Spin-off Completed in April Creating
Pure-Play Live Entertainment Company
NEW
YORK, May 18, 2023 /PRNewswire/ -- Madison
Square Garden Entertainment Corp. (NYSE: MSGE) ("MSG
Entertainment") today reported financial results for the fiscal
third quarter ended March 31, 2023.
This marks the first quarter that MSG Entertainment is reporting
financial results as a standalone company, following its spin-off
from Sphere Entertainment Co. (NYSE: SPHR) ("Sphere
Entertainment"), which was completed on April 20, 2023.
The Company continues to benefit from robust consumer and
corporate demand for live experiences and is on track to host
nearly 900 events and more than 5 million guests at its venues in
fiscal 2023. This includes a successful run of the
Christmas Spectacular production, for which over 930,000
tickets were sold in its first complete run since the 2019 holiday
season. The majority of concerts held at the Company's venues
continue to sell out, while in-venue per-capita spending continues
to exceed results for the prior year. In addition, suite and
sponsorship revenues are on track to exceed pre-pandemic levels as
a result of strong new sales and renewal activity coming out of the
pandemic.
The Company's fiscal 2023 and 2022 results are presented in
accordance with accounting requirements for the preparation of
carve-out financial statements, reflecting the results of the
traditional live entertainment businesses previously owned and
operated by Sphere Entertainment through its Entertainment business
segment. These results do not include all of the expenses that
would have been incurred by MSG Entertainment had it been a
standalone company for the periods presented.
For the fiscal 2023 third quarter, the Company reported revenues
of $201.2 million, an increase of
$7.2 million, or 4%, as compared to
the prior year quarter. Excluding the impact of the termination of
the advertising sales representation agreement with MSG Networks,
total revenues would have increased 9% as compared to the prior
year period. In addition, the Company reported operating income of
$24.7 million, an increase of
$8.8 million, or 56%, and adjusted
operating income of $38.0 million, an
increase of $4.3 million, or 13%,
both as compared to the prior year period.(1)
Executive Chairman and CEO James L.
Dolan said, "With the completion of our spin-off, MSG
Entertainment begins its new chapter as a standalone, pure-play
live entertainment company. We remain confident in the strength of
our assets and brands and believe that we are well-positioned to
create long-term value for shareholders."
Results for the
Three and Nine Months Ended March 31, 2023 and 2022:
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
March
31,
|
|
Change
|
|
March
31,
|
|
Change
|
$ millions
|
|
2023
|
|
2022
|
|
$
|
|
%
|
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues
|
|
$
201.2
|
|
$
194.0
|
|
$
7.2
|
|
4 %
|
|
$
703.6
|
|
$
475.2
|
|
$
228.4
|
|
48 %
|
Operating Income
(Loss)
|
|
$
24.7
|
|
$
15.8
|
|
$
8.8
|
|
56 %
|
|
$
126.8
|
|
$
(0.1)
|
|
$
126.9
|
|
NM
|
Adjusted Operating
Income
|
|
$
38.0
|
|
$
33.7
|
|
$
4.3
|
|
13 %
|
|
$
175.8
|
|
$
60.1
|
|
$
115.7
|
|
192 %
|
Note: Amounts may not
foot due to rounding
|
|
(1)
|
See page 3 of this
earnings release for the definition of adjusted operating income
(loss) included in the discussion of non-GAAP financial
measures.
|
Summary of Reported Results of Operations
For the
fiscal 2023 third quarter, the Company generated revenues of
$201.2 million, an increase of
$7.2 million, or 4%, as compared to
the prior year period. Revenues related to the Company's
arena license agreements with the New York Knicks ("Knicks") and
New York Rangers ("Rangers") increased $11.7
million. This included a $10.1
million increase in revenues subject to the sharing of
economics with Madison Square Garden Sports Corp. ("MSG Sports"),
primarily reflecting higher food, beverage and merchandise sales
and higher suite revenues at Knicks and Rangers games. Revenues
from the presentation of the Christmas Spectacular
production increased $3.5 million,
which reflected seven performances during the current year quarter
as compared to no performances in the prior year quarter. The
increase in revenues was partially offset by a decrease in
advertising sales commissions of $9.6
million in the current year period due to the termination of
MSG Networks' advertising sales representation agreement. Excluding
the impact of the termination of MSG Networks' advertising sales
representation agreement, total revenues for the fiscal 2023 third
quarter would have increased 9% as compared to the prior year
period.
