NEW YORK--(BUSINESS WIRE)--Madison Square Garden Entertainment Corp. (NYSE: MSGE) today reported financial results for the fiscal second quarter ended December 31, 2020.
During the fiscal 2021 second quarter, the Madison Square Garden Arena ("The Garden") began hosting New York Knicks home games without fans in attendance - marking the first events at The Garden since all of the Company’s performance venues were closed in March 2020 due to the COVID-19 pandemic. Aside from these games and certain other limited exceptions, the Company's performance venues remained closed during the fiscal 2021 second quarter. In addition, TAO Group Hospitality's venues are either closed or operating with significant restrictions due to regulatory requirements.
Subsequent to the end of the fiscal 2021 second quarter, New York State announced that New York City restaurants can resume indoor dining starting today and New York arenas with capacities of over 10,000 people can re-open beginning February 23, 2021, both with limited capacities.
The COVID-19 pandemic materially impacted the Company’s financial results for the fiscal 2021 second quarter as the Company reported revenues of $23.1 million, a decrease of 94% as compared with the prior year quarter.(1)(2) In addition, the Company reported an operating loss of $112.5 million and an adjusted operating loss of $64.0 million for the fiscal 2021 second quarter, as compared to operating income of $69.6 million and adjusted operating income of $108.5 million in the prior year quarter.(3)
Executive Chairman and CEO James L. Dolan said, “We are excited by the start of live entertainment returning to New York, with Governor Cuomo’s decision to re-open indoor dining in New York City and arenas across the state, both at limited capacities. We believe this represents another important step on the road to a full and safe re-opening of our venues and a return to normal operations. We know there continues to be significant pent-up demand for live entertainment and we remain confident in the strength of our business and the long-term outlook for our Company.”
Segment Results for the Three and Six Months Ended December 31, 2020 and 2019:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
| December 31, | Change | December 31, | Change | ||||||||||||||||||||||||
| 2020 | 2019 | $ | % | 2020 | 2019 | $ | % | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||
| Entertainment | $ | 12.7 | $ | 325.4 | $ | (312.7 | ) | (96 | )% | $ | 20.2 | $ | 445.0 | $ | (424.8 | ) | (95 | )% | |||||||||
| Tao Group Hospitality | 10.5 | 69.1 | (58.6 | ) | (85 | )% | 17.7 | 127.7 | (110.0 | ) | (86 | )% | |||||||||||||||
| Other(4) | — | (0.4 | ) | 0.4 | NM | (0.4 | ) | (0.7 | ) | 0.3 | 41 | % | |||||||||||||||
| Total Revenues | $ | 23.1 | $ | 394.1 | $ | (370.9 | ) | (94 | )% | $ | 37.5 | $ | 572.0 | $ | (534.5 | ) | (93 | )% | |||||||||
| Operating Income (Loss) | |||||||||||||||||||||||||||
| Entertainment | $ | (97.1 | ) | $ | 67.1 | $ | (164.2 | ) | NM | $ | (207.7 | ) | $ | (0.3 | ) | $ | (207.4 | ) | NM | ||||||||
| Tao Group Hospitality | (11.2 | ) | 7.5 | (18.7 | ) | NM | (22.4 | ) | 10.8 | (33.3 | ) | NM | |||||||||||||||
| Other(4) | (4.3 | ) | (5.0 | ) | 0.8 | 16 | % | (9.0 | ) | (9.1 | ) | 0.1 | 1 | % | |||||||||||||
| Total Operating Income (Loss) | $ | (112.5 | ) | $ | 69.6 | $ | (182.1 | ) | NM | $ | (239.1 | ) | $ | 1.4 | $ | (240.6 | ) | NM | |||||||||
| Adjusted Operating Income (Loss) | |||||||||||||||||||||||||||
| Entertainment | $ | (55.3 | ) | $ | 98.6 | $ | (153.9 | ) | NM | $ | (113.5 | ) | $ | 63.0 | $ | (176.6 | ) | NM | |||||||||
| Tao Group Hospitality | (8.4 | ) | 9.9 | (18.3 | ) | NM | (17.5 | ) | 15.5 | (33.0 | ) | NM | |||||||||||||||
| Other(4) | (0.3 | ) | (0.1 | ) | (0.2 | ) | (251 | )% | (0.5 | ) | (0.2 | ) | (0.4 | ) | (250 | )% | |||||||||||
| Total Adjusted Operating Income (Loss) | $ | (64.0 | ) | $ | 108.5 | $ | (172.4 | ) | NM | $ | (131.6 | ) | $ | 78.3 | $ | (210.0 | ) | NM | |||||||||
| Note: Does not foot due to rounding | |||
| (1) | Financial results for the three and six months ended December 31, 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 operating results include the results for the Forum which was sold on May 1, 2020. | ||
| (3) | See page 3 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures. | ||
| (4) | Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments. | ||
Entertainment
For the fiscal 2021 second quarter, Entertainment segment revenues of $12.7 million decreased 96%, or $312.7 million, as compared with the prior year quarter, primarily reflecting the impact of the COVID-19 pandemic. This included a decrease in revenues of $122.8 million due to the cancellation of the 2020 run of the Christmas Spectacular Starring the Radio City Rockettes. The continued closure of the Company's venues led to decreases of $102.9 million in event-related revenues, $36.1 million in suite license fee revenues and $26.9 million in venue-related signage and sponsorship revenues. In addition, the prior year quarter included $21.3 million in revenues from the Forum, which was sold in May 2020.
