November 28, 2020

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Madison Square Garden Entertainment Corp. Reports Fiscal 2021 First Quarter Results


Madison Square Garden Entertainment Corp. (NYSE: MSGE) (“MSG Entertainment”) today reported financial results for the fiscal first quarter ended September 30, 2020.


As a result of the COVID-19 pandemic, the Company’s performance venues and Tao Group Hospitality’s entertainment dining and nightlife venues were closed in mid-March and, except for certain Tao Group Hospitality venues, remained closed during the fiscal 2021 first quarter, materially impacting the Company’s financial results. For the fiscal 2021 first quarter, the Company reported revenues of $14.4 million, a decrease of 92% as compared with the prior year quarter.(1)(2) In addition, the Company had an operating loss of $126.6 million and an adjusted operating loss of $67.7 million, compared to an operating loss of $68.1 million and an adjusted operating loss of $30.1 million in the prior year quarter.(3)(4)


The Company recently completed a $650 million debt financing in the form of a five-year senior secured term loan, significantly strengthening the Company’s liquidity position. In addition, Madison Square Garden Sports Corp. (“MSG Sports”) recently terminated its $200 million delayed draw term loans with MSG Entertainment, which removed a potential near-term obligation for the Company.


Executive Chairman and CEO James L. Dolan said, “Our business continues to be impacted by COVID-19; however, we remain confident that our Company is well-positioned to navigate these unprecedented times. Our focus is on preserving our strong balance sheet and protecting our core entertainment business, while we also make important progress on MSG Sphere. We remain encouraged by the continued engagement from artists and fans, and expect our business to return quickly when we are able to safely re-open our venues.”


Segment Results for the Quarter Ended September 30, 2020 and 2019:





















 


 


Three Months Ended


 


 





 


 


 


September 30,


 





Change


 


 


2020


 





2019


 


$


 


%





Revenues


 


 


 


 





 


 


 



Entertainment


 





$


7.6


 


 


$





119.7


 


 


$


(112.1





)


 


(94)%


Tao Group Hospitality


 





7.2


 


 


58.6


 





 


(51.4


)


 


(88)%





Other(5)


 


(0.4


)


 





(0.3


)


 


(0.1


)





 


NM


Total Revenues


 


$





14.4


 


 


$


178.0





 


 


$


(163.6


)





 


(92)%


 


Operating Income (Loss)


 





 


 


 


 


 





 


Entertainment


 


$


(110.7





)


 


$


(67.4


)





 


$


(43.2


)


 





(64)%


Tao Group Hospitality


 


(11.3


)





 


3.3


 


 


(14.6





)


 


NM


Other(5)


 





(4.7


)


 


(4.0


)





 


(0.7


)


 


NM





Total Operating Loss


 


$


(126.6


)





 


$


(68.1


)


 





$


(58.5


)


 


(86)%





 


Adjusted Operating Income (Loss)


 


 


 





 


 


 


 


Entertainment





 


$


(58.3


)


 





$


(35.6


)


 


$





(22.7


)


 


(64)%


Tao Group Hospitality





 


(9.1


)


 


5.6





 


 


(14.7


)


 





NM


Other(5)


 


(0.3


)





 


(0.1


)


 


(0.2





)


 


NM


Total Adjusted Operating Loss


 





$


(67.7


)


 


$





(30.1


)


 


$


(37.5





)


 


(125)%







Note: Does not foot due to rounding


(1)


 





Financial results for the three months ended September 30, 2019 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 (April 17, 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 first quarter operating results include the results for the Forum which was sold on May 1, 2020.


(3)





 


Fiscal 2021 first quarter operating loss includes $19.9 million of restructuring charges related to the Company’s workforce reduction.


(4)


 


See page 4 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.





(5)


 


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


Entertainment


For the fiscal 2021 first quarter, Entertainment segment revenues of $7.6 million decreased 94%, or $112.1 million, as compared with the prior year quarter, primarily reflecting the impact of COVID-19. The closure of the Company’s venues led to decreases of $70.4 million in event-related revenues, $19.6 million in suite license fee revenues, and $11.6 million in venue-related signage and sponsorship revenues. In addition, the prior year quarter included $11.8 million in revenues from the Forum, which was sold in May 2020.


Fiscal 2021 first quarter direct operating expenses of $23.6 million decreased 75%, or $71.3 million, as compared with the prior year quarter, primarily reflecting the impact of COVID-19. The absence of events in the quarter led to decreases of $42.7 million in event-related expenses at the Company’s venues, $13.4 million in suite license expenses, and $6.2 million in venue-related signage and sponsorship expenses. In addition, the prior year quarter included $6.9 million in direct operating expenses from the Forum.


