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April 16, 2020

Mike Dowse

New York, New York

CHRIS WIDMAIER: Thank you all the members of the media that have joined us on this call today. This is Chris Widmaier, managing director of communications for the USTA. I want to do a little bit of housekeeping before turning this over to the USTA chief executive officer Mike Dowse.

Everybody on this call should have received our press release. It talks about the USTA and the overall industry's Phase II support of the tennis ecosystem here in the United States.

Generally myself, Brendan McIntyre and Pat Mitsch are in the office together. This is the first time we're doing this remotely. If for any reason somebody was hoping to get a question in and it doesn't happen, please reach out to any one of us and we will ensure we get answers to whatever questions you may have.

Finally this is a conference call to talk about the USTA and the tennis industry's support of the front lines of tennis. Mike will go through those details momentarily. This is not a call about the status of the US Open. That being said, Mike will start his remarks with a comment regarding the US Open because I know obviously it's on everybody's mind.

Without further ado, I'm going to ask Mike to give his opening remarks, then following that we will turn it over to a Q&A.

Mike, would you please start.

MIKE DOWSE: Thank you everyone for joining, whether it's morning or afternoon where you are at.

I will start with the US Open. Specific to that, I just want to share with you our approach. In one sense we're very fortunate that we're the fourth Grand Slam to go, so time is on our side at this point. Obviously our ambition is to run the tournament. It's the engine that drives our organization, our governing body.

Having said that, that won't be the driving factor. The driving factor will be the health and wellbeing of the players, the fans and our staff. To that we just don't have enough information that we can run the tournament safely.

We've set a timeframe around June to make that decision. The way we're approaching it is through a medical advisory group. We have five or six doctors that are consulting with us on a regular basis. Based off that information, we'll ultimately make the decision if it's safe to play the tournament or not. So stay tuned on that. We'll open it up to follow-up questions at some point if you have some more questions around the US Open.

With that I want to transition into the purpose of the call which really is our approach to helping the industry during this time. You know in mid March when the pandemic hit, it became very concerning what was happening to the tennis industry. We commissioned a group of our colleagues, many of you whom you knew, the USPTA, PTR, the ITA and others.

I was really impressed. This group within 24 hours put together a survey, sent it out, had over 3,200 responses in the first 24 hours. That was the good news.

The bad news, on March 23rd, 85% of tennis clubs were already closed in the United States. We know that number is probably higher today. We also realized most of our teaching professionals are out of work. Our understanding and belief is that without our tennis facilities and our teaching pros, we would not have an ability to grow the sport.

Our immediate response as an organization was to get information and aid to these stakeholders ASAP to make sure they could access government grants. We know that will be the driving financial force, financial aid will come through government assistance, whether it be federal, state or local. That package went out on March 26th, you can find it on our website Tennis Industry United.

From there we knew that wasn't enough, so we're now moving into Phase II, which is around financial aid for the key stakeholders of tennis facilities of teaching pros first. We took inspiration from FDR's statement of relief recovery and he used the term 'reform' during the Great Depression. We have modeled around relief, recovery and rebuild.

Phase I is all about relief for our tennis facilities, tennis pros and community tennis associations.

Phase II is around the rebuild. That's where we're going to be providing financial assistance to help these facilities and pros turn the lights back on and get back up and running.

Phase III will be all around rebuild where we go back to implementing our mission of growing and supporting the sport tennis.

In totality we're putting $50 million to this effort in the first two phases: the relief and recovery. 15 of that is spelled out in new programs we're initiating to resource fluidity. If you read the press release, you'll notice we have taken salary reductions across a large part of our organization. We made cuts in player development, marketing and operations. Through that we've come up with $15 million to fund this Phase II approach.

On top of that we made a top priority of committing $35 million to our 17 sections, 17 sections that make the best decisions because they're the closest to the local providers. We didn't want to have all that money centralized, we wanted to decentralize it as quickly as we could.

