GlobeNewswire Inc | Aug 13, 2020 06:55AM EDT

August 13, 2020

Fiscal 2020 fourth quarter revenues of $152.1 millionFiscal 2020 fourth quarter operating income of $83.1 millionFiscal 2020 fourth quarter adjusted operating income of $90.5 million

NEW YORK, Aug. 13, 2020 (GLOBE NEWSWIRE) -- MSG Networks Inc. (NYSE: MSGN) today reported financial results for the fourth quarter and fiscal year ended June30, 2020.

For the fiscal 2020 fourth quarter, MSG Networks Inc. generated revenues of $152.1 million, a decrease of 10% as compared with the prior year quarter. In addition, the Company generated operating income of $83.1 million, an increase of 18%, adjusted operating income of $90.5 million, an increase of 18%, and net income of $55.9 million, an increase of 36%, all as compared with the prior year quarter.(1)

For fiscal 2020, MSG Networks Inc. generated revenues of $685.8 million, a decrease of 5% as compared with the prior year. In addition, the Company generated operating income of $295.0 million, a decrease of 5%, adjusted operating income of $321.4 million, a decrease of 4%, and net income of $185.2 million, a decrease of 1%, all as compared with the prior year.

President and CEO Andrea Greenberg said, The impact of the COVID-19 pandemic is being felt by virtually every business around the world. Yet despite its effects, we have continued to accomplish many of our key goals, while engaging fans with compelling programming on our two 24/7 networks. During fiscal 2020, we successfully renewed two major affiliate agreements, grew non-ratings based advertising revenue, strengthened our balance sheet and generated substantial free cash flow. As we continue to navigate the challenges of the pandemic as well as the evolving media landscape, we remain confident in the importance of our live professional sports content and the value it delivers for our affiliates, advertisers and viewers.

Fiscal Year 2020 Fourth Quarter and Annual Results(In thousands, except per share data) Three Months Twelve Months Ended Ended June 30, June 30, 2020 2020Revenues $ 152,114 $ 685,797 Operating income 83,068 294,968 Adjusted operating income 90,491 321,366 Net Income 55,920 185,221 Diluted EPS $ 0.97 $ 2.92

^ ^See page 3 of this earnings release for the definition of adjusted(1) operating income included in the discussion of non-GAAP financial measures.

Summary of Fiscal 2020 Fourth Quarter Results from OperationsFiscal 2020 fourth quarter total revenues of $152.1 million decreased 10%, or $16.2 million, as compared with the prior year period. Affiliation fee revenue decreased $8.3 million, primarily due to the impact of a decrease in subscribers of approximately 8% and, to a lesser extent, an unfavorable $2.0 million net affiliate adjustment recorded in the current year quarter, partially offset by the impact of higher affiliation rates.

Advertising revenue decreased $7.2 million, as compared with the prior year period, primarily due to the absence of live professional sports telecasts (including playoff games) in the current year quarter due to the cancellation of games as a result of the shortened NBA and NHL 2019-20 seasons, as well as a lower net decrease in deferred revenue related to ratings guarantees, and other net decreases. Other revenues decreased $0.7 million as compared with the prior year period.

Direct operating expenses of $46.4 million decreased 34%, or $23.7 million, as compared with the prior year quarter. The decrease was primarily due to a reduction in rights fees expense due to the cancellation of games as a result of the shortened NBA and NHL 2019-20 seasons, partially offset by contractual rate increases.

Selling, general and administrative expenses of $20.7 million decreased 22%, or $5.7 million, as compared with the prior year quarter. This decrease reflects the absence of $3.6 million in expenses recorded in the prior year quarter that were not indicative of the Company's core expense base, as well as lower advertising and marketing costs and lower advertising sales commissions, partially offset by other net cost increases.

Operating income of $83.1 million increased 18%, or $12.9 million, as compared with the prior year quarter, primarily due to the decrease in direct operating expenses and, to a lesser extent, lower selling, general and administrative expenses (including share-based compensation expense), partially offset by the decrease in revenues.

Adjusted operating income of $90.5 million increased 18%, or $14.1 million, as compared with the prior year quarter, primarily due to the decrease in direct operating expenses and, to a lesser extent, lower selling, general and administrative expenses (excluding share-based compensation expense), partially offset by the decrease in revenues.

