GlobeNewswire Inc | Aug 14, 2020 06:55AM EDT

August 14, 2020

NEW YORK, Aug. 14, 2020 (GLOBE NEWSWIRE) -- Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fourth quarter and fiscal year ended June30, 2020. On April 17, 2020, The Madison Square Garden Company completed the spin-off of its entertainment businesses into a new company named Madison Square Garden Entertainment Corp. (MSG Entertainment) and changed its name to Madison Square Garden Sports Corp. (the Company or MSG Sports).

For all periods through the date of the spin-off, the financial results of the entertainment businesses previously owned and operated by the Company through its MSG Entertainment segment, as well as the sports booking business previously owned and operated by the Company through its MSG Sports segment, are reflected as discontinued operations. In addition, results from continuing operations through April 17, 2020 include certain corporate overhead expenses that the Company did not incur after the spin-off date and does not expect to incur in future periods, but did not meet the criteria for inclusion in discontinued operations. The financial results of the Company for the period after the spin-off date (April 18, 2020 through June 30, 2020) reflect the Companys results on a standalone basis.

Results for the fourth quarter and fiscal year ended June 30, 2020 reflect the impact of the COVID-19 pandemic. When the NBA and NHL regular seasons were suspended in March, the Knicks had 16 games remaining, including eight home games; and the Rangers had 12 games remaining, including five home games. Both leagues have resumed play, and while the Knicks were not part of the NBAs re-start in the Orlando bubble, the Rangers were part of the NHLs return in the hub cities of Toronto and Edmonton. Based on the completion of the 2019-20 seasons, the Company would recognize both NBA and NHL national media rights fees related to those seasons in the first quarter of fiscal 2021.

For fiscal 2020, the Company generated $603.3 million in revenues, a 17% decrease as compared to the prior year. In addition, the Company had an operating loss of $93.9 million and an adjusted operating loss of $27.5 million, compared to an operating loss of $58.2 million and adjusted operating income of $11.2 million in the prior year.(1)

On a pro forma basis for fiscal 2019, which was the last full fiscal year of operations before the impact of the COVID-19 pandemic, the Company generated $695.3 million in revenues, $25.4 million in operating income and $95.5 million in adjusted operating income.(1)(2)

For the fiscal 2020 fourth quarter, the Company reported negative revenues of $7.0 million, as compared to revenues of $68.2 million in the prior year quarter. In addition, the Company had an operating loss of $44.9 million and an adjusted operating loss of $33.6 million in the fiscal 2020 fourth quarter, compared to an operating loss of $56.0 million and an adjusted operating loss of $38.3 million in the prior year quarter.

Madison Square Garden Sports Corp. President and CEO Andrew Lustgarten said: We remain confident in our Company's future prospects and are comfortable that we have the financial flexibility to navigate through this period of uncertainty. The strong response from fans to the return of the NBA and NHL this summer has, once again, reminded us of the power and popularity of sports. And with a portfolio that features some of the most recognized brands in professional sports, we believe our business is well-positioned to drive long-term growth and value creation for our shareholders.

Results from OperationsResults for the quarter and year ended June30, 2020 and 2019 are as follows:

Three Months Ended Twelve Months Ended June 30, Change June 30, Change$ millions 2020 2019 $ % 2020 2019 $ %Revenues $ (7.0 ) $ 68.2 $ (75.1 ) NM $ 603.3 $ 729.4 $ (126.1 ) (17 ) %Operating loss $ (44.9 ) $ (56.0 ) $ 11.0 20 % $ (93.9 ) $ (58.2 ) $ (35.7 ) (61 ) %Adjustedoperating income $ (33.6 ) $ (38.3 ) $ 4.7 12 % $ (27.5 ) $ 11.2 $ (38.7 ) NM(loss)Note: Does not foot due to rounding(1) See page 3 of this earnings release for the definition of adjustedoperating income (loss) included in the discussion of non-GAAP financialmeasures.(2) Pro forma results are derived from the Company?s unaudited pro formacondensed combined financial statements included in the Company?s CurrentReport on Form 8-K filed with the Securities and Exchange Commission on April23, 2020 and reflect adjustments related to the spin-off of MSG Entertainment,as well as certain adjustments that are incremental to those related to thespin-off (including arrangements we entered into with MSG Entertainment), as ifthe spin-off had occurred on July 1, 2018. The unaudited pro forma condensedcombined financial statements should not be considered representative of theCompany?s future consolidated results of operations. See Page 5 for additionalinformation regarding the pro forma results.

