Business Wire | Feb 3, 2021 07:30AM EST

Madison Square Garden Sports Corp. Reports Fiscal 2021 Second Quarter Results

Feb. 03, 2021

NEW YORK--(BUSINESS WIRE)--Feb. 03, 2021--Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fiscal second quarter ended December 31, 2020.

In the fall, the NBA and NHL successfully completed their 2019-20 seasons. Since then, the NBA announced a 72-game, 2020-21 regular season, which started on December 22, 2020. During the fiscal 2021 second quarter, the New York Knicks' ("Knicks") played nine pre/regular season games as compared to 37 pre/regular season games in the prior year period. The Knicks' four home games at Madison Square Garden Arena ("The Garden") during the fiscal 2021 second quarter were played without fans due to ongoing government-mandated assembly restrictions. The NHL announced a 56-game, 2020-21 regular season, which began on January 13, 2021. As a result, the New York Rangers ("Rangers") did not play any games during the fiscal 2021 second quarter, as compared to 39 regular season games in the prior year period.

For the fiscal 2021 second quarter, financial results reflect the impact of the COVID-19 pandemic, including the timing of the start of the 2020-21 NBA and NHL regular seasons and fan attendance restrictions at The Garden. As a result, the Company generated revenues of $28.8 million, a decrease of $264.0 million, or 90%, as compared to the prior year period. In addition, the Company reported an operating loss of $38.4 million and an adjusted operating loss of $19.0 million, as compared to an operating loss of $0.2 million and adjusted operating income of $19.0 million in the prior year period.(1)(2)

Madison Square Garden Sports Corp. President and CEO Andrew Lustgarten said, "We are excited to have the Knicks and Rangers competing again and look forward to the time when we can safely welcome fans back to The Garden. As we prepare for a return to normal operations, we remain confident in the fundamentals of our business, the strength of our balance sheet, and that we are well-positioned to create long-term shareholder value."

Results from Operations

Results for the three and six months ended December 31, 2020 and 2019 are as follows:

Three Months Ended Six Months Ended

December 31, Change December 31, Change

$ 2020 2019 $ % 2020 2019 $ %millions

Revenues $ 28.8 $ 292.8 $ (264.0) (90) % $ 85.8 $ 342.6 $ (256.8) (75) %

Operating $ (38.4) $ (0.2) $ (38.2) NM $ (65.8) $ (59.6) $ (6.3) (10) %loss

Adjustedoperating $ (19.0) $ 19.0 $ (38.0) NM $ (36.8) $ (21.6) $ (15.1) (70) %income(loss)

Note: Does not foot due to rounding

For the three and six months ended December 31, 2019, the reported financial results of the Company reflect the results of the MSG Entertainment business segment and the sports booking business, previously owned and operated by the Company through its MSG Sports business segment, as discontinued operations. In addition, results from continuing operations for the same period include certain corporate overhead expenses(1) that the Company did not incur in the period after the completion of the spin-off of Madison Square Garden Entertainment Corp. ("MSG Entertainment") and does not expect to incur in future periods, but which did not meet the criteria for inclusion in discontinued operations. The reported financial results of the Company for the three and six months ended December 31, 2020 reflect the Company's results on a standalone basis, including the Company's actual corporate overhead.

(2) 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

Fiscal 2021 second quarter revenues of $28.8 million decreased $264.0 million, or 90%, as compared to the prior year period, primarily driven by the absence of pre/regular season ticket-related revenues and suite license fee revenue as well as a decrease in local media rights fees from MSG Networks, league distribution revenues, and sponsorship and signage revenues.

Pre/regular season ticket-related revenues decreased $108.7 million and suite license fee revenue decreased $28.2 million, both as compared to the prior year period, as a result of fans being prohibited from attending events at The Garden.

Local media rights fees from MSG Networks decreased $47.2 million and league distribution revenues decreased $37.3 million, both as compared to the prior year period, primarily due to the timing of the start of the 2020-21 NBA and NHL regular seasons.

Sponsorship and signage revenues decreased $23.8 million as compared to the prior year period, due to the timing of the start of the 2020-21 NBA and NHL regular seasons, the impact of fans being prohibited from attending events at The Garden, and the spin-off of MSG Entertainment, which impacted the comparability of results on a year-over-year basis.(3)

Direct operating expenses of $16.7 million decreased $181.1 million, or 92%, as compared with the prior year period, primarily due to the timing of the start of the 2020-21 NBA and NHL regular seasons and the impact of fans being prohibited from attending events at The Garden. Team personnel compensation decreased $88.7 million, other team operating expenses decreased $36.9 million, and net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax decreased $28.4 million, all as compared to the prior year period.

