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Madison Square Garden Entertainment Corp. Reports Fourth Quarter and Fiscal 2021 Results

08/23/2021

Fourth Quarter Results Reflect Return of Live Events to the Company’s Venues

Tao Group Hospitality Achieves First Profitable Quarter Since Start of Pandemic

MSG Networks Acquisition Completed on July 9, 2021

Company Moves Forward with Greater Scale and Revenue Diversity, As Well As Enhanced Financial Flexibility

NEW YORK--(BUSINESS WIRE)-- Madison Square Garden Entertainment Corp. (NYSE: MSGE) (“MSG Entertainment”) today reported financial results for the fourth quarter and fiscal year ended June 30, 2021.

The fiscal 2021 fourth quarter reflected the return of live events to the Company’s performance venues, following an easing of restrictions during the period. This included Madison Square Garden (“The Garden”) hosting three sold-out New York Knicks home playoff games in May and June, welcoming what was, at that time, the largest indoor crowds to gather in New York State since the start of the pandemic. This was followed by the Foo Fighters, which marked the first sold-out, 100% capacity concert at The Garden since March 2020, and which was one of several events throughout June at the Company’s venues. In addition, last month, the Company officially announced the return of the Christmas Spectacular Starring the Radio City Rockettes production to Radio City Music Hall, with 163 shows scheduled for the 2021 holiday season.

Capacity restrictions were also lifted in several U.S. markets for entertainment dining and nightlife venues in the fiscal fourth quarter, permitting Tao Group Hospitality’s U.S. portfolio – which expanded following its acquisition of Hakkasan Group in April – to operate at 100% capacity by the end of the period. This included Tao Group Hospitality’s two largest markets – Las Vegas, where capacity restrictions were lifted June 1, and New York, where capacity restrictions and social distancing requirements ended June 15. To help venues continue to operate safely at full capacity, municipalities have taken proactive steps to curb the impacts of the pandemic. In Las Vegas and Chicago, mask mandates for indoor public settings were announced in July and August, respectively, and, in New York City, proof of vaccination for all guests dining indoors or attending indoor events was announced earlier this month.

Executive Chairman and CEO James L. Dolan said, “Our Company successfully navigated the challenges of this past fiscal year. And while we continue to operate in a fluid environment, we remain cautiously optimistic as we prepare to meet the pent-up demand for live experiences and, after the MSG Networks acquisition, move forward with greater scale and enhanced financial flexibility to pursue growth opportunities and deliver long-term value for shareholders.”

Results from Operations

Results for the fiscal year ended June 30, 2021 reflect the impact of the COVID-19 pandemic. For fiscal 2021, the Company reported revenues of $180.4 million, as compared to revenues of $762.9 million in the prior year.(1)(2) In addition, the Company had an operating loss of $450.2 million and an adjusted operating loss of $271.0 million in fiscal 2021, compared to an operating loss of $59.8 million and adjusted operating loss of $43.3 million in the prior year.(3)(4)

For the fiscal 2021 fourth quarter, the Company reported revenues of $99.8 million, as compared to $9.0 million in revenues in the prior year quarter. In addition, the Company had an operating loss of $102.4 million and an adjusted operating loss of $70.0 million in the fiscal 2021 fourth quarter, compared to operating income of $94.4 million and an adjusted operating loss of $103.5 million in the prior year quarter.(4)

(1)

Financial results for the fiscal 2020 period from July 1, 2019 to April 17, 2020 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 Madison Square Garden Sports Corp. (“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 reflect the impact of intercompany agreements between the Company and MSG Sports from the date of the spin-off (April 17, 2020) through June 30, 2020 and may not reflect the level of expenses that would have been incurred by the Company had it been a stand-alone company for the period presented.

(2)

Fiscal 2020 operating results include the Forum’s results through May 1, 2020.

(3)

See page 5 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.

(4)

Fiscal 2020 and fiscal 2020 fourth quarter operating loss results include $105.8 million and $3.6 million, respectively, in impairment charges related to Tao Group Hospitality. Fiscal 2020 and fiscal 2020 fourth quarter operating results include a $240.8 million gain on the sale of the Forum and associated settlements.

Segment Results for the Quarters and Years Ended June 30, 2021 and 2020:

(In millions)

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

 

 

2021

 

2020

 

% Change

 

2021

 

2020

 

% Change

Revenues:

 

 

 

 

 

 

Entertainment

$

31.1

 

$

8.6

 

264

%

$

82.3

 

$

585.2

 

(86

)%

Tao Group Hospitality

69.7

 

1.3

 

NM

 

100.2

 

180.2

 

(44

)%

Other(5)

(1.0

)

(0.9

)

(10

)%

(2.0

)

(2.5

)

17

%

Total Revenues

$

99.8

 

$

9.0

 

NM

 

$

180.4

 

$

762.9

 

(76

)%

 

Operating Income (Loss):

 

 

 

 

 

 

Entertainment

$

(103.2

)