Summary of Reported Results from Continuing OperationsFor the fiscal 2020 fourth quarter, the Company reported negative revenues of $7.0 million, a decrease of $75.1 million as compared to the prior year period. The overall decrease in revenue was primarily due to the suspension of the 2019-20 NBA and NHL regular seasons.

League distributions decreased $35.7 million as compared to the prior year quarter. Due to the suspension of the NBA and NHL regular seasons, a portion of national media rights fees that was recognized during the first nine months of fiscal 2020 was reversed in the fiscal 2020 fourth quarter. Based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize the remainder of national media rights fees related to those seasons in the first quarter of fiscal 2021.

Ticket-related revenue, suite license fees, sponsorship and signage revenues and food, beverage and merchandise sales decreased a combined $38.1 million, as compared to the prior year quarter, primarily due to the suspensions of the NBA and NHL regular seasons.

Local media rights fees from MSG Networks decreased $3.1 million as compared to the prior year quarter, primarily reflecting the Knicks and Rangers being unable to deliver for broadcast the contractually-obligated minimum threshold of games for the 2019-20 seasons. This decrease was partially offset by contractual rate increases. As a result of the Rangers' participation in the Stanley Cup Qualifiers, the Company will recognize additional local media rights fees in the first quarter of fiscal 2021.

For the fiscal 2020 fourth quarter, the Company recorded a $17.6 million credit in direct operating expenses as compared to $34.2 million in direct operating expenses in the prior year period. Net provisions for league revenue sharing expense and NBA luxury tax resulted in a $42.7 million credit in the current year quarter as compared to $6.2 million in expenses in the prior year period. This primarily reflects higher estimated net player escrow recoveries and lower estimated revenue sharing expense for the 2019-20 seasons due to the impact of the regular season suspensions and the leagues' return-to-play format. Based on the completion of the NBA and NHL seasons, in the first quarter of fiscal 2021 the Company would recognize a portion of revenue sharing expense, net of escrow recoveries, as well as team personnel compensation, that would have otherwise been recognized in fiscal 2020.

For the fiscal 2020 fourth quarter, selling, general and administrative expenses were $53.4 million, a decrease of 37%, or $31.2 million, as compared to the prior year period primarily due to lower corporate overhead costs. This primarily reflects the absence of certain corporate expenses in the period following the completion of the spin-off (April 18, 2020 through June 30, 2020). The Company did not incur these expenses after the spin-off date and does not expect to incur these costs in future periods. However, these costs did not meet the criteria for inclusion in discontinued operations for the periods prior to the spin-off date. The overall decrease in expenses was partially offset by corporate costs incurred during the period following the spin-off, higher professional fees and an increase in employee compensation and related benefits.

Fiscal 2020 fourth quarter operating loss of $44.9 million decreased 20%, or $11.0 million, and adjusted operating loss of $33.6 million decreased by 12%, or $4.7 million. This primarily reflects lower direct operating expenses and selling, general and administrative expenses, partially offset by the decrease in revenues.

Other MattersAs of June 30, 2020, the Company had $293 million of liquidity, comprised of the following components:

-- $78 million of cash and cash equivalents, -- $200 million in borrowing capacity under two delayed draw term loan facilities with MSG Entertainment; and -- $15 million available under an unsecured revolving credit facility associated with the New York Knicks.

Total debt outstanding under the Company's New York Knicks and New York Rangers senior secured revolving credit facilities was $350 million.

As ofJune 30, 2020, the Company's current deferred revenue obligations were approximately $126 million.Of this amount, approximately $61 million is related to the 2019-20 NBA and NHL seasons, including approximately $42 million associated with national media rights fees. Based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize these fees in the first quarter of fiscal 2021. The balance of deferred revenue obligations related to the 2019-20 seasons is comprised of suites and sponsorships, which will be addressed, to the extent necessary, through credits, make-goods and/or refunds, as applicable.

With the ongoing uncertainty due to COVID-19, earlier this month, the Company implemented cost-reduction measures designed to preserve cash until the Company is able to fully resume operations. These measures included workforce reductions, limits on third-party vendor use and additional cuts to discretionary spending.

