Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 10-Q ________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39245 MADISON SQUARE GARDEN ENTERTAINMENT CORP. (Exact name ...

Financial Data and Key Metrics Changes - In the fiscal second quarter, total revenues reached $516 million, with adjusted operating income (AOI) of $76 million, marking a significant improvement over the previous year's COVID-impacted quarter [39] - The Entertainment segment generated $248 million in revenues, with an AOI of $15 million, indicating a return to positive quarterly AOI for the first time since the pandemic began [39][40] - MSG Networks reported revenues of $160 million, a 9% year-over-year increase, and an AOI of $44 million, compared to $74 million in the prior year quarter [41] - Tao Group generated revenues of $117 million and an AOI of $17.5 million, reflecting reopening momentum in key markets [42] Business Line Data and Key Metrics Changes - The Entertainment segment saw a ramp-up in live events, with nearly 300 events hosted and approximately 1.7 million guests welcomed [11] - Tao Group experienced strong demand, with average check sizes significantly above 2019 levels, although margins were impacted by increased staffing and inflation [19][20] - MSG Networks benefited from strong advertising revenue driven by a return to full schedules for teams, despite lower affiliate revenues due to the non-renewal with Comcast [30][31] Market Data and Key Metrics Changes - The percentage of ticket buyers attending events is recovering and approaching pre-Omicron levels, indicating sustained consumer demand for live experiences [16] - The concert booking schedule for calendar 2022 is strong, pacing nearly 50% ahead of the same point in 2020 [16] - The advertising revenue from mobile sports betting operators has increased significantly, reflecting broad-based advertiser interest [31][35] Company Strategy and Development Direction - The company is optimistic about the future, with plans for further expansion in the Tao Group and the MSG Sphere project, which is on track to open in 2023 [26][43] - The company is exploring direct-to-consumer models while maintaining relationships with traditional MVPD partners [36][48] - The integration of Tao and Hakkasan is expected to create synergies that enhance growth and operational efficiency [90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operating environment as the Omicron wave recedes, with expectations for a strong end to the fiscal year [16][42] - The company is optimistic about generating long-term shareholder value and is encouraged by the positive momentum across its business [26] - Management highlighted the importance of adapting to the evolving media landscape and the potential for innovative partnerships in the blockchain and crypto space [94] Other Important Information - The company has approximately $1.3 billion in cash and a debt balance of approximately $1.7 billion as of December 31 [43] - MSG Sphere's construction costs to date are approximately $1.1 billion, with a total estimated cost of $1.865 billion [43][44] Q&A Session Summary Question: Impact of direct-to-consumer launch on MVPD relationships - Management indicated that they are balancing the direct-to-consumer offering with traditional linear business and are confident in finding an appropriate model [47][48] Question: Opportunities for M&A in Tao Group - Management stated that while organic growth is the primary focus, they remain open to opportunistic acquisitions if the right opportunity arises [56][58] Question: Insights into concert pipeline for 2023 - Management noted strong demand for concerts, with expectations for continued growth beyond 2022 [60][62] Question: Thoughts on sports betting facilities in MSG - Management expressed optimism about the potential for incremental revenue from sports betting facilities as regulations evolve [76][78] Question: Normalized margins for Tao Group - Management expects long-term margins for Tao to be in the mid-teens, with fluctuations based on seasonality and demand [84] Question: Upcoming material agreements with distributor partners - Management confirmed that major affiliate deals are staggered and will come up for renewal, but specifics were not disclosed [85]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements and detailed notes for Q3 2021 and 2020, covering financial position, operations, cash flows, and equity [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheets show slight asset and liability increases from June to September 2021, with cash and cash equivalents decreasing | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $5,279,366 | $5,240,651 | | Total Liabilities | $3,090,902 | $2,962,743 | | Total Equity | $2,048,054 | $2,140,074 | | Cash and cash equivalents | $1,331,450 | $1,516,992 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Revenues significantly increased for Q3 2021, but operating and net losses widened, leading to a higher loss per common share | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Revenues | $294,510 | $170,546 | | Operating loss | $(83,338) | $(58,679) | | Net loss | $(84,276) | $(40,606) | | Basic and diluted loss per common share | $(2.55) | $(1.06) | [Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Consolidated comprehensive loss increased for Q3 2021 due to a higher net loss and a shift from other comprehensive income to loss | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net loss | $(84,276) | $(40,606) | | Other comprehensive income (loss), net of income taxes | $(4,788) | $11,697 | | Comprehensive loss | $(89,064) | $(28,909) | | Comprehensive loss attributable to Madison Square Garden Entertainment Corp.'s stockholders | $(91,641) | $(24,390) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved to minimal use, but investing and financing activities significantly increased cash outflow for Q3 2021 | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,338) | $(95,582) | | Net cash (used in) provided by investing activities | $(136,976) | $192,589 | | Net cash used in financing activities | $(44,797) | $(15,996) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(184,497) | $86,825 | [Consolidated Statements of Stockholders' Equity and Redeemable Noncontrolling Interests](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20and%20Redeemable%20Noncontrolling%20Interests) Stockholders' equity decreased and redeemable noncontrolling interests increased from June to September 2021, due to net and comprehensive losses | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Madison Square Garden Entertainment Corp. stockholders' equity | $2,034,913 | $2,128,170 | | Redeemable noncontrolling interests | $140,410 | $137,834 | | Nonredeemable noncontrolling interests | $13,141 | $11,904 | | Total equity | $2,048,054 | $2,140,074 | [Notes to Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Detailed notes for unaudited consolidated financial statements, covering business, accounting policies, acquisitions, revenue, debt, and segment information [Note 1. Description of Business and Basis of Presentation](index=11&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Post-merger with MSG Networks Inc., the company operates three segments, all still materially impacted by the COVID-19 pandemic - The Company completed its acquisition of MSG Networks Inc. on July 9, 2021, which was accounted for as a transaction between entities under common control[30](index=30&type=chunk)[31](index=31&type=chunk) - The Company is comprised of three reportable segments: Entertainment (venues, Christmas Spectacular, MSG Sphere), MSG Networks (regional sports and entertainment networks), and Tao Group Hospitality (entertainment dining and nightlife)[33](index=33&type=chunk)[38](index=38&type=chunk) - COVID-19 pandemic materially impacted operations in Fiscal Year 2021, leading to suspended Entertainment operations, fewer MSG Networks games, and reduced capacity for Tao Group Hospitality. While operations have resumed, a full return to normal is uncertain[40](index=40&type=chunk)[41](index=41&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 2. Accounting Policies](index=14&type=section&id=Note%202.%20Accounting%20Policies) Updated accounting policies reflect MSG Networks segment specifics for revenue and expenses, with ASU 2019-12 adopted and ASU 2020-04 under evaluation - MSG Networks segment generates revenue primarily from affiliation fees (sales-based and usage-based royalty arrangements) and advertising sales, recognized as programming is provided or advertising is aired[57](index=57&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk) - Direct operating expenses for MSG Networks primarily include media rights fees and other programming/production costs, expensed straight-line over the contract period[61](index=61&type=chunk) - The Company adopted ASU No. 2019-12 (Income Taxes) in Q1 FY2022 with no impact on financial statements and is evaluating ASU 2020-04 (Reference Rate Reform)[65](index=65&type=chunk)[66](index=66&type=chunk) [Note 3. Acquisition](index=16&type=section&id=Note%203.%20Acquisition) Hakkasan acquisition's purchase price allocation finalized, revising noncontrolling interest to 15% and decreasing related assets and liabilities - The noncontrolling interest ownership in Tao Group Sub-Holdings LLC (from Hakkasan acquisition) was revised from approximately **18% to 15%** during the three months ended September 30, 2021[67](index=67&type=chunk)[70](index=70&type=chunk) | Adjustment Impact (in thousands) | Amount | | :--- | :--- | | Decrease in Redeemable Noncontrolling Interest | $7,500 | | Decrease in Goodwill | $2,014 | | Decrease in Amortizable Intangibles | $7,020 | [Note 4. Revenue Recognition](index=17&type=section&id=Note%204.%20Revenue%20Recognition) Total revenues from customer contracts significantly increased year-over-year, with deferred revenue also rising from advance payments | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Total revenues from contracts with customers | $292,194 | $169,798 | | Contract Balance (in thousands) | September 30, 2021 | June 30, 2021 | | :--- | :--- | :--- | | Deferred revenue, including non-current portion | $266,941 | $210,187 | - The estimated revenue expected to be recognized from remaining performance obligations as of September 30, 2021, is **$535,727 thousand**, primarily from sponsorship, suite licenses, and non-variable affiliation fee arrangements[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 5. Computation of Earnings (Loss) per Common Share](index=21&type=section&id=Note%205.%20Computation%20of%20Earnings%20(Loss)%20per%20Common%20Share) Basic and diluted loss per common share increased to $(2.55) for Q3 2021, with all restricted stock units and stock options excluded | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net loss attributable to Madison Square Garden Entertainment Corp.'s stockholders | $(86,853) | $(36,087) | | Basic and diluted loss per common share | $(2.55) | $(1.06) | [Note 6. Cash, Cash Equivalents and Restricted Cash](index=21&type=section&id=Note%206.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Total cash, cash equivalents, and restricted cash decreased to **$1.36 billion** as of September 30, 2021, from **$1.54 billion** in June | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,331,450 | $1,516,992 | | Restricted cash | $24,029 | $22,984 | | Total cash, cash equivalents and restricted cash | $1,355,479 | $1,539,976 | [Note 7. Investments in Nonconsolidated Affiliates](index=22&type=section&id=Note%207.