NEW YORK--(BUSINESS WIRE)--Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fiscal second quarter ended December 31, 2021.
The New York Knicks (“Knicks”) and New York Rangers (“Rangers”) began their 2021-22 regular seasons in October, which include full season schedules and no capacity restrictions at the Madison Square Garden Arena ("The Garden"). The Company is seeing positive results across its key revenue lines driven by robust consumer and corporate demand. For the fiscal 2022 second quarter, regular season average per-game ticket revenue was in line with pro-forma results for the fiscal 2020 second quarter, the most recent pre-pandemic period.(2) In addition, regular season average per-game suite and sponsorship revenues as well as food, beverage and merchandise per-caps exceeded results for that same pre-pandemic period. Local and national media rights fees were also higher, reflecting contractual rate increases and the impact of the NHL's new U.S. media rights agreements.
As a result of this positive momentum, the Company generated revenues of $289.6 million, operating income of $35.9 million and adjusted operating income of $55.7 million for the fiscal 2022 second quarter.(1) The comparability of fiscal 2022 and 2021 second quarter results is impacted by the COVID-19 pandemic, which, in the prior year period, caused the delayed starts to the 2020-21 NBA and NHL seasons. During the second quarter of fiscal 2022, the Knicks and Rangers played a combined 35 pre/regular season home games with no capacity restrictions, as compared with four Knicks home games without fans in attendance and no Rangers home games in the prior year period. As a result, the Company’s financial performance in the fiscal 2022 second quarter reflects significant improvements compared to the fiscal 2021 second quarter in which the Company generated $28.8 million in revenues, an operating loss of $38.4 million and an adjusted operating loss of $19.0 million.
Madison Square Garden Sports Corp. President and CEO Andrew Lustgarten said, “We are pleased with how quickly our business has returned to pre-pandemic levels, with our second quarter results reflecting robust ongoing demand for the Knicks and Rangers. We will look to build on this momentum through the rest of the fiscal year and remain confident in the value of owning iconic professional sports franchises.”
Results from Operations
Results for the three and six months ended December 31, 2021 and 2020 are as follows:
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Three Months Ended |
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|
|
|
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Six Months Ended |
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|
|
|
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December 31, |
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Change |
|
December 31, |
|
Change |
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$ millions |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Revenues |
|
$ 289.6 |
|
$ 28.8 |
|
$ 260.8 |
|
NM |
|
$ 308.4 |
|
$ 85.8 |
|
$ 222.6 |
|
NM |
Operating income (loss) |
|
$ 35.9 |
|
$ (38.4) |
|
$ 74.3 |
|
NM |
|
$ 1.0 |
|
$ (65.8) |
|
$ 66.8 |
|
NM |
Adjusted operating income (loss)(1) |
|
$ 55.7 |
|
$ (19.0) |
|
$ 74.7 |
|
NM |
|
$ 27.5 |
|
$ (36.8) |
|
$ 64.3 |
|
NM |
Note: Does not foot due to rounding
- See page 3 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.
- Fiscal 2020 second quarter results on a pro-forma basis for the spin-off of Madison Square Garden Entertainment Corp ("MSG Entertainment").
Summary of Reported Results from Operations for the Fiscal 2022 Second Quarter
For the fiscal 2022 second quarter, the Company generated revenues of $289.6 million, as compared to revenues of $28.8 million in the prior year period, an increase of $260.8 million. The year-over-year comparability of fiscal second quarter revenues was impacted by several factors related to the COVID-19 pandemic, resulting in higher pre/regular season ticket-related revenues, local media rights fees, league distribution revenues, suite license revenues, and sponsorship and signage revenues in the current year period.
Pre/regular season ticket-related revenues increased $100.8 million as compared to the prior year period due to restrictions in place during the prior year period that prohibited fans from attending events at The Garden.
Local media rights fees increased $50.9 million as compared to the prior year period due to the delayed start of the 2020-21 NBA and NHL regular seasons and the impact of the shortened 2020-21 NHL regular season schedule in the prior year period, as well as contractual rate increases.
League distribution revenues increased $44.8 million as compared to the prior year period, primarily as a result of the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year period, as well as increased NHL media rights fees in the current year period.