$

118.2

 

NM

 

$

(391.0

)

$

71.0

 

NM

 

Tao Group Hospitality

2.9

 

(20.6

)

NM

 

(29.4

)

(102.6

)

71

%

Other(5)

(2.1

)

(3.3

)

34

%

(29.8

)

(28.2

)

(6

)%

Total Operating Income (Loss)

$

(102.4

)

$

94.4

 

NM

 

$

(450.2

)

$

(59.8

)

(653

)%

 

Adjusted Operating Income (Loss):

 

 

 

 

 

 

Entertainment

$

(79.6

)

$

(90.2

)

12

%

$

(254.9

)

$

(44.3

)

(476

)%

Tao Group Hospitality

9.8

 

(13.0

)

NM

 

(15.2

)

1.5

 

NM

 

Other(5)

(0.1

)

(0.3

)

50

%

(0.9

)

(0.5

)

(89

)%

Total Adjusted Operating Income (Loss)

$

(70.0

)

$

(103.5

)

32

%

$

(271.0

)

$

(43.3

)

(526

)%

Note: Does not foot due to rounding

(5)

Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments.

Entertainment

For the fiscal 2021 fourth quarter, the Entertainment segment generated revenues of $31.1 million, an increase of $22.6 million, as compared with the prior year period. Revenues this quarter reflect the Company’s various commercial arrangements with MSG Sports. This includes $8.3 million in arena license fee revenues; $3.3 million in revenues from food and beverage sales during New York Knicks and New York Rangers games at The Garden and the Company’s share of MSG Sports merchandise sold at The Garden; as well as a $2.2 million increase in revenues related to the Sponsorship Sales and Service Representation Agreements with MSG Sports. Advertising sales commission revenues from MSG Networks Inc. (“MSG Networks”) increased $4.9 million as compared with the prior year period. In addition, event-related revenues increased $3.5 million primarily due to select events held in the current year quarter as compared to no events in the prior year period.

Fiscal 2021 fourth quarter direct operating expenses of $31.4 million decreased 9%, or $3.0 million, as compared with the prior year quarter. Expenses this quarter reflect the impact of the Company’s spin-off from MSG Sports in the prior year period (see note 1 on previous page), as venue-operating related costs decreased $5.6 million and venue-related signage and sponsorship expenses decreased $1.5 million, primarily due to the impact of carve-out adjustments in the prior year period. These decreases were partially offset by an increase of $2.3 million in expenses associated with hosting Knicks and Rangers games in the current year quarter, pursuant to the Arena License Agreements with MSG Sports, and an increase of $1.8 million in event-related expenses at the Company’s venues.

Fiscal 2021 fourth quarter selling, general and administrative expenses of $83.0 million increased 9%, or $6.7 million, as compared with the prior year quarter. Expenses this quarter reflect an increase in professional fees of $5.9 million as compared with the prior year period, $4.1 million of which was associated with the Company’s acquisition of MSG Networks, and other cost increases. These increases were partially offset by a decrease in employee compensation and related benefits of $10.2 million, which included the impact of severance-related costs attributable to separation agreements in the prior year period.

Fiscal 2021 fourth quarter operating income decreased by $221.4 million to an operating loss of $103.2 million and adjusted operating loss decreased by $10.6 million to an adjusted operating loss of $79.6 million. The decrease in operating income reflects the impact of a $240.8 million gain on the sale of the Forum and associated settlements recorded in the fiscal 2020 fourth quarter. The improved adjusted operating loss primarily reflects the increase in revenues and, to a lesser extent, lower direct operating expenses, partially offset by higher selling, general and administrative expenses.

Tao Group Hospitality

For the fiscal 2021 fourth quarter, the Tao Group Hospitality segment generated revenues of $69.7 million as compared to $1.3 million in the prior year period. The portfolio of venues operated by Tao Group Hospitality prior to the acquisition of Hakkasan Group (which the Company refers to as the “legacy venues”) generated $42.1 million in revenues in the current year quarter as compared to $1.3 million in the prior year period, which reflects the easing of government-mandated capacity restrictions. Tao Group Hospitality acquired Hakkasan Group on April 27, 2021 and, as a result, revenues in the current year quarter included $27.6 million from Hakkasan Group in the post-acquisition period (April 28, 2021 through June 30, 2021).

Fiscal 2021 fourth quarter direct operating expenses of $35.3 million increased by $28.7 million as compared to the prior year quarter. The current year quarter included $12.3 million in direct operating expenses from Hakkasan Group in the post-acquisition period. In addition, employee compensation and related benefits increased $9.8 million, primarily reflecting a staffing increase at the legacy venues, while the cost of food and beverage at legacy venues increased $6.7 million, both as compared with the prior year period.