The Company will host its earnings conference call today, beginning at 10:30 a.m. ET. Going forward, the Company will host two earnings conference calls a year - one for its fiscal second quarter, and one for its fiscal fourth quarter - which will allow for a mid-season update, followed by a full-season review.

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 atwww.msgsports.com.

Non-GAAP Financial MeasuresWe define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) before (i) deferred rent expense under the arena license agreements with Madison Square Garden Entertainment Corp., (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 managements 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 StatementsThis 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 Companys filings with the Securities and Exchange Commission, including the sections titled Risk Factors and Managements 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.

Contacts: Kimberly Kerns Ari Danes, CFACommunications Investor(212) 465-6442 Relations (212) 465-6072

Conference Call Information:The conference call will be Webcast live today at 10:30 a.m. ET at investor.msgsports.comConference call dial-in number is 877-347-9170 / Conference ID Number 9269626Conference call replay number is 855-859-2056 / Conference ID Number 9269626 until August21, 2020

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

Three Months Ended Twelve Months Ended June 30, June 30, 2020 2019 2020 2019Revenues $ (6,960 ) $ 68,150 $ 603,319 $ 729,404 Direct operating (17,620 ) 34,209 359,970 440,081 expenses (credit)Selling, general and 53,392 84,549 319,675 327,441 administrative expensesDepreciation and 2,202 5,371 17,540 20,077 amortizationOperating loss (44,934 ) (55,979 ) (93,866 ) (58,195 )Other income (expense): Interest income 9 309 700 1,191 Interest expense (2,221 ) (1,338 ) (4,461 ) (4,970 )Miscellaneous (income) (105 ) (151 ) (421 ) 1,333 expense, netLoss from continuingoperations before income (47,251 ) (57,159 ) (98,048 ) (60,641 )taxesIncome tax benefit (31,725 ) 19,676 (20,593 ) 12,619 (expense)Loss from continuing (78,976 ) (37,483 ) (118,641 ) (48,022 )operationsIncome (loss) fromdiscontinued operations, (185 ) (36,257 ) (66,089 ) 57,149 net of taxesNet income (loss) (79,161 ) (73,740 ) (184,730 ) 9,127 Less: Net lossattributable to (642 ) (509 ) (2,342 ) (2,300 )nonredeemablenoncontrolling interestsNet income (loss)attributable to Madison $ (78,519 ) $ (73,231 ) $ (182,388 ) $ 11,427 Square Garden SportsCorp.?s stockholders Basic Continuing operations $ (3.26 ) $ (1.56 ) $ (4.86 ) $ (1.92 )Discontinued operations $ (0.01 ) $ (1.52 ) $ (2.76 ) $ 2.40 Basic earnings (loss)per common shareattributable to Madison $ (3.27 ) $ (3.08 ) $ (7.62 ) $ 0.48 Square Garden SportsCorp.?s stockholders Diluted Continuing operations $ (3.26 ) $ (1.56 ) $ (4.86 ) $ (1.91 )Discontinued operations $ (0.01 ) $ (1.52 ) $ (2.76 ) $ 2.39 Diluted earnings (loss)per common shareattributable to Madison $ (3.27 ) $ (3.08 ) $ (7.62 ) $ 0.48 Square Garden SportsCorp.?s stockholders Basic weighted-averagenumber of common shares 24,025 23,793 23,942 23,767 outstandingDiluted weighted-averagenumber of common shares 24,025 23,793 23,942 23,900 outstanding

MADISON SQUARE GARDEN SPORTS CORP.

ADJUSTMENTS TO RECONCILE OPERATING LOSS TOADJUSTED OPERATING INCOME (LOSS)(Unaudited)

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 expense. This adjustment eliminates the impact of the non-cash portion of lease expense associated with the arena license agreements with Madison Square Garden Entertainment Corp. -- Share-based compensation expense. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under our employee stock plan and non-employee director plan in all periods. -- Depreciation and amortization. This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods. -- Purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to the CLG acquisition.

