MSG Results Soar on Knicks, Networks

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Madison Square Garden Co. reported strong fiscal third quarter revenue, fueled by a media unit that turned in double-digit growth despite losing one of its largest distributors for half the period.
Revenue rose 21% to $400.5 million and adjusted operating cash flow leaped 46% to $80.2 million at MSG, which includes the Madison Square Garden arena, professional sports teams the New York Knicks, New York Rangers and New York Liberty, regional sports networks MSG and MSG Plus and concert venues Radio City Music Hall, the Beacon Theater and the Chicago Theater. The gains were fueled by strong performance at its MSG Media unit (which houses the sports channels and the Fuse music network) and MSG Sports (which includes the teams), offset by a decline at its MSG Entertainment segment.
MSG Media reported a 13% increase in revenue to $166.7 million and a 4% rise in AOCF to $65.3, despite being dark for half of the quarter to Time Warner Cable customers in New York City. MSG was returned to those TWC subscribers on Feb. 17, after a 48-day impasse.
In a research note, Morgan Stanley media analyst Ben Swinburne was impressed by the gains at the networks, adding that the unit's $10.4 million increase in affiliate revenue indicates that Time Warner Cable agreed to a fee increase "well in excess of our mid-to-high single digit base case estimate."
Revenue at MSG Sports rose 37% in the period to $216.1 million and AOCF increased nine-fold from $3.5 million to $29.3 million, spurred by higher ticket revenue from the Knicks and Rangers, league distributions, food beverage and merchandise sales, suite rental fees, event-related revenue from other live sporting events and sponsorship and signage revenue.
MSG Entertainment revenue declined 20% to $34.3 million in the period.
"We generated significant AOCF during our fiscal third quarter, a reflection of the strength of our assets and brands, as well as the value we provide to customers and partners," MSG CEO Hank Ratner said in a statement. "In particular, MSG Sports delivered its most profitable quarter in our two year history as a public company. The segment is realizing financial benefits as a result of the new products and amenities we are providing as part of the first phase of the transformation project. Once the playoffs conclude, we will begin the second phase of the transformation and look forward to the debut of the transformed upper bowl of the arena this fall."
MSG stock rosenearly 4% ($1.41 each) to $37.94 per share in Friday trading.

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