Fiscal 2023 third quarter direct operating expenses of
$115.1 million increased $5.2 million, or 5%, as compared to the prior
year quarter. This was due to higher expenses associated with
the sharing of economics with MSG Sports pursuant to the arena
license agreements of $4.5 million
and an increase in other direct operating expenses associated with
the arena license agreements of $3.7
million, partially offset by other net cost decreases.
Fiscal 2023 third quarter selling, general and administrative
expenses of $44.1 million decreased
$2.9 million, or 6%, as compared with
the prior year quarter. This decrease primarily reflects lower
employee compensation and related benefits, partially offset by
other net cost increases.
Fiscal 2023 third quarter operating income of $24.7 increased by $8.8
million, or 56%, and adjusted operating income of
$38.0 million increased by
$4.3 million, or 13%, both as
compared to the prior year period. The increase in operating income
was primarily due to the increase in revenues, lower selling,
general and administrative expenses (including share-based
compensation) and the impact of lower restructuring charges in the
current year period, partially offset by higher direct operating
expenses. The increase in adjusted operating income was primarily
due to the increase in revenues and, to a lesser extent, lower
selling, general and administrative expenses (excluding share-based
compensation), partially offset by higher direct operating
expenses.
Financial Guidance
As the Company nears the completion
of the fiscal year, it is reaffirming its previously issued fiscal
2023 guidance for adjusted operating income, while refining its
guidance for revenue and operating income. These fiscal 2023
projections reflect MSG Entertainment as if it had been a
standalone, independent entity from the start of the fiscal year
(July 1, 2022), including expenses
that would have been incurred by the Company had it been a
standalone company for the entire fiscal year. The Company
now expects the following(2):
- Revenues of $835 million to
$845 million.
- Operating income of $85 million
to $95 million.
- Adjusted operating income of $145
million to $155 million.
An updated version of the MSG Entertainment investor
presentation, which was originally issued in February 2023, is now available at
investor.msgentertainment.com.
About Madison Square Garden Entertainment
Corp.
Madison Square Garden Entertainment Corp. (MSG
Entertainment) is a leader in live entertainment, delivering
unforgettable experiences while forging deep connections with
diverse and passionate audiences. The Company's portfolio includes
a collection of world-renowned venues – New York's Madison Square Garden, The Theater
at Madison Square Garden, Radio City Music Hall, and Beacon
Theatre; and The Chicago Theatre – that showcase a broad array of
sporting events, concerts, family shows, and special events for
millions of guests annually. In addition, the Company features the
original production, the Christmas Spectacular Starring the
Radio City Rockettes, which has been a holiday tradition for 89
years. More information is available at
www.msgentertainment.com.
(2)
|
Financial guidance for
fiscal year 2023 reflects the impact of the termination of the
advertising sales representation agreement with MSG Networks as if
it had been terminated at the start of fiscal 2023, the estimated
impact of post spin-off intercompany agreements with Sphere
Entertainment Co. and a public company overhead structure. See the
appendix for a reconciliation from operating income to adjusted
operating income.
|
Non-GAAP Financial Measures
We define adjusted
operating income (loss), which is a non-GAAP financial measure, as
operating income (loss) excluding (i) 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) share-based compensation expense or
benefit, (iv) restructuring charges or credits, (v) merger and
acquisition-related costs, including litigation expenses, (vi)
gains or losses on sales or dispositions of businesses and
associated settlements, (vii) the impact of purchase accounting
adjustments related to business acquisitions, (viii) gains and
losses related to the remeasurement of liabilities under the
executive deferred compensation plan, and (ix) amortization for
capitalized cloud computing arrangement costs. 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 that this adjustment is
beneficial for other incremental reasons as well. This adjustment
provides senior management, investors and analysts with important
information regarding a long-term related party agreement with MSG
Sports. In addition, this adjustment is included under the
Company's debt covenant compliance calculations and is a component
of the performance measures used to evaluate, and compensate,
senior management of the Company. 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 eliminate merger and
acquisition-related costs, when applicable, because the Company
does not consider such costs to be indicative of the ongoing
operating performance of the Company as they result from an event
that is of a non-recurring nature, thereby enhancing comparability.
