News Details

View all news

Madison Square Garden Entertainment Corp. Reports Fiscal 2020 Third Quarter Results

05/18/2020

NEW YORK--(BUSINESS WIRE)-- Madison Square Garden Entertainment Corp. (NYSE: MSGE) ("MSG Entertainment") today reported financial results for the fiscal third quarter ended March 31, 2020. This marks the first quarter that MSG Entertainment is reporting financial results as a standalone company, following its spin-off from Madison Square Garden Sports Corp. ("MSG Sports"), which was completed on April 17, 2020.

Executive Chairman and CEO James L. Dolan said, “With the MSG Entertainment spin-off complete, we believe we have created a company that will expand on our track record of creating long-term value for shareholders. Our Company has been in the business of bringing people together for decades, and we are confident that we are well-positioned to weather these uncertain times. We believe the public’s innate desire to be part of shared experiences will continue and we look forward to opening our doors for unforgettable events yet to come.”

Results from Operations
The Company's fiscal 2020 and 2019 results are presented in accordance with accounting requirements for the preparation of carve-out financial statements, reflecting the results of the entertainment businesses previously owned and operated by MSG Sports through its MSG Entertainment business segment, as well as the sports bookings business previously owned and operated by MSG Sports through its MSG Sports business segment. These results do not include the impact of intercompany agreements between the Company and MSG Sports, which were effective as of the date of the spin-off, and do not reflect the level of expenses that would have been incurred by the Company had it been a stand-alone company for the periods presented. Given the recent completion of the spin-off, the Company has elected not to host a conference call to discuss this quarter's financial results, but does anticipate hosting a fiscal 2020 year-end earnings conference call.

Results for the fiscal 2020 third quarter include the impact of the COVID-19 pandemic which, in March 2020, led to the temporary closure of the Company's venues. In addition, the impact of the pandemic on Tao Group Hospitality resulted in significant non-cash impairment charges, which are included in the Company's fiscal 2020 third quarter operating loss.(1) On a reported basis, the Company generated fiscal 2020 third quarter revenues of $199.9 million, a decrease of 20%, and an operating loss of $145.5 million, an increase of $126.9 million, both as compared to the prior year quarter.(2) In addition, fiscal 2020 third quarter adjusted operating income decreased by $25.2 million to a loss of $7.2 million, as compared to the prior year quarter.(3)

Results for the three and nine months ended March 31, 2020 and 2019 are as follows:

 

 

Three Months Ended

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

March 31,

 

Change

 

March 31,

 

Change

$ thousands

 

2020

 

2019

 

$

 

%

 

2020

 

2019

 

$

 

%

Revenues

 

$

199.9

 

 

$

250.0

 

 

$

(50.2

)

 

(20

)%

 

$

767.0

 

 

$

832.4

 

 

$

(65.3

)

 

(8

)%

Operating income (loss) (2)

 

$

(145.5

)

 

$

(18.6

)

 

$

(126.9

)

 

NM

 

$

(146.0

)

 

$

12.5

 

 

$

(158.5

)

 

NM

Adjusted operating income (loss)

 

$

(7.2

)

 

$

17.9

 

 

$

(25.2

)

 

NM

 

$

70.2

 

 

$

125.7

 

 

$

(55.5

)

 

(44

)%

 

(1) Other than the non-cash impairment charges related to Tao Group Hospitality recorded in the fiscal 2020 third quarter, the Company records Tao Group Hospitality's operating results in its consolidated statements of operations on a three-month lag basis.
(2) For the fiscal 2020 third quarter, the Company's operating loss results include $102.2 million in impairment charges related to Tao Group Hospitality (please see page 5 of this release for additional detail).
(3) See page 3 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.

For the fiscal 2020 third quarter, total revenues of $199.9 million decreased 20%, as compared to the prior year period. This primarily reflects lower event-related revenues at the Company's performance venues, as well as revenue decreases across suites, sponsorship and signage, and Tao Group Hospitality. Aside from the results of Tao Group Hospitality which are reported on a three-month lag basis, the decrease in revenues reflects the impact of the temporary closure of the Company's performance venues starting on March 12, 2020 due to the COVID-19 pandemic. The decrease in event-related revenues also includes the impact of fewer events at the Company's venues for the period of January 1, 2020 to March 11, 2020 as compared to the same period in the prior year. The decrease in Tao Group Hospitality revenues was primarily due to lower revenues at its New York venues, including the impact of the permanent closure of one venue.