Fiscal 2021 first quarter selling, general and administrative expenses of $52.7 million decreased 25%, or $17.7 million, as compared with the prior year quarter. This primarily reflects an $11.4 million decrease in professional fees primarily related to litigation, corporate development, and MSG Sphere content development and a $3.9 million decrease in employee compensation and related benefits.


Fiscal 2021 first quarter operating loss of $110.7 million increased 64%, or $43.2 million, and adjusted operating loss of $58.3 million increased 64%, or $22.7 million, both as compared to the prior year quarter. This primarily reflects the decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, lower selling, general and administrative expenses. With respect to operating loss, the increase was also driven by $19.9 million of restructuring charges related to the Company’s full-time workforce reduction in August 2020.


Tao Group Hospitality


For the fiscal 2021 first quarter, Tao Group Hospitality segment revenues of $7.2 million decreased 88%, or $51.4 million, as compared to the prior year quarter, primarily reflecting the impact of COVID-19. The closure of certain entertainment dining and nightlife venues reduced revenues by $25.7 million, while capacity restrictions at re-opened venues reduced revenues by $20.9 million.


Fiscal 2021 first quarter direct operating expenses of $9.8 million decreased 72%, or $25.8 million, as compared to the prior year quarter, primarily as a result of the COVID-19 pandemic. Employee compensation and related benefits decreased $11.6 million, primarily due to a significant reduction in Tao Group Hospitality’s venue staff. In addition, the cost of food and beverage and venue entertainment decreased $10.8 million primarily resulting from the closure of certain venues and capacity restrictions at re-opened venues.


Fiscal 2021 first quarter selling, general and administrative expenses of $7.6 million decreased 56%, or $9.8 million, as compared to the prior year quarter. This primarily reflects a $3.5 million decrease in marketing costs and a $1.4 million decrease in employee compensation and related benefits, as well as other net decreases.


Fiscal 2021 first quarter operating income decreased by $14.6 million to a loss of $11.3 million and adjusted operating income decreased by $14.7 million to a loss of $9.1 million, both as compared to the prior year quarter. This primarily reflects the decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, lower selling, general and administrative expenses.


Other Matters


During this period of uncertainty, the Company has taken a number of steps to reduce expenses and conserve its liquidity. In August, the Company implemented a workforce reduction and significant spending cuts, resulting in approximately $100 million in estimated operating expense savings on an annual basis. The ongoing effects of the pandemic also drove the Company’s decision to lengthen its construction timetable for MSG Sphere in Las Vegas, which the Company expects to open in calendar 2023.


This month, the Company completed a $650 million debt financing in the form of a five-year senior secured term loan at a subsidiary of MSG Entertainment that owns and operates the Company’s core live entertainment business. The term loan collateral package includes equity interests in certain of the Company’s venues and the Christmas Spectacular Starring the Radio City Rockettes production, but excludes the Madison Square Garden Arena. MSG Sphere and Tao Group Hospitality are not in the term loan borrower group. The financing bolsters the Company’s already strong liquidity position, further strengthening MSG Entertainment’s ability to support its core businesses through this shutdown of its venues.


Also in November, MSG Sports terminated its $110 million New York Knicks delayed draw term loan and its $90 million New York Rangers delayed draw term loan, both with MSG Entertainment. These facilities, which were undrawn, were scheduled to mature in October 2021. The termination of these facilities removes a potential near-term obligation for the Company.


As of September 30, 2020, pro forma for the debt financing, the Company’s cash balance and total debt outstanding were nearly $1.6 billion and $682.5 million, respectively.


The Company’s cash balance at quarter-end included approximately $191 million in deferred revenue and collections due to promoters, as compared to approximately $200 million as of June 30, 2020. The overall balance as of September 30, 2020 was primarily related to suites and tickets, which will be addressed, to the extent necessary, through credits, make-goods, refunds and/or rescheduled dates. Of the amount related to tickets, the significant majority was for events that have been or are expected to be rescheduled into calendar 2021. A majority of ticket holders for rescheduled events have opted to retain their tickets and, as a result, the Company paid out less than $10 million in ticket-related refunds in the fiscal 2021 first quarter.


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 (i) adjustments to remove the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with MSG Sports, (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.


We believe adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of our business segments 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 6 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 4:30 p.m. ET at investor.msgentertainment.com

Conference call dial-in number is 888-421-7163 / Conference ID Number 8046795

Conference call replay number is 855-859-2056 / Conference ID Number 8046795 until November 22, 2020





























MADISON SQUARE GARDEN ENTERTAINMENT CORP.


CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS


(Unaudited)





(In thousands, except per share data)

 


 


 


Three Months Ended


 





 


September 30,


 


 


2020





 


2019


Revenues


 


$





14,378


 


 


$


177,963





 


Direct operating expenses


 


34,159


 





 


131,522


 


Selling, general and administrative expenses


 





60,325


 


 


87,767


 





Depreciation and amortization


 


26,582


 


 





26,820


 


Restructuring charges


 


19,927





 


 




 


Operating loss





 


(126,615


)


 


(68,146





)


Other income (expense):


 


 


 





 


Loss in equity method investments


 


(1,696


)





 


(1,473


)


Interest income


 





295


 


 


7,315


 





Interest expense


 


(409


)


 





(1,105


)


Miscellaneous income, net


 


34,224





 


 


7,031


 


Loss from operations before income taxes





 


(94,201


)


 


(56,378





)


Income tax expense


 


(163


)





 


(185


)


Net loss


 





(94,364


)


 


(56,563


)





Less: Net loss attributable to redeemable noncontrolling interests


 


(3,889


)


 





(636


)


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


 


(630





)


 


40


 


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





 


$


(89,845


)


 





$


(55,967


)


Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders


 





$


(3.69


)


 


$





(2.33


)


Basic and diluted weighted-average number of common shares outstanding


 


24,334





 


 


23,992


 


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:


  • 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 reduction in August 2020.

  • 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


 





 


September 30,


 


 


2020





 


2019


Operating loss


 


$





(126,615


)


 


$


(68,146





)


Share-based compensation


 


11,529


 





 


10,085


 


Depreciation and amortization(1)


 





26,582


 


 


26,820


 





Restructuring charges


 


19,927


 


 







 


Other purchase accounting adjustments


 


924





 


 


1,120


 


Adjusted operating loss





 


$


(67,653


)


 





$


(30,121


)



_________________


(1)


Includes depreciation and amortization related to purchase accounting adjustments.
























MADISON SQUARE GARDEN ENTERTAINMENT CORP.


SEGMENT RESULTS


(Dollars in thousands)


(Unaudited)

 


BUSINESS SEGMENT RESULTS






 


 


Three Months Ended


 


 





September 30, 2020


 


 


Entertainment


 





Tao Group

Hospitality


 


Other(2)


 


Total





Revenues


 


$


7,555


 





 


$


7,221


 


 





$


(398


)


 


$





14,378


 


Direct operating expenses


 


23,615





 


 


9,828


 


 





716


 


 


34,159


 





Selling, general and administrative expenses


 


52,650


 


 





7,603


 


 


72


 





 


60,325


 


Depreciation and amortization


 





22,014


 


 


1,046


 





 


3,522


 


 


26,582





 


Restructuring charges


 


19,927


 





 




 


 







 


 


19,927


 


Operating loss





 


$


(110,651


)


 





$


(11,256


)


 


$





(4,708


)


 


$


(126,615





)


Reconciliation to adjusted operating loss:


 


 


 





 


 


 


 


 





Share-based compensation


 


10,433


 


 





1,096


 


 




 





 


11,529


 


Depreciation and amortization(1)


 





22,014


 


 


1,046


 





 


4,446


 


 


27,506





 


Restructuring charges


 


19,927


 





 




 


 







 


 


19,927


 


Adjusted operating loss





 


$


(58,277


)


 





$


(9,114


)


 


$





(262


)


 


$


(67,653





)














 


 


Three Months Ended


 





 


September 30, 2019


 


 


Entertainment





 


Tao Group

Hospitality


 


Other(2)


 





Total


Revenues


 


$


119,652





 


 


$


58,617


 





$


(306


)


 


$





177,963


 


Direct operating expenses


 


94,960





 


 


35,667


 


895





 


 


131,522


 


Selling, general and administrative expenses





 


70,349


 


 


17,424





 


(6


)


 


87,767





 


Depreciation and amortization


 


21,787


 





 


2,179


 


2,854


 





 


26,820


 


Operating loss


 





$


(67,444


)


 


$





3,347


 


$


(4,049


)





 


$


(68,146


)


Reconciliation to adjusted operating loss:





 


 


 


 


 





 


 


 


Share-based compensation


 





10,057


 


 


28


 







 


 


10,085


 





Depreciation and amortization(1)


 


21,787


 


 





2,179


 


3,974


 


 





27,940


 


Adjusted operating loss


 


$





(35,600


)


 


$


5,554





 


$


(75


)


 





$


(30,121


)




_________________


(1)


Depreciation and amortization includes other purchase accounting adjustments of $924 and $1,120 for the three months ended September 30, 2020 and September 30, 2019, respectively.