%20Investments%20in%20Nonconsolidated%20Affiliates) Investments in nonconsolidated affiliates include equity method and fair value securities; Q3 2021 recorded an unrealized loss, a shift from prior year's gain | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Unrealized gain (loss) on equity investments with readily determinable fair value | $(2,460) | $33,658 | | Investment Type | September 30, 2021 (in thousands) | | :--- | :--- | | Equity method investments (SACO, Others) | $41,263 | | Equity securities without readily determinable fair values | $6,877 | | Total investments in nonconsolidated affiliates | $48,140 | [Note 8. Property and Equipment](index=24&type=section&id=Note%208.%20Property%20and%20Equipment) Net property and equipment increased from June to September 2021, driven by MSG Sphere construction, with a Tao Group Hospitality impairment charge | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Property and equipment, net | $2,226,175 | $2,107,064 | | Construction in progress | $1,284,278 | $1,145,297 | - Tao Group Hospitality recorded an impairment charge of **$3,269 thousand** for leasehold improvements for the three months ended September 30, 2021, due to decisions to cease operations at certain Hakkasan venues[95](index=95&type=chunk) [Note 9. Leases](index=24&type=section&id=Note%209.%20Leases) Operating lease ROU assets and total lease liabilities significantly increased from June to September 2021 due to new leases and an ROU asset impairment | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Right-of-use lease assets (Operating leases) | $413,463 | $280,579 | | Total lease liabilities | $450,140 | $306,979 | - The Company recorded new operating lease liabilities of **$167,070 thousand** for the three months ended September 30, 2021, primarily from the renewal of the Radio City Music Hall lease and a venue associated with MSG Sphere[103](index=103&type=chunk) - A non-cash impairment charge of **$4,549 thousand** was recorded for right-of-use lease assets associated with certain Hakkasan venues due to management decisions to cease operations[105](index=105&type=chunk) [Note 10. Goodwill and Intangible Assets](index=27&type=section&id=Note%2010.%20Goodwill%20and%20Intangible%20Assets) Goodwill slightly decreased due to a Hakkasan adjustment; annual impairment tests for goodwill and indefinite-lived intangibles found no impairments | Metric | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Goodwill | $500,181 | $502,195 | | Indefinite-lived intangible assets | $63,801 | $63,801 | | Amortizable intangible assets, net | $186,169 | $198,274 | - The Company performed its annual impairment tests for goodwill and indefinite-lived intangible assets as of August 31, 2021, and found no impairments for any reporting units or assets[112](index=112&type=chunk)[113](index=113&type=chunk) [Note 11. Commitments and Contingencies](index=28&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) Contractual obligations increased post-MSG Networks merger due to media rights. Ongoing legal complaints allege fiduciary duty breaches and misleading disclosures, with potential liability undeterminable | Contractual Obligations (MSG Networks Segment) | Amount (in thousands) | | :--- | :--- | | Total | $3,646,250 | - Fifteen complaints were filed in connection with the MSG Networks merger, alleging materially incomplete/misleading information and breaches of fiduciary duties by the Board and majority stockholders[118](index=118&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - Most disclosure actions were voluntarily dismissed, but consolidated derivative and class action lawsuits are ongoing, with the company currently unable to determine a range of potential liability[119](index=119&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Note 12. Fair Value Measurements](index=30&type=section&id=Note%2012.%20Fair%20Value%20Measurements) Fair value assets, mainly cash equivalents and equity investments, decreased from June to September 2021; long-term debt uses Level II inputs | Asset Type | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total assets measured at fair value | $1,249,909 | $1,447,993 | - The company's long-term debt is classified within Level II of the fair value hierarchy, valued using quoted indices of similar securities with readily observable inputs[138](index=138&type=chunk) [Note 13. Credit Facilities](index=31&type=section&id=Note%2013.%20Credit%20Facilities) Details of MSG Networks, National Properties, and Tao credit facilities are provided; all were covenant compliant as of September 30, 2021, with Tao's covenants suspended due to COVID-19 | Credit Facility | Outstanding Balance (Sep 30, 2021, in thousands) | FY2022 Remainder Repayments (in thousands) | | :--- | :--- | :--- | | MSG Networks Senior Secured Credit Facilities | $1,035,375 | $37,125 | | National Properties Term Loan Facility | $645,125 | $4,875 | | Tao Credit Facilities | $27,500 | $5,000 | | Total | $1,708,000 | $47,000 | - All credit facilities (MSG Networks, National Properties, Tao) were in compliance with their respective covenants as of September 30, 2021[141](index=141&type=chunk)[152](index=152&type=chunk)[156](index=156&type=chunk) - The Tao Senior Credit Agreement's financial maintenance covenants were suspended through December 31, 2021, due to COVID-19, with an increased minimum liquidity requirement for Tao Group Hospitality and a guarantee from MSG Entertainment Group[156](index=156&type=chunk)[331](index=331&type=chunk) [Note 14. Pension Plans and Other Postretirement Benefit Plan](index=37&type=section&id=Note%2014.%20Pension%20Plans%20and%20Other%20Postretirement%20Benefit%20Plan) The company sponsors defined benefit pension and postretirement plans; pension costs decreased, postretirement costs slightly increased, and defined contribution expenses rose | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net periodic (benefit) cost - Pension Plans | $90 | $172 | | Net periodic (benefit) cost - Postretirement Plans | $45 | $41 | | Expenses - Savings Plans | $2,019 | $1,405 | | Expenses - Union Savings Plan | $14 | $9 | [Note 15. Share-based Compensation](index=38&type=section&id=Note%2015.%20Share-based%20Compensation) Share-based compensation expense increased for Q3 2021; post-MSG Networks merger, all RSUs and stock options converted to Company Class A Common Stock awards | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Share-based compensation expense | $19,528 | $16,156 | | Capitalized share-based compensation expense | $751 | $866 | - At the effective time of the MSG Networks merger, each RSU and stock option for MSG Networks Inc. common stock was converted into **0.172** RSUs/options for the Company's Class A Common Stock[174](index=174&type=chunk) - All outstanding performance-based vesting RSU or stock option awards for which the performance period had not been completed were converted into time-based vesting awards[174](index=174&type=chunk) [Note 16. Accumulated Other Comprehensive Loss](index=39&type=section&id=Note%2016.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss increased from June to September 2021, primarily due to translation adjustments and other comprehensive loss | Component | September 30, 2021 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Balance as of period end | $(35,060) | $(30,272) | | Other comprehensive income (loss) before reclassifications | $(6,418) | N/A | | Income tax benefit (expense) | $1,120 | N/A | [Note 17. Income Taxes](index=40&type=section&id=Note%2017.%20Income%20Taxes) The company reported an income tax benefit for Q3 2021, a significant change from prior year's expense, driven by state tax benefits and rate changes, offset by merger costs | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Income tax benefit (expense) | $20,615 | $(9,392) | - The income tax benefit in the current period was primarily due to state income tax benefit (**$9,131k**) and a tax benefit from a change in estimated applicable tax rate (**$1,711k**)[184](index=184&type=chunk) - Offsetting factors included tax expense for writing off deferred tax for merger transaction costs (**$9,823k**) and nondeductible officers' compensation (**$2,859k**)[184](index=184&type=chunk) [Note 18. Related Party Transactions](index=41&type=section&id=Note%2018.%20Related%20Party%20Transactions) The company engages in various transactions with related parties, including MSG Sports and Dolan family entities; related party revenues increased for Q3 2021 - The Dolan Family Group collectively beneficially owned **100%** of the Company's Class B Common Stock and approximately **5.0%** of Class A Common Stock, representing about **72.6%** of aggregate voting power[189](index=189&type=chunk) - Key related party arrangements include media rights agreements with MSG Sports, sponsorship sales, arena license agreements for The Garden, and a Transition Services Agreement for corporate functions[190](index=190&type=chunk) | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Revenues from related parties | $4,187 | $2,823 | [Note 19. Segment Information](index=44&type=section&id=Note%2019.%20Segment%20Information) The company operates three segments: Entertainment, MSG Networks, and Tao Group Hospitality, with performance evaluated by adjusted operating income; consolidated adjusted operating income increased - The Company's three reportable segments are Entertainment, MSG Networks, and Tao Group Hospitality[213](index=213&type=chunk) - Segment performance is evaluated using 'adjusted operating income (loss)', which excludes non-cash straight-line leasing revenue, depreciation, amortization, impairment, share-based compensation, restructuring charges, and M&A-related costs[214](index=214&type=chunk) | Segment | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Entertainment Adjusted Operating Loss | $(71,392) | $(58,277) | | MSG Networks Adjusted Operating Income | $55,793 | $74,391 | | Tao Group Hospitality Adjusted Operating Income (Loss) | $26,188 | $(9,114) | | Total Adjusted Operating Income | $10,257 | $6,738 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and operations, highlighting COVID-19 impacts, MSG Networks merger, segment performance, liquidity, and MSG Sphere progress [Introduction](index=51&type=section&id=Introduction) This introduction outlines the MD&A structure and confirms the company's three reportable segments post-merger - The MD&A provides an understanding of the company's financial condition, changes in financial condition, and results of operations[233](index=233&type=chunk) - Following the Entertainment Distribution and the MSG Networks merger, the Company operates with three segments: Entertainment, Tao Group Hospitality, and MSG Networks[233](index=233&type=chunk) [Business Overview](index=51&type=section&id=Business%20Overview) The company leads in live experiences, including venues, entertainment, regional sports networks, and dining. The MSG Networks merger integrated it as a wholly-owned subsidiary - The Company is a leader in live experiences, comprising iconic venues (The Garden, Radio City Music Hall, MSG Sphere), marquee entertainment brands (Christmas Spectacular, Boston Calling), regional sports and entertainment networks (MSG Network, MSG+), and popular dining and nightlife offerings (Tao Group Hospitality)[237](index=237&type=chunk) - The acquisition of MSG Networks Inc. on July 9, 2021, was accounted for as a transaction between entities under common control, with MSG Networks Inc.'s net assets combined at historical carrying amounts for all historical