Fiscal 2021 fourth quarter selling, general and administrative expenses of $26.3 million increased by $17.7 million as compared to the prior year quarter. This primarily reflects $8.0 million in selling, general and administrative expenses from Hakkasan Group in the post-acquisition period; a $3.6 million increase in employee compensation and related benefits; a $1.6 million increase in restaurant expenses and supplies, repairs and maintenance, utilities and general liability insurance; a $1.2 million increase in marketing; and other net increases.

Fiscal 2021 fourth quarter operating income increased by $23.5 million to $2.9 million and adjusted operating income increased by $22.8 million to $9.8 million, both as compared to the prior year quarter. This primarily reflects the increase in revenues, partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses. Fiscal 2020 fourth quarter operating loss included a net impairment charge of $4.8 million.

Liquidity

As of June 30, 2021, MSG Entertainment’s unrestricted cash balance was $1.17 billion, while MSG Networks’ cash balance was $348.2 million, for a total combined cash position of $1.52 billion.(6)

On a combined basis, the Company’s total debt outstanding as of June 30, 2021 was $1.74 billion.(6) This was comprised of a $1.05 billion term loan at MSG Networks, a $646.8 million term loan at a subsidiary of MSG Entertainment and $43.8 million in credit facilities at Tao Group Hospitality.

MSG Entertainment’s cash balance at quarter-end included $232.9 million in deferred revenue and collections due to promoters, as compared to $193.9 million as of March 31, 2021. The increase in deferred revenue and collections due to promoters primarily reflects advance ticket sales for future events at the Company’s performance venues.

MSG Networks

The Company completed its acquisition of MSG Networks on July 9, 2021. The below is a summary of MSG Networks’ financial results for the fourth quarter and fiscal year ended June 30, 2021 on a standalone basis. MSG Networks’ financial information (along with a reconciliation of operating income to adjusted operating income) for the fourth quarter and fiscal year ended June 30, 2021 can be found starting on page 13 of this press release.

(In millions)

Three Months Ended

Twelve Months Ended

 

June 30,

June 30,

 

2021

2021

Revenues

$

166.1

 

$

647.5

 

Operating income

58.4

 

262.0

 

Adjusted operating income

63.8

 

287.0

 

For fiscal 2021, MSG Networks generated total revenues of $647.5 million, a decrease of 6% as compared with the prior year. In addition, MSG Networks generated operating income of $262.0 million, a decrease of 11%, adjusted operating income of $287.0 million, a decrease of 11%, and net income of $156.3 million, a decrease of 16%, all as compared with the prior year.

(6)

MSG Entertainment completed its acquisition of MSG Networks on July 9, 2021. The combined cash and debt position of MSG Entertainment and MSG Networks as of June 30, 2021 is presented for illustrative purposes.

For the fiscal 2021 fourth quarter, MSG Networks generated total revenues of $166.1 million, an increase of 9% as compared with the prior year quarter. Affiliation fee revenue decreased $9.7 million, primarily due to the impact of a decrease in subscribers of approximately 7%, an increase in unfavorable affiliate adjustments of $3.8 million and, to a lesser extent, the impact of the previously disclosed nonrenewal with a small Connecticut-based distributor as of October 1, 2020(7), partially offset by the impact of higher affiliation rates.

Advertising revenue increased $22.2 million, as compared with the prior year period, primarily due to sales related to live professional sports telecasts (including playoff games) in the current year quarter as compared to no telecasts in the prior year period due to the cancellation of games during the 2019-20 NBA and NHL seasons. Other revenues increased $1.4 million as compared with the prior year period.

Direct operating expenses of $66.4 million increased 43%, or $20.0 million, as compared with the prior year quarter. The increase reflects higher rights fees expense due to the impact of the cancellation of games during the 2019-20 NBA and NHL seasons in the prior year quarter and, to a lesser extent, the impact of the timing of the 2020-21 NBA and NHL regular seasons and annual contractual rate increases in the current year quarter. These increases were partially offset by the impact in the current year quarter of fewer NHL and NBA games made available for exclusive broadcast by MSG Networks during the NHL and NBA’s shortened 2020-21 regular seasons. In addition, other programming and production-related costs increased as compared to the prior year quarter, primarily due to the impact of professional sports telecasts taking place in the current year quarter versus none in the prior year quarter.

Selling, general and administrative expenses of $39.4 million increased 91%, or $18.7 million, as compared with the prior year quarter. The increase primarily reflects higher advertising and marketing expenses, advertising sales commissions and employee compensation and related benefits as compared with the prior year quarter, as well as $3.3 million of professional fees related to the acquisition of MSG Networks by MSG Entertainment, slightly offset by other net decreases.

Operating income of $58.4 million decreased 30%, or $24.6 million, and adjusted operating income of $63.8 million decreased 30%, or $26.7 million, both as compared with the prior year quarter, primarily due to the increase in direct operating expenses and selling, general and administrative expenses, partially offset by the increase in revenues.

(7)

The approximately 7% year-over-year rate of subscriber decline excludes the impact of the previously disclosed non-renewal with a small Connecticut-based distributor as of October 1, 2020.