In addition, management believes that the exclusion of gains and
losses related to the remeasurement of liabilities under the
executive deferred compensation plan, provides investors with a
clearer picture of the Company's operating performance given that,
in accordance with U.S. generally accepted accounting principles
("GAAP"), gains and losses related to the remeasurement of
liabilities under the executive deferred compensation plan are
recognized in Operating (income) loss whereas gains and losses
related to the remeasurement of the assets under the executive
deferred compensation plan, which are equal to and therefore fully
offset the gains and losses related to the remeasurement of
liabilities, are recognized in Other income (expense), net, which
is not reflected in Operating income (loss).
We believe adjusted operating income (loss) is an appropriate
measure for evaluating the operating performance of the Company on
a combined 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 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 or events may differ materially from those in the
forward-looking statements as a result of various factors,
including financial community perceptions of the Company and its
business, operations, financial condition and the industries in
which it operates 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.
Contacts:
Ari Danes, CFA
Senior Vice President, Investor Relations, Financial Communications
& Treasury
Madison Square Garden Entertainment Corp.
(212) 465-6072
Justin Blaber
Vice President, Financial Communications
Madison Square Garden Entertainment Corp.
(212) 465-6109
Grace Kaminer
Senior Director, Investor Relations & Treasury
Madison Square Garden Entertainment Corp.
(212) 631-5076
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 888-660-6386 / Conference ID Number
8020251
Conference call replay number is 800-770-2030 /
Conference ID Number 8020251 until May 25,
2023
MADISON SQUARE
GARDEN ENTERTAINMENT CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands,
except per share data)
|
|
|
|
Three Months
Ended
March
31,
|
|
Nine Months
Ended
March
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
|
$
201,229
|
|
$
193,988
|
|
$
703,561
|
|
$
475,150
|
Direct operating
expenses
|
|
(115,133)
|
|
(109,962)
|
|
(397,398)
|
|
(292,198)
|
Selling, general and
administrative expenses
|
|
(44,122)
|
|
(47,027)
|
|
(127,537)
|
|
(128,725)
|
Depreciation and
amortization
|
|
(14,798)
|
|
(16,007)
|
|
(46,369)
|
|
(49,166)
|
(Loss) gains, net on
dispositions
|
|
(51)
|
|
—
|
|
4,361
|
|
—
|
Restructuring
charges
|
|
(2,461)
|
|
(5,171)
|
|
(9,820)
|
|
(5,171)
|
Operating income
(loss)
|
|
24,664
|
|
15,821
|
|
126,798
|
|
(110)
|
Interest
income
|
|
2,482
|
|
1,541
|
|
5,804
|
|
5,145
|
Interest
expense
|
|
(13,423)
|
|
(13,009)
|
|
(38,055)
|
|
(39,804)
|
Other income
(expense), net
|
|
8,070
|
|
(8,495)
|
|
6,784
|
|
(27,742)
|
Income (loss) from
operations before income taxes
|
|
21,793
|
|
(4,142)
|
|
101,331
|
|
(62,511)
|
Income tax
expense
|
|
(73)
|
|
—
|
|
(804)
|
|
—
|
Net income
(loss)
|
|
21,720
|
|
(4,142)
|
|
100,527
|
|
(62,511)
|
Less: Net loss
attributable to nonredeemable noncontrolling
interest
|
|
—
|
|
(212)
|
|
(553)
|
|
(579)
|
Net income (loss)
attributable to MSG Entertainment's stockholders
|
|
$
21,720
|
|
$
(3,930)
|
|
$
101,080
|
|
$
(61,932)
|
Basic and diluted
earnings (loss) per common share
attributable to the MSG Entertainment's
stockholders(1)
|
|
$
0.42
|
|
$
(0.08)
|
|
$
1.95
|
|
$
(1.20)
|
_________________
|
(1)
|
On April 20, 2023,
51,768 common shares of MSG Entertainment were outstanding. This
share amount is being utilized for the calculation of basic and
diluted earnings (loss) per share for both the three and nine
months ended March 31, 2023 and 2022 because the Company was not a
standalone public company prior to the April 20, 2023 spin-off from
Sphere Entertainment Co.
|
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 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.