periods[238](index=238&type=chunk)[240](index=240&type=chunk) [Factors Affecting Results of Operations](index=52&type=section&id=Factors%20Affecting%20Results%20of%20Operations) COVID-19 continues to materially impact operations. MSG Sphere construction resumed, targeting a 2023 opening. MSG Networks' performance is affected by affiliation agreements, subscribers, and advertising - COVID-19 pandemic continues to materially impact operations, with venue closures, capacity restrictions, and event cancellations affecting Entertainment, MSG Networks, and Tao Group Hospitality[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Construction of MSG Sphere in Las Vegas was suspended in April 2020 due to COVID-19, resumed in August 2020 with a lengthened timetable, and is now expected to open in calendar year **2023**[253](index=253&type=chunk)[254](index=254&type=chunk) - MSG Networks' financial performance is influenced by affiliation agreements with distributors, subscriber numbers, advertising rates, and the popularity/performance of professional sports teams[258](index=258&type=chunk) [Consolidated Results of Operations](index=55&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenues significantly increased for Q3 2021, but operating and net losses widened; adjusted operating income rose **52%**, driven by Tao Group Hospitality | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $294,510 | $170,546 | $123,964 | 73% | | Operating loss | $(83,338) | $(58,679) | $(24,659) | (42)% | | Net loss | $(84,276) | $(40,606) | $(43,670) | (108)% | | Adjusted operating income | $10,257 | $6,738 | $3,519 | 52% | - The increase in net interest expense by **$12,943 thousand** was primarily due to the National Properties Term Loan Facility, which was entered into in the second quarter of Fiscal Year 2021[266](index=266&type=chunk) - Miscellaneous income (expense), net, decreased by **$36,564 thousand**, primarily due to an unrealized loss on DraftKings investments in the current period compared to an unrealized gain in the prior year[267](index=267&type=chunk) [Business Segment Results](index=58&type=section&id=Business%20Segment%20Results) Entertainment revenues increased but operating loss widened. MSG Networks saw revenue decline and decreased operating income. Tao Group Hospitality reported significant revenue growth and operating income [Entertainment](index=58&type=section&id=Entertainment) Entertainment revenues significantly increased due to event resumption and higher arena license fees, but rising expenses led to increased operating and adjusted operating losses | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $34,239 | $7,555 | $26,684 | NM | | Operating loss | $(114,681) | $(110,651) | $(4,030) | (4)% | | Adjusted operating loss | $(71,392) | $(58,277) | $(13,115) | (23)% | - Event-related revenues increased by **$20,660 thousand**, primarily from concerts (**$16,501k**) and other sporting/live entertainment events (**$4,159k**), due to the return of events post-COVID-19[275](index=275&type=chunk) - Selling, general and administrative expenses increased by **$40,312 thousand**, primarily due to a **$18,763 thousand** increase in employee compensation and related benefits and **$13,992 thousand** in merger and acquisition-related costs[278](index=278&type=chunk) [MSG Networks](index=60&type=section&id=MSG%20Networks) MSG Networks revenues decreased **10%** due to lower affiliation fees and advertising; SG&A surged from merger costs, leading to a significant drop in operating income | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $141,473 | $157,363 | $(15,890) | (10)% | | Operating income | $23,278 | $67,936 | $(44,658) | (66)% | | Adjusted operating income | $55,793 | $74,391 | $(18,598) | (25)% | - Affiliation fee revenue decreased by **$12,265 thousand**, primarily due to a **6.5%** subscriber decline and a **$5,200 thousand** increase in net affiliate adjustments[285](index=285&type=chunk) - Selling, general and administrative expenses increased by **$25,448 thousand**, primarily due to approximately **$24,900 thousand** in costs related to the Merger, including executive separation agreements[290](index=290&type=chunk) - Comcast's non-carriage of MSG Networks, effective October 1, 2021, reduced MSG Networks' subscribers by approximately **10%** and is expected to reduce revenue and operating income by a comparable percentage[288](index=288&type=chunk) [Tao Group Hospitality](index=62&type=section&id=Tao%20Group%20Hospitality) Tao Group Hospitality saw substantial revenue increase and a shift to operating income, driven by the Hakkasan acquisition and post-COVID-19 recovery, offset by increased expenses | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $119,464 | $7,221 | $112,243 | NM | | Operating income (loss) | $10,081 | $(11,256) | $21,337 | NM | | Adjusted operating income (loss) | $26,188 | $(9,114) | $35,302 | NM | - Revenue increase was primarily due to the Hakkasan acquisition (**$59,352k**), increased revenues at venues previously under capacity restrictions (**$26,273k**), and venues temporarily closed (**$25,548k**)[297](index=297&type=chunk) - Direct operating expenses increased by **$51,265 thousand**, largely due to Hakkasan (**$27,866k**), increased food/beverage costs (**$10,165k**), and higher employee compensation (**$10,110k**) as operations resumed[298](index=298&type=chunk) - An impairment charge of **$7,818 thousand** for long-lived assets was recorded due to decisions to cease operations at certain Hakkasan venues[301](index=301&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity from cash, operations, and credit facilities, funding the MSG Sphere project. Debt facilities are compliant, but cash decreased from investing and financing [Overview](index=64&type=section&id=Overview) Primary liquidity sources are cash, operating cash flows, and borrowing capacity, used for working capital, capital spending, and debt service; sufficient liquidity is expected - Primary liquidity sources include cash and cash equivalents, cash flows from operations, and available borrowing capacity under MSGN Credit Agreement[312](index=312&type=chunk) - Principal uses of cash include working capital, capital spending (MSG Sphere), debt service, and investments[312](index=312&type=chunk) - As of September 30, 2021, the company had **$1,331,450 thousand** in cash and cash equivalents and believes it has sufficient liquidity for the next **12 months**[313](index=313&type=chunk) [MSG Sphere](index=65&type=section&id=MSG%20Sphere) MSG Sphere in Las Vegas is progressing, with a **2023** opening and an estimated cost of **$1.87 billion**, **$976 million** incurred; self-funding is planned, with a London Sphere also envisioned - MSG Sphere at The Venetian in Las Vegas is expected to open in calendar year **2023**[318](index=318&type=chunk) | Metric | Amount (in thousands) | | :--- | :--- | | Cost estimate (inclusive of core technology and soft costs) | ~$1,865,000 | | Actual construction costs incurred (through Sep 30, 2021) | ~$976,000 | - The company plans to finance MSG Sphere construction from cash-on-hand and cash flows from operations, but may access additional capital if needed. A future MSG Sphere is also planned for Stratford, London[321](index=321&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk) [Financing Agreements](index=66&type=section&id=Financing%20Agreements) All credit facilities (MSG Networks, National Properties, Tao) were covenant compliant as of September 30, 2021; Tao's covenants remain suspended due to COVID-19 | Credit Facility | Outstanding Balance (Sep 30, 2021, in thousands) | FY2022 Remainder Repayments (in thousands) | | :--- | :--- | :--- | | MSG Networks Senior Secured Credit Facilities | $1,035,375 | $37,125 | | National Properties Term Loan Facility | $645,125 | $4,875 | | Tao Term Loan Facility | $27,500 | $5,000 | - All credit facilities were in compliance with their respective covenants as of September 30, 2021[326](index=326&type=chunk)[329](index=329&type=chunk)[331](index=331&type=chunk) - The Tao Senior Credit Agreement's financial maintenance covenants were suspended through December 31, 2021, due to COVID-19 disruptions, with a minimum liquidity requirement and a guarantee from MSG Entertainment Group[331](index=331&type=chunk) [Cash Flow Discussion](index=68&type=section&id=Cash%20Flow%20Discussion) Net cash used in operating activities significantly decreased due to improved working capital; investing and financing activities substantially increased cash usage | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,338) | $(95,582) | | Net cash used in investing activities | $(136,976) | $192,589 | | Net cash used in financing activities | $(44,797) | $(15,996) | | Net decrease (increase) in cash, cash equivalents and restricted cash | $(184,497) | $86,825 | - The decrease in net cash used in operating activities was primarily due to changes in working capital, including higher cash collection from deferred revenue and accounts receivables[338](index=338&type=chunk) - The increase in net cash used in investing activities was mainly due to the absence of proceeds from short-term investment maturities in the prior year and increased capital expenditures[339](index=339&type=chunk) [Seasonality of Our Business](index=68&type=section&id=Seasonality%20of%20Our%20Business) The Entertainment segment typically sees higher revenues and operating income in Q2 and Q3, driven by the Christmas Spectacular and arena license fees, leading to lower Q1 performance - The Entertainment segment generally earns a disproportionate share of its annual revenues and operating income in the second and third fiscal quarters[341](index=341&type=chunk)[342](index=342&type=chunk) - This seasonality is driven by the Christmas Spectacular production and arena license fees from MSG Sports for Knicks and Rangers home games[341](index=341&type=chunk) [Recently Issued Accounting Pronouncements and Critical Accounting Policies](index=69&type=section&id=Recently%20Issued%20Accounting%20Pronouncements%20and%20Critical%20Accounting%20Policies) Annual impairment tests for goodwill and indefinite-lived intangible assets as of August 31, 2021, found no impairments, based on macroeconomic, industry, cost, and financial factors - The Company performed its annual impairment tests for goodwill and identifiable indefinite-lived intangible assets as of August 31, 2021[345](index=345&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) - No impairments of goodwill or indefinite-lived intangibles were identified for any reporting units or assets[348](index=348&type=chunk)[350](index=350&type=chunk) - The qualitative assessment for impairment considered macroeconomic conditions, industry/market factors, cost factors, overall financial performance, and company-specific events[347](index=347&type=chunk)[349](index=349&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from floating-rate credit facilities, with a **100 bps** increase raising annual interest expense by **$12.77 million**. Foreign currency risk from GBP for London MSG Sphere could impact net asset value by **$9 million** - The company has interest rate risk exposure from floating-rate borrowings under MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility, and Tao Senior Secured Credit Facilities[352](index=352&type=chunk)[354](index=354&type=chunk) - A hypothetical **100 basis point** increase in floating interest rates would increase annual interest expense by **$12,773 thousand**[355](index=355&type=chunk) - The company is exposed to foreign currency exchange rate risk, primarily