About Madison Square Garden Entertainment Corp.

Madison Square Garden Entertainment Corp. (MSG Entertainment) is a leader in live entertainment. 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. 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. The Company’s two regional sports and entertainment networks, MSG Network and MSG+, deliver a wide range of live sports content and other programming. Also under the MSG Entertainment umbrella is Tao Group Hospitality, with entertainment dining and nightlife brands including: Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan and Omnia. 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 (i) adjustments to remove the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with Madison Square Garden Sports Corp., (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) amortization for capitalized cloud computing arrangement costs, (iv) share-based compensation expense or benefit, (v) restructuring charges or credits, and (vi) gains or losses on sales or dispositions of businesses and associated settlements, which is referred to as adjusted operating income (loss), a non-GAAP measure. In addition to excluding the impact of the items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated adjusted operating income (loss). 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 that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance.

On July 9, 2021, we completed our acquisition of MSG Networks Inc. The financial results of MSG Networks will be incorporated in our financial results retrospectively for all periods presented. Certain financial metrics are included in this release, such as adjusted operating income, which is a non-GAAP financial measure. MSG Networks defines adjusted operating income as operating income before (i) depreciation, amortization and impairments of property and equipment and intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits and (iv) gains or losses on sales or dispositions of businesses. Because it is based upon operating income, adjusted operating income 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 MSG Networks 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 our business segments, including MSG Networks, and 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 7 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. 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 industries 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.

Conference Call Information:

The conference call will be Webcast live today at 10:00 a.m. ET at investor.msgentertainment.com 
Conference call dial-in number is 888-421-7163 / Conference ID Number 2256668
Conference call replay number is 855-859-2056 / Conference ID Number 2256668 until August 30, 2021

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Revenues

 

$

99,784

 

 

$

8,999

 

 

$

180,401

 

 

$

762,936

 

Direct operating expenses

 

66,671

 

 

41,729

 

 

171,924

 

 

508,122

 

Selling, general and administrative expenses

 

109,120

 

 

84,981

 

 

322,714

 

 

344,637

 

Depreciation and amortization

 

26,429

 

 

25,100

 

 

114,664

 

 

104,899

 

Impairment for intangibles, long-lived assets, and goodwill

 

 

 

3,606

 

 

 

 

105,817

 

Gain on disposal of assets held for sale and associated settlements

 

 

 

(240,783

)

 

 

 

(240,783

)

Restructuring charges

 

 

 

 

 

21,299

 

 

 

Operating income (loss)

 

(102,436

)

 

94,366

 

 

(450,200

)

 

(59,756

)

Other income (expense):

 

 

 

 

 

 

 

 

Earnings (loss) in equity method investments

 

(1,280

)

 

(694

)

 

(6,858

)

 

(4,433

)

Interest income

 

318

 

 

751

 

 

1,273

 

 

17,993

 

Interest expense

 

(12,157

)

 

(446

)

 

(35,098

)

 

(2,300

)

Miscellaneous expense, net

 

(2,238

)

 

39,850

 

 

51,062

 

 

38,855

 

Income (loss) from operations before income taxes

 

(117,793

)

 

133,827

 

 

(439,821

)

 

(9,641

)

Income tax benefit (expense)

 

(2,002

)

 

(13,732

)

 

9,371

 

 

(5,046

)

Net income (loss)

 

(119,795

)

 

120,095

 

 

(430,450

)

 

(14,687

)

Less: Net loss attributable to redeemable noncontrolling interests

 

(2,178

)

 

(5,238

)

 

(16,269

)

 

(30,387

)

Less: Net loss attributable to nonredeemable noncontrolling interests

 

151

 

 

(1,293

)

 

(2,099

)

 

(1,534

)

Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders

 

$

(117,768

)

 

$

126,626

 

 

$

(412,082

)

 

$

17,234

 

Basic earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders

 

$

(4.87

)

 

$

5.27

 

 

$

(17.39

)

 

$

0.72

 

Diluted earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders

 

$

(4.87

)

 

$

5.27

 

 

$

(17.39

)

 

$

0.72

 

Basic weighted-average number of common shares outstanding

 

24,171

 

 

24,019

 

 

24,205

 

 

23,998

 

Diluted weighted-average number of common shares outstanding

 

24,171

 

 

24,095

 

 

24,205

 

 

24,017

 

 
 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO

ADJUSTED OPERATING INCOME (LOSS)

(Unaudited)

 

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:

  • Non-cash portion of arena license fees from MSG Sports. This adjustment removes the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with MSG Sports.
  • Share-based compensation. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under the MSG Entertainment Employee Stock Plan, 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.
  • Restructuring charges. This adjustment eliminates costs related to termination benefits provided to employees as part of the Company's full-time workforce reductions.
  • Gains or losses on disposal of assets. This adjustment eliminates the impact of gains or losses from the disposition of assets or businesses.
  • 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

 

