Madison Square Garden Sports Corp. (NYSE: MSGS) has reported
financial results for the fiscal first quarter ended September 30,
2021.
In October, the New York Rangers (“Rangers”) and New York Knicks
(“Knicks”) began their 2021-22 regular seasons, with full 82-game
schedules and no capacity restrictions for home games at the
Madison Square Garden Arena (“The Garden”). Both teams are
experiencing strong season ticket renewal rates, along with
increased corporate sponsorship demand. The Company extended key
marketing partnerships with JPMorgan Chase, Anheuser-Busch, Lexus
and Squarespace, while also welcoming new partners, including
Infosys and Benjamin Moore, as well as BetMGM, which represents the
Company's first significant marketing partnership related to mobile
sports gaming in New York State.
The year-over-year comparability of fiscal first quarter results
was impacted by several factors related to the COVID-19 pandemic.
After suspending the 2019-20 seasons in March 2020, the NHL and NBA
resumed play during the summer of 2020 and successfully completed
their postseasons in September and October 2020, respectively.
Consequently, the Company's results for the prior year first
quarter include the recognition of the remaining balance of
national media rights fees, along with operating expenses, both
related to the 2019-20 NBA and NHL seasons. Furthermore, the timing
of the completion of the 2019-20 NBA and NHL seasons caused delayed
starts to the 2020-21 seasons, resulting in no preseason games in
the prior year first quarter as compared with two Rangers preseason
home games during the current year period.
For the fiscal 2022 first quarter, the Company generated
revenues of $18.8 million, a decrease of $38.2 million, as compared
to the prior year period. In addition, the Company had an operating
loss of $34.9 million and an adjusted operating loss of $28.1
million, as compared to an operating loss of $27.4 million and an
adjusted operating loss of $17.8 million in the prior year
quarter.(1)
Madison Square Garden Sports Corp. President and CEO Andrew
Lustgarten said, “We’re pleased that the Knicks’ and Rangers’
regular seasons are underway – with both teams playing with no
capacity restrictions and a full slate of scheduled games. And
while there continues to be some uncertainty due to the pandemic,
we’re encouraged by what we’re seeing across several areas of our
business, including season tickets, corporate hospitality and
marketing partnerships. We believe our strong fundamentals, along
with new meaningful opportunities like mobile sports gaming in New
York, leave us well-positioned to generate long-term value for our
shareholders.”
Results from Operations Results for the three months
ended September 30, 2021 and 2020 are as follows:
Three Months Ended
September 30,
Change
$ millions
2021
2020
$
%
Revenues
$
18.8
$
57.0
$
(38.2
)
(67
)%
Operating loss
$
(34.9
)
$
(27.4
)
$
(7.5
)
(27
)%
Adjusted operating loss(1)
$
(28.1
)
$
(17.8
)
$
(10.4
)
(58
)%
Note: Does not foot due to rounding (1) See page 3 of this
earnings release for the definition of adjusted operating income
(loss) included in the discussion of non-GAAP financial
measures.
Summary of Reported Results from
Continuing Operations For the fiscal 2022 first quarter,
the Company generated revenues of $18.8 million, as compared to
revenues of $57.0 million in the prior year period, a decrease of
$38.2 million. The decrease in revenues was primarily driven by
declines in league distribution revenues and local media rights
fees. This was partially offset by an increase in pre/regular
season ticket-related revenues.
League distribution revenues decreased $41.2 million as compared
to the prior year period, primarily due to the recognition of the
remainder of national media rights fees related to the 2019-20 NBA
and NHL seasons during the fiscal 2021 first quarter that otherwise
would have been recognized during fiscal year 2020.
Local media rights fees decreased $1.8 million as compared to
the prior year period, primarily due to the impact of the Rangers'
participation in the Stanley Cup Qualifiers in the prior year
period, which was partially offset by contractual rate
increases.
Pre/regular season ticket-related revenues increased $3.7
million as compared to the prior year period, resulting from two
Rangers preseason home games played during the current year period
as compared to no games played in the prior year period as a result
of the 2020-21 NHL season's delayed start.
Direct operating expenses of $8.6 million decreased $31.2
million, or 78%, as compared with the prior year period. During the
prior year first quarter, the Company recognized a portion of
player compensation expenses and revenue sharing expense (net of
escrow) related to the 2019-20 NBA and NHL seasons that otherwise
would have been recognized during fiscal year 2020. As a result,
team personnel compensation decreased $13.5 million as compared to
the prior year period. Net provisions for league revenue sharing
expense (net of escrow) and NBA luxury tax decreased $8.9 million
as compared to the prior year period. In addition, net provisions
for certain team personnel transactions decreased $10.1 million as
compared to the prior year period. These decreases were partially
offset by $1.3 million of operating lease costs, including deferred
operating lease costs, under the Arena License Agreements with
Madison Square Garden Entertainment Corp. ("MSG
Entertainment").
