EX-99.1 2 d433561dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

MADISON SQUARE GARDEN SPORTS CORP. REPORTS

FISCAL 2023 SECOND QUARTER RESULTS

NEW YORK, N.Y., February 7, 2023 - Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fiscal second quarter ended December 31, 2022.

The New York Knicks (“Knicks”) and New York Rangers (“Rangers”) began their 2022-23 regular seasons in October at the Madison Square Garden Arena (“The Garden”). The Company has continued to experience positive operating momentum across its key revenue categories driven by sustained consumer and corporate demand. For the fiscal 2023 second quarter, average per-game revenues for tickets, suites, sponsorship and food, beverage and merchandise all exceeded results for the prior year period. In addition, local and national media rights fees were higher, primarily due to contractual rate increases.

During the fiscal 2023 second quarter, the Company implemented its plan to return approximately $250 million to shareholders, in light of the Company’s strong financial performance in fiscal 2022 and the trading price of its common stock relative to the intrinsic value of its professional sports teams. The return consisted of a special cash dividend of $7.00 per share (approximately $173 million) and a $75 million accelerated share repurchase (“ASR”) program, which the Company completed in January 2023.

For the fiscal 2023 second quarter, the Company generated revenues of $353.7 million, an increase of $64.1 million, or 22%, as compared to the prior year period. In addition, the Company reported operating income of $51.5 million, an increase of $15.6 million, or 43%, and adjusted operating income of $76.6 million, an increase of $21.0 million, or 38%, both as compared to the prior year period.(1)

Madison Square Garden Sports Corp. Executive Chairman James L. Dolan said, “Our second quarter results reflect ongoing positive momentum across all key areas of our business following last year’s robust financial performance. We are confident in the strength of our 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, 2022 and 2021 were as follows:

 

     Three Months Ended                    Six Months Ended                
     December 31,          Change          December 31,          Change      
 $ millions    2022      2021          $              %          2022      2021          $              %      

 Revenues

   $ 353.7      $ 289.6      $ 64.1        22%      $ 377.8      $ 308.4      $ 69.4        23%  

 Operating income

   $ 51.5      $ 35.9      $ 15.6        43%      $ 15.6      $ 1.0      $ 14.6        NM  

 Adjusted operating income(1)

   $ 76.6      $ 55.7      $ 21.0        38%      $ 49.4      $ 27.5      $ 21.8        79%  

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.

 

1


Summary of Reported Results from Operations

For the fiscal 2023 second quarter, revenues of $353.7 million increased $64.1 million, or 22%, as compared to the prior year period. This increase was primarily due to higher pre/regular season ticket-related revenues, suite license fee revenues, sponsorship and signage revenues, food, beverage and merchandise sales, local media rights fees and league distribution revenues. The Rangers played six more regular season home games at The Garden in the current year period as compared to the prior year period.

Pre/regular season ticket-related revenues increased $29.7 million as compared to the prior year period, primarily due to higher average per-game revenue and the Rangers playing additional games at The Garden during the current year period.

Suite license fee revenues increased $12.5 million as compared to the prior year period, primarily due to the Rangers playing additional games at The Garden during the current year period and increased sales of suite products.

Sponsorship and signage revenues increased $10.0 million as compared to the prior year period, primarily due to the Rangers playing additional games at The Garden during the current year period, higher net sales of existing sponsorship and signage inventory, and sales of new sponsorship and signage inventory.

Pre/regular season food, beverage and merchandise sales increased $4.0 million as compared to the prior year period, primarily due to higher average per-game revenue and the Rangers playing additional games at The Garden. Local media rights fees increased $3.9 million as compared to the prior year period, primarily due to contractual rate increases. In addition, league distributions increased $3.2 million as compared to the prior year period due to increased NBA and NHL national media rights fees and other league distributions in the current year period.

Direct operating expenses of $225.7 million increased $32.9 million, or 17%, as compared with the prior year period. This increase was primarily driven by an increase in team personnel compensation of $19.1 million, as well as an increase in other team operating expenses of $7.4 million, both as compared to the prior year period.