Twelve Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Operating income (loss)

 

$

(102,436

)

 

$

94,366

 

 

$

(450,200

)

 

$

(59,756

)

Non-cash portion of arena license fees from MSG Sports

 

(4,286

)

 

 

 

(13,026

)

 

 

Share-based compensation

 

9,713

 

 

12,896

 

 

52,917

 

 

42,190

 

Depreciation and amortization (1)

 

26,429

 

 

25,100

 

 

114,664

 

 

104,899

 

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

 

 

 

3,606

 

 

 

 

105,817

 

Restructuring charges

 

 

 

 

 

21,299

 

 

 

Gain on disposal of assets held for sale, including associated settlements

 

 

 

(240,783

)

 

 

 

(240,783

)

Purchase accounting adjustments

 

599

 

 

1,338

 

 

3,334

 

 

4,367

 

Adjusted operating loss

 

$

(69,981

)

 

$

(103,477

)

 

$

(271,012

)

 

$

(43,266

)

_________________

(1)

Includes depreciation and amortization related to purchase accounting adjustments.

(2)

As a result of operating disruptions due to COVID-19, the Company was required to assess the carrying value of Tao Group Hospitality’s intangible assets, long-lived assets and goodwill. As a result, the Company recorded a non-cash impairment charge of $105,817 associated with Tao Group Hospitality for the twelve months ended June 30, 2020. This charge reflected $88,583 related to goodwill, as well as impairment charges related to Tao Group Hospitality venues of $13,693 for long-lived assets and $3,541 for intangible assets for the twelve months ended June 30, 2020. For the three months ended June 30, 2020, the Company recorded a non-cash impairment charge related to Tao Group Hospitality venues of $3,606. This charge reflected $7,885 related to goodwill, partially offset by net impairment credits related to Tao Group Hospitality venues of $4,279.

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

SEGMENT RESULTS

(Dollars in thousands)

(Unaudited)

BUSINESS SEGMENT RESULTS

 

 

Three Months Ended June 30, 2021

 

 

Entertainment

 

Tao Group
Hospitality

 

Other(2)

 

Total

Revenues

 

$

31,100

 

 

$

69,664

 

 

$

(980

)

 

$

99,784

 

Direct operating expenses

 

31,421

 

 

35,303

 

 

(53

)

 

66,671

 

Selling, general and administrative expenses

 

83,039

 

 

26,275

 

 

(194

)

 

109,120

 

Depreciation and amortization

 

19,801

 

 

5,216

 

 

1,412

 

 

26,429

 

Operating loss

 

$

(103,161

)

 

$

2,870

 

 

$

(2,145

)

 

$

(102,436

)

Reconciliation to adjusted operating loss:

 

 

 

 

 

 

 

 

Non-cash portion of arena license fees from MSG Sports

 

(4,286

)

 

 

 

 

 

(4,286

)

Share-based compensation

 

8,027

 

 

1,686

 

 

 

 

9,713

 

Depreciation and amortization(1)

 

19,801

 

 

5,216

 

 

2,011

 

 

27,028

 

Adjusted operating loss

 

$

(79,619

)

 

$

9,772

 

 

$

(134

)

 

$

(69,981

)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

Entertainment

 

Tao Group
Hospitality

 

Other(2)

 

Total

Revenues

 

$

8,550

 

 

$

1,337

 

 

$

(888

)

 

$

8,999

 

Direct operating expenses

 

34,382

 

 

6,642

 

 

705

 

 

41,729

 

Selling, general and administrative expenses

 

76,352

 

 

8,617

 

 

12

 

 

84,981

 

Depreciation and amortization

 

20,396

 

 

1,869

 

 

2,835

 

 

25,100

 

Impairment for intangibles, long-lived assets, and goodwill

 

 

 

4,792

 

 

(1,186

)

 

3,606

 

Gain on disposal of assets held for sale

 

(240,783

)

 

 

 

 

 

(240,783

)

Operating income (loss)

 

$

118,203

 

 

$

(20,583

)

 

$

(3,254

)

 

$

94,366

 

Reconciliation to adjusted operating income (loss):

 

 

 

 

 

 

 

 

Share-based compensation

 

11,961

 

 

935

 

 

 

 

12,896

 

Depreciation and amortization(1)

 

20,396

 

 

1,869

 

 

4,173

 

 

26,438

 

Impairment for intangibles, long-lived assets, and goodwill

 

 

 

4,792

 

 

(1,186

)

 

3,606

 

Gain on disposal of assets held for sale

 

(240,783

)

 

 

 

 

 

(240,783

)

Adjusted operating income (loss)

 

$

(90,223

)

 

$

(12,987

)

 

$

(267

)

 

$

(103,477

)

_________________

(1)

Depreciation and amortization includes other purchase accounting adjustments of $599 and $1,338 for the three months ended June 30, 2021 and 2020, respectively.

(2)

Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments.