Fiscal 2020 third quarter operating loss increased by $126.9 million to $145.5 million and adjusted operating income decreased by $25.2 million to a loss of $7.2 million, both as compared to the prior year period. The increase in operating loss includes the $102.2 million in non-cash impairment charges related to Tao Group Hospitality, while the decrease in adjusted operating income reflects the decrease in revenues and, to a lesser extent, higher selling, general and administrative expenses, partially offset by lower direct operating expenses.

The decrease in direct operating expenses primarily reflects the impact of the temporary COVID-19 related venue closures, which resulted in lower event-related expenses at the Company's performance venues and lower suite, sponsorship and signage revenue sharing expenses. In addition, Tao Group Hospitality and other expenses were lower as compared to the prior year quarter. A portion of the overall expense decrease was offset as the Company continued to pay certain event-level employees during the time its venues were closed in the quarter. The increase in selling, general and administrative expenses was primarily due to higher expenses related to the MSG Sphere initiative, largely offset by a decrease in employee compensation and related benefits, lower professional fees, the absence of pre-opening venue expenses at Tao Group Hospitality that were recorded in the prior year quarter, and other net decreases.

COVID-19 Update
On March 12, 2020, the COVID-19 pandemic led to the temporary closure of MSG Entertainment’s performance venues, with virtually all events postponed or canceled through June. In addition, the Company’s 2020 Boston Calling Music Festival, which had been slated for Memorial Day weekend, has been canceled and Tao Group Hospitality has temporarily closed virtually all of its venues worldwide.

As a result of these COVID-related impacts, MSG Entertainment is currently recognizing minimal revenue. And while the Company is also realizing lower expenses due to reduced event-related costs and a decrease in discretionary spending - in areas such as advertising and promotion - these cost reductions do not offset the loss in revenue.

COVID-19 has also impacted the construction of MSG Sphere at The Venetian in Las Vegas. Due to significant impediments beyond the Company’s control, including disruptions to its supply chain, the Company implemented a temporary suspension of construction in mid-April. And although MSG Entertainment no longer expects to open the venue in calendar year 2021, the Company looks forward to resuming construction as soon as practicable.

The Company believes it is well positioned to navigate through this temporary shutdown. As of May 1, 2020, MSG Entertainment had approximately $1.4 billion in cash and cash equivalents and short-term investments, including the net proceeds from the sale of the Forum. Adjusted for the sale of the Forum, as of March 31, 2020, the Company had approximately $220 million in advance cash proceeds - primarily related to tickets, suites and sponsorships - all of which will be addressed, to the extent necessary, through refunds, credits, make-goods and/or rescheduled dates. To-date, the significant majority of impacted events have been postponed and are expected to be rescheduled.

MSG Entertainment has a portfolio of popular venues, entertainment properties and dining and nightlife offerings that, together, entertain millions of people each year. Before the onset of COVID-19, the Company was realizing strong growth across its businesses, including its bookings business, which in recent years has delivered continued increases in the number of events and attendance. The Christmas Spectacular production, which last year celebrated its 87th year, has generated record-setting revenues over the past several years. And Tao Group Hospitality was off to a strong start to fiscal 2020, generating solid growth in the first half of the fiscal year as the hospitality business continued to successfully execute on its venue expansion plans. The desire for shared experiences has fueled these achievements, and, while it may take some time, the Company believes that its brands and expertise, along with its commitment to creating unforgettable experiences, will enable it to continue its leadership position once business resumes.

About Madison Square Garden Entertainment Corp.
Madison Square Garden Entertainment Corp. (MSG Entertainment) is a leader in live entertainment experiences. The Company presents or hosts a broad array of events in its diverse collection of venues: New York’s Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre; and The Chicago Theatre. MSG Entertainment is also building a new state-of-the-art venue in Las Vegas, MSG Sphere at The Venetian, and has announced plans to build a second MSG Sphere in London, pending necessary approvals. In addition, the Company features the original production – the Christmas Spectacular Starring the Radio City Rockettes – and through Boston Calling Events, produces the Boston Calling Music Festival. Also under the MSG Entertainment umbrella is Tao Group Hospitality, with entertainment dining and nightlife brands including Tao, Marquee, Lavo, Avenue, Beauty & Essex and Cathédrale. More information is available at www.msgentertainment.com.

Non-GAAP Financial Measures
We define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) before 1) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, 2) share-based compensation expense or benefit, 3) restructuring charges or credits, 4) gains or losses on sales or dispositions of businesses and 5) 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 the various operating units of our business without regard to the settlement of an obligation that is not expected to be made in cash.