Selling, general and administrative expenses of $48.9 million decreased $41.4 million, or 46%, as compared to the prior year period. This was primarily due to lower corporate overhead costs, which in the prior year period included certain corporate expenses that the Company has not incurred since the spin-off of MSG Entertainment and does not expect to incur in future periods, but which did not meet the criteria for inclusion in discontinued operations.(2)

Operating loss of $38.4 million increased $38.2 million while adjusted operating income decreased by $38.0 million to an adjusted operating loss of $19.0 million, both as compared with the prior year period. This primarily reflects the decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, a decrease selling, general and administrative expenses.

Other Matters

As of December 31, 2020, the Company had $290.8 million of liquidity, comprised of the following components:

* $70.8 million of cash and cash equivalents; * $55 million in borrowing capacity under the Knicks senior secured revolving credit facility; * $90 million in borrowing capacity under the Rangers senior secured revolving credit facility; and * $75 million available under the Knicks Holdings unsecured revolving credit facility.

As of December 31, 2020, total debt outstanding under the Company's Knicks and Rangers senior secured revolving credit facilities was $380 million. In addition, the Company's deferred revenue obligations as of the end of the fiscal 2021 second quarter were approximately $206 million, net of billed, but not yet collected deferred revenue, as compared to approximately $127 million as of September 30, 2020. The increase was primarily due to local and national media rights payments related to the 2020-21 NBA and NHL seasons, as well as $30 million from the NBA, which the league provided to each team following the completion of its $900 million private placement in December 2020. The majority of the deferred revenue balance was comprised of local and national media rights, tickets, and suites, all of which will be addressed through games played and, to the extent necessary, through make-goods, credits and/or refunds.

Prior to the spin-off of MSG Entertainment, suite license fee revenue and interior and exterior signage and sponsorship rights at The Garden that were not specific to the Company's teams or entertainment events were allocated between the Company's MSG Sports and MSG Entertainment business segments and were recognized over the fiscal year based on the total number of events held at The Garden during the fiscal year. Following the(3) spin-off, the Company recognizes suite license fee revenue and interior signage and sponsorship rights at The Garden as home games are played by the Knicks and Rangers at The Garden. Pursuant to the Arena License Agreements, the Company's aggregate share of suite license fees is now 67.5%, as compared to a higher percentage allocated to the Knicks and Rangers prior to the spin-off. In addition, pursuant to the Arena License Agreements, the Company no longer recognizes revenue related to exterior signage at The Garden.

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 877-347-9170 / Conference ID Number 5598615 Conference call replay number is 855-859-2056 / Conference ID Number 5598615 until February 10, 2021

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Six Months Ended

December 31, December 31,

2020 2019 2020 2019

Revenues $ 28,771 $ 292,798 $ 85,809 $ 342,648

Direct operating 16,661 197,783 56,447 216,202 expenses

Selling, general andadministrative 48,909 90,328 91,905 176,238 expenses

Depreciation and 1,607 4,920 3,267 9,765 amortization

Operating loss (38,406) (233) (65,810) (59,557)

Other income (expense):

Interest income - 233 - 526

Interest expense (2,487) (796) (4,476) (1,373)

Miscellaneous (70) (88) (190) (174) expense, net

Loss from continuingoperations before (40,963) (884) (70,476) (60,578) income taxes

Income tax benefit (170) (2,773) 328 16,730 (expense)

Loss from continuing (41,133) (3,657) (70,148) (43,848) operations

Income fromdiscontinued - 96,006 - 55,531 operations, net oftaxes

Net income (loss) (41,133) 92,349 (70,148) 11,683

Less: Net lossattributable tononredeemable (508) (465) (1,106) (915) noncontrollinginterests fromcontinuing operations

Less: Net lossattributable toredeemablenoncontrolling - (1,241) - (1,404) interests fromdiscontinuedoperations

Less: Net lossattributable tononredeemablenoncontrolling - (86) - (158) interests fromdiscontinuedoperations

Net income (loss)attributable toMadison Square Garden $ (40,625) $ 94,141 $ (69,042) $ 14,160 Sports Corp.'sstockholders



Basic

Continuing operations $ (1.68) $ (0.13) $ (2.86) $ (1.80)

Discontinued - 4.07 - 2.39 operations

Basic income (loss)per common shareattributable to $ (1.68) $ 3.94 $ (2.86) $ 0.59 Madison Square GardenSports Corp.'sstockholders



