Madison Square Garden Entertainment Corp. Reports Fiscal 2021 Third Quarter Results
Madison Square Garden Entertainment Corp. (NYSE: MSGE) ("MSG Entertainment") today reported financial results for the fiscal third quarter ended March 31, 2021.
In February, the Company welcomed fans back to Madison Square Garden Arena ("The Garden") for New York Knicks and New York Rangers home games at
While indoor dining restrictions also eased during the quarter, many of Tao Group Hospitality’s venues continued to operate with significant capacity restrictions and others remained closed throughout the quarter. Since the close of the fiscal 2021 third quarter, Las Vegas restaurant capacity increased to
For the fiscal 2021 third quarter, the Company reported revenues of
Executive Chairman and CEO James L. Dolan said, “It's clear that people are eager for opportunities to gather together, and as capacity limits for our venues continue to increase, our company, with its unique collection of live entertainment assets, will be well-positioned to meet this pent-up demand. Looking ahead, we also believe the MSG Networks transaction would further strengthen our portfolio and help set the stage for long-term value creation for all shareholders.”
Segment Results for the Three and Nine Months Ended March 31, 2021 and 2020:
|
Three Months Ended |
Nine Months Ended |
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|
March 31, |
Change |
March 31, |
Change |
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$ millions |
2021 |
|
2020 |
$ |
% |
2021 |
2020 |
$ |
% |
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Revenues |
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|
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Entertainment |
$ |
31.0 |
|
$ |
131.6 |
$ |
(100.7) |
(76)% |
$ |
51.2 |
$ |
576.7 |
$ |
(525.5) |
(91)% |
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Tao Group Hospitality |
12.8 |
|
51.1 |
(38.4) |
(75)% |
30.5 |
178.9 |
(148.4) |
(83)% |
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Other(4) |
(0.6) |
|
(0.9) |
0.2 |
NM |
(1.1) |
(1.6) |
0.5 |
|
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Total Revenues |
$ |
43.1 |
|
$ |
181.9 |
$ |
(138.8) |
(76)% |
$ |
80.6 |
$ |
753.9 |
$ |
(673.3) |
(89)% |
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Operating Loss |
|
|
|
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|
|
|
|
|
|
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Entertainment |
$ |
(80.1) |
|
$ |
(46.9) |
$ |
(33.2) |
(71)% |
$ |
(287.8) |
$ |
(47.2) |
$ |
(240.6) |
NM |
||||||||||||||||||||||
Tao Group Hospitality |
(9.8) |
|
(92.8) |
83.0 |
|
(32.3) |
(82.0) |
49.7 |
|
||||||||||||||||||||||||||||
Other(4) |
(18.7) |
|
(15.8) |
(2.9) |
(18)% |
(27.7) |
(24.9) |
(2.8) |
(11)% |
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Total Operating Loss |
$ |
(108.6) |
|
$ |
(155.6) |
$ |
46.9 |
|
$ |
(347.8) |
$ |
(154.1) |
$ |
(193.6) |
(126)% |
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Adjusted Operating Income (Loss) |
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Entertainment |
$ |
(61.7) |
|
$ |
(17.1) |
|
(44.7) |
NM |
$ |
(175.3) |
$ |
46.0 |
$ |
(221.3) |
NM |
||||||||||||||||||||||
Tao Group Hospitality |
|
(7.4) |
|
|
(1.0) |
|
(6.4) |
NM |
|
(24.9) |
|
14.5 |
|
(39.4) |
NM |
||||||||||||||||||||||
Other(4) |
|
(0.3) |
|
|
(0.1) |
|
(0.2) |
NM |
|
(0.8 ) |
|
(0.2) |
|
(0.6) |
NM |
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Total Adjusted Operating Income
|
$ |
(69.4) |
|
$ |
(18.1) |
$ |
(51.3) |
NM |
$ |
(201.0) |
$ |
60.2 |
$ |
(261.2) |
NM |
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Note: Does not foot due to rounding
- Financial results for the three and nine months ended March 31, 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 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.
- Fiscal 2020 operating results include the results for the Forum which was sold on May 1, 2020.
- See page 4 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.
- Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments.
Entertainment
For the fiscal 2021 third quarter, the Entertainment segment generated revenues of
Fiscal 2021 third quarter direct operating expenses of
Fiscal 2021 third quarter selling, general and administrative expenses of
Fiscal 2021 third quarter operating loss increased by
Tao Group Hospitality
For the fiscal 2021 third quarter, the Tao Group Hospitality segment generated revenues of
Fiscal 2021 third quarter direct operating expenses of
Fiscal 2021 third quarter selling, general and administrative expenses of
Fiscal 2021 third quarter operating loss improved by
Other Matters
On March 26, 2021, MSG Entertainment announced plans to acquire MSG Networks in an all-stock, fixed exchange ratio transaction. Upon the closing of the transaction, MSG Networks stockholders would receive 0.172 shares of MSG Entertainment Class A or Class B common stock for each share of MSG Networks Class A or Class B common stock they own. The merger is expected to be tax-free for both MSG Entertainment and MSG Networks and their stockholders. The transaction, which is also subject to customary closing conditions, is expected to be completed during the third quarter of calendar 2021.
