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 September 30, 2020 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 ...

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Madison Square Garden Entertainment Corp. leads in live experiences through its Entertainment and Tao Group Hospitality segments, significantly impacted by COVID-19 and marked by the sale of the Forum - The company became a separate public entity on **April 17, 2020**, after its distribution from MSG Sports[11](index=11&type=chunk) - Operations are structured into two segments: **Entertainment** and **Tao Group Hospitality**[13](index=13&type=chunk)[14](index=14&type=chunk) - The **COVID-19 pandemic** has materially impacted operations, leading to business suspension and reduced capacity for Tao Group Hospitality[15](index=15&type=chunk) - The company sold the Forum for **$400 million** on May 1, 2020, realizing a **$240.8 million gain** on the sale[80](index=80&type=chunk) [Business Overview and Strategy](index=3&type=section&id=Business%20Overview%20and%20Strategy) The company's strategy centers on delivering world-class live experiences through iconic venues, proprietary content, and hospitality expertise, including the MSG Sphere expansion - The company's strategy aims to create world-class live experiences leveraging its iconic venues, exclusive content, and expertise in venue management and hospitality[22](index=22&type=chunk) - A key growth initiative involves developing **MSG Spheres**, with the first in Las Vegas and a second planned for London[25](index=25&type=chunk) - Proprietary content is being developed via MSG Sphere Studios to reduce touring reliance and create unique immersive attractions[30](index=30&type=chunk) - The company utilizes its controlling interest in Tao Group Hospitality to enhance food and hospitality offerings and integrate premium experiences across its venues[31](index=31&type=chunk) [Entertainment Segment](index=7&type=section&id=Entertainment%20Segment) The Entertainment segment produces and hosts diverse live events, including the successful 'Christmas Spectacular,' leveraging iconic venues and agreements with MSG Sports - The segment hosts events at multiple venues including The Garden and Radio City Music Hall, with capacities from **2,800 to 21,000**[33](index=33&type=chunk) - The **2019 'Christmas Spectacular'** was the most successful in its 87-year history, selling over **one million tickets**[46](index=46&type=chunk) - Long-term Arena License Agreements with MSG Sports ensure the Knicks and Rangers play home games at The Garden[40](index=40&type=chunk) - The segment holds a controlling interest in Boston Calling Events, LLC, operator of the Boston Calling Music Festival[34](index=34&type=chunk)[50](index=50&type=chunk) [Performance Venues](index=9&type=section&id=Performance%20Venues) The company operates five iconic venues and is developing the MSG Sphere project, with the Las Vegas venue expected to open in 2023 after COVID-19 related delays - The Garden, Radio City Music Hall, Hulu Theater, and The Chicago Theatre are ranked among the **highest-grossing venues globally** by Billboard's 2020 mid-year rankings[53](index=53&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[68](index=68&type=chunk) - The MSG Sphere in Las Vegas is a complex project featuring a **fully-programmable LED exterior**, the **world's largest high-resolution LED screen**, and an advanced acoustics system[69](index=69&type=chunk)[71](index=71&type=chunk) - Construction of the MSG Sphere in Las Vegas was suspended due to COVID-19 supply chain issues, has resumed, and is now expected to open in **calendar year 2023**[74](index=74&type=chunk)[107](index=107&type=chunk) - Land has been purchased in London for a second MSG Sphere, pending approvals, leveraging learnings from the Las Vegas project design[73](index=73&type=chunk) [Tao Group Hospitality Segment](index=12&type=section&id=Tao%20Group%20Hospitality%20Segment) The company holds a **77.5% controlling interest** in Tao Group Hospitality, which operates **28 venues** globally and integrates hospitality expertise into live entertainment offerings - The company increased its ownership in Tao Group Hospitality from **62.5% to 77.5%** in January 2020[75](index=75&type=chunk) - Tao Group Hospitality operates **28 venues** across six major markets including New York City and Las Vegas[76](index=76&type=chunk) - Tao Group Hospitality is a strategic partner for the MSG Sphere in Las Vegas, leveraging its **15-year market history** to enhance guest