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

SEGMENT RESULTS (Continued)

(Dollars in thousands)

(Unaudited)

 

 

 

Year ended June 30, 2021

 

 

Entertainment

 

Tao Group
Hospitality

 

Other(2)

 

Total

Revenues

 

$

82,281

 

 

$

100,166

 

 

$

(2,046

)

 

$

180,401

 

Direct operating expenses

 

103,089

 

 

66,591

 

 

2,244

 

 

171,924

 

Selling, general and administrative expenses

 

268,705

 

 

54,034

 

 

(25

)

 

322,714

 

Depreciation and amortization

 

80,142

 

 

8,955

 

 

25,567

 

 

114,664

 

Restructuring charges

 

21,299

 

 

 

 

 

 

21,299

 

Operating loss

 

$

(390,954

)

 

$

(29,414

)

 

$

(29,832

)

 

$

(450,200

)

Reconciliation to adjusted operating loss:

 

 

 

 

 

 

 

 

Non-cash portion of arena license fees from MSG Sports

 

(13,026

)

 

 

 

 

 

(13,026

)

Share-based compensation

 

47,633

 

 

5,284

 

 

 

 

52,917

 

Depreciation and amortization(1)

 

80,142

 

 

8,955

 

 

28,901

 

 

117,998

 

Restructuring charges

 

21,299

 

 

 

 

 

 

21,299

 

Adjusted operating loss

 

$

(254,906

)

 

$

(15,175

)

 

$

(931

)

 

$

(271,012

)

 

 

 

 

 

 

 

 

 

 

 

Year ended June 30, 2020

 

 

Entertainment

 

Tao Group
Hospitality

 

Other(2)

 

Total

Revenues

 

$

585,208

 

 

$

180,201

 

 

$

(2,473

)

 

$

762,936

 

Direct operating expenses

 

388,643

 

 

116,638

 

 

2,841

 

 

508,122

 

Selling, general and administrative expenses

 

282,043

 

 

63,049

 

 

(455

)

 

344,637

 

Depreciation and amortization

 

84,289

 

 

8,156

 

 

12,454

 

 

104,899

 

Impairment for intangibles, long-lived assets, and goodwill

 

 

 

94,946

 

 

10,871

 

 

105,817

 

Gain on disposal of assets held for sale

 

(240,783

)

 

 

 

 

 

(240,783

)

Operating income (loss)

 

$

71,016

 

 

$

(102,588

)

 

$

(28,184

)

 

$

(59,756

)

Reconciliation to adjusted operating income (loss):

 

 

 

 

 

 

 

 

Share-based compensation

 

41,227

 

 

963

 

 

 

 

42,190

 

Depreciation and amortization(1)

 

84,289

 

 

8,156

 

 

16,821

 

 

109,266

 

Impairment for intangibles, long-lived assets, and goodwill

 

 

 

94,946

 

 

10,871

 

 

105,817

 

Gain on disposal of assets held for sale

 

(240,783

)

 

 

 

 

 

(240,783

)

Adjusted operating income (loss)

 

$

(44,251

)

 

$

1,477

 

 

$

(492

)

 

$

(43,266

)

_________________

(1)

Depreciation and amortization includes other purchase accounting adjustments of $3,334 and $4,367 for the years ended June 30, 2021 and 2020, respectively.

(2)

Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments.

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

June 30,

 

 

2021

 

2020

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

1,168,760

 

 

$

906,555

 

Restricted cash

 

22,984

 

 

17,749

 

Short-term investments

 

 

 

337,192

 

Accounts receivable, net

 

85,955

 

 

57,184

 

Net related party receivables

 

36,378

 

 

23,062

 

Prepaid expenses

 

60,493

 

 

62,127

 

Other current assets

 

37,779

 

 

22,633

 

Total current assets

 

1,412,349

 

 

1,426,502

 

Investments in nonconsolidated affiliates

 

45,969

 

 

52,622

 

Property and equipment, net

 

2,099,347

 

 

1,646,115

 

Right-of-use lease assets

 

268,568

 

 

220,328

 

Amortizable intangible assets, net

 

171,451

 

 

150,426

 

Indefinite-lived intangible assets

 

63,801

 

 

63,801

 

Goodwill

 

77,687

 

 

74,309

 

Other assets

 

128,169

 

 

85,103

 

Total assets

 

$

4,267,341

 

 

$

3,719,206

 

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS (Continued)

(In thousands, except per share data)

(Unaudited)

 

 

June 30,

 

 

2021

 

2020

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

23,933

 

 

$

17,258

 

Net related party payables, current

 

57,616

 

 

18,418

 

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

 

5,728

 

 

5,429

 

Accrued liabilities:

 

 

 

 

Employee related costs

 

68,242

 

 

68,837

 

Other accrued liabilities

 

181,636

 

 

125,452

 

Operating lease liabilities, current

 

68,544

 

 

53,388

 

Collections due to promoters

 

37,877

 

 

31,879

 

Deferred revenue

 

209,501

 