to the British pound sterling, related to its London MSG Sphere development. A hypothetical **5%** fluctuation in the GBP/USD exchange rate would change net asset value by approximately **$9,000 thousand**[356](index=356&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control - The company's disclosure controls and procedures were effective as of September 30, 2021[357](index=357&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the fiscal quarter ended September 30, 2021[358](index=358&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) Multiple legal complaints related to the MSG Networks merger, alleging incomplete disclosures and fiduciary duty breaches, are ongoing, with potential liability undeterminable - Fifteen complaints were filed in connection with the MSG Networks merger, alleging materially incomplete/misleading information and breaches of fiduciary duties[361](index=361&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - Nine disclosure actions were voluntarily dismissed with prejudice prior to or shortly after the merger[362](index=362&type=chunk) - Consolidated derivative and class action lawsuits are ongoing, and the company is currently unable to determine a range of potential liability, thus no accrual has been made in the financial statements[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has an authorized share repurchase program for up to **$350 million** of Class A Common Stock, with no shares repurchased to date - The company has an authorized share repurchase program for up to **$350 million** of its Class A Common Stock[375](index=375&type=chunk) - No shares have been repurchased under this program as of September 30, 2021[375](index=375&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including stock plans, employment agreements, corporate policies, and SOX certifications - The exhibits include MSG Networks Inc. 2010 Employee Stock Plan, forms of Restricted Stock Units Agreements, an Employment Agreement for Andrea Greenberg, and the Policy Concerning Certain Matters Relating to Madison Square Garden Sports Corp. and AMC Networks Inc.[377](index=377&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[377](index=377&type=chunk)

Madison Square Garden Entertainment Corp. (MSGE) Q1 2022 Earnings Conference Call November 9, 2021 10:00 AM ET Company Participants Ari Danes - Investor Relations Andy Lustgarten - President Andrea Greenberg - President and Chief Executive Officer, MSG Networks Mark FitzPatrick - Executive Vice President and Chief Financial Officer Conference Call Participants Brandon Ross - LightShed Partners David Karnovsky - JP Morgan John Janedis - Wolfe Research Cassandra Lee - Jefferies Ben Swinburne - Morgan Stanley ...

Live Entertainment and Venues - The company has a strong and growing presence in live entertainment, with a portfolio of world-renowned venues and marquee live entertainment brands [25]. - The company is building its first MSG Sphere venue in Las Vegas, which is expected to pioneer the next generation of immersive experiences [27]. - The company has exclusive local media rights to live games of five professional New York-area NBA and NHL teams, including long-term agreements with the Knicks and Rangers [28]. - The company has successfully developed unique residencies, including Billy Joel at The Garden, which has reached 73 performances since January 2014 [38]. - The company operates 61 entertainment dining and nightlife venues globally through its controlling interest in Tao Group Hospitality, expanding its domestic and international reach [34]. - The company has established deep industry relationships that drive top-tier performers and a wide variety of events to its venues [25]. - The Garden has hosted significant events, including the 60th Annual Grammy Awards and the first-ever Broadway play performance for 18,000 New York City public school students in February 2020 [53]. - The company operates five venues, including The Garden and Hulu Theater, with a total seating capacity of approximately 21,000 for entertainment and sporting events [57]. - The Christmas Spectacular, featuring the Rockettes, has been performed for 87 years and is a key cultural event, despite the 2020 cancellation due to the pandemic [45][46]. - The Boston Calling Music Festival, owned by the company, will return in 2022 after cancellations in 2020 and 2021, featuring over 50 performers including Foo Fighters and Rage Against the Machine [49]. - Radio City Music Hall, with approximately 6,000 seats, regularly ranks as one of the highest-grossing entertainment venues of its size globally [59]. - The company has extended the lease for Radio City Music Hall until August 31, 2038, with an option to renew for an additional 10 years [61]. - The Garden has been recognized as the highest-grossing entertainment venue of its size based on Billboard magazine's rankings [52]. - The company operates the Beacon Theatre, a 2,800-seat venue, which has been a high-grossing entertainment venue, recognized by Billboard magazine [63]. - The Chicago Theatre, with approximately 3,600 seats, was acquired in October 2007 and has become a popular destination for various live events, also ranking highly in Billboard's revenue rankings [66]. - MSG Sphere in Las Vegas is a 17,500-seat venue utilizing advanced technologies, with construction costs supported by a $75 million agreement from Las Vegas Sands Corp [68]. - The MSG Sphere project includes features like the world's largest LED screen, advanced acoustics, and a haptic system for immersive experiences, aiming to open in calendar year 2023 [70]. Financial Performance and Risks - The company has faced substantial operating losses and negative cash flow, with no assurance of future profitability [138]. - The financial results of the Entertainment business are heavily reliant on the popularity of the Christmas Spectacular, which represented 17% of revenues in Fiscal Year 2020 [157]. - The estimated cost for MSG Sphere at The Venetian has increased to approximately $1.865 billion, reflecting a 10% increase due to various factors including the pandemic's impact on supply chains [159]. - The company recorded $14.7 million in affiliate rebates in FY 2021, reflecting potential revenue loss from affiliation agreements [177]. - The Madison Square Garden Complex benefits from a real estate tax exemption valued at $42.9 million for FY 2021, which may be subject to legislative changes [173]. - The company has written off approximately $75.4 million in deferred production costs related to past productions, indicating potential financial risks in new content development [168]. - The company is dependent on a limited number of distributors for MSG Networks revenues, which poses risks if any significant distributor is lost or if agreements are not renewed on favorable terms [180]. - The decline in subscribers to traditional MVPD services in the U.S. has accelerated, negatively impacting the company's affiliation revenues [186]. - The company has experienced a decrease in subscribers for several consecutive fiscal years, adversely affecting operating results [186]. - Advertising revenues are influenced by various factors, including economic health, team performance, and viewer preferences, which are often unpredictable [188]. - The company relies on media rights agreements with professional sports teams, and failure to renew these agreements on favorable terms could negatively impact revenues [190]. - The popularity of NBA and NHL teams whose media rights the company controls is crucial for generating viewership and advertising revenues [191]. Innovation and Development - The company is committed to innovation in media, having pioneered interactive gaming features in its streaming app, MSG GO [34]. - The company is exploring the creation of proprietary venue content to gain greater control over venue utilization and reduce reliance on touring schedules [34]. - The company is pursuing the MSG Sphere initiative, which involves significant capital investments for a new venue in Las Vegas [134]. - The company is exploring additional domestic and international markets for MSG Sphere venues, indicating potential for future expansion [163]. - The company plans to finance MSG Sphere at The Venetian using cash-on-hand and cash flows from operations, but may need to access additional capital if these are insufficient [163]. Community Engagement and Social Responsibility - The company has engaged in community support initiatives, including donating over 100,000 meals during the COVID-19 pandemic and raising over $50 million for hurricane victims [88]. - The Garden of Dreams Foundation has impacted nearly 400,000 young people and their families since its inception in 2006 [89]. - The company is committed to increasing brand awareness through public appearances and dance education offerings for the Rockettes [47]. - The company aims to enhance diversity and inclusion through initiatives such as employee resource groups and partnerships with local organizations [123]. Regulatory Environment and Compliance - The company is subject to extensive governmental regulations, including health and safety codes, which may materially affect its business operations [92]. - The California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA) impose additional data protection obligations effective January 1, 2023 [95]. - The regulatory environment for ticket sales and consumer protection statutes is subject to change, impacting the entertainment business [93]. - The company must comply with FCC regulations regarding closed captioning and commercial loudness standards for its programming networks [99][100]. - The evolving data protection landscape may require additional compliance investments and changes in business processes [95]. - Legislative enactments and regulatory changes could materially affect the programming business, impacting rates, terms, and conditions for content distribution [220]. - The U.S. Congress and the FCC are considering laws and regulations that may directly or indirectly affect the business, with potential for future material changes [220]. - The complexity and inconsistency of data privacy laws may pose challenges for the company's operations and compliance efforts [221]. Competition and Market Challenges - The company faces intense competition in the entertainment market, particularly in New York City, which is one of the most competitive entertainment markets globally [107]. - The competitive landscape for MSG Networks includes significant pressure from other programming networks and online streaming services, impacting viewership and advertising revenues [153]. - The company competes for advertising revenue, which is influenced by viewer preferences and the quality of competing programming [119]. - Competition for programming sources, especially sports-related content, is increasing due to the growing number of programming networks and distribution outlets [115]. - Tao Group Hospitality must continuously invest in maintaining high-quality venues and competitive pricing to attract customers in a highly competitive market [152]. - Economic downturns and changes in consumer preferences could adversely impact ticket sales, food and beverage spending, and advertising revenues [211]. - Negative publicity regarding any of the Tao Group Hospitality brands could lead to reduced sales and diminished brand value [203]. - The geographic concentration of operations in major markets exposes the company to greater risks compared to competitors with a more diversified presence [210].

