MADISON SQUARE GARDEN SPORTS CORP. NEW YORK, Feb. 6, 2024 /PRNewswire/ -- Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fiscal second quarter ended December 31, 2023.
With the 2023-24 New York Knicks ("Knicks") and New York Rangers ("Rangers") seasons now more than halfway complete, the Company has continued to see positive operating momentum across its business. During the fiscal 2024 second quarter, average per-game revenues for nearly every key revenue category – including tickets, suites, food, beverage and merchandise – exceeded results for the prior year period. In addition, local and national media rights fees were higher, primarily due to contractual rate increases.
In the fiscal 2024 second quarter, the Knicks and Rangers played a combined nine fewer regular season home games as compared to the prior year period. As a result, the Company generated revenues of $326.9 million, a decrease of $26.8 million, or 8%, as compared to the prior year period. In addition, the Company reported operating income of $28.8 million, a decrease of $22.7 million, or 44%, and adjusted operating income of $37.0 million, a decrease of $27.4 million, or 43%, both as compared to the prior year period.(1)
Madison Square Garden Sports Corp. Executive Chairman James L. Dolan said, "Enthusiasm for the Knicks and Rangers from fans and partners alike remains strong, with our Company seeing growth in average per-game revenues in the second quarter. We remain confident in the value of owning premier professional sports franchises and our ability to generate long-term value for shareholders."
Results from Operations
Results for the three and six months ended December 31, 2023 and 2022 were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | Change | December 31, | Change | |||||||||||||
$ millions | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | ||||||||
Revenues | $ 326.9 | $ 353.7 | $ (26.8) | (8) % | $ 369.9 | $ 377.8 | $ (7.8) | (2) % | ||||||||
Operating income | $ 28.8 | $ 51.5 | $ (22.7) | (44) % | $ 14.0 | $ 15.6 | $ (1.6) | (10) % | ||||||||
Adjusted operating income(1) | $ 37.0 | $ 64.4 | $ (27.4) | (43) % | $ 27.0 | $ 36.7 | $ (9.6) | (26) % | ||||||||
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. During the fourth quarter of fiscal 2023, the Company amended this definition so that the impact of the non-cash portion of operating lease costs (which was $9.0 million and $9.4 million for the three and six months ended December 31, 2023, respectively, and $12.2 million and $12.7 million for the three and six months ended December 31, 2022, respectively) related to the Company's arena license agreements with Madison Square Garden Entertainment Corp. ("MSG Entertainment") is no longer excluded in all periods presented. |
Summary of Reported Results from Operations
For the fiscal 2024 second quarter, revenues of $326.9 million decreased $26.8 million, or 8%, as compared to the prior year period. This decrease was primarily due to the Knicks and Rangers playing a combined nine fewer regular season home games at the Madison Square Garden Arena ("The Garden") during the fiscal 2024 second quarter as compared to the prior year period. As a result, pre/regular season ticket-related revenues, suite revenues and sponsorship and signage revenues all decreased as compared to the prior year period. The decrease in revenues was partially offset by higher local media rights fees and revenues from league distributions.
Pre/regular season ticket-related revenues decreased $19.0 million, as compared to the prior year period, primarily due to the Knicks and Rangers playing fewer games at The Garden during the fiscal 2024 second quarter, partially offset by higher average per-game revenue.
Suite revenues decreased $5.9 million, as compared to the prior year period, primarily due to the Knicks and Rangers playing fewer games at The Garden during the fiscal 2024 second quarter, partially offset by higher net sales of suite products, including revenue related to new premium hospitality offerings which were made available at the start of the 2023-24 seasons.
Sponsorship and signage revenues decreased $5.8 million as compared to the prior year period, primarily due to the Knicks and Rangers playing fewer games at The Garden during the fiscal 2024 second quarter.
Local media rights fees increased $2.0 million as compared to the prior year period, primarily due to contractual rate increases. In addition, revenues from league distributions increased $1.7 million as compared to the prior year period, primarily due to higher national media rights fees, partially offset by lower other league distributions.
Direct operating expenses of $232.2 million increased $6.5 million, or 3%, as compared to the prior year period. This increase was primarily driven by higher team personnel compensation of $12.2 million and higher net provisions for league revenue sharing expense (net of escrow and excluding playoffs) of $2.6 million, both as compared to the prior year period. These increases were partially offset by a decrease in operating lease costs under the arena license agreements with MSG Entertainment of $7.3 million due to the Knicks and Rangers playing fewer games at The Garden during the fiscal 2024 second quarter, and other net cost decreases.
Selling, general and administrative expenses of $65.1 million decreased $10.6 million, or 14%, as compared to the prior year period. This decrease was primarily driven by lower employee compensation and related benefits of $7.8 million, mainly due to executive management transition costs recognized in the prior year period, and lower other general and administrative expenses.