- Depreciation and amortization. This adjustment eliminates
depreciation and amortization of property and equipment and
intangible assets in all periods.
- Share-based compensation. This adjustment eliminates the
compensation expense relating to restricted stock units and stock
options granted under the Sphere Entertainment Employee Stock Plan,
MSG Sports Employee Stock Plan, and Sphere Entertainment
Non-Employee Director Plan 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 (loss), net on dispositions. This adjustment eliminates
non-cash impairment charges and the impact of gains or losses from
the disposition of assets or businesses in all periods.
- Amortization for capitalized cloud computing arrangement costs.
This adjustment eliminates amortization of capitalized cloud
computing arrangement costs.
- Remeasurement of deferred compensation liabilities. This
adjustment eliminates the impact of gains and losses related to the
remeasurement of liabilities under the executive deferred
compensation plan.
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
March
31,
|
|
March
31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Operating income
(loss)
|
|
$
24,664
|
|
$
15,821
|
|
$
126,798
|
|
$
(110)
|
Non-cash portion of
arena license fees from MSG Sports(1)
|
|
(12,149)
|
|
(12,073)
|
|
(25,078)
|
|
(23,962)
|
Depreciation and
amortization
|
|
14,798
|
|
16,007
|
|
46,369
|
|
49,166
|
Share-based
compensation
|
|
8,014
|
|
8,789
|
|
21,980
|
|
29,868
|
Restructuring
charges
|
|
2,461
|
|
5,171
|
|
9,820
|
|
5,171
|
Loss (gains), net on
dispositions
|
|
51
|
|
—
|
|
(4,361)
|
|
—
|
Amortization for
capitalized cloud computing arrangement costs
|
|
65
|
|
12
|
|
169
|
|
12
|
Remeasurement of
deferred compensation plan liabilities
|
|
126
|
|
—
|
|
132
|
|
—
|
Adjusted operating
income
|
|
$
38,030
|
|
$
33,727
|
|
$ 175,829
|
|
$
60,145
|
_________________
|
(1)
|
This adjustment
represents the non-cash portion of operating lease revenue related
to the Company's Arena License Agreements with MSG Sports. Pursuant
to GAAP, recognition of operating lease revenue is recorded on a
straight-line basis over the term of the agreement based upon the
value of total future payments under the arrangement. As a result,
operating lease revenue is comprised of a contractual cash
component plus or minus a non-cash component for each period
presented. Operating income on a GAAP basis includes lease income
of (i) $19,014 and $39,234 of revenue collected in cash for the
three and nine months ended March 31, 2023, respectively, and
$17,543 and $34,836 of revenue collected in cash for the three and
nine months ended March 31, 2022, respectively, and (ii) a non-cash
portion of $12,149 and $25,078 for the three and nine months ended
March 31, 2023, respectively, and $12,073 and $23,962 for the three
and nine months ended March 31, 2022, respectively.
|
MADISON SQUARE
GARDEN ENTERTAINMENT CORP.