(2)


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


























MADISON SQUARE GARDEN ENTERTAINMENT CORP.


CONSOLIDATED BALANCE SHEETS


(In thousands)





(Unaudited)

 


 


 


September 30,

2020


 





June 30,

2020


ASSETS


 


 


 





 


Current Assets:


 


 


 





 


Cash and cash equivalents


 


$


925,779





 


 


$


906,555


 





Restricted cash


 


27,807


 


 





17,749


 


Short-term investments


 


38,888





 


 


337,192


 


Accounts receivable, net





 


63,710


 


 


57,184





 


Net related party receivables


 


45,043


 





 


23,062


 


Prepaid expenses


 





62,191


 


 


62,127


 





Other current assets


 


15,647


 


 





22,633


 


Total current assets


 


1,179,065





 


 


1,426,502


 


Investments in nonconsolidated affiliates





 


50,982


 


 


52,622





 


Property and equipment, net


 


1,739,755


 





 


1,646,115


 


Right-of-use lease assets


 





208,779


 


 


220,328


 





Amortizable intangible assets, net


 


147,542


 


 





150,426


 


Indefinite-lived intangible assets


 


63,801





 


 


63,801


 


Goodwill





 


74,309


 


 


74,309





 


Other assets


 


122,005


 





 


85,103


 


Total assets


 





$


3,586,238


 


 


$





3,719,206


 









































MADISON SQUARE GARDEN ENTERTAINMENT CORP.


CONSOLIDATED BALANCE SHEETS (continued)


(In thousands)





(Unaudited)


 


 


September 30,

2020


 





June 30,

2020


LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY


 


 


 





 


Current Liabilities:


 


 


 





 


Accounts payable


 


$


7,734





 


 


$


17,258


 





Net related party payables, current


 


18,844


 


 





18,418


 


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


 


5,398





 


 


5,429


 


Accrued liabilities:





 


 


 


 


Employee related costs





 


44,544


 


 


68,837





 


Other accrued liabilities


 


106,131


 





 


125,452


 


Operating lease liabilities, current


 





53,356


 


 


53,388


 





Collections due to promoters


 


12,987


 


 





31,879


 


Deferred revenue


 


202,008





 


 


189,308


 


Total current liabilities





 


451,002


 


 


509,969





 


Long-term debt, net of deferred financing costs


 


26,845


 





 


28,126


 


Operating lease liabilities, noncurrent


 





164,279


 


 


174,219


 





Defined benefit and other postretirement obligations


 


25,633


 


 





26,132


 


Other employee related costs


 


14,259





 


 


15,591


 


Collections due to promoters, noncurrent





 


10,394


 


 







 


Deferred tax liabilities, net


 


12,632


 





 


12,450


 


Other liabilities


 





80,190


 


 


78,279


 





Total liabilities


 


785,234


 


 





844,766


 


Commitments and contingencies


 


 





 


 


Redeemable noncontrolling interests


 


17,298





 


 


20,600


 


Madison Square Garden Entertainment Corp. Stockholders’ Equity:





 


 


 


 


Class A Common stock, par value $0.01, 120,000 shares authorized; 19,613 and 19,493 shares outstanding as of September 30, 2020 and June 30, 2020, respectively





 


196


 


 


195





 


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


 


45


 





 


45


 


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


 







 


 




 





Additional paid-in capital


 


2,757,155


 


 





2,751,318


 


Treasury stock, at cost, no shares as of September 30, 2020 and June 30, 2020, respectively


 







 


 




 


Retained earnings





 


52,091


 


 


141,936





 


Accumulated other comprehensive loss


 


(37,554


)





 


(51,857


)


Total Madison Square Garden Entertainment Corp. stockholders’ equity


 





2,771,933


 


 


2,841,637


 





Nonredeemable noncontrolling interests


 


11,773


 


 





12,203


 


Total equity


 


2,783,706





 


 


2,853,840


 


Total liabilities, redeemable noncontrolling interests and equity





 


$


3,586,238


 


 





$


3,719,206


 

















MADISON SQUARE GARDEN ENTERTAINMENT CORP.


SELECTED CASH FLOW INFORMATION





(Dollars in thousands)


(Unaudited)

 


 


 


Three Months Ended





 


 


September 30,


 


 





2020


 


2019


Net cash used in operating activities


 





$


(163,841


)


 


$





(19,171


)


Net cash provided by (used in) investing activities


 


194,330





 


 


(66,610


)


Net cash used in financing activities





 


(7,021


)


 


(35,286





)


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


 


5,814


 





 


(1,950


)


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


 





29,282


 


 


(123,017


)





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


 


$





953,586


 


 


$


969,048





 


 

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