In totality we've put $50 million to this initiative. We're in Phase II now. As we move into Phase III, we'll be focusing on growing the game again and also working with our peers at the ATP, WTA, Grand Slam boards, ITF. We're working closely with them to put a package together for lower-ranked tennis professionals on both the ATP and WTA Tour, as we know they have suffered significant financial hardship during this period as well.

With that, hopefully that gives you a little bit of an overview of how we're approaching the situation from both the US Open and community tennis. With that I think I'll open it up to questions.

Q. Mike, you mentioned eliminating programs and marketing player development and operations. Can you be more specific as to what kinds of things you're eliminating, and be a little more specific in the financial assistance you're going to give to the pro circuit players ranked below 150 or 200 in the world because they seem to be struggling the most right now.
MIKE DOWSE: Yes, for sure.

The first part of your question, our salary reductions. That was some of the money that's going towards the grassroots.

The second area on player development, some of that happened naturally, to be honest with you, as events didn't happen. We've also made reductions in choices on some of the things we're going to support in the latter part of the year.

On marketing we have taken funds primarily away from what we call grow the game initiatives, consumer facing initiatives. We know without facilities and teaching pros there won't be a place for consumers to go to. It made more sense to channel the consumer funding back towards more of a B to B approach as opposed to a B to C approach.

Specific to your second question, there's really two things we're doing to support those lower-ranked players. We've made a commitment to continue to fund the challenger series and ITF related tournaments when those come back online. That's an investment in the neighborhood of $7.5 million.

On top of that, literally on a weekly basis, we're talking with the WTA and ATP. We've made a commitment to them, along with our peers at the other Grand Slams and the ITF, to support the packages they're putting together for their stakeholders.

Q. Would you consider grants or loans to American players who are ranked at that pro circuit level?
MIKE DOWSE: We want to do this as part of a holistic package. It will be part of that relationship we have with the ATP and WTA. Those details are being finalized right now by those two organizations. As a matter of fact, we have a call with them this Friday and early next week to get that information out as soon as we can.

Q. Mike, question about the player development. How is the player development program being impacted by these cuts?
MIKE DOWSE: The first situation, as you can imagine, a majority, much of that player development happens at our national campus down in Orlando. Unfortunately, but rightfully so, we closed the doors on March 13th. The coaching and training associated with that has been the primary cut at this point.

Also, frankly, the lack of travel needed and expenses associated with that, travel not just to the majors such as Roland Garros and Wimbledon, but to the other ITF and global events, that's where a lot of that is coming from at this point.

Q. The employees who are working there at the USTA, coaches, staff, are they still being paid or have they been furloughed? What's happening with that?
MIKE DOWSE: Our full-time employees are still on the payroll. If they fall within our various salary reductions, they're affected that way.

Q. Obviously few if any people saw this pandemic coming. How would you rate the USTA's preparedness for something like this financially speaking? Were there rainy day funds, anything you were able to call on once you realized the economic hit of something like this?
MIKE DOWSE: That's a very good question. The answer is yes. Traditionally the USTA has been a very fiscally sound organization. We do have reserves.

Having said that, we've had some pretty significant investments over the years for the transformation of the US Open, the Billie Jean King Tennis Center, as well as our campus in Orlando. We've had a reserve policy in place at both the national level and our 17 sections.

A big portion of that will allow us to continue to invest that $35 million I mentioned earlier out to our 17 sections, then again to resource fluidity, the other $15 million of our $50 million commitment to community tennis and grassroots tennis during this pandemic.

Q. Any plans you were working on that got derailed by what's gone on, drew focus from other projects?
MIKE DOWSE: As maybe you know, I started on January 1st. Coming into the door, the first and foremost priority is to execute the strategy. Our mission is to promote and grow the sport of tennis.

We have five strategic choices we focus on. Those we're not losing sight of, we're taking a very long-term approach. But how we prioritize our investments right now is first and foremost to guide what I call a relief phase. Ultimately when we get to the rebuild phase it will all be about our five strategic choices.

