NEW YORK, Aug. 14, 2020 (GLOBE NEWSWIRE) — Madison Square Garden Sports Corp. (NYSE: MSGS) today reported financial results for the fourth quarter and fiscal year ended June 30, 2020.  On April 17, 2020, The Madison Square Garden Company completed the spin-off of its entertainment businesses into a new company named Madison Square Garden Entertainment Corp. (“MSG Entertainment”) and changed its name to Madison Square Garden Sports Corp. (“the Company” or “MSG Sports”).
For all periods through the date of the spin-off, the financial results of the entertainment businesses previously owned and operated by the Company through its MSG Entertainment segment, as well as the sports booking business previously owned and operated by the Company through its MSG Sports segment, are reflected as discontinued operations.  In addition, results from continuing operations through April 17, 2020 include certain corporate overhead expenses that the Company did not incur after the spin-off date and does not expect to incur in future periods, but did not meet the criteria for inclusion in discontinued operations.  The financial results of the Company for the period after the spin-off date (April 18, 2020 through June 30, 2020) reflect the Company’s results on a standalone basis.Results for the fourth quarter and fiscal year ended June 30, 2020 reflect the impact of the COVID-19 pandemic. When the NBA and NHL regular seasons were suspended in March, the Knicks had 16 games remaining, including eight home games; and the Rangers had 12 games remaining, including five home games.  Both leagues have resumed play, and while the Knicks were not part of the NBA’s re-start in the Orlando bubble, the Rangers were part of the NHL’s return in the hub cities of Toronto and Edmonton.  Based on the completion of the 2019-20 seasons, the Company would recognize both NBA and NHL national media rights fees related to those seasons in the first quarter of fiscal 2021.For fiscal 2020, the Company generated $603.3 million in revenues, a 17% decrease as compared to the prior year.  In addition, the Company had an operating loss of $93.9 million and an adjusted operating loss of $27.5 million, compared to an operating loss of $58.2 million and adjusted operating income of $11.2 million in the prior year.⁽¹⁾On a pro forma basis for fiscal 2019, which was the last full fiscal year of operations before the impact of the COVID-19 pandemic, the Company generated $695.3 million in revenues, $25.4 million in operating income and $95.5 million in adjusted operating income.⁽¹⁾⁽²⁾For the fiscal 2020 fourth quarter, the Company reported negative revenues of $7.0 million, as compared to revenues of $68.2 million in the prior year quarter.  In addition, the Company had an operating loss of $44.9 million and an adjusted operating loss of $33.6 million in the fiscal 2020 fourth quarter, compared to an operating loss of $56.0 million and an adjusted operating loss of $38.3 million in the prior year quarter.Madison Square Garden Sports Corp. President and CEO Andrew Lustgarten said: “We remain confident in our Company’s future prospects and are comfortable that we have the financial flexibility to navigate through this period of uncertainty.  The strong response from fans to the return of the NBA and NHL this summer has, once again, reminded us of the power and popularity of sports.  And with a portfolio that features some of the most recognized brands in professional sports, we believe our business is well-positioned to drive long-term growth and value creation for our shareholders.”Results from Operations
Results for the quarter and year ended June 30, 2020 and 2019 are as follows:Summary of Reported Results from Continuing Operations
For the fiscal 2020 fourth quarter, the Company reported negative revenues of $7.0 million, a decrease of $75.1 million as compared to the prior year period.  The overall decrease in revenue was primarily due to the suspension of the 2019-20 NBA and NHL regular seasons.League distributions decreased $35.7 million as compared to the prior year quarter.  Due to the suspension of the NBA and NHL regular seasons, a portion of national media rights fees that was recognized during the first nine months of fiscal 2020 was reversed in the fiscal 2020 fourth quarter.  Based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize the remainder of national media rights fees related to those seasons in the first quarter of fiscal 2021.Ticket-related revenue, suite license fees, sponsorship and signage revenues and food, beverage and merchandise sales decreased a combined $38.1 million, as compared to the prior year quarter, primarily due to the suspensions of the NBA and NHL regular seasons.Local media rights fees from MSG Networks decreased $3.1 million as compared to the prior year quarter, primarily reflecting the Knicks and Rangers being unable to deliver for broadcast the contractually-obligated minimum threshold of games for the 2019-20 seasons.  