 

189,308

 

Total current liabilities

 

653,077

 

 

509,969

 

Long-term debt, net of deferred financing costs

 

655,093

 

 

28,126

 

Operating lease liabilities, noncurrent

 

224,729

 

 

174,219

 

Defined benefit and other postretirement obligations

 

28,847

 

 

26,132

 

Other employee related costs

 

15,629

 

 

15,591

 

Collections due to promoters, noncurrent

 

6,625

 

 

 

Deferred tax liabilities, net

 

11,972

 

 

12,450

 

Other liabilities

 

73,790

 

 

78,279

 

Total liabilities

 

1,669,762

 

 

844,766

 

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests

 

137,834

 

 

20,600

 

Madison Square Garden Entertainment Corp. Stockholders’ Equity:

 

 

 

 

Class A common stock, par value $0.01 , 120,000 shares authorized; 19,618 and 19,493 shares outstanding as of June 30, 2021 and 2020, respectively

 

196

 

 

195

 

Class B common stock, par value $0.01, 30,000 shares authorized; 4,530 and 4,530 shares outstanding as of June 30, 2021 and 2020, respectively

 

45

 

 

45

 

Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of June 30, 2021 and 2020

 

 

 

 

Additional paid-in capital

 

2,744,866

 

 

2,751,318

 

Retained earnings (accumulated deficit)

 

(270,146

)

 

141,936

 

Accumulated other comprehensive loss

 

(27,120

)

 

(51,857

)

Total Madison Square Garden Entertainment Corp. stockholders’ equity

 

2,447,841

 

 

2,841,637

 

Nonredeemable noncontrolling interests

 

11,904

 

 

12,203

 

Total equity

 

2,459,745

 

 

2,853,840

 

Total liabilities, redeemable noncontrolling interests and equity

 

$

4,267,341

 

 

$

3,719,206

 

 

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

 

 

Twelve Months Ended

 

 

June 30,

 

 

2021

 

2020

Net cash provided by operating activities

 

$

(289,480

)

 

$

96,031

 

Net cash used in investing activities

 

(84,440

)

 

(389,657

)

Net cash provided by (used in) financing activities

 

633,333

 

 

122,938

 

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

 

8,027

 

 

2,927

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

267,440

 

 

(167,761

)

Cash, cash equivalents and restricted cash at beginning of period

 

924,304

 

 

1,092,065

 

Cash, cash equivalents and restricted cash at end of period

 

$

1,191,744

 

 

$

924,304

 

 

APPENDIX

MSG NETWORKS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Revenues

 

$

166,055

 

 

$

152,114

 

 

$

647,510

 

 

$

685,797

 

Direct operating expenses

 

66,362

 

 

46,350

 

 

262,859

 

 

282,837

 

Selling, general and administrative expenses

 

39,377

 

 

20,656

 

 

115,339

 

 

100,829

 

Depreciation and amortization

 

1,872

 

 

2,040

 

 

7,335

 

 

7,163

 

Operating income

 

58,444

 

 

83,068

 

 

261,977

 

 

$

294,968

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

503

 

 

500

 

 

1,949

 

 

4,234

 

Interest expense

 

(4,895

)

 

(6,156

)

 

(20,215

)

 

(36,324

)

Debt refinancing expense

 

 

 

 

 

 

 

(2,764

)

Other components of net periodic benefit cost

 

(206

)

 

(256

)

 

(826

)

 

(1,030

)

Miscellaneous income

 

 

 

 

 

1,252

 

 

 

 

 

(4,598

)

 

(5,912

)

 

(17,840

)

 

(35,884

)

Income from operations before income taxes

 

53,846

 

 

77,156

 

 

244,137

 

 

259,084

 

Income tax expense

 

(19,692

)

 

(21,236

)

 

(87,866

)

 

(73,863

)

Net income

 

$

34,154

 

 

$

55,920

 

 

$

156,271

 

 

$

185,221

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.98

 

 

$

2.72

 

 

$

2.93

 

Diluted

 

$

0.59

 

 

$

0.97

 

 

$

2.70

 

 

$

2.92

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

57,505

 

 

57,062

 

 

57,394

 

 

63,172

 

Diluted

 

58,283

 

 

57,357

 

 

57,901

 

 

63,515

 

 

APPENDIX

MSG NETWORKS INC.

ADJUSTMENTS TO RECONCILE OPERATING INCOME

TO ADJUSTED OPERATING INCOME

(In thousands)

 

The following is a description of the adjustments to operating income in arriving at adjusted operating income as described in this earnings release with respect to MSG Networks Inc.'s financial results:

  • Share-based compensation expense. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under MSG Networks Inc.'s employee stock plan and non-employee director stock plan in all periods.
  • Depreciation and amortization. This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.