Q. Mike, the reduction in game initiative area you mentioned earlier, does that include Net Generation? In order to have long-term savings for the USTA, is the elimination of player development on the horizon or not?
MIKE DOWSE: To your first question, as far as Net Generation, it's something we're earmarked more for consumer facing activation are being redeployed, what I'm calling the B to B execution.

As far as any restructuring of the company, we've paused on that because our first priority is the health and wellbeing, making sure we're making smart choices on our office policies, travel policies, then ultimately the US Open.

Once we get through that, I believe and subscribe to the philosophy of structure follow strategy. At that point we'll look at what is the optimum structure to support our strategy.

Q. Mike, a theoretical involving the US Open. If, in fact, US Open could be played but without spectators, how significant would that impact be on your support initiatives?
MIKE DOWSE: Playing without spectators, we're not taking anything off the table right now, but to be honest and open, I think that's highly unlikely. That's not really in the spirit of the celebration of tennis. It also goes back to the health and wellbeing of not just the spectators but of our players and support staff that help run the tournament.

Unless the medical industry or medical experts come up with a solution that truly is foolproof and safe, we don't see that as an option.

Having said that, things are fluid. If the medical experts come back and say here is a foolproof way of running a very safe tournament, unfortunately it has to be without fans, we may reconsider and look at it at this point. Today it's just too early to kind of speculate on what the exact specifics will be at that time.

Q. You wouldn't play the tournament without spectators?
MIKE DOWSE: Just to be 100% clear, we're not taking anything off the table. Right now I'd say that's a highly unlikely scenario.

Q. Mike, you mentioned in your opening remarks the industry survey. What stood out or what maybe surprised you from that? How has that survey guided the second phase?
MIKE DOWSE: The survey, to reiterate, 3,200 respondents, 85% of them were closed on March 23rd. 15% said they were running on a limited basis. Forward a few weeks, with all the stay-at-home orders, we can well imagine that is at 90% now.

It's not a surprise, that is the desire to have access to information on financial aid. That's why it compelled us and we worked extremely closely with our partners in this Tennis Industry United to come up with the assistance package that we published within 24 hours of the survey results. That's the one we have on our website.

The other thing that really stood out to me was the need and desire for education during this time that tennis professionals and clubs wanted access to all things around education, from running clean facilities to improving their skills as far as being a tennis professional, legal assistance, tax assistance, all those types of things within the education space. That was one of the other top priorities in pushing that out of what we call Phase I.

Q. If we're looking for a silver lining in this unfortunate situation, do you think potentially the tennis industry could come out of this with a more unified front beyond the relief efforts with the organizations involved with the Tennis Industry United campaign and with the ATP, WTA, ITF?
MIKE DOWSE: Actually I think there's two silver linings. The first is what you just spoke to, the collaboration amongst what we call the alphabet soup of tennis. It's been fantastic. We're having weekly calls at the global level with our peers at ATP, WTA, ITF, Grand Slam boards. We're having daily and weekly calls with our peers within the U.S., the USPTA, PTR, TIA, et cetera.

The other silver lining, once we get through the containment phase of this pandemic, tennis can be a great social distancing sport. We heard comments in the initial phases of the pandemic, people were gravitating towards tennis. Sales of tennis balls, what we call recreational racquets that are generally around $50, were up double-digits. People saw this as a great alternative to sports that are not as safe and not as conducive to social distancing.

I think once we get through the relief and recovery phase, there's a huge opportunity for community tennis at the parks level to really start growing because people want to work, people want to play. If you're going to play, you want to play in a safe way. Tennis is the perfect sport to do that once we get through that initial phase.

Q. Can you step back and give a personal reflection on how this pandemic has hit the sport. What is the big picture for the game? Do you think it's going to come back in a different way or do we have a long way to recover for the American game and the international game?
MIKE DOWSE: Maybe similar to my answer to the previous question. In the short-term there is a lot of pain. We can't ignore the fact of the number of facilities and teaching professionals that are out of the sport. We need to help get them through this. We're not going to be able to do it ourselves. With the help of all these great government aid packages, along with our targeted efforts, I'm confident we can get the majority of facilities and pros through this time.