Suite license fee revenues increased $34.3 million, sponsorship and signage revenues increased $20.2 million, and food, beverage and merchandise sales increased $8.5 million, all as compared to the prior year period, as a result of restrictions in place during the prior year period that prohibited fans from attending events at The Garden.
Direct operating expenses of $192.8 million increased $176.2 million as compared with the prior year period, primarily due to the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year period. As a result, team personnel compensation increased $91.1 million, other team operating expenses increased $36.4 million, and operating lease costs, including deferred operating lease costs, under the Arena License Agreements with MSG Entertainment increased $25.5 million, all as compared to the prior year period. Net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax increased $20.8 million as compared to the prior year period, primarily due to higher provisions for league revenue sharing expense (net of escrow) as a result of the impact of the COVID-19 pandemic in the prior year period, partially offset by higher recoveries of NBA luxury tax in the current year period.
Selling, general and administrative expenses of $59.6 million increased $10.7 million, or 22%, as compared to the prior year period. This increase was primarily due to higher marketing costs, fees related to the Company's sponsorship sales and service representation agreements with MSG Entertainment, and costs related to the Company's services agreement with MSG Entertainment.
Operating income of $35.9 million improved $74.3 million and adjusted operating income of $55.7 million improved by $74.7 million, both as compared with the prior year period, primarily due to the increase in revenues, partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative 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 6569519
Conference call replay number is 855-859-2056 / Conference ID Number 6569519 until February 10, 2022
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
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|
|
Three Months Ended |
|
Six Months Ended |
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|
|
December 31, |
|
December 31, |
||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
|
$ 289,581 |
|
$ 28,771 |
|
$ 308,375 |
|
$ 85,809 |
Direct operating expenses |
|
192,847 |
|
16,661 |
|
201,425 |
|
56,447 |
Selling, general and administrative expenses |
|
59,600 |
|
48,909 |
|
103,328 |
|
91,905 |
Depreciation and amortization |
|
1,215 |
|
1,607 |
|
2,641 |
|
3,267 |
Operating income (loss) |
|
35,919 |
|
(38,406) |
|
981 |
|
(65,810) |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
43 |
|
— |
|
93 |
|
— |
Interest expense |
|
(3,585) |
|
(2,487) |
|
(6,688) |
|
(4,476) |
Miscellaneous expense, net |
|
(64) |
|
(70) |
|
(127) |
|
(190) |
Income (loss) from operations before income taxes |
|
32,313 |
|
(40,963) |
|
(5,741) |
|
(70,476) |
Income tax (expense) benefit |
|
(17,115) |
|
(170) |
|
4,054 |
|
328 |
Net income (loss) |
|
15,198 |
|
(41,133) |
|
(1,687) |
|
(70,148) |
Less: Net loss attributable to nonredeemable noncontrolling interests |
|
(647) |
|
(508) |
|
(1,127) |
|
(1,106) |
Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders |
|
$ 15,845 |
|
$ (40,625) |
|
$ (560) |
|
$ (69,042) |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share attributable to Madison
|
|
$ 0.65 |
|
$ (1.68) |
|
$ (0.02) |
|
$ (2.86) |
Diluted earnings (loss) per common share attributable to Madison
|
|
$ 0.65 |
|
$ (1.68) |
|
$ (0.02) |
|
$ (2.86) |
|
|
|
|
|
|
|
|
|
Basic weighted-average number of common shares outstanding |
|
24,261 |
|
24,144 |
|
24,217 |
|
24,103 |
Diluted weighted-average number of common shares outstanding |
|
24,373 |
|
24,144 |
|
24,217 |
|
24,103 |
ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)
The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating income (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.
