, perhaps Cliff, just on the trophies that you’ve won and then would hope to win with Europa League. Is there material prize money that’s earned with these successes and if so, where does it get reported? Secondly, on employee expenses, I wonder what the variability is around success in the Europa League? So is there incentivization that we should be thinking about when we compute employee expenses forecast? And then just finally, perhaps one for you, Ed. I wonder if you could just talk briefly about the retail strategy. It’s been a while since we’ve touched on that in terms of broadening out beyond Old Trafford and conquering the world?

Alex, I’ll take the long first. I mean, I think in terms of the trophies, really, the material one and the only material one for us to talk through would be Stockholm next week. The winner of that in fixed fee terms get GBP 6.5 million. The loser gets GBP 3.5 million. We’ll also get a little bit of market pool from that. So there’s your delta in terms of win or lose. I mean, for us, the bigger prize arguably is this – is obviously, we’ve talked about the adidas impact and the Champions League, in terms of pure financial terms, we’re talking there. So that’s the delta there. In terms of – yes, we do have – we would have some bonuses payable, but in relationship to the size of our overall payroll, they are not material, and we also have small bonuses due contractually from some of our contracts – sponsorship contracts were we to win as well, which sort of net each other out. So nothing material from an overall financial point of view. I think the main thing to stress, which I replied on the previous question is this has been an exceptional year for us in Europa, the way the events have worked out. So the actual revenues that we’ve made from the tournament this year unlikely to be achieved if one went into the Europa again because of the way teams have behaved and performed with us. So that has given us a benefit to revenue and to EBITDA that you’ve seen a little bit in the upgraded guidance today. Not all of that guidance increases due to the Europa, but a good portion of it is.

And then your question on retail. I mean, I obviously mentioned obviously on the call already around the megastore performance, which has been fantastic in six of the last nine months, we have records broken in terms of revenue and the relationship from a – if you like broader wholesale perspective with adidas has been fantastic. We’ve experienced in the megastore the highest ever conversion rates and average baskets that we’ve ever had. So the products are going very well, the demand is fantastic from the fan base. E-commerce is mirroring that, as we said, 10% increase, particularly through Fanatics in the U.S. market, but in terms of the own retail side of that business, there is no further update to this point. We’re still critically reviewing options with regard to how and when and where we may roll out our own retail. So again, we hope to give you a bit more information on that in the next call.

Thanks, Ed. Thanks, Cliff.

Thank you, and as that was the last question, that concludes the question-and-answer session and the call as well. Thank you for attending today’s presentation. You may now disconnect.