Diluted

Continuing operations $ (1.68) $ (0.13) $ (2.86) $ (1.79)

Discontinued - 4.06 - 2.38 operations

Diluted income (loss)per common shareattributable to $ (1.68) $ 3.93 $ (2.86) $ 0.59 Madison Square GardenSports Corp.'sstockholders



Basicweighted-average 24,144 23,913 24,103 23,870 number of commonshares outstanding

Dilutedweighted-average 24,144 23,979 24,103 23,977 number of commonshares outstanding

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 income (loss) as described in this earnings release:

* Deferred rent. This adjustment eliminates the impact of the non-cash portion of lease 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 full-time workforce reduction in August 2020. * Purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to the CLG acquisition.

Three Months Ended Six Months Ended

December 31, December 31,

2020 2019 2020 2019

Operating loss $ (38,406) $ (233) $ (65,810) $ (59,557)

Deferred rent 1,802 - 1,802 -

Depreciation and 1,607 4,920 3,267 9,765 amortization ^(1)

Share-based 15,981 14,255 22,326 28,051 compensation

Restructuring charges - - 1,644 -

Other purchaseaccounting - 50 - 100 adjustments

Adjusted operating $ (19,016) $ 18,992 $ (36,771) $ (21,641) income (loss)

(1)

Includes depreciation and amortization related to purchase accounting adjustments.

(1) Includes depreciation and amortization related to purchase accounting adjustments.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

December 31,2020

June 30,2020

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

70,762

$

77,852

Restricted cash

9,500

12,821

Accounts receivable, net

24,897

7,403

Net related party receivables

11,935

135

Prepaid expenses

47,535

20,634

Other current assets

10,851

9,433

Total current assets

175,480

128,278

Property and equipment, net of accumulated depreciation and amortization of $41,098 and $38,361 as of December 31, 2020 and June 30, 2020, respectively

37,034

39,597

Right-of-use lease assets

711,882

718,051

Amortizable intangible assets, net

2,224

2,754

Indefinite-lived intangible assets

112,144

112,144

Goodwill

226,955

226,955

Other assets

26,398

6,019

Total assets

$

1,292,117

$

1,233,798

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

December 31, June 30, 2020 2020

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents $ 70,762 $ 77,852

Restricted cash 9,500 12,821

Accounts receivable, net 24,897 7,403

Net related party receivables 11,935 135

Prepaid expenses 47,535 20,634

Other current assets 10,851 9,433

Total current assets 175,480 128,278

Property and equipment, net of accumulateddepreciation and amortization of $41,098 and 37,034 39,597 $38,361 as of December 31, 2020 and June 30,2020, respectively

Right-of-use lease assets 711,882 718,051

Amortizable intangible assets, net 2,224 2,754

Indefinite-lived intangible assets 112,144 112,144

Goodwill 226,955 226,955

Other assets 26,398 6,019

Total assets $ 1,292,117 $ 1,233,798

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except per share data)

December 31,2020

June 30,2020

(Unaudited)

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable

$

1,174

$

2,301

Net related party payables

25,468

17,952

Accrued liabilities:

Employee related costs

36,032

71,451

Other accrued liabilities

58,338

33,071

Operating lease liabilities, current

26,807

39,131

Deferred revenue

200,329

126,348

Total current liabilities

348,148

290,254

Long-term debt

380,000

350,000

Operating lease liabilities, noncurrent

687,535

679,053

Defined benefit and other postretirement obligations

6,617

7,014

Other employee related costs

44,574

50,027

Deferred tax liabilities, net

57,393

57,721

Deferred revenue, noncurrent

31,978

2,014

Other liabilities

1,000

1,150

Total liabilities

1,557,245

1,437,233

Commitments and contingencies

Madison Square Garden Sports Corp. Stockholders' Equity:

Class A Common stock, par value $0.01, 120,000 shares authorized; 19,582 and 19,466 shares outstanding as of December 31, 2020 and June 30, 2020, respectively

204

204

Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2020 and June 30, 2020

45

45

Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2020 and June 30, 2020

-

-

Additional paid-in capital

15,432

5,940

Treasury stock, at cost, 866 and 982 shares as of December 31, 2020 and June 30, 2020, respectively

(147,585)

(167,431)

Accumulated deficit

(133,986)

(43,605)

Accumulated other comprehensive loss

(2,119)

(2,139)

Total Madison Square Garden Sports Corp. stockholders' equity

(268,009)