Operating income of $28.8 million decreased $22.7 million, or 44%, as compared to the prior year period, primarily due to the decrease in revenues and, to a lesser extent, the increase in direct operating expenses, partially offset by lower selling, general and administrative expenses. Adjusted operating income of $37.0 million decreased $27.4 million, or 43%, as compared to the prior year period, primarily due to the decrease in revenues and, to a lesser extent, the increase in direct operating expenses, partially offset by a decrease in 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), as well as two development league teams – the Westchester Knicks (NBAGL) and the Hartford Wolf Pack (AHL). MSG Sports also operates a professional sports team performance center – the MSG Training Center in Greenburgh, NY. More information is available at www.msgsports.com.
Non-GAAP Financial Measures
During the fourth quarter of fiscal 2023, the Company amended its definition of adjusted operating income (loss) so that the impact of the non-cash portion of operating lease costs related to the Company's arena license agreements with MSG Entertainment is no longer excluded in the calculation of adjusted operating income (loss) in all periods presented.
We define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) excluding (i) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, (iv) gains or losses on sales or dispositions of businesses, (v) the impact of purchase accounting adjustments related to business acquisitions, and (vi) gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan. 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. In addition, we believe that the exclusion of gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan provides investors with a clearer picture of the Company's operating performance given that, in accordance with U.S. generally accepted accounting principles ("GAAP"), gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan are recognized in Operating (income) loss whereas gains and losses related to the remeasurement of the assets under the Company's Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Miscellaneous income (expense), net, which is not reflected in Operating income (loss).
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 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, 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.
Contacts:
Ari Danes, CFA Investor Relations and Financial Communications (212) 465-6072 | Justin Blaber Financial Communications (212) 465-6109 | |
Grace Kaminer Investor Relations (212) 631-5076 |
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 888-660-6386 / Conference ID Number 6996895
Conference call replay number is 800-770-2030 / Conference ID Number 6996895 until February 13, 2024
MADISON SQUARE GARDEN SPORTS CORP. (In thousands, except per share data) (Unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | $ 326,898 | $ 353,694 | $ 369,944 | $ 377,783 | ||||||||||||
Direct operating expenses | 232,225 | 225,702 | 235,745 | 229,383 | ||||||||||||
Selling, general and administrative expenses | 65,066 | 75,636 | 118,622 | 130,917 | ||||||||||||
Depreciation and amortization | 790 | 838 | 1,584 | 1,863 | ||||||||||||
Operating income | 28,817 | 51,518 | 13,993 | 15,620 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 619 | 567 | 1,072 | 923 | ||||||||||||
Interest expense | (7,419) | (6,079) | (14,348) | (9,391) | ||||||||||||
Miscellaneous income (expense), net | 2,991 | 385 | (9,674) | 219 | ||||||||||||
Income (loss) before income taxes | 25,008 | 46,391 | (8,957) | 7,371 | ||||||||||||
Income tax (expense) benefit | (10,784) | (24,555) | 4,360 | (4,062) | ||||||||||||
Net income (loss) | 14,224 | 21,836 | (4,597) | 3,309 | ||||||||||||
Less: Net loss attributable to nonredeemable noncontrolling interests | — | (655) | — | (1,362) | ||||||||||||
Net income (loss) attributable to Madison Square Garden Sports Corp.'s | $ 14,224 | $ 22,491 | $ (4,597) | $ 4,671 | ||||||||||||
Basic earnings (loss) per common share attributable to Madison Square Garden | $ 0.59 | $ 0.85 | $ (0.19) | $ 0.11 | ||||||||||||
Diluted earnings (loss) per common share attributable to Madison Square Garden | $ 0.59 | $ 0.84 | $ (0.19) | $ 0.11 | ||||||||||||
Basic weighted-average number of common shares outstanding | 24,017 | 24,130 | 23,994 | 24,213 | ||||||||||||
Diluted weighted-average number of common shares outstanding | 24,065 | 24,189 | 23,994 | 24,306 | ||||||||||||
MADISON SQUARE GARDEN SPORTS CORP. | ||||||||||||||||
ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO | ||||||||||||||||
(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:
- 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.
- Remeasurement of deferred compensation plan liabilities. This adjustment eliminates the impact of gains and losses related to the remeasurement of liabilities under the Company's executive deferred compensation plan.