Financial Data and Key Metrics Changes - In the fiscal fourth quarter, the company generated revenues of $99.8 million with an adjusted operating loss of $70 million [32] - Tao Group contributed $69.7 million in revenue, driven by strong reopening in key markets, particularly Las Vegas [32] - The company had approximately $1.17 billion in cash as of June 30, and $1.52 billion including MSG Networks' cash [35] Business Line Data and Key Metrics Changes - Tao Group's fourth quarter results included the impact of the Hakkasan Group acquisition, which significantly expanded its revenue base [18][60] - Hakkasan contributed approximately $28 million of revenue, representing 40% of Tao's total revenue for the quarter [61] - MSG Networks' standalone results will be discussed in detail starting next quarter, as the acquisition was completed on July 9 [31] Market Data and Key Metrics Changes - The best performing market for Tao Group in the fourth quarter was Las Vegas, which benefited from the Hakkasan acquisition [20] - The company noted that New York City has one of the highest vaccination rates in the country, positively impacting attendance at events [12][13] Company Strategy and Development Direction - The company is focused on the MSG Sphere project in Las Vegas, with an updated cost estimate of approximately $1.865 billion and an expected opening in calendar 2023 [34][22] - The acquisition of MSG Networks is expected to create a company with greater scale and revenue diversity, enhancing financial flexibility [10] - The company is exploring opportunities in mobile sports gaming, anticipating a competitive market in New York [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, citing strong pent-up demand for live events and a busy year ahead [25][15] - The company expects concert touring to ramp up in late September, with fiscal 2022 pacing ahead of fiscal 2020 [15] - Management acknowledged the fluid environment due to the Delta variant but believes vaccination policies will be beneficial [14] Other Important Information - The company completed a $650 million debt raise to strengthen its balance sheet during the pandemic [11] - A long-term lease renewal for Radio City Music Hall was secured, extending the lease until 2038 [17] Q&A Session Summary Question: Thoughts on sports betting and competition - Management highlighted the opportunity presented by mobile gaming legislation and the potential for multiple operators in the market, which could enhance competition and revenue [39][40] Question: Stock buyback considerations - Management stated that the priority is to protect and invest in core assets, with a focus on MSG Sphere and refinancing existing debt [43][44] Question: Update on MSG Sphere costs and inflation impact - Management discussed actions taken to manage costs amid inflation, including securing structural steel and monitoring supply chains [49][50] Question: Direct-to-consumer offering update - Management is exploring various options for direct-to-consumer products and is in the process of renewing agreements with the NBA and NHL [53][55] Question: Hakkasan's pre-pandemic performance - Management noted that Hakkasan nearly doubled Tao's revenue base based on 2019 results and highlighted the transformative potential of the acquisition [60][61] Question: Long-term recovery outlook - Management expressed confidence in a strong booking calendar for fiscal 2022, driven by rescheduled shows and new events [64][65] Question: Cost synergies post-merger - Management expects to realize savings in taxes, operating expenses, and interest payments, with specific figures provided for each category [71]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting com ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's discussion and analysis of financial condition [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated and combined financial statements for periods ended December 31, 2020, and June 30, 2020 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity as of December 31, 2020, and June 30, 2020 Consolidated Balance Sheets (in thousands) | Metric | December 31, 2020 (in thousands) | June 30, 2020 (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | | Cash and cash equivalents | $1,451,352 | $906,555 | | Total current assets | $1,662,293 | $1,426,502 | | Total assets | $4,121,839 | $3,719,206 | | Total current liabilities | $472,278 | $509,969 | | Long-term debt, net | $649,445 | $28,126 | | Total liabilities | $1,411,991 | $844,766 | | Total equity | $2,695,305 | $2,853,840 | - Total assets increased by **$402.6 million** from June 30, 2020, to December 31, 2020, primarily driven by an increase in cash and cash equivalents and construction in progress[9](index=9&type=chunk) - Long-term debt significantly increased from **$28.1 million to $649.4 million**, reflecting new financing activities[12](index=12&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details revenues, expenses, and net income or loss for the three and six months ended December 31, 2020 and 2019 Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenues | $23,137 | $394,072 | $37,515 | $572,035 | | Operating income (loss) | $(112,524) | $69,590 | $(239,139) | $1,444 | | Net income (loss) | $(129,103) | $82,644 | $(223,467) | $26,081 | | Basic and diluted EPS | $(5.17) | $3.39 | $(8.91) | $1.06 | - Revenues for the three months ended December 31, 2020, decreased by **94% YoY**, and for the six months ended December 31, 2020, decreased by **93% YoY**, primarily due to the COVID-19 pandemic's impact on operations[14](index=14&type=chunk) - The company reported significant operating and net losses for both the three and six months ended December 31, 2020, a stark contrast to the income reported in the prior year periods[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) This statement presents net income or loss and other comprehensive income or loss for the three and six months ended December 31, 2020 and 2019 Consolidated Statements of Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $(129,103) | $82,644 | $(223,467) | $26,081 | | Other comprehensive income, net of income taxes | $12,173 | $23,532 | $26,476 | $13,853 | | Comprehensive income (loss) | $(116,930) | $106,176 | $(196,991) | $39,934 | - Comprehensive loss for the three and six months ended December 31, 2020, was **$(116.9) million** and **$(197.0) million**, respectively, primarily driven by the net losses[15](index=15&type=chunk) - Other comprehensive income included significant cumulative translation adjustments, which were **$11.9 million** for the three months and **$25.8 million** for the six months ended December 31, 2020[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for the six months ended December 31, 2020 and 2019 Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------- | :---------------------------- | :---------------------------- | | Net cash (used in) provided by operating activities | $(215,632) | $103,758 | | Net cash provided by (used in) investing activities | $146,682 | $(129,606) | | Net cash provided by (used in) financing activities | $614,410 | $(40,885) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $553,255 | $(65,040) | - Operating activities used **$215.6 million** in cash for the six months ended December 31, 2020, a significant decrease from **$103.8 million** provided in the prior year, mainly due to higher operating loss and changes in working capital[18](index=18&type=chunk)[288](index=288&type=chunk) - Investing activities provided **$146.7 million**, a reversal from **$129.6 million** used in the prior year, primarily due to proceeds from short-term investment maturities[18](index=18&type=chunk)[289](index=289&type=chunk) - Financing activities provided **$614.4 million**, a substantial increase from **$40.9 million** used in the prior year, driven by proceeds from the National Properties Term Loan Facility[20](index=20&type=chunk)[290](index=290&type=chunk) [Consolidated Statements of Equity and Redeemable Noncontrolling Interests](index=9&type=section&id=Consolidated%20Statements%20of%20Equity%20and%20Redeemable%20Noncontrolling%20Interests) This statement outlines changes in stockholders' equity and noncontrolling interests for periods ended December 31, 2020, and June 30, 2020 Consolidated Statements of Equity and Redeemable Noncontrolling Interests (in thousands) | Metric (in thousands) | December 31, 2020 | June 30, 2020 | | :-------------------- | :---------------- | :------------ | | Total Madison Square Garden Entertainment Corp. stockholders' equity | $2,684,134 | $2,841,637 | | Total equity | $2,695,305 | $2,853,840 | - Total equity decreased from **$2,853.8 million** at June 30, 2020, to **$2,695.3 million** at December 31, 2020, primarily due to net loss attributable to stockholders[29](index=29&type=chunk) - Share-based compensation contributed **$36.7 million** to additional paid-in capital for the six months ended December 31, 2020[29](index=29&type=chunk) [Notes to Consolidated and Combined Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20and%20Combined%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated and combined financial statements [Note 1. Description of Business and Basis of Presentation](index=13&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes MSG Entertainment's core business, its spin-off, and the significant impact of the COVID-19 pandemic - MSG Entertainment is a leader in live experiences, operating iconic venues like Madison Square Garden, Radio City Music Hall, and the Beacon Theatre, and is constructing MSG Sphere in Las Vegas and planning one in London[35](index=35&type=chunk) - The company was spun off from Madison Square Garden Sports Corp. on April 17, 2020, and now operates with two reportable segments: Entertainment and Tao Group Hospitality[37](index=37&type=chunk)[38](index=38&type=chunk) - The COVID-19 pandemic has materially impacted operations, leading to venue closures, event cancellations (e.g., Christmas Spectacular, Boston Calling Music Festival), and significantly reduced capacity for Tao Group Hospitality[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) [Note 2. Accounting Policies](index=14&type=section&id=Note%202.%20Accounting%20Policies) This note details accounting principles, consolidation methods, and recently adopted accounting standards used in financial statements - The financial statements are prepared on a consolidated basis post-Entertainment Distribution (April 17, 2020) and a combined basis prior to that date, reflecting allocations from the former parent, MSG Sports[40](index=40&type=chunk)[52](index=52&type=chunk) - The company consolidates Tao Group Hospitality and Boston Calling Events, LLC, where it holds controlling voting interests, with other stockholders' equity shown as noncontrolling interests[53](index=53&type=chunk) - Several new accounting standards (ASU 2016-13, 2018-13, 2018-14, 2018-15, 2018-17, 2018-18, 2019-04, 2019-08, 2020-01) were adopted in Q1 Fiscal Year 2021, none of which had a material impact on the consolidated financial statements, except for ASU 2018-15 which may reclassify future amortization of cloud computing costs[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 3. Revenue Recognition](index=19&type=section&id=Note%203.