Company Implements Significant Cost-Reduction Measures
Lengthens Construction Timetable for MSG Sphere In Las Vegas; Expects to Open Venue in Calendar 2023
Maintains Strong Liquidity Position, With $1.2 Billion in Cash and Short-Term Investments at Fiscal Year-End
NEW YORK, N.Y., August 14, 2020 – Madison Square Garden Entertainment Corp. (NYSE: MSGE) today provided an update on its business operations and reported financial results for the fourth quarter and fiscal year ended June 30, 2020. On April 17, 2020, Madison Square Garden Entertainment Corp. (“the Company” or “MSG Entertainment”) became a standalone company, following the completion of its spin-off from The Madison Square Garden Company, which was renamed Madison Square Garden Sports Corp. (“MSG Sports”).
Executive Chairman and CEO James L. Dolan said, “Our core operations performed well over the first eight months of fiscal 2020 and, even after the onset of COVID-19, we completed important initiatives, including the Forum sale and spin-off transaction. However, the ongoing impact of the pandemic has required us to make difficult decisions and take significant action in order to preserve the strength of our balance sheet and ensure we are well-positioned to resume operations when the time is right. Despite the uncertainty for our industry, we remain confident in our business and look forward to when we can bring fans and artists back together in our venues.”
Over the first eight months of fiscal 2020, the Company was experiencing positive momentum across its operations. The 2019 season of the Christmas Spectacular Starring the Radio City Rockettes marked the show’s highest grossing run ever. The Company’s entertainment and sports bookings business was on track for a record number of events for the fiscal year and Tao Group Hospitality was delivering strong year-over-year growth. In addition, the Company was making significant progress on a number of important initiatives, including the construction of its MSG Sphere venue in Las Vegas and the completion of both the spin-off transaction and the $400 million sale of the Forum in Inglewood, California.
As a result of the COVID-19 pandemic, in mid-March, the Company’s performance venues and Tao Group Hospitality’s entertainment dining and nightlife venues were closed, and, except for certain Tao Group Hospitality venues, remain closed today. The Boston Calling Music Festival, scheduled for Memorial Day weekend, was canceled. And last week, the Company canceled its Christmas Spectacular production for this upcoming holiday season as a result of the ongoing uncertainty.
Following the shutdown of its venues in March, the Company took immediate steps to reduce discretionary spending and made several difficult decisions. Tao Group Hospitality eliminated essentially all its venue line staff and manager positions. The Company also ended financial support of event-level employees at its performance venues at the end of May. The Company has continued to review its operations and last week implemented additional actions, including a workforce reduction and significantly reduced spending across all departments.
The Company’s MSG Sphere venue in Las Vegas is also impacted. In April, the Company announced that it was suspending construction of MSG Sphere due to COVID-19 related factors that were outside of its control, including supply chain issues. As the ongoing effects of the pandemic have continued to impact its operations, the Company has revised its processes and construction schedule, and has resumed work with a lengthened timetable that enables the Company to better preserve cash in the near-term. The Company remains committed to bringing MSG Sphere to Las Vegas and, based on its new construction schedule, now expects to open the venue in calendar 2023.
The Company has taken these steps to conserve cash and believes it is well positioned to navigate the temporary shutdown. As of June 30, 2020, the Company had approximately $1.2 billion in cash and short-term investments. Debt outstanding consisted of a $33.8 million bank term loan at Tao Group Hospitality. The Company’s cash and cash equivalents at fiscal year-end included approximately $200 million in deferred revenue and collections due to promoters, primarily related to tickets, suites and sponsorships – all of which will be addressed, to the extent necessary, through credits, make-goods, refunds and/or rescheduled dates. As of June 30, 2020, the significant majority of deferred ticket revenue was related to events that have been or are expected to be rescheduled into calendar 2021. Ticketholders for rescheduled events have primarily opted to retain their tickets, and the Company is providing ticket refunds as appropriate.
Results from Operations
For all periods presented through the date of the spin-off, the financial results of the Company 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 (through April 17, 2020) do not include the impact of intercompany agreements between the Company and MSG Sports, which were effective as of the date of the spin-off, and may not reflect the level of expenses that would have been incurred by the Company had it been a stand-alone company for the periods presented. Results for the period after the completion of the spin-off (April 18, 2020 through June 30, 2020) reflect the Company on a standalone basis.
The COVID-19 pandemic significantly impacted the Company’s fiscal 2020 results, and also led to significant non-cash impairment charges related to Tao Group Hospitality. In addition, fiscal 2020 results include a gain, resulting from the Forum sale and associated settlements, which was recorded during the fiscal 2020 fourth quarter. For fiscal 2020, the Company generated $762.9 million in revenues, a 27% decrease as compared to fiscal 2019. The Company had an operating loss of $59.8 million and an adjusted operating loss of $43.3 million in fiscal 2020, compared to an operating loss of $45.6 million and adjusted operating income of $103.9 million in fiscal 2019.(1)(2)(3)
For the fiscal 2020 fourth quarter, the Company reported revenues of $9.0 million, a decrease of 96% as compared with the prior year quarter. The Company had operating income of $94.4 million and an adjusted operating loss of $103.5 million, compared to an operating loss of $57.2 million and an adjusted operating loss of $21.5 million in the prior year quarter.(2)(3)(4)