Three Months Ended | Six Months Ended | |||||||
December 31, | December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Operating income | $ 28,817 | $ 51,518 | $ 13,993 | $ 15,620 | ||||
Depreciation and amortization | 790 | 838 | 1,584 | 1,863 | ||||
Share-based compensation | 6,570 | 11,619 | 10,719 | 18,839 | ||||
Remeasurement of deferred compensation plan liabilities | 839 | 449 | 735 | 346 | ||||
Adjusted operating income(1) | $ 37,016 | $ 64,424 | $ 27,031 | $ 36,668 | ||||
______________________ | |
(1) | During the fourth quarter of fiscal 2023, the Company amended its definition of adjusted operating income (loss) so that the impact of the non-cash portion of operating lease costs related to the Company's arena license agreements with MSG Entertainment is no longer excluded. Pursuant to GAAP, recognition of operating lease costs is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease costs is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Adjusted operating income includes operating lease costs of (i) $15,409 and $16,238 of expense paid in cash for the three and six months ended December 31, 2023, respectively, and $19,416 and $20,221 of expense paid in cash for the three and six months ended December 31, 2022, respectively, and (ii) a non-cash expense of $8,953 and $9,435 for the three and six months ended December 31, 2023, respectively, and $12,202 and $12,708 for the three and six months ended December 31, 2022, respectively. |
MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) | ||||
December 31, | June 30, | |||
(Unaudited) | ||||
ASSETS | ||||
Current Assets: | ||||
Cash and cash equivalents | $ 37,880 | $ 40,398 | ||
Restricted cash | 3,352 | 61 | ||
Accounts receivable, net of allowance for doubtful accounts of $0 and $0 as of | 72,668 | 40,139 | ||
Net related party receivables | 17,334 | 15,969 | ||
Prepaid expenses | 55,661 | 24,768 | ||
Other current assets | 28,738 | 27,898 | ||
Total current assets | 215,633 | 149,233 | ||
Property and equipment, net of accumulated depreciation and amortization of $50,701 | 29,697 | 30,501 | ||
Right-of-use lease assets | 706,569 | 715,283 | ||
Indefinite-lived intangible assets | 103,644 | 103,644 | ||
Goodwill | 226,523 | 226,523 | ||
Investments | 62,112 | 67,374 | ||
Other assets | 24,271 | 22,459 | ||
Total assets | $ 1,368,449 | $ 1,315,017 | ||
MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED BALANCE SHEETS (continued) (In thousands, except per share data) | ||||
December 31, | June 30, | |||
(Unaudited) | ||||
LIABILITIES AND EQUITY | ||||
Current Liabilities: | ||||
Accounts payable | $ 4,969 | $ 9,093 | ||
Net related party payables | 5,615 | 5,842 | ||
Debt | 30,000 | 30,000 | ||
Accrued liabilities: | ||||
Employee related costs | 90,987 | 144,310 | ||
League-related accruals | 110,904 | 106,926 | ||
Other accrued liabilities | 9,653 | 17,561 | ||
Operating lease liabilities, current | 50,683 | 49,745 | ||
Deferred revenue | 257,626 | 157,051 | ||
Total current liabilities | 560,437 | 520,528 | ||
Long-term debt | 330,000 | 295,000 | ||
Operating lease liabilities, noncurrent | 741,003 | 746,437 | ||
Defined benefit obligations | 4,539 | 4,526 | ||
Other employee related costs | 50,719 | 49,070 | ||
Deferred tax liabilities, net | 19,535 | 24,024 | ||
Deferred revenue, noncurrent | 1,405 | 12,666 | ||
Total liabilities | 1,707,638 | 1,652,251 | ||
Commitments and contingencies | ||||
Madison Square Garden Sports Corp. Stockholders' Equity: | ||||
Class A Common Stock, par value $0.01, 120,000 shares authorized; 19,412 and 19,364 | 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 | 11,471 | 16,846 | ||
Treasury stock, at cost, 1,036 and 1,084 shares as of December 31, 2023 and June 30, | (171,400) | (179,410) | ||
Accumulated deficit | (178,512) | (173,910) | ||
Accumulated other comprehensive loss | (997) | (1,009) | ||
Total equity | (339,189) | (337,234) | ||
Total liabilities and equity | $ 1,368,449 | $ 1,315,017 | ||
MADISON SQUARE GARDEN SPORTS CORP. (In thousands) (Unaudited) | ||||
Six Months Ended | ||||
December 31, | ||||
2023 | 2022 | |||
Net cash (used in) provided by operating activities | $ (20,257) | $ 31,577 | ||
Net cash used in investing activities | (5,238) | (1,314) | ||
Net cash provided by (used in) financing activities | 26,268 | (76,123) | ||
Net increase (decrease) in cash, cash equivalents and restricted cash | 773 | (45,860) | ||
Cash, cash equivalents and restricted cash at beginning of period | 40,459 | 91,018 | ||
Cash, cash equivalents and restricted cash at end of period | $ 41,232 | $ 45,158 | ||
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SOURCE Madison Square Garden Sports Corp.