%20Revenue%20Recognition) This note provides a breakdown of revenue sources and the COVID-19 pandemic's impact on the company's revenue recognition Revenue from Contracts with Customers (in thousands) | Revenue Source (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :---------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Event-related and entertainment dining and nightlife offerings | $10,138 | $305,718 | $16,525 | $440,760 | | Sponsorship, signage and suite licenses | $6,499 | $74,449 | $8,799 | $109,854 | | Other | $4,167 | $13,905 | $9,110 | $21,421 | | Total revenues from contracts with customers | $20,804 | $394,072 | $34,434 | $572,035 | - Total revenues from contracts with customers decreased significantly by **94.7%** for the three months and **94%** for the six months ended December 31, 2020, compared to the prior year, primarily due to the COVID-19 pandemic's impact on event-related and entertainment dining/nightlife offerings[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk) - Deferred revenue, representing consideration received in advance, increased from **$193.1 million** at June 30, 2020, to **$207.8 million** at December 31, 2020[75](index=75&type=chunk) [Note 4. Restructuring Charges](index=23&type=section&id=Note%204.%20Restructuring%20Charges) This note details restructuring charges incurred due to employee termination benefits as part of COVID-19 cost-saving initiatives - The company incurred restructuring charges of **$1.4 million** for the three months and **$21.3 million** for the six months ended December 31, 2020[79](index=79&type=chunk) - These charges are related to termination benefits for approximately **350 employees** in August 2020 and **10 employees** in November 2020, as part of cost-saving initiatives due to the COVID-19 pandemic[79](index=79&type=chunk) [Note 5. Cash, Cash Equivalents and Restricted Cash](index=23&type=section&id=Note%205.%20Cash%2C%20Cash%20Equivalents%20and%20Restricted%20Cash) This note provides a breakdown of cash, cash equivalents, and restricted cash balances and their changes over the period Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric (in thousands) | December 31, 2020 | June 30, 2020 | | :-------------------- | :---------------- | :------------ | | Cash and cash equivalents | $1,451,352 | $906,555 | | Restricted cash | $26,207 | $17,749 | | Total cash, cash equivalents and restricted cash | $1,477,559 | $924,304 | - Total cash, cash equivalents, and restricted cash increased by **$553.3 million** from June 30, 2020, to December 31, 2020[82](index=82&type=chunk) - Restricted cash as of December 31, 2020, included an **$8.1 million** deposit in a reserve account associated with Tao Group Hospitality's credit facilities[82](index=82&type=chunk) [Note 6. Investments in Nonconsolidated Affiliates](index=24&type=section&id=Note%206.%20Investments%20in%20Nonconsolidated%20Affiliates) This note details the company's equity method investments and equity securities, including fair value measurements and sales Investments in Nonconsolidated Affiliates (in thousands) | Investment Type (in thousands) | December 31, 2020 | June 30, 2020 | | :----------------------------- | :---------------- | :------------ | | Equity method investments | $46,126 | $49,122 | | Equity securities without readily determinable fair values | $3,500 | $3,500 | | Total investments in nonconsolidated affiliates | $49,626 | $52,622 | Equity Investment with Readily Determinable Fair Values (in thousands) | Equity Investment with Readily Determinable Fair Values (in thousands) | December 31, 2020 Carrying Value / Fair Value | June 30, 2020 Carrying Value / Fair Value | | :----------------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | | Townsquare common stock | $21,366 | $14,340 | | DraftKings common stock | $41,647 | $42,589 | | Total | $63,013 | $57,061 | - The company sold **395 shares** of DraftKings common stock for **$20.6 million**, realizing a loss of **$2.7 million**, and recorded a net unrealized gain of **$29.1 million** on DraftKings and Townsquare investments for the six months ended December 31, 2020[86](index=86&type=chunk) [Note 7. Property and Equipment](index=25&type=section&id=Note%207.%20Property%20and%20Equipment) This note provides details on property and equipment, including construction in progress for MSG Spheres and depreciation expenses Property and Equipment, Net (in thousands) | Asset Type (in thousands) | December 31, 2020 | June 30, 2020 | | :------------------------ | :---------------- | :------------ | | Construction in progress | $895,542 | $685,382 | | Total property and equipment, net | $1,837,072 | $1,646,115 | - Construction in progress increased by **$210.2 million**, primarily due to the development and construction of MSG Spheres in Las Vegas and London[87](index=87&type=chunk) - Depreciation and amortization expense on property and equipment was **$44.7 million** for the six months ended December 31, 2020, down from **$46.4 million** in the prior year[88](index=88&type=chunk) [Note 8. Leases](index=26&type=section&id=Note%208.%20Leases) This note outlines the company's right-of-use lease assets, lease liabilities, and associated lease costs and revenues Lease Metrics (in thousands) | Lease Metric (in thousands) | December 31, 2020 | June 30, 2020 | | :-------------------------- | :---------------- | :------------ | | Right-of-use lease assets | $198,464 | $220,328 | | Total lease liabilities | $210,403 | $227,607 | Lease Cost (in thousands) | Lease Cost (in thousands) | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :------------------------ | :---------------------------- | :---------------------------- | | Total lease cost | $23,661 | $33,096 | - The company's operating lease ROU assets and liabilities decreased, with a weighted average remaining lease term of **5.7 years** and a weighted average discount rate of **9.27%** as of December 31, 2020[94](index=94&type=chunk)[96](index=96&type=chunk) - Operating lease revenue from Arena License Agreements with MSG Sports was **$1.6 million** for the three and six months ended December 31, 2020, as The Garden reopened for Knicks games without fans[99](index=99&type=chunk) [Note 9. Goodwill and Intangible Assets](index=28&type=section&id=Note%209.%20Goodwill%20and%20Intangible%20Assets) This note details the company's goodwill and indefinite-lived intangible assets, including impairment testing and amortization expense - Goodwill remained at **$74.3 million** as of December 31, 2020, all within the Entertainment segment, with no impairment identified during the annual test in Q1 Fiscal Year 2021[100](index=100&type=chunk) Indefinite-Lived Intangible Assets (in thousands) | Indefinite-Lived Intangible Assets (in thousands) | December 31, 2020 | | :------------------------------------------------ | :---------------- | | Trademarks | $61,881 | | Photographic related rights | $1,920 | | Total | $63,801 | - Amortization expense for intangible assets was **$5.8 million** for the six months ended December 31, 2020, a decrease from **$7.8 million** in the prior year[103](index=103&type=chunk) [Note 10. Commitments and Contingencies](index=29&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note describes the company's contractual obligations and ongoing legal matters, with no material adverse effects anticipated - The company's commitments primarily consist of long-term noncancelable operating lease agreements for venues and offices[104](index=104&type=chunk) - No material changes in contractual obligations since Fiscal Year 2020, except for the National Properties Term Loan Facility and the termination of Delayed Draw Term Loan Facilities (DDTL Facilities)[104](index=104&type=chunk) - Management does not believe that the resolution of ongoing lawsuits will have a material adverse effect on the company[105](index=105&type=chunk) [Note 11. Fair Value Measurements](index=30&type=section&id=Note%2011.%20Fair%20Value%20Measurements) This note provides details on assets and liabilities measured at fair value, categorized by the fair value hierarchy levels Assets Measured at Fair Value (in thousands) | Asset Type (in thousands) | December 31, 2020 Fair Value | | :------------------------ | :--------------------------- | | Money market accounts | $198,051 | | Time deposits | $481,011 | | U.S. treasury bills | $314,998 | | Equity investments with readily determinable fair value | $63,013 | | Total assets measured at fair value | $1,057,073 | - All assets measured at fair value are classified within **Level I** of the fair value hierarchy, reflecting quoted prices in active markets[106](index=106&type=chunk) - Long-term debt under the National Properties Term Loan Facility and Tao Credit Facilities is classified within **Level II** of the fair value hierarchy[107](index=107&type=chunk) [Note 12. Credit Facilities](index=31&type=section&id=Note%2012.%20Credit%20Facilities) This note details the company's credit agreements, including the Tao Senior Credit Agreement and the National Properties Term Loan Facility - Tao Group Hospitality's Tao Senior Credit Agreement was amended in August 2020, suspending financial covenants through December 31, 2021, and increasing minimum liquidity requirements[111](index=111&type=chunk) - MSG Entertainment Group guaranteed Tao Group Hospitality's obligations under the Tao Senior Credit Agreement and established a reserve account with an initial deposit of **$9.8 million**[111](index=111&type=chunk) - MSG National Properties entered into a new five-year **$650 million** senior secured term loan facility in November 2020, with quarterly principal repayments of **0.25%** per quarter and an interest rate of **7.00%** as of December 31, 2020[119](index=119&type=chunk)[122](index=122&type=chunk) Debt Principal (in thousands) | Debt Type (in thousands) | December 31, 2020 Principal | | :----------------------- | :-------------------------- | | Tao Term Loan Facility | $31,250 | | Tao Revolving Credit Facility | $6,500 | | National Properties Term Loan Facility | $650,000 | | Total Principal | $687,750 | [Note 13. Pension Plans and Other Postretirement Benefit Plan](index=35&type=section&id=Note%2013.