NEW YORK--(BUSINESS WIRE)--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 | ||||||||||||||||||||||
| $ millions | 2020 | 2019 | $ | % | 2020 | 2019 | $ | % | |||||||||||||||||
| Revenues | $ | 28.8 | $ | 292.8 | $ | (264.0) | (90) | % | $ | 85.8 | $ | 342.6 | $ | (256.8) | (75) | % | |||||||||
| Operating loss | $ | (38.4) | $ | (0.2) | $ | (38.2) | NM | $ | (65.8) | $ | (59.6) | $ | (6.3) | (10) | % | ||||||||||
| Adjusted operating income (loss) | $ | (19.0) | $ | 19.0 | $ | (38.0) | NM | $ | (36.8) | $ | (21.6) | $ | (15.1) | (70) | % | ||||||||||
| (1) | 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 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. |
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.
(3) | 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 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.