Selling, general and administrative expenses of $75.6 million increased $16.0 million, or 27%, as compared to the prior year period. This increase was primarily due to higher employee compensation and related benefits, reflecting executive management transition costs recorded in the current year period, as well as higher marketing costs.

Operating income of $51.5 million increased $15.6 million, or 43%, as compared to the prior year period, primarily due to the increase in revenues, partially offset by higher direct operating expenses and an increase in selling, general and administrative expenses (including share-based compensation). Adjusted operating income of $76.6 million increased by $21.0 million, or 38%, as compared to the prior year period, primarily due to the increase in revenues, partially offset by higher direct operating expenses and an increase in selling, general and administrative expenses (excluding share-based compensation).

Other Matters

On October 6, 2022, the Company’s Board of Directors authorized a $75.0 million ASR program under the Company’s existing share repurchase authorization. On October 28, 2022, the Company entered into an ASR agreement with JPMorgan Chase Bank (“JP Morgan”). Pursuant to the ASR agreement, the Company made a payment of $75.0 million to JP Morgan and JP Morgan delivered 388,777 initial shares of Class A Common Stock to the Company on November 1, 2022, representing 80% of the total shares expected to be repurchased under the ASR (determined based on the closing price of the Company’s Class A Common Stock of $154.33 on October 28, 2022). The ASR was completed on January 31, 2023 with JP Morgan delivering 67,681 additional shares of Class A Common Stock to the Company upon final settlement. The average purchase price per share for shares of Class A Common Stock purchased by the Company pursuant to the ASR was $164.31.

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 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.

 

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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 Madison Square Garden Entertainment Corp. (“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, (vi) the impact of purchase accounting adjustments related to business acquisitions, and (vii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan (which was established in November 2021). 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 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 that this adjustment is beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Entertainment. In addition, this adjustment is a component of the performance measures used to evaluate, and compensate, senior management of the Company. 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 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 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, 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.

# # #

 

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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 14, 2023

 

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended      Six Months Ended  
         December 31,                      December 31,          
     2022     2021      2022     2021  

 Revenues

   $ 353,694      $ 289,581       $ 377,783      $ 308,375   

 Direct operating expenses

     225,702        192,847         229,383        201,425   

 Selling, general and administrative expenses

     75,636        59,600        130,917        103,328   

 Depreciation and amortization

     838        1,215         1,863        2,641   
  

 

 

   

 

 

    

 

 

   

 

 

 

 Operating income

     51,518        35,919         15,620        981   

 Other income (expense):

         

Interest income

     567        43         923        93   

Interest expense

     (6,079)       (3,585)        (9,391)       (6,688)  

Miscellaneous income (expense), net

     385        (64)        219        (127)  
  

 

 

   

 

 

    

 

 

   

 

 

 

 Income (loss) from operations before income taxes

     46,391        32,313         7,371        (5,741)  

 Income tax (expense) benefit

     (24,555)       (17,115)        (4,062)       4,054   
  

 

 

   

 

 

    

 

 

   

 

 

 

 Net income (loss)

     21,836        15,198         3,309        (1,687)  

Less: Net loss attributable to nonredeemable noncontrolling interests

     (655)       (647)        (1,362)       (1,127)  
  

 

 

   

 

 

    

 

 

   

 

 

 

 Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders

   $ 22,491      $ 15,845       $ 4,671      $ (560)  
  

 

 

   

 

 

    

 

 

   

 

 

 
         

Basic earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders

   $ 0.85      $ 0.65       $ 0.11      $ (0.02)  

Diluted earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders

   $ 0.84      $ 0.65       $ 0.11      $ (0.02)  
         

 Basic weighted-average number of common shares outstanding

     24,130        24,261         24,213        24,217   

 Diluted weighted-average number of common shares outstanding

     24,189        24,373         24,306        24,217   

 

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MADISON SQUARE GARDEN SPORTS CORP.

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO

ADJUSTED OPERATING INCOME (LOSS)

The following is a description of the adjustments to operating income in arriving at adjusted operating income 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.