This decrease was partially offset by contractual rate increases.  As a result of the Rangers’ participation in the Stanley Cup Qualifiers, the Company will recognize additional local media rights fees in the first quarter of fiscal 2021.For the fiscal 2020 fourth quarter, the Company recorded a $17.6 million credit in direct operating expenses as compared to $34.2 million in direct operating expenses in the prior year period.  Net provisions for league revenue sharing expense and NBA luxury tax resulted in a $42.7 million credit in the current year quarter as compared to $6.2 million in expenses in the prior year period.  This primarily reflects higher estimated net player escrow recoveries and lower estimated revenue sharing expense for the 2019-20 seasons due to the impact of the regular season suspensions and the leagues’ return-to-play format.  Based on the completion of the NBA and NHL seasons, in the first quarter of fiscal 2021 the Company would recognize a portion of revenue sharing expense, net of escrow recoveries, as well as team personnel compensation, that would have otherwise been recognized in fiscal 2020.For the fiscal 2020 fourth quarter, selling, general and administrative expenses were $53.4 million, a decrease of 37%, or $31.2 million, as compared to the prior year period primarily due to lower corporate overhead costs.  This primarily reflects the absence of certain corporate expenses in the period following the completion of the spin-off (April 18, 2020 through June 30, 2020).  The Company did not incur these expenses after the spin-off date and does not expect to incur these costs in future periods.  However, these costs did not meet the criteria for inclusion in discontinued operations for the periods prior to the spin-off date.  The overall decrease in expenses was partially offset by corporate costs incurred during the period following the spin-off, higher professional fees and an increase in employee compensation and related benefits.Fiscal 2020 fourth quarter operating loss of $44.9 million decreased 20%, or $11.0 million, and adjusted operating loss of $33.6 million decreased by 12%, or $4.7 million.  This primarily reflects lower direct operating expenses and selling, general and administrative expenses, partially offset by the decrease in revenues.Other Matters
As of June 30, 2020, the Company had $293 million of liquidity, comprised of the following components:$78 million of cash and cash equivalents,$200 million in borrowing capacity under two delayed draw term loan facilities with MSG Entertainment; and$15 million available under an unsecured revolving credit facility associated with the New York Knicks. Total debt outstanding under the Company’s New York Knicks and New York Rangers senior secured revolving credit facilities was $350 million.As of June 30, 2020, the Company’s current deferred revenue obligations were approximately $126 million. Of this amount, approximately $61 million is related to the 2019-20 NBA and NHL seasons, including approximately $42 million associated with national media rights fees.  Based on the completion of the 2019-20 NBA and NHL seasons, the Company would recognize these fees in the first quarter of fiscal 2021.  The balance of deferred revenue obligations related to the 2019-20 seasons is comprised of suites and sponsorships, which will be addressed, to the extent necessary, through credits, make-goods and/or refunds, as applicable.With the ongoing uncertainty due to COVID-19, earlier this month, the Company implemented cost-reduction measures designed to preserve cash until the Company is able to fully resume operations. These measures included workforce reductions, limits on third-party vendor use and additional cuts to discretionary spending.The Company will host its earnings conference call today, beginning at 10:30 a.m. ET.  Going forward, the Company will host two earnings conference calls a year – one for its fiscal second quarter, and one for its fiscal fourth quarter – which will allow for a mid-season update, followed by a full-season review.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) before (i) deferred rent expense under the arena license agreements with Madison Square Garden Entertainment Corp., (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.
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