The proposed transaction would create a leading entertainment and media company and deliver numerous strategic and financial benefits. The combined company would be well positioned to capitalize on the significant revenue opportunity related to the expansion of legalized mobile sports gaming in its market.
The new company would also be able to more efficiently utilize MSG Entertainment’s approximately
The Company continues to make significant progress on the construction of MSG Sphere. On February 7, 2020, the Company announced that the venue’s cost estimate, inclusive of core technology and soft costs, was approximately
On April 28, 2021, Tao Group Hospitality announced that it acquired Hakkasan Group utilizing equity from one of Tao Group Hospitality's subsidiaries, creating a global leader in premium hospitality with significant potential for future growth. The newly combined company operates 61 entertainment dining and nightlife venues in 22 markets across five continents and features a collection of widely recognized hospitality brands. The addition of Hakkasan Group also delivers an instant international foothold in destinations like London and the Middle East and increases Tao Group Hospitality’s U.S. presence in key markets such as Las Vegas, the future home of MSG Sphere.
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, 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 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 7 of this release.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed transaction between MSG Entertainment and MSG Networks. In connection with the proposed transaction, MSG Entertainment and MSG Networks filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 on May 6, 2021 that includes a preliminary joint proxy statement of MSG Entertainment and MSG Networks that also constitutes a prospectus of MSG Entertainment. The information in the preliminary joint proxy statement/prospectus is not complete and may be changed. MSG Entertainment and MSG Networks also intend to file other documents with the SEC regarding the proposed transaction. This document is not a substitute for the preliminary joint proxy statement/prospectus, Form S-4 or any other document which MSG Entertainment or MSG Networks may file with the SEC. INVESTORS AND SECURITY HOLDERS OF MSG ENTERTAINMENT AND MSG NETWORKS ARE URGED TO READ THE REGISTRATION STATEMENT, THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the Form S-4 and the preliminary joint proxy statement/prospectus and other documents filed with the SEC by MSG Entertainment and MSG Networks from the SEC’s website at www.sec.gov. Copies of documents filed with the SEC by MSG Entertainment will be made available free of charge on MSG Entertainment’s investor relations website at http://investor.msgentertainment.com. Copies of documents filed with the SEC by MSG Networks will be made available free of charge on MSG Networks’ investor relations website at http://investor.msgnetworks.com.
No Offer or Solicitation
This communication is for informational purposes only and is not intended to and does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, sale or solicitation would be unlawful, prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.
Participants in the Solicitation
MSG Entertainment, MSG Networks and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of MSG Entertainment and MSG Networks securities in respect of the proposed transaction under the rules of the SEC. Information regarding MSG Entertainment’s directors and executive officers is available in MSG Entertainment’s proxy statement relating to its 2020 annual meeting of stockholders filed with the SEC on October 27, 2020. Information regarding MSG Networks’ directors and executive officers is available in MSG Networks’ proxy statement relating to its 2020 annual meeting of stockholders filed with the SEC on October 21, 2020. Investors may obtain additional information regarding these directors and executive officers and a description of their direct and indirect interests, by security holdings or otherwise, in the Form S-4 and preliminary joint proxy statement/prospectus regarding the proposed transaction, including any amendments thereto, as well as the definitive joint proxy statement/prospectus if and when it becomes available and other relevant materials to be filed with the SEC by MSG Entertainment and MSG Networks. Investors should read the preliminary joint proxy statement/prospectus, and the definitive joint proxy statement/prospectus if and when it becomes available, carefully before making any voting or investment decisions. These documents will be available free of charge from the sources indicated above.
Forward-Looking Statements
This document contains statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or the negative of those words or other comparable terminology. However, the absence of these words does not mean that the statements are not forward-looking.