Fiscal 2021 second quarter direct operating expenses of $23.4 million decreased 86%, or $144.8 million, as compared with the prior year quarter, primarily reflecting the impact of the COVID-19 pandemic. The absence of events in the quarter led to decreases of $55.5 million in event-related expenses at the Company’s venues, $47.6 million in expenses related to the Christmas Spectacular production, $24.1 million in suite license expenses and $23.6 million in venue-related signage and sponsorship expenses. In addition, the prior year quarter included $11.2 million in direct operating expenses from the Forum. These decreases were partially offset by other net increases of $17.3 million, primarily related to the absence of venue-operating cost carve-out adjustments in the prior year period (see note 1 on previous page).
Fiscal 2021 second quarter selling, general and administrative expenses of $65.7 million decreased 5%, or $3.1 million, as compared with the prior year quarter, primarily due to a $4.6 million decrease in professional fees associated with litigation and MSG Sphere content development, partially offset by an increase of $0.9 million in employee compensation and related benefits.
Fiscal 2021 second quarter operating income decreased $164.2 million to a loss of $97.1 million and adjusted operating income decreased $153.9 million to a loss of $55.3 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.
Tao Group Hospitality
For the fiscal 2021 second quarter, Tao Group Hospitality segment revenues of $10.5 million decreased 85%, or $58.6 million, as compared to the prior year quarter, primarily reflecting the impact of the COVID-19 pandemic. Capacity restrictions at re-opened entertainment dining and nightlife venues reduced revenues by $34.3 million, while the continued closure of certain venues reduced revenues by $19.7 million.
Fiscal 2021 second quarter direct operating expenses of $11.0 million decreased 73%, or $30.2 million, as compared to the prior year quarter, primarily as a result of the COVID-19 pandemic. Employee compensation and related benefits decreased $12.3 million, primarily due to a reduction in Tao Group Hospitality’s venue staff at re-opened venues and the elimination of venue staff at closed venues. The cost of food and beverage and venue entertainment decreased $11.4 million, primarily resulting from the impact of capacity restrictions at re-opened venues and the continued closure of certain venues. In addition, rent expense decreased $2.8 million, which includes the impact of rent concessions received from landlords as a result of the pandemic.
Fiscal 2021 second quarter selling, general and administrative expenses of $9.1 million decreased 49%, or $8.9 million, as compared to the prior year quarter. This primarily reflects a $3.2 million decrease in marketing costs and a $1.9 million decrease in employee compensation and related benefits as well as other net decreases.
Fiscal 2021 second quarter operating income decreased by $18.7 million to a loss of $11.2 million and adjusted operating income decreased by $18.3 million to a loss of $8.4 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
In December 2020, the Company announced that it had assumed the role of construction manager for MSG Sphere in Las Vegas and that AECOM had transitioned from general contractor to supporting MSG Sphere with a new services agreement that facilitates AECOM’s continued involvement through the project’s completion. The Company believes this change will provide it with greater transparency and control over the construction process, while enabling it to continue benefiting from AECOM’s expertise.
The Company has assembled a world-class team of construction management professionals who are now directing all aspects of the project. This includes strategic planning, the construction timeline, and management of all subcontractors, as well as oversight of 30 seconded AECOM employees who continue to support key areas of the project.
Current construction work is focused on finishing all superstructure concrete pours, which includes completing stair and elevator cores and the venue’s proscenium wall. Steel for the remaining exterior ring beams and inboard decks will then be placed, and the Company anticipates starting to build the steel frame for the venue’s roof in the coming months.
As previously disclosed, due to challenges stemming from the COVID-19 pandemic, the company revised its construction schedule for MSG Sphere in Las Vegas, providing for a substantially reduced spend in fiscal 2021 and a lengthened timetable that enables the Company to better preserve cash in the near-term.
MSG Sphere is a complex construction project that has become even more challenging due to the global impact of COVID-19. The Company announced on February 7, 2020 a project cost estimate, inclusive of core technology and soft costs, of approximately $1.66 billion. Relative to this cost estimate, the Company’s actual construction costs for MSG Sphere incurred through December 31, 2020 were approximately $645 million. This cost estimate is subject to uncertainty given the complexity of the project, the more than two years remaining until the venue’s planned opening and the ongoing impact of the global pandemic. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in calendar 2023.
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.