Selling, general and administrative expenses of $43.7 million
increased $0.7 million, or 2%, as compared to the prior year
period.
Operating loss of $34.9 million increased $7.5 million, as
compared with the prior year period, primarily due to the decrease
in revenues, partially offset by lower direct operating expenses.
Adjusted operating loss of $28.1 million increased by $10.4
million, as compared with the prior year period, primarily as a
result of the decrease in revenues and, to a lesser extent, higher
selling, general and administrative expenses, partially offset by
the decrease in direct operating expenses.
About Madison Square Garden Sports Corp. Madison Square
Garden Sports Corp. (MSG Sports) is a leading professional sports
company, with a collection of assets that includes: the New York
Knicks (NBA) and the New York Rangers (NHL); two development league
teams – the Westchester Knicks (NBAGL) and the Hartford Wolf Pack
(AHL); and esports teams through Counter Logic Gaming, a leading
North American esports organization, and Knicks Gaming, an NBA 2K
League franchise. MSG Sports also operates two professional sports
team performance centers – the MSG Training Center in Greenburgh,
NY and the CLG Performance Center in Los Angeles, CA. More
information is available at www.msgsports.com.
Non-GAAP Financial Measures We define adjusted operating
income (loss), which is a non-GAAP financial measure, as operating
income (loss) excluding (i) deferred rent expense under the Arena
License Agreements with MSG Entertainment, (ii) depreciation,
amortization and impairments of property and equipment, goodwill
and other intangible assets, (iii) share-based compensation expense
or benefit, (iv) restructuring charges or credits, (v) gains or
losses on sales or dispositions of businesses, and (vi) the impact
of purchase accounting adjustments related to business
acquisitions. Because it is based upon operating income (loss),
adjusted operating income (loss) also excludes interest expense
(including cash interest expense) and other non-operating income
and expense items. We believe that the exclusion of share-based
compensation expense or benefit allows investors to better track
the performance of our business without regard to the settlement of
an obligation that is not expected to be made in cash. We believe
that given the length of the Arena License Agreements and resulting
magnitude of the difference in deferred rent expense and the cash
rent payments, the exclusion of deferred rent expense provides
investors with a clearer picture of the Company's operating
performance.
We believe adjusted operating income (loss) is an appropriate
measure for evaluating the operating performance of our Company.
Adjusted operating income (loss) and similar measures with similar
titles are common performance measures used by investors and
analysts to analyze our performance. Internally, we use revenues
and adjusted operating income (loss) as the most important
indicators of our business performance, and evaluate management’s
effectiveness with specific reference to these indicators. Adjusted
operating income (loss) should be viewed as a supplement to and not
a substitute for operating income (loss), net income (loss), cash
flows from operating activities, and other measures of performance
and/or liquidity presented in accordance with U.S. generally
accepted accounting principles (“GAAP”). Since adjusted operating
income (loss) is not a measure of performance calculated in
accordance with GAAP, this measure may not be comparable to similar
measures with similar titles used by other companies. For a
reconciliation of operating income (loss) to adjusted operating
income (loss), please see page 5 of this release.
Forward-Looking Statements This press release 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 in the forward-looking
statements as a result of various factors, including financial
community and rating agency perceptions of the Company and its
business, operations, financial condition and the industry in which
it operates, the impact of the COVID-19 pandemic and the factors
described in the Company’s filings with the Securities and Exchange
Commission, including the sections titled “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 contained
herein.
Conference Call Information: The conference call will be
Webcast live today at 10:00 a.m. ET at investor.msgsports.com
Conference call dial-in number is 833-942-2482 / Conference ID
Number 2298086 Conference call replay number is 855-859-2056 /
Conference ID Number 2298086 until November 17, 2021
CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
2021
2020
Revenues
$
18,794
$
57,038
Direct operating expenses
8,578
39,786
Selling, general and administrative
expenses
43,728
42,996
Depreciation and amortization
1,426
1,660
Operating loss
(34,938
)
(27,404
)
Other income (expense):
Interest income
50
—
Interest expense
(3,103
)
(1,989
)
Miscellaneous expense, net
(63
)
(120
)
Loss from operations before income
taxes
(38,054
)
(29,513
)
Income tax benefit
21,169
498
Net loss
(16,885
)
(29,015
)
Less: Net loss attributable to
nonredeemable noncontrolling interests
(480
)
(598
)
Net loss attributable to Madison Square
Garden Sports Corp.’s stockholders
$
(16,405
)
$
(28,417
)
Basic loss per common share attributable
to Madison Square Garden Sports Corp.’s stockholders
$
(0.68
)
$
(1.18
)
Diluted loss per common share attributable
to Madison Square Garden Sports Corp.’s stockholders
$
(0.68
)
$
(1.18
)
Basic weighted-average number of common
shares outstanding
24,172
24,062
Diluted weighted-average number of common
shares outstanding
24,172
24,062
ADJUSTMENTS TO RECONCILE OPERATING INCOME
(LOSS) TO ADJUSTED OPERATING INCOME (LOSS)
The following is a description of the adjustments to operating
loss in arriving at adjusted operating loss as described in this
earnings release:
- Deferred rent. This adjustment
eliminates the impact of the non-cash portion of rent expense
associated with the Arena License Agreements with MSG
Entertainment.