%20Pension%20Plans%20and%20Other%20Postretirement%20Benefit%20Plan) This note outlines the net periodic benefit costs for the company's pension and postretirement plans Net Periodic Benefit Cost (in thousands) | Net Periodic Benefit Cost (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Pension Plans | $(187) | $312 | $(314) | $623 | | Postretirement Plan | $43 | $38 | $86 | $79 | - Net periodic benefit cost for Pension Plans shifted from an expense of **$312 thousand** in Q2 FY2019 to a benefit of **$(187) thousand** in Q2 FY2021, and from an expense of **$623 thousand** in H1 FY2019 to a benefit of **$(314) thousand** in H1 FY2021[132](index=132&type=chunk) - Defined Contribution Pension Plans expenses were **$1.5 million** for Savings Plans and **$10 thousand** for Union Savings Plan for the three months ended December 31, 2020[133](index=133&type=chunk) [Note 14. Share-based Compensation](index=36&type=section&id=Note%2014.%20Share-based%20Compensation) This note details the share-based compensation expense, including the impact of award cancellations and vested RSUs Share-based Compensation (in thousands) | Share-based Compensation (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Share-based compensation expense | $23,562 | $10,373 | $35,091 | $20,458 | | Capitalized share-based compensation expense | $2,784 | $2,482 | $2,784 | $2,482 | - Share-based compensation expense increased significantly, including an incremental **$11.1 million** expense for the three and six months ended December 31, 2020, due to the cancellation of certain awards related to an executive settlement[135](index=135&type=chunk) - The fair value of RSUs that vested during the six months ended December 31, 2020, was **$16.3 million**[136](index=136&type=chunk) [Note 15. Accumulated Other Comprehensive Loss](index=37&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Loss) This note presents the components of accumulated other comprehensive loss, including pension adjustments and translation adjustments Accumulated Other Comprehensive Loss (in thousands) | Component (in thousands) | December 31, 2020 | June 30, 2020 | | :----------------------- | :---------------- | :------------ | | Pension Plans and Postretirement Plan | $(38,680) | $(39,322) | | Cumulative Translation Adjustments | $13,299 | $(12,535) | | Total Accumulated Other Comprehensive Loss | $(25,381) | $(51,857) | - Accumulated other comprehensive loss decreased from **$(51.9) million** at June 30, 2020, to **$(25.4) million** at December 31, 2020, primarily due to positive cumulative translation adjustments[140](index=140&type=chunk) - Cumulative translation adjustments contributed **$25.8 million** in other comprehensive income for the six months ended December 31, 2020[140](index=140&type=chunk) [Note 16. Income Taxes](index=38&type=section&id=Note%2016.%20Income%20Taxes) This note details the income tax expense, influenced by valuation allowances and share-based compensation, and prior tax responsibilities Income Tax Expense (in thousands) | Income Tax Expense (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2109 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Income tax expense | $(323) | $(1,255) | $(486) | $(1,440) | - Income tax expense for the three and six months ended December 31, 2020, was primarily influenced by an increase in valuation allowance (**$35.8 million** and **$64.3 million**, respectively) and accelerated share-based compensation expense, partially offset by state income tax benefits[142](index=142&type=chunk)[143](index=143&type=chunk) - Prior to the Entertainment Distribution, MSG Sports was responsible for the company's income taxes[147](index=147&type=chunk) [Note 17. Related Party Transactions](index=39&type=section&id=Note%2017.%20Related%20Party%20Transactions) This note describes transactions with related parties, including the Dolan Family Group and various agreements with MSG Sports and MSG Networks - The Dolan Family Group beneficially owned **100%** of Class B Common Stock and approximately **3.1%** of Class A Common Stock, representing about **70.7%** of total voting power, and also controls MSG Sports, MSG Networks, and AMC Networks[148](index=148&type=chunk) - Key related party arrangements include sponsorship, arena license agreements with MSG Sports, transition services agreements (TSA) with MSG Sports and MSG Networks, and various aircraft time-sharing agreements[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) Related Party Transactions (in thousands) | Related Party Transactions (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenues | $5,262 | $984 | $9,280 | $7,459 | | Revenue sharing expenses | $15 | $47,214 | $96 | $65,502 | | Corporate general and administrative expenses, net — MSG Sports | $(8,445) | $(32,720) | $(18,625) | $(63,813) | - Revenues from related parties increased significantly, primarily from advertising sales commissions and sponsorship/representation agreements with MSG Sports[161](index=161&type=chunk) [Note 18. Segment Information](index=43&type=section&id=Note%2018.%20Segment%20Information) This note provides financial data for the company's Entertainment and Tao Group Hospitality segments, evaluated by Adjusted Operating Income (Loss) - The company operates two reportable segments: Entertainment and Tao Group Hospitality[175](index=175&type=chunk) - Segment performance is evaluated based on Adjusted Operating Income (Loss), a non-GAAP measure that excludes non-cash leasing revenue, depreciation, amortization, share-based compensation, restructuring charges, and purchase accounting adjustments[176](index=176&type=chunk) Segment Operating Loss (in thousands) | Segment Operating Loss (in thousands) | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | | :------------------------------------ | :------------------------------ | :---------------------------- | | Entertainment | $(97,088) | $(207,739) | | Tao Group Hospitality | $(11,183) | $(22,439) | Segment Adjusted Operating Loss (in thousands) | Segment Adjusted Operating Loss (in thousands) | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | | :--------------------------------------------- | :------------------------------ | :---------------------------- | | Entertainment | $(55,272) | $(113,549) | | Tao Group Hospitality | $(8,432) | $(17,546) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and results, highlighting the severe impact of the COVID-19 pandemic - The company's operations are materially impacted by the COVID-19 pandemic, with virtually all Entertainment business operations suspended and Tao Group Hospitality operating at significantly reduced capacity[200](index=200&type=chunk) - The 2020 Christmas Spectacular and Boston Calling Music Festival were canceled, and most venue events are postponed or canceled through at least March 2021[201](index=201&type=chunk) - MSG Sphere in Las Vegas construction was temporarily suspended and the opening is now expected in **calendar year 2023**, with reduced near-term spending on technology and content development[204](index=204&type=chunk)[256](index=256&type=chunk) - The company estimates its monthly operational cash burn rate will average approximately **$25 million** for the remainder of Fiscal Year 2021, excluding severance, capital expenditures, capitalized content/technology spending for MSG Sphere, and working capital adjustments[258](index=258&type=chunk) [Business Overview](index=50&type=section&id=Business%20Overview) This section provides an overview of MSG Entertainment's core business in live experiences and the basis of its financial statements - MSG Entertainment is a leader in live experiences, owning and operating iconic venues (e.g., Madison Square Garden, Radio City Music Hall) and developing MSG Sphere in Las Vegas and London[194](index=194&type=chunk) - The company's financial statements for periods prior to April 17, 2020, are presented on a carve-out basis from MSG Sports, including allocations for centralized support functions[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Consolidated and Combined Results of Operations](index=53&type=section&id=Consolidated%20and%20Combined%20Results%20of%20Operations) This section analyzes the company's overall financial performance, including revenues, operating income, and net income, highlighting COVID-19 impacts Consolidated and Combined Results of Operations (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change Amount | Change Percentage | | :-------------------- | :------------------------------ | :------------------------------ | :------------ | :---------------- | | Revenues | $23,137 | $394,072 | $(370,935) | (94)% | | Operating income (loss) | $(112,524) | $69,590 | $(182,114) | NM | | Net income (loss) | $(129,103) | $82,644 | $(211,747) | NM | | Adjusted operating income (loss) | $(63,967) | $108,465 | $(172,432) | NM | - The significant decline in revenues and shift to operating and net losses are primarily attributed to the **COVID-19 pandemic** and related government restrictions[212](index=212&type=chunk) - Net interest income decreased by **$13.5 million** for the three months and **$19.8 million** for the six months, due to lower interest income from a shift to lower-yield U.S. Treasury Bills and higher interest expense from the National Properties Term Loan Facility[217](index=217&type=chunk) - Miscellaneous income (expense), net, decreased by **$16.7 million** for the three months due to unrealized/realized losses on DraftKings investment and lower unrealized gains on Townsquare, but increased by **$10.5 million** for the six months due to higher net gains on DraftKings[218](index=218&type=chunk) [Business Segment Results](index=58&type=section&id=Business%20Segment%20Results) This section provides a detailed analysis of the financial performance for the Entertainment and Tao Group Hospitality segments [Entertainment](index=58&type=section&id=Entertainment) This section analyzes the Entertainment segment's revenues, operating income, and adjusted operating income, severely impacted by COVID-19 Entertainment Segment Results (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change Amount | Change Percentage | | :-------------------- | :------------------------------ | :------------------------------ | :------------ | :---------------- | | Revenues | $12,669 | $325,370 | $(312,701) | (96)% | | Operating income (loss) | $(97,088) | $67,132 | $(164,220) | NM | | Adjusted operating income (loss) | $(55,272) | $98,633 | $(153,905) | NM | - Entertainment segment revenues decreased by **96.1%** for the three months and **95%** for the six months, primarily due to the cancellation of the Christmas Spectacular, lower event-related revenues (concerts, live entertainment), and reduced suite license and sponsorship revenues due to COVID-19[234](index=234&type=chunk) - Direct operating expenses