(206,986)

Nonredeemable noncontrolling interests

2,881

3,551

Total equity

(265,128)

(203,435)

Total liabilities and equity

$

1,292,117

$

1,233,798

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except per share data)

December 31, June 30, 2020 2020

(Unaudited)

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable $ 1,174 $ 2,301

Net related party payables 25,468 17,952

Accrued liabilities:

Employee related costs 36,032 71,451

Other accrued liabilities 58,338 33,071

Operating lease liabilities, current 26,807 39,131

Deferred revenue 200,329 126,348

Total current liabilities 348,148 290,254

Long-term debt 380,000 350,000

Operating lease liabilities, noncurrent 687,535 679,053

Defined benefit and other postretirement 6,617 7,014 obligations

Other employee related costs 44,574 50,027

Deferred tax liabilities, net 57,393 57,721

Deferred revenue, noncurrent 31,978 2,014

Other liabilities 1,000 1,150

Total liabilities 1,557,245 1,437,233

Commitments and contingencies

Madison Square Garden Sports Corp. Stockholders' Equity:

Class A Common stock, par value $0.01, 120,000shares authorized; 19,582 and 19,466 shares 204 204 outstanding as of December 31, 2020 and June30, 2020, respectively

Class B Common stock, par value $0.01, 30,000shares authorized; 4,530 shares outstanding as 45 45 of December 31, 2020 and June 30, 2020

Preferred stock, par value $0.01, 15,000 sharesauthorized; none outstanding as of December 31, - - 2020 and June 30, 2020

Additional paid-in capital 15,432 5,940

Treasury stock, at cost, 866 and 982 shares asof December 31, 2020 and June 30, 2020, (147,585) (167,431) respectively

Accumulated deficit (133,986) (43,605)

Accumulated other comprehensive loss (2,119) (2,139)

Total Madison Square Garden Sports Corp. (268,009) (206,986) stockholders' equity

Nonredeemable noncontrolling interests 2,881 3,551

Total equity (265,128) (203,435)

Total liabilities and equity $ 1,292,117 $ 1,233,798

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

Six Months Ended

December 31,

2020

2019(1)

Net cash (used in) provided by operating activities

$

(21,633)

$

111,172

Net cash used in investing activities

(141)

(143,913)

Net cash provided by (used in) financing activities

11,363

(43,749)

Effect of exchange rates on cash, cash equivalents and restricted cash

-

1,693

Net decrease in cash, cash equivalents and restricted cash

(10,411)

(74,797)

Cash, cash equivalents and restricted cash from continuing operations, beginning of period

90,673

25,836

Cash, cash equivalents and restricted cash from discontinued operations, beginning of period

-

1,092,065

Cash, cash equivalents and restricted cash at beginning of period

90,673

1,117,901

Cash, cash equivalents and restricted cash from continuing operations, end of period

80,262

27,528

Cash, cash equivalents and restricted cash from discontinued operations, end of period

-

1,015,576

Cash, cash equivalents and restricted cash at end of period

$

80,262

$

1,043,104

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

Six Months Ended

December 31,

2020 2019^(1)

Net cash (used in) provided by operating $ (21,633) $ 111,172 activities

Net cash used in investing activities (141) (143,913)

Net cash provided by (used in) financing 11,363 (43,749) activities

Effect of exchange rates on cash, cash - 1,693 equivalents and restricted cash

Net decrease in cash, cash equivalents and (10,411) (74,797) restricted cash

Cash, cash equivalents and restricted cash from 90,673 25,836 continuing operations, beginning of period

Cash, cash equivalents and restricted cash from - 1,092,065 discontinued operations, beginning of period

Cash, cash equivalents and restricted cash at 90,673 1,117,901 beginning of period

Cash, cash equivalents and restricted cash from 80,262 27,528 continuing operations, end of period

Cash, cash equivalents and restricted cash from - 1,015,576 discontinued operations, end of period

Cash, cash equivalents and restricted cash at $ 80,262 $ 1,043,104 end of period

(1)

The selected cash flow information for the six months ended December 31, 2019 includes results related to the MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment through the MSG Entertainment spin-off date. These results have been classified as discontinued operations and, as permitted under ASU 2014-08, the Company has elected not to adjust the consolidated statement of cash flows for the six months ended December 31, 2019 to exclude cash flows attributable to discontinued operations.

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CONTACT: Kimberly Kerns Communications (212) 465-6442 Ari Danes, CFA Investor Relations (212) 465-6072