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Madison Square Garden Entertainment (MSGE) reported on Thursday (February 9) that revenue rose 24% to $642.2 million in the second quarter, driven by strong consumer and business demand for events and substantial cost-cutting.
Speaking for the first time since publicly announcing the company is Explore sale of its stake in Tao Group HospitalityMSGE chief financial officer Dave Burns Said revenue growth came from broad demand for events, hotels, suites, sponsorships and merchandise.
The company is also in the midst of a complex restructuring to spin off its live entertainment business — which includes the namesake venue and Rockette’s production of Christmas spectacle — from its focus on the MSG Sphere — the state-of-the-art Las Vegas currently under construction. Sri Lanka venue. The latter business will also house MSG Networks and (at least for now) Tao Group.
“We are moving quickly and expect to complete the spinoff by the end of March,” Burns said on a conference call to discuss financial results.
Byrnes also said the MSG Sphere, which features a 580,000-square-foot LED exosphere (the world’s largest LED screen), is expected to open in September with an as-yet-unannounced artist residency and could become Hollywood’s leading director of “original attractions” . Byrnes said they expect to make both announcements in the coming weeks.
It’s these two types of events—artist performances and films—plus advertising, sponsorships and hospitality that MSGE hopes will help cover the $2.175 billion price tag for building Sphere.
For the quarter ended December 31, MSGE had approximately $2.01 billion in debt and approximately $554 million in cash on hand and restricted cash.
The company announced last quarter that it was exploring areas for cost-cutting within the company, including layoffs in areas such as the MSG Networks unit. Severance payments and other factors related to layoffs resulted in a charge of $13.7 million in the quarter.
MSG Networks segment revenues of $158.9 million were down 1 percent from a year ago as higher royalties were partially offset by higher advertising revenues.
The company’s entertainment segment generated $356.5 million in revenue, up sharply from last year, largely due to mostly sold-out events at the Garden and the full run of its Christmas extravaganza — the first in three years due to the pandemic.
Byrnes also elaborated on the company’s decision to repurchase its Tao Group stake, saying it was time for the company to explore opportunities to deliver attractive returns to shareholders.
MSG bought a 62.5 percent stake in the hotel group for $181 million in 2017 and currently owns 67 percent of the company.
“The bidding process was very robust with multiple bidders showing strong interest,” Burns said. “We are advancing the process and will keep you posted as we have more news.”
Tao Group generated $136 million in revenue, up 16% from last year, when the Omicron variant of COVID-19 dampened demand for corporate holiday parties and dining out.
Additionally, MSGE filed a request with the New York City Department of Planning on Thursday to remove the time limit for Madison Square Garden’s special operating permit, which is currently set to expire on July 24. The gardens should remain in place permanently, the company said in a statement, because relocation would likely cost $8.5 billion in public funds, and improvements to the portion of Penn Station beneath the gardens are already underway without relocating the site.
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