About MSG Networks Inc.MSG Networks Inc., a pioneer in sports media, owns and operates two award-winning regional sports and entertainment networks and a companion streaming service that serve the nations number one media market, the New York DMA, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania. The networks feature a wide range of compelling sports content, including exclusive live local games and other programming of the New York Knicks, New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres, as well as significant coverage of the New York Giants and Buffalo Bills. This content, in addition to a diverse array of other sporting events and critically acclaimed original programming, has established MSG Networks as the gold standard in regional sports.

Non-GAAP Financial MeasuresWe define adjusted operating income, which is a non-GAAP financial measure, as operating income before 1) depreciation, amortization and impairments of property and equipment and intangible assets, 2) share-based compensation expense or benefit, 3) restructuring charges or credits and 4) gains or losses on sales or dispositions of businesses. Because it is based upon operating income, adjusted operating income 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 the Company without regard to the settlement of an obligation that is not expected to be made in cash.

We believe adjusted operating income is an appropriate measure for evaluating the operating performance of our Company. Adjusted operating income 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 measures as the most important indicators of our business performance, and evaluate managements effectiveness with specific reference to these indicators. Adjusted operating income should be viewed as a supplement to and not a substitute for operating income, net income, 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 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 to adjusted operating income, please see page 6 of this release.

The Company defines Free Cash Flow (Free Cash Flow), which is a non-GAAP financial measure, as net cash provided by operating activities less capital expenditures, both of which are reported in our Consolidated Statement of Cash Flows. The Company believes the most comparable GAAP financial measure is net cash provided by operating activities. The Company believes that Free Cash Flow is useful as an indicator of its overall ability to generate liquidity, as the amount of Free Cash Flow generated in any period is representative of cash that is generated for debt repayment, investment, and other discretionary and non-discretionary cash uses. The Company also believes that Free Cash Flow is one of several benchmarks used by analysts and investors for comparison of the Companys generation of liquidity with other companies in the industry, although the Companys measure of Free Cash Flow may not be directly comparable to similar measures reported by other companies. For a reconciliation of Free Cash Flow to net cash provided by operating activities, please see page 8 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 perceptions of the Company and its business, operations, financial condition and the industry in which it operates 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 Relations(212) 465-6442 (212) 465-6072

Conference Call Information:The conference call will be Webcast live today at 10:00 a.m. ET at investor.msgnetworks.comConference call dial-in number is 877-883-0832 / Conference ID Number 3798172Conference call replay number is 855-859-2056 / Conference ID Number 3798172 until August 20, 2020

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 $ 152,114 $ 168,362 $ 685,797 $ 720,845 Direct operating 46,350 70,064 282,837 300,274 expensesSelling, general and 20,656 26,343 100,829 103,274 administrative expensesDepreciation and 2,040 1,748 7,163 7,398 amortizationOperating income 83,068 70,207 294,968 309,899 Other income (expense): Interest income 500 1,772 4,234 6,343 Interest expense (6,156 ) (12,316 ) (36,324 ) (47,589 )Debt refinancing ? ? (2,764 ) ? expenseOther components of net (256 ) 1,475 (1,030 ) 244 periodic benefit cost (5,912 ) (9,069 ) (35,884 ) (41,002 )Income from operations 77,156 61,138 259,084 268,897 before income taxesIncome tax expense (21,236 ) (19,959 ) (73,863 ) (82,715 )Net income $ 55,920 $ 41,179 $ 185,221 $ 186,182 Earnings per share: Basic Net income $ 0.98 $ 0.55 $ 2.93 $ 2.48 Diluted Net income $ 0.97 $ 0.54 $ 2.92 $ 2.46 Weighted-average numberof common shares outstanding:Basic 57,062 75,152 63,172 75,069 Diluted 57,357 75,764 63,515 75,731

ADJUSTMENTS TO RECONCILE OPERATING INCOMETO ADJUSTED OPERATING INCOME(In thousands)

The following is a description of the adjustments to operating income in arriving at adjusted operating income as described in this earnings release:

-- 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 stock plan in all periods. -- Depreciation and amortization.This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.