 

 

Three Months Ended

 

Twelve Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Operating income

 

$

58,444

 

 

$

83,068

 

 

$

261,977

 

 

$

294,968

 

Share-based compensation expense

 

3,450

 

 

5,383

 

 

17,667

 

 

19,235

 

Depreciation and amortization

 

1,872

 

 

2,040

 

 

7,335

 

 

7,163

 

Adjusted operating income

 

$

63,766

 

 

$

90,491

 

 

$

286,979

 

 

$

321,366

 

 

APPENDIX

MSG NETWORKS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

June 30,

 

 

2021

 

2020

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

348,232

 

 

$

196,837

 

Accounts receivable, net

 

98,658

 

 

105,549

 

Related party receivables, net

 

35,297

 

 

14,190

 

Prepaid income taxes

 

2,813

 

 

461

 

Prepaid expenses

 

6,952

 

 

11,063

 

Other current assets

 

8,194

 

 

4,541

 

Total current assets

 

500,146

 

 

332,641

 

Property and equipment, net

 

7,717

 

 

8,758

 

Amortizable intangible assets, net

 

26,823

 

 

30,283

 

Goodwill

 

424,508

 

 

424,508

 

Operating lease right-of-use assets

 

12,011

 

 

17,153

 

Other assets

 

41,864

 

 

37,460

 

Total assets

 

$

1,013,069

 

 

$

850,803

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

2,711

 

 

$

2,115

 

Related party payables

 

5,294

 

 

1,472

 

Current portion of long-term debt

 

48,245

 

 

37,229

 

Current portion of operating lease liabilities

 

4,879

 

 

5,492

 

Income taxes payable

 

2,527

 

 

641

 

Accrued liabilities:

 

 

 

 

Employee related costs

 

23,611

 

 

14,187

 

Other accrued liabilities

 

29,135

 

 

10,116

 

Deferred revenue

 

150

 

 

2,753

 

Total current liabilities

 

116,552

 

 

74,005

 

Long-term debt, net of current portion

 

995,535

 

 

1,043,780

 

Long-term operating lease liabilities

 

8,827

 

 

13,780

 

Defined benefit and other postretirement obligations

 

25,332

 

 

25,860

 

Other employee related costs

 

5,564

 

 

5,149

 

Other liabilities

 

1,473

 

 

1,536

 

Deferred tax liability

 

241,253

 

 

239,542

 

Total liabilities

 

1,394,536

 

 

1,403,652

 

Commitments and contingencies

 

 

 

 

Stockholders' Deficiency:

 

 

 

 

Class A Common Stock, par value $0.01, 360,000 shares authorized; 43,460 and 43,122 shares outstanding as of June 30, 2021 and 2020, respectively

 

643

 

 

643

 

Class B Common Stock, par value $0.01, 90,000 shares authorized; 13,589 shares outstanding as of June 30, 2021 and 2020

 

136

 

 

136

 

Preferred stock, par value $0.01, 45,000 shares authorized; none outstanding

 

 

 

 

Additional paid-in capital

 

20,940

 

 

12,731

 

Treasury stock, at cost, 20,799 and 21,137 shares as of June 30, 2021 and 2020, respectively

 

(450,053

)

 

(457,363

)

Retained earnings (accumulated deficit)

 

54,999

 

 

(100,792

)

Accumulated other comprehensive loss

 

(8,132

)

 

(8,204

)

Total stockholders' deficiency

 

(381,467

)

 

(552,849

)

Total liabilities and stockholders' deficiency

 

$

1,013,069

 

 

$

850,803

 

 

APPENDIX

MSG NETWORKS INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(Dollars in thousands)

(Unaudited)

Summary Data from the Statements of Cash Flows

 

 

Twelve Months Ended

 

 

June 30,

 

 

2021

 

2020

Net cash provided by operating activities

 

$

195,896

 

 

$

210,032

 

Net cash used in investing activities

 

(3,853

)

 

(2,814

)

Net cash used in financing activities

 

(40,648

)

 

(236,804

)

Net increase (decrease) in cash and cash equivalents

 

151,395

 

 

(29,586

)

Cash and cash equivalents at beginning of period

 

196,837

 

 

226,423

 

Cash and cash equivalents at end of period

 

$

348,232

 

 

$

196,837

 

Capitalization

 

June 30,

 

 

2021

Cash and cash equivalents

 

$

348,232

 

Credit facility debt(a)

 

1,047,750

 

Net debt

 

$

699,518

 

 

 

 

Reconciliation of operating income to AOI for the trailing twelve-month period (b)

 

 

Operating income

 

$

261,977

 

Share-based compensation expense

 

17,667

 

Depreciation and amortization

 

7,335

 

Adjusted operating income

 

$

286,979

 

 

 

 

Leverage ratio(c)

 

2.4x

(a) Represents aggregate principal amount of the debt outstanding.

(b) Represents reported adjusted operating income for the trailing twelve-month period.

(c) Represents net debt divided by adjusted operating income for the trailing twelve-month period, which differs from the covenant calculation contained in MSG Networks Inc.'s credit facility.

 

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.

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