We believe adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company on a consolidated basis. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and adjusted operating income (loss) as the most important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators. Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of operating income (loss) to adjusted operating income (loss), please see page 5 of this release.

Forward-Looking Statements
This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements related to the impact of the COVID-19 pandemic. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including financial community and rating agency perceptions of the Company and its business, operations, financial condition and the industry in which it operates, the impact of the COVID-19 pandemic and the factors described in the Company’s filings with the Securities and Exchange Commission, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.

 

COMBINED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,

 

March 31,

 

 

2020

 

2019

 

2020

 

2019

Revenues

 

$

199,861

 

 

$

250,018

 

 

$

767,038

 

 

$

832,384

 

Direct operating expenses

 

132,809

 

 

158,710

 

 

472,582

 

 

507,249

 

Selling, general and administrative expenses

 

84,186

 

 

83,159

 

 

257,970

 

 

231,038

 

Depreciation and amortization

 

26,196

 

 

26,768

 

 

80,271

 

 

81,606

 

Impairment for intangibles, long-lived assets, and goodwill

 

102,211

 

 

 

 

102,211

 

 

 

Operating income (loss)

 

(145,541

)

 

(18,619

)

 

(145,996

)

 

12,491

 

Other income (expense):

 

 

 

 

 

 

 

 

Earnings (loss) in equity method investments

 

(1,096

)

 

(2,881

)

 

(3,739

)

 

17,131

 

Interest income

 

3,659

 

 

7,987

 

 

17,242

 

 

22,020

 

Interest expense

 

(605

)

 

(3,247

)

 

(1,854

)

 

(10,076

)

Miscellaneous income (expense), net

 

(17,381

)

 

4,613

 

 

(2,893

)

 

(4,118

)

Income (loss) from operations before income taxes

 

(160,964

)

 

(12,147

)

 

(137,240

)

 

37,448

 

Income tax benefit (expense)

 

10,126

 

 

(469

)

 

8,686

 

 

(1,253

)

Net income (loss)

 

(150,838

)

 

(12,616

)

 

(128,554

)

 

36,195

 

Less: Net loss attributable to redeemable noncontrolling interests

 

(22,447

)

 

(7

)

 

(23,851

)

 

(3,662

)

Less: Net income (loss) attributable to nonredeemable noncontrolling interests

 

195

 

 

(680

)

 

38

 

 

(3,121

)

Net income (loss) attributable to the Company

 

$

(128,586

)

 

$

(11,929

)

 

$

(104,741

)

 

$

42,978

 

Basic and diluted earnings (loss) per common share attributable to the Company

 

$

(5.36

)

 

$

(0.50

)

 

$

(4.37

)

 

$

1.79

 

Basic and diluted weighted-average number of common shares outstanding

 

23,992

 

 

23,992

 

 

23,992

 

 

23,992

 

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating income (loss) as described in this earnings release:

  • Share-based compensation. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under the MSG Sports employee stock plan and non-employee director plan in all periods.
  • Depreciation and amortization. This adjustment eliminates depreciation and amortization of property and equipment and intangible assets in all periods.
  • Impairment of intangibles, long-lived assets and goodwill. This adjustment eliminates non-cash impairment charges in all periods.
  • Purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to business acquisitions, primarily favorable / unfavorable lease agreements of the acquiree.

 

 

Three Months Ended

 

Nine Months Ended

 

 

March 31,

 

March 31,

 

 

2020 

 

 2019

 

 2020

 

 2019

Operating income (loss)

 

$

(145,541

)

 

$

(18,619

)

 

$

(145,996

)

 

$

12,491

 

Share-based compensation

 

8,836

 

 

8,726

 

 

29,294

 

 

27,929

 

Depreciation and amortization (1)

 

26,196

 

 

26,768

 

 

80,271

 

 

81,606

 

Impairment for intangibles, long-lived assets, and goodwill (2)

 

102,211

 

 

 

 

102,211

 

 

 

Other purchase accounting adjustments

 

1,068

 

 

1,069

 

 

4,464

 

 

3,717

 

Adjusted operating income (loss)

 

$

(7,230

)

 

$

17,944

 

 

$

70,244

 

 

$

125,743

 

(1) Includes depreciation and amortization related to purchase accounting adjustments.
(2) As a result of operating disruptions due to COVID-19, the Company recorded a non-cash impairment charge of $102,211 associated with Tao Group Hospitality for the three and nine months ended March 31, 2020. This charge reflected $80,698 related to goodwill, as well as impairment charges related to one Tao Group Hospitality venue of $17,972 for long-lived assets and $3,541 for intangible assets.