- Depreciation and amortization.
This adjustment eliminates depreciation, amortization and
impairments of property and equipment, goodwill and other
intangible assets in all periods.
- Share-based compensation. This
adjustment eliminates the compensation expense related to
restricted stock units and stock options granted under the
Company's employee stock plan and non-employee director plan in all
periods.
- Restructuring charges. This
adjustment eliminates costs related to termination benefits
provided to employees as part of the Company's workforce reduction
in August 2020.
Three Months Ended
September 30,
2021
2020
Operating loss
$
(34,938
)
$
(27,404
)
Deferred rent
529
—
Depreciation and amortization
1,426
1,660
Share-based compensation
4,851
6,345
Restructuring charges
—
1,644
Adjusted operating loss
$
(28,132
)
$
(17,755
)
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30,
2021
June 30, 2021
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$
33,610
$
64,902
Restricted cash
6,668
7,134
Accounts receivable, net of allowance for
doubtful accounts of $0 and $0 as of September 30, 2021 and June
30, 2021, respectively
54,872
74,197
Net related party receivables
9,545
6,420
Prepaid expenses
48,528
16,724
Other current assets
12,728
15,869
Total current assets
165,951
185,246
Property and equipment, net of accumulated
depreciation and amortization of $43,834 and $42,673 as of
September 30, 2021 and June 30, 2021, respectively
34,734
35,716
Right-of-use lease assets
702,605
703,521
Amortizable intangible assets, net
1,430
1,695
Indefinite-lived intangible assets
112,144
112,144
Goodwill
226,955
226,955
Deferred income tax assets, net
37,101
15,943
Other assets
47,016
28,719
Total assets
$
1,327,936
$
1,309,939
CONSOLIDATED BALANCE SHEETS
(continued) (In thousands, except per share data)
September 30,
2021
June 30, 2021
(Unaudited)
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$
1,692
$
2,226
Net related party payables
32,876
17,089
Debt
30,000
30,000
Accrued liabilities:
Employee related costs
55,033
90,269
Other accrued liabilities
48,022
55,718
Operating lease liabilities, current
42,425
41,951
Deferred revenue
219,725
131,025
Total current liabilities
429,773
368,278
Long-term debt
355,000
355,000
Operating lease liabilities,
noncurrent
681,007
691,152
Defined benefit obligations
6,251
6,283
Other employee related costs
54,842
57,740
Deferred revenue, noncurrent
31,497
31,603
Other liabilities
1,750
1,749
Total liabilities
1,560,120
1,511,805
Commitments and contingencies
Madison Square Garden Sports Corp.
Stockholders’ Equity:
Class A Common stock, par value $0.01,
120,000 shares authorized; 19,689 and 19,587 shares outstanding as
of September 30, 2021 and June 30, 2021, respectively
204
204
Class B Common stock, par value $0.01,
30,000 shares authorized; 4,530 shares outstanding as of September
30, 2021 and June 30, 2021
45
45
Preferred stock, par value $0.01, 15,000
shares authorized; none outstanding as of September 30, 2021 and
June 30, 2021
—
—
Additional paid-in capital
—
23,102
Treasury stock, at cost, 759 and 861
shares as of September 30, 2021 and June 30, 2021, respectively
(129,426
)
(146,734
)
Accumulated deficit
(103,235
)
(78,898
)
Accumulated other comprehensive loss
(2,005
)
(2,027
)
Total Madison Square Garden Sports Corp.
stockholders’ equity
(234,417
)
(204,308
)
Nonredeemable noncontrolling interests
2,233
2,442
Total equity
(232,184
)
(201,866
)
Total liabilities and equity
$
1,327,936
$
1,309,939
SELECTED CASH FLOW INFORMATION
(Dollars in thousands) (Unaudited)
Three Months Ended
September 30,
2021
2020
Net cash used in operating activities
$
(19,310
)
$
(57,485
)
Net cash used in investing activities
(306
)
(80
)
Net cash used in financing activities
(12,142
)
(6,902
)
Net decrease in cash, cash equivalents and
restricted cash
(31,758
)
(64,467
)
Cash, cash equivalents and restricted cash
at beginning of period
72,036
90,673
Cash, cash equivalents and restricted cash
at end of period
$
40,278
$
26,206
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211110005577/en/
Kimberly Kerns Communications (212) 465-6442
Ari Danes, CFA Investor Relations (212) 465-6072
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