These forward-looking statements include, but are not limited to, statements regarding the proposed transaction, pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities and anticipated future performance. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including, but not limited to, the following factors: the impact of public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets; MSG Entertainment’s and MSG Networks’ ability to effectively manage the impacts of the COVID-19 pandemic and the actions taken in response by governmental authorities and certain professional sports leagues; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with respect to the proposed transaction between MSG Entertainment and MSG Networks or otherwise cause the transaction not to occur; the risk that the conditions to the closing of the proposed transaction between MSG Entertainment and MSG Networks may not be satisfied or waived, including the risk that required approvals from the stockholders of MSG Entertainment and MSG Networks, regulatory clearances and other approvals are not obtained; the risk that the anticipated tax treatment of the proposed transaction between MSG Entertainment and MSG Networks is not obtained; potential litigation relating to the proposed transaction between MSG Entertainment and MSG Networks; uncertainties as to the timing of the consummation of the proposed transaction between MSG Entertainment and MSG Networks; the risk that the proposed transaction disrupts the current business plans and operations of MSG Entertainment or MSG Networks; the ability of MSG Entertainment and MSG Networks to retain and hire key personnel; unexpected costs, charges or expenses resulting from the proposed transaction; potential adverse reactions or changes to the business relationships of MSG Entertainment and MSG Networks resulting from the announcement, pendency or completion of the proposed transaction; financial community and rating agency perceptions of each of MSG Entertainment and MSG Networks and its business, operations, financial condition and the industry in which it operates; strategic or financial benefits or opportunities if the merger is completed; the impact of the merger on the liquidity position or financial flexibility and other potential impacts of the proposed transaction; opportunities related to mobile sports gaming or growth initiatives; strategic or financial benefits or opportunities if the merger is completed; the impact of the merger on the liquidity position or financial flexibility and other potential impacts of the proposed transaction; opportunities related to sports gaming or growth initiatives; and the potential impact of general economic, political and market factors on MSG Entertainment and MSG Networks or the proposed transaction. These risks, as well as other risks associated with the proposed transaction between MSG Entertainment and MSG Networks, are more fully discussed in the preliminary joint proxy statement/prospectus that are included in the registration statement on Form S-4 that was filed with the SEC in connection with the proposed transaction, and will be discussed in the definitive joint proxy statement/prospectus if and when it becomes available. The effects of the COVID-19 pandemic may give rise to risks that are currently unknown or amplify the risks associated with many of these factors.
In addition, future performance and actual results are subject to other risks and uncertainties that relate more broadly to MSG Entertainment’s and MSG Networks’ overall business and financial condition, including those more fully described in MSG Entertainment’s and MSG Networks’ filings with the SEC including their respective Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q and other SEC filings, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. Forward-looking statements speak only as of the date made, and MSG Entertainment and MSG Networks each disclaim any obligation to update or revise any forward-looking statements except as required by applicable law.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) |
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|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
March 31, |
|
March 31, |
||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Revenues |
|
$ |
43,102 |
|
|
$ |
181,902 |
|
|
$ |
80,617 |
|
|
$ |
753,937 |
|
Direct operating expenses |
|
35,630 |
|
|
124,677 |
|
|
105,253 |
|
|
466,393 |
|
||||
Selling, general and administrative expenses |
|
78,319 |
|
|
85,035 |
|
|
213,594 |
|
|
259,656 |
|
||||
Depreciation and amortization |
|
37,778 |
|
|
25,545 |
|
|
88,235 |
|
|
79,799 |
|
||||
Impairment for intangibles, long-lived assets, and goodwill |
|
— |
|
|
102,211 |
|
|
— |
|
|
102,211 |
|
||||
Restructuring charges |
|
— |
|
|
— |
|
|
21,299 |
|
|
— |
|
||||
Operating loss |
|
(108,625) |
|
|
(155,566) |
|
|
(347,764) |
|
|
(154,122) |
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
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Loss in equity method investments |
|
(2,314) |
|
|
(1,096) |
|
|
(5,578) |
|
|
(3,739) |
|
||||
Interest income |
|
311 |
|
|
3,659 |
|
|
955 |
|
|
17,242 |
|
||||
Interest expense |
|
(14,857) |
|
|
(605) |
|
|
(22,941) |
|
|
(1,854) |
|
||||
Miscellaneous income (loss), net |
|
26,438 |
|
|
(17,381) |
|
|
53,300 |
|
|
(995) |
|
||||
Loss from operations before income taxes |
|
(99,047) |
|
|
(170,989) |
|
|
(322,028) |
|
|
(143,468) |
|
||||
Income tax benefits |
|
11,859 |
|
|
10,126 |
|
|
11,373 |
|
|
8,686 |
|
||||
Net loss. |
|
(87,188) |
|
|
(160,863) |
|
|
(310,655) |
|
|
(134,782) |
|
||||
Less: Net loss attributable to redeemable noncontrolling
|
|
(6,860) |
|
|
(25,398) |
|
|
(14,091) |
|
|
(25,149) |
|
||||
Less: Net loss attributable to nonredeemable noncontrolling interests |
|
(718) |
|
|
(734) |
|
|
(2,250) |
|
|
(241) |
|
||||
Net loss attributable to Madison Square Garden Entertainment
|
|
$ |
(79,610) |
|
|
$ |
(134,731) |
|
|
$ |
(294,314) |
|
|
$ |
(109,392) |
|
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders |
|
$ |
(3.66) |
|
Madison Square Garden Entertainment Corp.
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