MSG Entertainment Posts Losses, Lower Revenue as Venues Remain Closed

Radio City Music Hall
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Exterior view of Radio City Music Hall in New York City.

Madison Square Garden Entertainment’s inaugural earnings since breaking off from its sporting side have the bad luck of also being the company's first since the COVID-19 pandemic shut its venues down. As a result of the ongoing health crisis, which kicked in roughly 18 days before the third quarter ended March 31, MSGE said on Monday that its revenues dipped 20% to $199.9 million, compared to $250 million in the prior-year quarter.

Operating losses for the three month period went from $18.6 million in the corresponding quarter in 2019 to $145.5 million this year, and the company said its adjusted operating income slid by $25.2 million to a $7.2 million loss. Operating expenses, however, decreased by $26 million to $132.8 million — reflective of venue closures resulting in lower overall expenses.

The company said the increase in operating loss includes the $102.2 million in non-cash impairment charges related to Tao Group Hospitality, its dining and nightlife unit that has had to temporarily shutter virtually all of its venues worldwide — in addition to one permanent closure.

In addition to Tao, MSGE's portfolio includes Madison Square Garden and the attached Hulu Theater at MSG in New York City. MSGE also leases Radio City Music Hall and Beacon Theatre, also in NYC, and it owns outright the Chicago Theatre. MSGE is also building the massive MSG Sphere at The Venetian in Las Vegas, though it says a disruption in the supply chain due to the pandemic led to a suspension in construction mid-April, with the company saying it does not expect to open the venue in 2021 as planned. It also plans on building a Sphere in London, pending approvals.

As of May 1, the company had approximately $1.4 billion in cash and cash equivalents and short-term investments, including the net proceeds from the sale of the Forum in Inglewood, Calif. to Clippers owner Steve Ballmer. Adjusted for the Forum sale, the company had roughly $220 million in advance cash proceeds, mostly tied to the completed sales of tickets and sponsorships — which will be addressed through refunds, credits or rescheduling.

The company said that, to date, the "significant majority of impacted events have been postponed and are expected to be rescheduled."

Citing the recent spinoff — MSGE began trading on Wall Street on April 20 — the firm declined to hold an investors call this quarter but said it anticipates returning for its year-end results. In a statement, executive chairman and CEO James L. Dolan signaled optimism that the company will more than weather the COVID storm once its venues can begin operating again safely.

"With the MSG Entertainment spin-off complete, we believe we have created a company that will expand on our track record of creating long-term value for shareholders," Dolan said. "Our Company has been in the business of bringing people together for decades, and we are confident that we are well-positioned to weather these uncertain times. We believe the public’s innate desire to be part of shared experiences will continue and we look forward to opening our doors for unforgettable events yet to come."

MSG Entertainment