Madison Square Garden Sports Corp. (NYSE:MSGS) reported fiscal third-quarter results on Friday that fell short of earnings expectations, although revenue came in slightly ahead of Wall Street forecasts.
Shares of the company moved modestly higher in premarket trading, rising 0.14% following the release.
Revenue edges higher on stronger league distributions
For the quarter ended March 31, the company reported a loss of -$0.83 per share, missing analyst estimates of $0.56 per share by $1.39.
Quarterly revenue increased 2% year-on-year to $432.2 million, topping consensus expectations of $429.66 million and improving from $424.2 million in the same period last year.
The rise in revenue was largely supported by an additional $27.0 million in league distributions, mainly linked to increased national media rights fees generated by the NBA’s new broadcasting agreements introduced this season.
Fewer home games weigh on key revenue streams
The company said the New York Knicks and New York Rangers played a combined total of five fewer regular-season home games at Madison Square Garden Arena during the quarter compared with the prior-year period.
That reduction negatively affected several business areas, including ticket sales, local media rights income, and food and beverage revenue generated at the venue.
Higher expenses pressure profitability
Operating income declined significantly to $2.0 million from $32.3 million a year earlier, while adjusted operating income fell to $10.3 million from $36.9 million.
Direct operating expenses rose 12% to $354.5 million during the quarter.
The increase included $18.8 million in additional team personnel compensation costs as well as $15.4 million tied to higher league revenue-sharing expenses and NBA luxury tax provisions.
“Our results this quarter again reflect growth in per-game revenues across all key categories, which is driven by strong demand for our teams,” said Executive Chairman and CEO James L. Dolan.
“We are also now exploring a potential separation of our Knicks and Rangers businesses into distinct public companies, which we believe would further create long-term value for shareholders.”
Company continues evaluating spin-off plans
Madison Square Garden Sports noted that its board approved a review process in February to evaluate a possible separation of the Knicks and Rangers into two independently traded public companies.
The company said the proposal remains under consideration as management assesses potential strategic and shareholder benefits.