Three Months Ended Twelve Months Ended June 30, June 30, 2020 2019 2020 2019 Pro Forma 2019^(1)Operatingincome $ (44,934 ) $ (55,979 ) $ (93,866 ) $ (58,195 ) $ 25,351 (loss)Deferred ? ? ? ? 29,963 rent expenseShare-based 9,134 12,296 48,693 49,113 19,935 compensationDepreciationand 2,202 5,371 17,540 20,077 20,077 amortization^(2)Otherpurchase 17 50 167 200 200 accountingadjustmentsAdjustedoperating $ (33,581 ) $ (38,262 ) $ (27,466 ) $ 11,195 $ 95,526 income(loss)

(1) Pro forma results are derived from the Companys unaudited pro forma condensed combined financial statements included in the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2020 and reflect adjustments related to the spin-off of MSG Entertainment, as well as certain adjustments that are incremental to those related to the spin-off, as if the spin-off had occurred on July 1, 2018. The unaudited pro forma condensed combined financial statements have been derived from the Companys historical consolidated financial statements and reflect certain assumptions and adjustments that management believes are reasonable under the circumstances and given the information available at that time. The unaudited pro forma condensed combined financial statements have been provided for illustrative and informational purposes only and are not intended to represent or be indicative of what the Companys results of operations would have been had the Company operated historically as an independent organization from MSG Entertainment, or if the spin-off and other transactions described therein had occurred on July 1, 2018. The unaudited pro forma condensed combined financial statements also should not be considered representative of the Companys future consolidated results of operations. The unaudited pro forma condensed combined financial statements should be read in conjunction with the Companys historical consolidated financial statements and accompanying notes.(2) Includes depreciation and amortization related to purchase accounting adjustments.

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS(In thousands, except per share data)(Unaudited)

June 30, 2020 2019ASSETS Current Assets: Cash and cash equivalents $ 77,852 $ 4,317 Restricted cash 12,821 21,519 Accounts receivable, net 7,403 15,542 Net related party receivables 135 ? Prepaid expenses 20,634 21,409 Other current assets 9,433 6,371 Current assets of discontinued operations ? 1,344,190 Total current assets 128,278 1,413,348 Property and equipment, net 39,597 31,270 Right-of-use lease assets 718,051 ? Amortizable intangible assets, net 2,754 6,315 Indefinite-lived intangible assets 112,144 112,144 Goodwill 226,955 226,955 Other assets 6,019 5,891 Non-current assets of discontinued operations ? 1,967,867 Total assets $ 1,233,798 $ 3,763,790

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS (continued)(In thousands, except per share data)(Unaudited)

June 30, 2020 2019LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITYCurrent Liabilities: Accounts payable $ 2,301 $ 1,035 Net related party payables 17,952 209 Accrued liabilities: Employee related costs 71,451 77,514 Other accrued liabilities 33,071 123,688 Operating lease liabilities, current 39,131 ? Deferred revenue 126,348 110,264 Current liabilities of discontinued operations ? 447,313 Total current liabilities 290,254 760,023 Related party payables, noncurrent ? 172 Long-term debt 350,000 ? Operating lease liabilities, noncurrent 679,053 ? Defined benefit obligations 7,014 7,049 Other employee related costs 50,027 48,274 Deferred tax liabilities, net 57,721 36,449 Other liabilities 3,164 6,696 Non-current liabilities of discontinued ? 198,740 operationsTotal liabilities 1,437,233 1,057,403 Commitments and contingencies Redeemable noncontrolling interests of ? 67,627 discontinued operationsMadison Square Garden Sports Corp. Stockholders? Equity:ClassA Common stock, par value $0.01, 120,000shares authorized; 19,466 and 19,229 shares 204 204 outstanding as of June 30, 2020 and 2019,respectivelyClassB Common stock, par value $0.01, 30,000shares authorized; 4,530 shares outstanding as of 45 45 June 30, 2020 and 2019Preferred stock, par value $0.01, 15,000 sharesauthorized; none outstanding as of June 30, 2020 ? ? and 2019Additional paid-in capital 5,940 2,845,961 Treasury stock, at cost, 982 and 1,219 shares as (167,431 ) (207,790 )of June 30, 2020 and 2019, respectivelyRetained earnings (accumulated deficit) (43,605 ) 29,003 Accumulated other comprehensive income (loss) (2,139 ) (46,923 )Total Madison Square Garden Sports Corp. (206,986 ) 2,620,500 stockholders? equityNonredeemable noncontrolling interests 3,551 18,260 Total equity (203,435 ) 2,638,760 Total liabilities, redeemable noncontrolling $ 1,233,798 $ 3,763,790 interests and equity