Atlanta Braves Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 3, 2023. The company owns the Atlanta Braves and operates The Battery Atlanta mixed-use development. The Liberty Braves tracking-stock split-off was completed July 18, 2023. Results are seasonal, with most revenue recognized during the second and third quarters.
Financial performance
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Total revenue | $271.8 | $245.4 | $572.9 | $517.3 |
| Operating income (loss) | $15.7 | $(4.7) | $(14.1) | $(23.4) |
| Adjusted OIBDA | $40.3 | $24.5 | $51.4 | $47.4 |
| Net earnings (loss) | $(6.0) | $(29.9) | $(92.9) | $10.8 |
| Diluted earnings (loss) per share | $(0.10) | $(0.48) | $(1.51) | $0.17 |
| Operating cash flow | — | $(21.3) | $19.4 | |
| Capital expenditures | — | $45.3 | $13.2 |
Q3 operating margin was approximately 5.8%, versus approximately negative 1.9% a year earlier; nine-month operating margin was approximately negative 2.5%. Adjusted OIBDA is a non-GAAP measure and should be considered alongside GAAP results.
- Revenue growth: Total revenue rose 10.7% in Q3 and 10.8% year to date. Baseball revenue was $256.3 million in Q3 and $528.8 million for nine months; Mixed-Use Development revenue was $15.6 million and $44.2 million, respectively.
- Cash and liquidity: September 30 cash and cash equivalents were $106.7 million, plus $19.8 million restricted cash. Operating cash flow was negative, with current and other assets using $67.5 million of cash. Management said expected liquidity sources, including cash, operations and available borrowing capacity, were sufficient for projected uses.
- Debt: Total debt was $555.3 million, including $7.8 million current and $547.5 million long-term debt. Cash less total debt was approximately negative $448.6 million. The company reported $69.9 million of floating-rate debt at a weighted average 6.9% and $489.2 million of fixed-rate debt at 4.4%. It was in compliance with financial covenants.
Changes and significant items
- Baseball event revenue increased $25.9 million in Q3, primarily on higher ticket demand and attendance; average home-game attendance rose to 32,481 from 31,232. Broadcasting revenue benefited from contractual rate increases. Fewer stadium concerts reduced other baseball revenue.
- Baseball operating costs increased $4.0 million in Q3 and $40.4 million year to date, including higher player salaries. Nine-month MLB revenue-sharing expense increased to $31.8 million from $19.4 million.
- Q3 Adjusted OIBDA improved $15.8 million, while nine-month Adjusted OIBDA increased $4.0 million. Corporate and other costs rose, primarily due to the split-off.
- Nine-month net loss included $83.2 million of realized and unrealized losses on pre-split-off intergroup interests, compared with a $5.2 million gain in 2022. These interests were settled and extinguished in connection with the split-off. The mark-to-market item substantially affected reported earnings and is distinct from operating performance.
- Interest expense rose to $28.0 million for nine months from $20.5 million, mainly due to higher rates on variable-rate debt. Nine-month investing cash use increased, mainly because capital spending rose to $45.3 million.
Outlook, risks and contingencies
- No specific earnings or revenue guidance was provided. Management expects to fund player, coach and executive contract payments, capital expenditures, real estate investments and debt service with cash on hand, operating cash flow and borrowings.
- Diamond Sports Group, parent of the Braves’ regional broadcaster, is in Chapter 11. The company continued receiving scheduled payments, but could be required to repay up to $34.2 million of payments received during the preference period. If the broadcasting agreement is rejected, it could lose remaining-term broadcast revenue and write down approximately $45.9 million of receivables and contract assets.
- Long-term employment contracts included annual amounts payable of $231.9 million for the remainder of 2023, $157.6 million in 2024, $143.5 million in 2025, $136.4 million in 2026, $111.2 million in 2027 and $251.2 million thereafter. Subsequent to quarter-end, the Braves entered player contracts expected to require approximately $40.3 million through 2026, excluding incentives.
- Other stated risks include leverage and refinancing, interest rates, consumer demand and inflation, labor and MLB revenue-sharing arrangements, the split-off transition, real estate development execution, and litigation or regulatory outcomes. Management expected ordinary-course legal contingencies, if any, not to be material.
- The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor verification points
- Track Diamond Sports’ bankruptcy outcome, ongoing payments, potential preference repayment and the recoverability of the $45.9 million receivable balance.
- Review operating cash flow, capital spending and borrowing needs against management’s liquidity expectations, including availability and rates on variable-rate facilities.
- Assess player-contract commitments, revenue-sharing costs and subsequent contract signings relative to baseball revenue and cash generation.
- Separate recurring operating trends from split-off-related intergroup mark-to-market losses and one-time transition expenses when evaluating earnings.