To my comment a few minutes ago, as people reevaluate how they participate in sports going forward, tennis can be the perfect solution. Again, it's a great sport for social distancing. It's low cost. You can play at public facilities, buy a can of tennis ball, a relatively inexpensive racquet, you're ready to go.

If we play it right, have our focus in the appropriate place coming out of the relief and recovery phase, we can accelerate the rebuild.

Again, I think there's going to be this pent-up demand of people wanting to work, people wanting to play. If you're going to go out and play, you have this desire to play some type of sport, tennis has to be rated at the top of that list.

Q. In terms of the US Open, not this year, the rescheduling, but would you consider a kind of change in the prize money protocol where it goes up and up and up? Would the USTA ever consider saying, Winner, Coco Gauff, here's $3.8 million, you can give $400,000 to your favorite charity? With the other wonderful statues at the Billie Jean center, have a statue to the health workers? Would you consider redirecting some of the entertainment budget in other directions?
MIKE DOWSE: Hopefully I capture your three different sentiments there.

As far as the prize money, to use that word reimagined, as we come out of the relief and recovery phase, everything is on the table. We would never do anything in that space without collaboration back to the comments we made earlier with an opportunity for the industry to come together. We'd work with our peers at WTA, ATP, to find out the best way to reimagine prize money.

As far as health workers, celebrating them, absolutely. That ties into the health workers who are using our tennis center now in New York City. Most people on this call know we converted our indoor tennis courts into a 450-bed hospital in New York City. On top of that, we're making 25,000 meals a day in our commissary to service health workers and kids who are not benefitting from school lunch programs at this point.

Q. Mike, the funding commitment to the sections, does that come with any requirements or restrictions as far as how the sections can spend that money?
MIKE DOWSE: Not specific restrictions. The reason being is we don't want to be an ivory tower organizations. We feel those decisions are best made at the local level. We want to encourage decentralizing that decision making.

We have great staff and volunteers in the sections. We would like to empower them. They're driven by what we call the BIT, best interests in tennis. That will be our guiding principle. We want that decision making decentralized.

Q. The USTA and President Patrick Galbraith were on a list that the White House was contacting. Is there anything more you can tell us about that?
MIKE DOWSE: Sure, yes. Patrick Galbraith was on the call yesterday with President Trump, our colleagues or peers from other professional sporting events.

The feedback is the President, he's publicly said he's very interested in getting sports back up and running again, they'll provide whatever resources we need.

Our definition of that is primarily information around the medical world, to assure we can run a safe event. The more access we can have to that expertise, the better. That was the message Patrick received.

Q. Mike, given the USTA investment in public parks tennis, what you just said about the White House, will the USTA have any voice on public park courts reopening as we see the curve flattens or is that solely up to the local and state governments and parks? Also, your experience in the industry on the commercial side, worst-case scenario, there's no more pro tennis this year, what would the economic impact be on the industry? Would you support what the Italian federation has said, back-playing the events like Rome as an indoor November kind of thing?
MIKE DOWSE: On the first part, specific to the parks, that's a decision made at the local level by the local authorities. Having said that, we're going to provide them as much medical information as we can as it relates to tennis. They can make a fact-based decision, do it in a proper way. We see ourselves as a facilitator in that discussion, but they're the ultimate decision makers as far as opening up the parks.

The second part, I'm a big fan of being entrepreneurs, doing what we can to keep pro tennis going, again all with the qualification that it has to be 100% safe for all those involved. That means the players, the coaches, the linesmen, umpires, physios, and of course the fans. Any way pro tennis can be played safely, we're for it in whatever package that may be delivered in.

CHRIS WIDMAIER: I want to take a moment to thank everybody for taking the time to join us today. I do appreciate Mike taking the time as well. Again, just from a housekeeping point of view, if you have not received the release or if there are questions that this call might have prompted that we don't have time at this moment to answer, please get in touch with myself, Brendan McIntyre or Pat Mitsch and we will take care of you to the best of our ability. As more news arises, we'll be sure to keep you informed.

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