decreased by **86%** for the three months and **82%** for the six months, reflecting lower event-related costs, Christmas Spectacular expenses, and suite license operations due to the pandemic[238](index=238&type=chunk) - Selling, general and administrative expenses decreased due to lower professional fees and workforce reductions, partially offset by an incremental **$11.1 million** share-based compensation expense from award cancellations[239](index=239&type=chunk)[240](index=240&type=chunk) [Tao Group Hospitality](index=62&type=section&id=Tao%20Group%20Hospitality) This section analyzes the Tao Group Hospitality segment's revenues and operating results, significantly affected by capacity restrictions and closures Tao Group Hospitality Segment Results (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change Amount | Change Percentage | | :-------------------- | :------------------------------ | :------------------------------ | :------------ | :---------------- | | Revenues | $10,491 | $69,104 | $(58,613) | (85)% | | Operating income (loss) | $(11,183) | $7,496 | $(18,679) | NM | | Adjusted operating income (loss) | $(8,432) | $9,907 | $(18,339) | NM | - Tao Group Hospitality's revenues decreased by **85%** for the three months and **86%** for the six months, primarily due to capacity restrictions at reopened venues, closures of other venues, and permanent closures of Avenue and Vandal in New York[248](index=248&type=chunk) - Direct operating expenses decreased by **73%** for both periods, driven by reductions in employee compensation, food/beverage costs, and rent expense due to venue closures and restrictions[249](index=249&type=chunk) - Selling, general and administrative expenses decreased by **49%** for the three months and **53%** for the six months, mainly due to lower marketing costs and reduced employee compensation[250](index=250&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, capital expenditure plans, and financing activities to manage liquidity - The company had **$1.45 billion** in cash and cash equivalents as of December 31, 2020, and believes it has sufficient liquidity to fund operations and MSG Sphere development for the next 12 months[259](index=259&type=chunk)[260](index=260&type=chunk) - A **$350 million** share repurchase program for Class A Common Stock was authorized, but no shares have been repurchased to date[262](index=262&type=chunk) - The DDTL Facilities with MSG Sports subsidiaries were terminated in November 2020 as MSG Sports secured third-party debt[261](index=261&type=chunk) [MSG Spheres](index=66&type=section&id=MSG%20Spheres) This section provides updates on the construction timeline and funding strategies for the MSG Sphere projects in Las Vegas and London - MSG Sphere at The Venetian in Las Vegas is now expected to open in **calendar year 2023**, with construction costs incurred through December 31, 2020, totaling approximately **$645 million**[266](index=266&type=chunk)[267](index=267&type=chunk) - The company plans to self-fund the Las Vegas Sphere's construction from cash-on-hand and cash flows, while exploring non-recourse debt, joint ventures, or equity partnerships for future venues[272](index=272&type=chunk)[273](index=273&type=chunk) - A second MSG Sphere is planned for London, pending approvals, with cost estimates still in development[270](index=270&type=chunk) [National Properties Term Loan Facility](index=68&type=section&id=National%20Properties%20Term%20Loan%20Facility) This section details the new $650 million term loan facility, its terms, and its impact on the company's liquidity - A five-year **$650 million** senior secured term loan facility was entered into in November 2020, with proceeds for working capital, general corporate purposes, and distributions to MSG Entertainment Group[274](index=274&type=chunk) - The facility includes a minimum liquidity covenant, initially **$450 million**, reducing over time to a floor of **$50 million** under certain conditions[275](index=275&type=chunk) - The loan bears interest at a floating rate (LIBOR or base rate plus margin), with an interest rate of **7.00%** as of December 31, 2020[276](index=276&type=chunk) [Tao Senior Secured Credit Facilities](index=69&type=section&id=Tao%20Senior%20Secured%20Credit%20Facilities) This section outlines the amended credit agreement for Tao Group Hospitality, including covenant suspensions and liquidity requirements - The Tao Senior Credit Agreement was amended in August 2020, suspending financial covenants through December 31, 2021, and increasing minimum liquidity requirements due to COVID-19 impacts[281](index=281&type=chunk) - MSG Entertainment Group guarantees Tao Group Hospitality's obligations and maintains a reserve account, with a minimum liquidity requirement of **$75 million**[281](index=281&type=chunk) - As of December 31, 2020, **$6.5 million** was outstanding on the Tao Revolving Credit Facility, with **$17.75 million** remaining available[280](index=280&type=chunk) [Seasonality of Our Business](index=70&type=section&id=Seasonality%20of%20Our%20Business) This section explains the historical seasonality of revenues, particularly the Christmas Spectacular, and its disruption in FY2021 - Historically, the company earns a disproportionate share of its revenues and operating income in the second fiscal quarter due to the Christmas Spectacular[291](index=291&type=chunk) - This seasonality is not expected for Fiscal Year 2021 due to the cancellation of the 2020 Christmas Spectacular production caused by COVID-19[291](index=291&type=chunk) [Recently Issued Accounting Pronouncements and Critical Accounting Policies](index=71&type=section&id=Recently%20Issued%20Accounting%20Pronouncements%20and%20Critical%20Accounting%20Policies) This section discusses new accounting standards adopted and the company's critical accounting policies, including goodwill impairment testing - The company adopted ASU No. 2017-04, simplifying goodwill impairment testing by removing Step 2, now measuring impairment as the excess of carrying value over fair value[296](index=296&type=chunk) - Annual impairment tests for goodwill and indefinite-lived intangible assets were performed in Q1 Fiscal Year 2021, with no impairments identified for the Entertainment reporting unit or indefinite-lived intangibles[300](index=300&type=chunk)[302](index=302&type=chunk) - Goodwill for the Entertainment segment was **$74.3 million** as of December 31, 2020, while Tao Group Hospitality had no remaining goodwill after FY2020 impairment charges[298](index=298&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines market risks, primarily interest rate fluctuations on variable-rate debt and foreign currency exchange rate changes - The company is exposed to interest rate risk from floating-rate borrowings under the National Properties Term Loan Facility and Tao Senior Secured Credit Facilities[305](index=305&type=chunk) - A hypothetical **100 basis point increase** in floating interest rates would increase annual interest expense by **$2.9 million**, and a **200 basis point increase** would result in a **$9.8 million** increase[306](index=306&type=chunk) - Foreign currency exchange rate exposure primarily relates to the British pound sterling for the London MSG Sphere development; a hypothetical **10% fluctuation** in GBP/USD would change net asset value by approximately **$17.7 million**[307](index=307&type=chunk) [Item 4. Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes to internal control over financial reporting - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 31, 2020[308](index=308&type=chunk) - There were no material changes in the company's internal control over financial reporting during the fiscal quarter ended December 31, 2020[309](index=309&type=chunk) [PART II. OTHER INFORMATION](index=71&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses ongoing legal matters, with management anticipating no material adverse effect from their resolution - The company is a defendant in various lawsuits, but management does not believe their resolution will have a material adverse effect[313](index=313&type=chunk) - A derivative action mentioned in the prior quarter's 10-Q was settled on June 18, 2020, with the settlement becoming effective on October 8, 2020[312](index=312&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section highlights key risks, including substantial indebtedness, interest rate fluctuations, and the potential impact of the LIBOR transition - The company has substantial indebtedness, including a new **$650 million** term loan facility, which requires significant interest and principal payments and limits financial flexibility[314](index=314&type=chunk) - Variable-rate indebtedness exposes the company to interest rate risk, where increases could significantly raise debt service obligations and reduce net income[316](index=316&type=chunk) - The discontinuation of LIBOR after 2021 and the potential transition to alternative reference rates like SOFR could impact interest payments on variable-rate debt[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the authorized share repurchase program for Class A Common Stock, noting no shares repurchased to date - The company has an authorized share repurchase program for up to **$350 million** of its Class A Common Stock[318](index=318&type=chunk) - No shares have been repurchased under this program as of December 31, 2020[318](index=318&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including various agreements, certifications, and XBRL taxonomy documents - Exhibits include a Letter Agreement amending the Ground Lease Agreement, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL instance and taxonomy documents[319](index=319&type=chunk)

Madison Square Garden Entertainment Corp. (MSGE) Q2 2021 Earnings Conference Call February 12, 2021 10:00 AM ET Company Participants Ari Danes - Investor Relations Andy Lustgarten - President Mark Fitzpatrick - EVP and Chief Financial Officer Conference Call Participants John Janedis - Wolfe Research Brandon Ross - LightShed Partners David Karnovsky - JPMorgan David Beckel - Berenberg Capital David Katz - Jefferies Operator Good morning. My name is Theresa, and I will be your conference operator today. At t ...

Madison Square Garden Entertainment Corp. (MSGE) Q1 2021 Earnings Conference Call November 16, 2020 4:30 PM ET Company Participants Ari Danes - Investor Relations Andy Lustgarten - President Mark FitzPatrick - Executive Vice President & Chief Financial Officer Conference Call Participants Brandon Ross - LightShed Partners John Janedis - Wolfe Research David Karnovsky - JPMorgan Operator Good morning. My name is Samaria, and I'll be your conference operator today. At this time, I would like to welcome everyo ...