 

 

COMBINED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

March 31,
2020

 

June 30,
2019

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents (1)

 

$

1,003,893

 

 

$

1,082,055

 

Restricted cash

 

17,955

 

 

10,010

 

Short-term investments

 

331,019

 

 

108,416

 

Accounts receivable, net

 

105,212

 

 

81,044

 

Net related party receivables

 

2,288

 

 

1,722

 

Prepaid expenses

 

39,255

 

 

24,067

 

Other current assets

 

40,581

 

 

39,430

 

Assets held for sale

 

109,155

 

 

 

Total current assets

 

1,649,358

 

 

1,346,744

 

Investments and loans to nonconsolidated affiliates

 

61,998

 

 

84,560

 

Property and equipment, net of accumulated depreciation and amortization

 

1,540,786

 

 

1,349,122

 

Right-of-use lease assets

 

234,760

 

 

 

Amortizable intangible assets, net

 

155,948

 

 

214,391

 

Indefinite-lived intangible assets

 

64,881

 

 

65,421

 

Goodwill

 

81,996

 

 

165,558

 

Other assets

 

37,438

 

 

89,963

 

Total assets

 

$

3,827,165

 

 

$

3,315,759

 

(1) Cash and cash equivalents as of March 31, 2020 includes unrestricted cash and cash equivalents of $100,000 which was retained by Madison Square Garden Sports Corp. at the time of the Madison Square Garden Entertainment Corp. spin-off.

 

COMBINED BALANCE SHEETS (continued)

(In thousands)

(Unaudited)

 

 

 

March 31,
2020

 

June 30,
2019

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND DIVISIONAL EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

18,766

 

 

$

23,974

 

Net related party payables, current

 

31,728

 

 

18,911

 

Current portion of long-term debt, net of deferred financing costs

 

4,792

 

 

6,042

 

Accrued liabilities:

 

 

 

 

Employee related costs

 

70,418

 

 

82,411

 

Other accrued liabilities

 

117,207

 

 

88,614

 

Operating lease liabilities, current

 

54,506

 

 

 

Collections due to promoters

 

49,421

 

 

67,212

 

Deferred revenue

 

206,045

 

 

186,883

 

Liabilities held for sale

 

72,811

 

 

 

Total current liabilities

 

625,694

 

 

474,047

 

Related party payables, noncurrent

 

 

 

172

 

Long-term debt, net of deferred financing costs

 

29,962

 

 

48,556

 

Operating lease liabilities, noncurrent

 

191,762

 

 

 

Defined benefit and other postretirement obligations

 

32,359

 

 

41,318

 

Other employee related costs

 

17,570

 

 

15,703

 

Deferred tax liabilities, net

 

13,131

 

 

22,973

 

Other liabilities

 

77,770

 

 

59,525

 

Total liabilities

 

988,248

 

 

662,294

 

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests

 

23,000

 

 

67,627

 

Company Divisional Equity:

 

 

 

 

Madison Square Garden Sports Corp. Investment

 

2,851,522

 

 

2,618,971

 

Accumulated other comprehensive loss

 

(52,607

)

 

(46,923

)

Total Company divisional equity

 

2,798,915

 

 

2,572,048

 

Nonredeemable noncontrolling interests

 

17,002

 

 

13,790

 

Total divisional equity

 

2,815,917

 

 

2,585,838

 

Total liabilities, redeemable noncontrolling interests and divisional equity

 

$

3,827,165

 

 

$

3,315,759

 

 

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

March 31,

 

 

2020

 

2019

Net cash provided by operating activities

 

$

136,951

 

 

$

44,966

 

Net cash used in investing activities

 

(477,984

)

 

(156,851

)

Net cash provided by financing activities

 

266,900

 

 

32,578

 

Effect of exchange rates on cash, cash equivalents and restricted cash

 

3,916

 

 

6,440

 

Net decrease in cash, cash equivalents and restricted cash

 

(70,217

)

 

(72,867

)

Cash, cash equivalents and restricted cash at beginning of period

 

1,092,065

 

 

1,232,356

 

Cash, cash equivalents and restricted cash at end of period

 

$

1,021,848

 

 

$

1,159,489

 

 

Kimberly Kerns
EVP and Chief Communications Officer
Madison Square Garden Entertainment Corp.
(212) 465-6442

Ari Danes, CFA
Senior Vice President, Investor Relations & Treasury
Madison Square Garden Entertainment Corp.
(212) 465-6072

Source: Madison Square Garden Entertainment Corp.

Multimedia Files:

Categories: Press Releases
View all news