Three Months Ended Twelve Months Ended June 30, June 30, 2020 2019 2020 2019Operating income $ 83,068 $ 70,207 $ 294,968 $ 309,899 Share-basedcompensation 5,383 4,429 19,235 18,087 expenseDepreciation and 2,040 1,748 7,163 7,398 amortizationAdjusted $ 90,491 $ 76,384 $ 321,366 $ 335,384 operating income

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

June30, June30, 2020 2019ASSETS Current Assets: Cash and cash equivalents $ 196,837 $ 226,423 Accounts receivable, net 105,549 108,349 Related party receivables, net 14,190 16,091 Prepaid income taxes 461 1,968 Prepaid expenses 11,063 2,003 Other current assets 4,541 5,286 Total current assets 332,641 360,120 Property and equipment, net 8,758 9,302 Amortizable intangible assets, net 30,283 33,743 Goodwill 424,508 424,508 Operating lease right-of-use assets 17,153 ? Other assets 37,460 39,226 Total assets $ 850,803 $ 866,899 LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current Liabilities: Accounts payable $ 2,115 $ 907 Related party payables 1,472 941 Current portion of long-term debt 37,229 111,789 Current portion of operating lease liabilities 5,492 ?

Income taxes payable 641 ? Accrued liabilities: Employee related costs 14,187 15,466 Other accrued liabilities 10,116 13,898 Deferred revenue 2,753 185 Total current liabilities 74,005 143,186 Long-term debt, net of current portion 1,043,780 906,228 Long-term operating lease liabilities 13,780 ? Defined benefit and other postretirement 25,860 25,834 obligationsOther employee related costs 5,149 4,713 Other liabilities 1,536 2,310 Deferred tax liability 239,542 243,396 Total liabilities 1,403,652 1,325,667 Commitments and contingencies Stockholders' Deficiency: ClassA Common Stock, par value $0.01, 360,000shares authorized; 43,122 and 61,287 shares 643 643 outstanding as of June30, 2020 and 2019,respectivelyClass B Common Stock, par value $0.01, 90,000shares authorized; 13,589 shares outstanding as of 136 136 June30, 2020 and 2019Preferred stock, par value $0.01, 45,000 shares ? ? authorized; none outstandingAdditional paid-in capital 12,731 9,916 Treasury stock, at cost, 21,137 and 2,972 shares as (457,363 ) (179,561 )of June30, 2020 and 2019, respectivelyAccumulated deficit (100,792 ) (282,414 )Accumulated other comprehensive loss (8,204 ) (7,488 ) Total stockholders' deficiency (552,849 ) (458,768 )Total liabilities and stockholders' deficiency $ 850,803 $ 866,899

SUPPLEMENTAL FINANCIAL INFORMATION(Dollars in thousands)(Unaudited)

Summary Data from the Statements of Cash Flows

Twelve Months Ended June 30, 2020 2019Net cash provided by operating activities $ 210,032 $ 205,959 Net cash used in investing activities (2,814 ) (4,879 )Net cash used in financing activities (236,804 ) (180,000 )Net increase (decrease) in cash and cash (29,586 ) 21,080 equivalentsCash and cash equivalents at beginning of period 226,423 205,343 Cash and cash equivalents at end of period $ 196,837 $ 226,423

Free Cash Flow

Twelve Months Ended June 30, 2020 2019Net cash provided by operating activities $ 210,032 $ 205,959 Less: Capital expenditures (2,814 ) (2,879 )Free cash flow $ 207,218 $ 203,080

Capitalization

June 30, 2020Cash and cash equivalents $ 196,837 Credit facility debt^(a) 1,086,250 Net debt $ 889,413 Reconciliation of operating income to AOI for trailing twelve-month period^(b)Operating Income $ 294,968 Share-based compensation expense 19,235 Depreciation and amortization 7,163 Adjusted operating income $ 321,366 Leverage ratio^(c) 2.8x ^(a)Represents aggregate principal amount of the debt outstanding.^(b)Represents reported adjusted operating income for the trailing twelvemonths.^(c)Represents net debt divided by trailing twelve-month adjusted operatingincome, which differs from the covenant calculation contained in the Company'scredit facility.