   

Remeasurement of deferred compensation 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,          
     2022     2021      2022     2021  

 Operating income

   $ 51,518     $ 35,919      $ 15,620     $ 981  

 Deferred rent

     12,202       11,179        12,708       11,708  

 Depreciation and amortization

     838       1,215        1,863       2,641  

 Share-based compensation

     11,619       7,354        18,839       12,205  

 Remeasurement of deferred compensation plan liabilities

     449              346        
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted operating income

   $ 76,626     $ 55,667      $ 49,376     $ 27,535  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

       December 31,  
2022
          June 30,      
2022
 
     (Unaudited)        

 ASSETS

    

 Current Assets:

    

Cash and cash equivalents

   $ 43,912     $ 91,018  

Restricted cash

     1,246        

Accounts receivable, net of allowance for doubtful accounts of $0 and $0 as of December 31, 2022 and June 30, 2022, respectively

     74,976       47,240  

Net related party receivables

     23,584       28,333  

Prepaid expenses

     43,502       18,810  

Other current assets

     20,717       19,868  
  

 

 

   

 

 

 

Total current assets

     207,937       205,269  

 Property and equipment, net of accumulated depreciation and amortization of $48,519 and $46,794 as of December 31, 2022 and June 30, 2022, respectively

     32,125       32,892  

 Right-of-use lease assets

     678,110       686,782  

 Amortizable intangible assets, net

     498       636  

 Indefinite-lived intangible assets

     112,144       112,144  

 Goodwill

     226,955       226,955  

 Other assets

     43,098       37,288  
  

 

 

   

 

 

 

Total assets

   $ 1,300,867     $ 1,301,966  
  

 

 

   

 

 

 

 

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except per share data)

 

     December 31,
2022
         June 30,    
2022
 
     (Unaudited)         

LIABILITIES AND EQUITY

     

Current Liabilities:

     

Accounts payable

   $ 7,924       $ 11,263   

Net related party payables

     8,030         19,624   

Debt

     30,000         30,000   

Accrued liabilities:

     

Employee related costs

     96,231         119,279   

League-related accruals

     97,560         75,269   

Other accrued liabilities

     11,190         6,796   

Operating lease liabilities, current

     43,751         43,699   

Deferred revenue

     188,274         132,369   
  

 

 

    

 

 

 

Total current liabilities

     482,960         438,299   

Long-term debt

     405,000         220,000   

Operating lease liabilities, noncurrent

     702,667         699,587   

Defined benefit obligations

     5,001         5,005   

Other employee related costs

     47,777         43,411   

Deferred tax liabilities, net

     12,926         8,917   

Deferred revenue, noncurrent

     30,948         31,122   

Other liabilities

     —         1,002   
  

 

 

    

 

 

 

Total liabilities

     1,687,279         1,447,343   
  

 

 

    

 

 

 

Commitments and contingencies

     

Madison Square Garden Sports Corp. Stockholders’ Equity:

     

Class A Common stock, par value $0.01, 120,000 shares authorized; 19,415 and 19,697 shares outstanding as of December 31, 2022 and June 30, 2022, respectively

     204         204   

Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2022 and June 30, 2022

     45         45   

Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2022 and June 30, 2022

     —         —   

Additional paid-in capital

     —         17,573   

Treasury stock, at cost, 1,033 and 751 shares as of December 31, 2022 and June 30, 2022, respectively

     (169,772)        (128,026)  

Accumulated deficit

     (217,047)        (35,699)  

Accumulated other comprehensive loss

     (1,180)        (1,186)  
  

 

 

    

 

 

 

Total Madison Square Garden Sports Corp. stockholders’ equity

     (387,750)        (147,089)  

Nonredeemable noncontrolling interests

     1,338         1,712   
  

 

 

    

 

 

 

Total equity

     (386,412)        (145,377)  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 1,300,867       $ 1,301,966   
  

 

 

    

 

 

 

 

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MADISON SQUARE GARDEN SPORTS CORP.

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

 

     Six Months Ended  
             December 31,          
     2022     2021  

Net cash provided by operating activities

   $ 31,577      $ 24,030   

Net cash used in investing activities

     (1,314)       (627)  

Net cash used in financing activities

     (76,123)       (39,879)  
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (45,860)       (16,476)  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

     91,018        72,036   
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 45,158      $ 55,560   
  

 

 

   

 

 

 

 

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