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|
Three Months Ended |
|
Six Months Ended |
||||
|
|
December 31, |
|
December 31, |
||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Operating income (loss) |
|
$ 35,919 |
|
$ (38,406) |
|
$ 981 |
|
$ (65,810) |
Deferred rent |
|
11,179 |
|
1,802 |
|
11,708 |
|
1,802 |
Depreciation and amortization |
|
1,215 |
|
1,607 |
|
2,641 |
|
3,267 |
Share-based compensation |
|
7,354 |
|
15,981 |
|
12,205 |
|
22,326 |
Restructuring charges |
|
— |
|
— |
|
— |
|
1,644 |
Adjusted operating income (loss) |
|
$ 55,667 |
|
$ (19,016) |
|
$ 27,535 |
|
$ (36,771) |
CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) |
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|
|
December 31,
|
|
June 30,
|
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ 54,815 |
|
$ 64,902 |
Restricted cash |
|
745 |
|
7,134 |
Accounts receivable, net of allowance for doubtful accounts of $0 and $0 as of
|
|
79,737 |
|
74,197 |
Net related party receivables |
|
31,751 |
|
6,420 |
Prepaid expenses |
|
33,996 |
|
16,724 |
Other current assets |
|
17,511 |
|
15,869 |
Total current assets |
|
218,555 |
|
185,246 |
Property and equipment, net of accumulated depreciation and amortization of $44,784
|
|
34,233 |
|
35,716 |
Right-of-use lease assets |
|
697,309 |
|
703,521 |
Amortizable intangible assets, net |
|
1,165 |
|
1,695 |
Indefinite-lived intangible assets |
|
112,144 |
|
112,144 |
Goodwill |
|
226,955 |
|
226,955 |
Deferred income tax assets, net |
|
19,975 |
|
15,943 |
Other assets |
|
39,085 |
|
28,719 |
Total assets |
|
$ 1,349,421 |
|
$ 1,309,939 |
CONSOLIDATED BALANCE SHEETS (continued) (In thousands, except per share data) |
||||
|
|
December 31,
|
|
June 30,
|
|
|
(Unaudited) |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
|
$ 3,009 |
|
$ 2,226 |
Net related party payables |
|
24,708 |
|
17,089 |
Debt |
|
30,000 |
|
30,000 |
Accrued liabilities: |
|
|
|
|
Employee related costs |
|
88,312 |
|
90,269 |
Other accrued liabilities |
|
85,883 |
|
55,718 |
Operating lease liabilities, current |
|
43,081 |
|
41,951 |
Deferred revenue |
|
176,805 |
|
131,025 |
Total current liabilities |
|
451,798 |
|
368,278 |
Long-term debt |
|
330,000 |
|
355,000 |
Operating lease liabilities, noncurrent |
|
692,532 |
|
691,152 |
Defined benefit obligations |
|
6,149 |
|
6,283 |
Other employee related costs |
|
46,234 |
|
57,740 |
Deferred revenue, noncurrent |
|
31,324 |
|
31,603 |
Other liabilities |
|
994 |
|
1,749 |
Total liabilities |
|
1,559,031 |
|
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
|
|
204 |
|
204 |
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares
|
|
45 |
|
45 |
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of
|
|
— |
|
— |
Additional paid-in capital |
|
6,460 |
|
23,102 |
Treasury stock, at cost, 759 and 861 shares as of December 31, 2021 and June 30, 2021, respectively |
|
(129,426) |
|
(146,734) |
Accumulated deficit |
|
(87,390) |
|
(78,898) |
Accumulated other comprehensive loss |
|
(1,983) |
|
(2,027) |
Total Madison Square Garden Sports Corp. stockholders’ equity |
|
(212,090) |
|
(204,308) |
Nonredeemable noncontrolling interests |
|
2,480 |
|
2,442 |
Total equity |
|
(209,610) |
|
(201,866) |
Total liabilities and equity |
|
$ 1,349,421 |
|
$ 1,309,939 |
SELECTED CASH FLOW INFORMATION (Dollars in thousands) (Unaudited) |
||||
|
|
Six Months Ended |
||
|
|
December 31, |
||
|
|
2021 |
|
2020 |
Net cash provided by (used in) operating activities |
|
$ 24,030 |
|
$ (21,633) |
Net cash used in investing activities |
|
(627) |
|
(141) |
Net cash (used in) provided by financing activities |
|
(39,879) |
|
11,363 |
Net decrease in cash, cash equivalents and restricted cash |
|
(16,476) |
|
(10,411) |
Cash, cash equivalents and restricted cash at beginning of period |
|
72,036 |
|
90,673 |
Cash, cash equivalents and restricted cash at end of period |
|
$ 55,560 |
|
$ 80,262 |