|
CONDENSED COMBINED
BALANCE SHEETS (Unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
March
31,
|
|
June
30,
|
|
|
2023
|
|
2022
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash, cash equivalents
and restricted cash
|
|
$
122,981
|
|
$
62,573
|
Accounts receivable,
net
|
|
130,642
|
|
102,501
|
Related party
receivables, current
|
|
80,463
|
|
96,938
|
Prepaid expenses and
other current assets
|
|
74,289
|
|
79,441
|
Total current
assets
|
|
408,375
|
|
341,453
|
Non-Current
Assets:
|
|
|
|
|
Property and
equipment, net
|
|
637,644
|
|
696,079
|
Right-of-use
lease assets
|
|
248,366
|
|
271,154
|
Goodwill
|
|
69,041
|
|
69,041
|
Intangible
assets, net
|
|
63,801
|
|
65,439
|
Other
non-current assets
|
|
118,506
|
|
83,535
|
Total assets
|
|
$ 1,545,733
|
|
$ 1,526,701
|
LIABILITIES AND
DIVISIONAL EQUITY (DEFICIT)
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts payable,
accrued and other current liabilities
|
|
$
199,796
|
|
$
221,961
|
Related party
payables, current
|
|
42,620
|
|
72,683
|
Current portion of
long-term debt
|
|
16,250
|
|
8,762
|
Operating lease
liabilities, current
|
|
38,298
|
|
39,006
|
Deferred
revenue
|
|
258,132
|
|
202,678
|
Total current
liabilities
|
|
555,096
|
|
545,090
|
Non-Current
Liabilities:
|
|
|
|
|
Long-term debt, net of
deferred financing costs
|
|
643,311
|
|
654,912
|
Operating lease
liabilities, non-current
|
|
229,501
|
|
254,114
|
Deferred tax
liabilities, net
|
|
23,377
|
|
23,253
|
Other non-current
liabilities
|
|
50,945
|
|
50,921
|
Total
liabilities
|
|
1,502,230
|
|
1,528,290
|
Commitments and
contingencies
|
|
|
|
|
MSG Entertainment
Divisional Equity (Deficit):
|
|
|
|
|
Sphere Entertainment
investment
|
|
77,365
|
|
33,265
|
Accumulated other
comprehensive loss
|
|
(33,862)
|
|
(34,740)
|
Total MSG Entertainment
divisional equity (deficit)
|
|
43,503
|
|
(1,475)
|
Nonredeemable
noncontrolling interest
|
|
—
|
|
(114)
|
Total liabilities and
divisional equity (deficit)
|
|
$ 1,545,733
|
|
$ 1,526,701
|
MADISON SQUARE
GARDEN ENTERTAINMENT CORP.
SELECTED CASH FLOW
INFORMATION
(Dollars in
thousands)
(Unaudited)
|
|
|
|
Nine Months
Ended
|
|
|
March
31,
|
|
|
2023
|
|
2022
|
Net cash provided by
operating activities
|
|
$
132,341
|
|
$
60,338
|
Net cash provided by
(used in) investing activities
|
|
13,261
|
|
(13,060)
|
Net cash used in
financing activities
|
|
(85,194)
|
|
(150,035)
|
Net increase (decrease)
in cash, cash equivalents and restricted cash
|
|
60,408
|
|
(102,757)
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
62,573
|
|
318,069
|
Cash, cash equivalents
and restricted cash, end of period
|
|
$
122,981
|
|
$
215,312
|
MADISON SQUARE
GARDEN ENTERTAINMENT CORP.
APPENDIX
FISCAL 2023
FINANCIAL GUIDANCE
ADJUSTMENTS TO
RECONCILE OPERATING INCOME TO
ADJUSTED OPERATING
INCOME
($ in
millions)
|
|
|
|
Fiscal Year
2023(1)
|
Operating
income
|
|
$85 - $95
|
Non-cash portion of
arena license fees from MSG Sports
|
|
(27)
|
Depreciation and
amortization
|
|
58
|
Share-based
compensation
|
|
22
|
Restructuring
charges
|
|
10
|
Gains, net on
dispositions
|
|
(4)
|
Amortization for
capitalized cloud computing costs
|
|
1
|
Adjusted operating
income
|
|
$145 - $155
|
_________________
|
(1)
|
Financial guidance for
fiscal year 2023 reflects MSG Entertainment as if it had been a
standalone, independent entity from the start of the fiscal year
(July 1, 2022), including the impact of the termination of the
advertising sales representation agreement with MSG Networks as if
it had been terminated at the start of fiscal 2023, the estimated
impact of post spin-off intercompany agreements with Sphere
Entertainment Co. and a public company overhead
structure.
|
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SOURCE Madison Square Garden Entertainment Corp.