experience[78](index=78&type=chunk)[79](index=79&type=chunk) [Regulation, Competition, and Employees](index=14&type=section&id=Regulation%2C%20Competition%2C%20and%20Employees) The company faces extensive regulations, intense competition, and as of June 30, 2020, had approximately **1,500 full-time** and **6,100 part-time employees**, with **62% unionized** - Business operations are subject to extensive regulation, including **COVID-19 mandated closures** and assembly limitations, which have suspended events and reduced capacity[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company competes with a wide array of live performances, sporting events, movies, and home entertainment in highly competitive markets like New York City[95](index=95&type=chunk) - As of June 30, 2020, the company had approximately **1,500 full-time** and **6,100 part-time employees**, a reduction primarily due to the Forum sale and COVID-19 impacts[99](index=99&type=chunk) - Approximately **62% of employees** were union-represented as of June 30, 2020[99](index=99&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the **COVID-19 pandemic**, substantial **MSG Sphere project costs**, intense competition, geographic concentration, and control by the Dolan Family - The **COVID-19 pandemic** is the most significant risk, causing near-total business suspension, substantial revenue loss, and future uncertainty[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - MSG Sphere projects pose substantial financial risk, with the Las Vegas venue estimated at **$1.66 billion**, facing potential delays, cost overruns, and technological challenges[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Business operations are highly concentrated in New York City, Las Vegas, and Los Angeles, increasing vulnerability to adverse local events and economic conditions[123](index=123&type=chunk) - The Dolan Family Group controls the company, holding approximately **70.9% of total voting power**, enabling control over stockholder decisions and preventing changes in control[201](index=201&type=chunk) - The company is materially dependent on MSG Sports' performance under various agreements, including Arena License Agreements for the Knicks and Rangers at The Garden[185](index=185&type=chunk)[186](index=186&type=chunk) [Item 2. Properties](index=33&type=section&id=Item%202.%20Properties) The company owns the Madison Square Garden Complex and The Chicago Theatre, leases other iconic venues, and holds land for MSG Sphere developments in Las Vegas and London - Owned properties include the **Madison Square Garden Complex** and **The Chicago Theatre**[216](index=216&type=chunk) - Leased properties include **Radio City Music Hall** and the **Beacon Theatre** in New York City[217](index=217&type=chunk) - The company leases property in Las Vegas and owns property in Stratford, London, for MSG Sphere venue development[217](index=217&type=chunk) [Item 3. Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in a derivative lawsuit concerning Executive Chairman James L. Dolan's compensation, with a settlement reached in June 2020 pending court approval - A derivative lawsuit was filed on behalf of former parent MSG Sports against directors concerning Executive Chairman James L. Dolan's compensation[220](index=220&type=chunk) - A settlement was reached in **June 2020**, pending court approval, where Mr. Dolan agreed to relinquish certain one-time equity awards[221](index=221&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=35&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock (MSGE) began trading on NYSE on **April 20, 2020**, with no dividends paid and a **$350 million** share repurchase program authorized but not yet utilized - Class A Common Stock is listed on the NYSE under symbol **"MSGE"** and began trading on **April 20, 2020**[226](index=226&type=chunk) - A share repurchase program for up to **$350 million** of Class A Common Stock is authorized, with no repurchases to date[230](index=230&type=chunk) - No dividends were paid in Fiscal Year 2020, with no current plans for future cash dividends[229](index=229&type=chunk) [Item 6. Selected Financial Data](index=37&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data for FY2017-2020 shows **FY2020 revenues of $762.9 million**, a decrease from **FY2019's $1.05 billion**, and **net income of $17.2 million** driven by the Forum sale Selected Financial Data (in thousands of USD) | | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | | **Revenues (in thousands of USD)** | $762,936 | $1,048,909 | $988,990 | $711,022 | | **Net income (loss) (in thousands of USD)** | $(14,687) | $(30,138) | $1,887 | $(112,611) | | **Net Income (loss) attributable to MSGE stockholders (in thousands of USD)** | $17,234 | $(17,894) | $6,898 | $(108,545) | | **Diluted EPS attributable to MSGE stockholders (in USD)** | $0.72 | $(0.75) | $0.29 | $(4.52) | | **Total assets (in thousands of USD)** | $3,719,206 | $3,315,759 | $3,287,771 | $3,271,497 | | **Long-term debt (including current portion), net (in thousands of USD)** | $33,555 | $54,598 | $105,700 | $105,433 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **COVID-19 pandemic's significant impact** on operations, leading to a **27% revenue decrease** in FY2020, an **adjusted operating loss of $43.3 million**, and details liquidity management for the **MSG Sphere project** - The **COVID-19 pandemic** materially impacted operations, suspending events, canceling the 2020 Christmas Spectacular, and reducing Tao Group Hospitality venue capacity[248](index=248&type=chunk)[249](index=249&type=chunk) - The estimated monthly operational cash burn rate for FY2021 is approximately **$25 million**, a reduction from Q4 FY2020[411](index=411&type=chunk) - Due to COVID-19 disruptions, the company recorded a total impairment charge of **$105.8 million** for the Tao Group Hospitality reporting unit[257](index=257&type=chunk) - The company maintains sufficient liquidity with approximately **$907 million in cash** and **$337 million in short-term investments** as of June 30, 2020[413](index=413&type=chunk) [Results of Operations (FY2020 vs. FY2019)](index=49&type=section&id=Results%20of%20Operations%20(FY2020%20vs.%20FY2019)) FY2020 consolidated revenues decreased **27% to $762.9 million** due to COVID-19, resulting in an operating loss of **$59.8 million** and an adjusted operating loss of **$43.3 million**, despite a **$17.2 million net income** from the Forum sale Consolidated Results of Operations (FY2020 vs. FY2019, in thousands of USD) | Metric | FY 2020 | FY 2019 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues (in thousands of USD)** | $762,936 | $1,048,909 | (27)% | | **Operating loss (in thousands of USD)** | $(59,756) | $(45,597) | (31)% | | **Net income (loss) attributable to MSGE stockholders (in thousands of USD)** | $17,234 | $(17,894) | NM | | **Adjusted operating income (loss) (in thousands of USD)** | $(43,266) | $103,911 | NM | - The Entertainment segment's revenues decreased **27% to $585.2 million**, with adjusted operating income falling by **$123.9 million** to a **$44.3 million loss**[333](index=333&type=chunk)[350](index=350&type=chunk) - The Tao Group Hospitality segment's revenues decreased **29% to $180.2 million**, and its adjusted operating income decreased **94% to $1.5 million**[352](index=352&type=chunk)[363](index=363&type=chunk) - A non-cash impairment charge of **$105.8 million** was recorded in FY2020 for the Tao Group Hospitality reporting unit due to COVID-19 impacts[317](index=317&type=chunk) [Results of Operations (FY2019 vs. FY2018)](index=58&type=section&id=Results%20of%20Operations%20(FY2019%20vs.%20FY2018)) FY2019 combined revenues increased **6% to $1.05 billion**, but operating loss widened to **$45.6 million**, and adjusted operating income decreased **8% to $103.9 million** Consolidated Results of Operations (FY2019 vs. FY2018, in thousands of USD) | Metric | FY 2019 | FY 2018 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues (in thousands of USD)** | $1,048,909 | $988,990 | 6% | | **Operating loss (in thousands of USD)** | $(45,597) | $(31,282) | (46)% | | **Net income (loss) attributable to MSGE stockholders (in thousands of USD)** | $(17,894) | $6,898 | NM | | **Adjusted operating income (in thousands of USD)** | $103,911 | $112,830 | (8)% | - Entertainment segment revenue grew **7% to $797.1 million**, driven by increased concerts, Christmas Spectacular revenue, and sponsorship sales[384](index=384&type=chunk)[386](index=386&type=chunk) - Tao Group Hospitality segment revenue grew **4% to $253.7 million**, primarily from new venue sales from Tao Chicago, which opened in September 2018[401](index=401&type=chunk)[402](index=402&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) The company has strong liquidity with **$907 million in cash** and **$337 million in short-term investments**, managing cash burn through cost-saving measures and financing the **$1.66 billion MSG Sphere project** - As of June 30, 2020, the company held approximately **$907 million in cash** and cash equivalents and **$337 million in short-term investments**[413](index=413&type=chunk) - The estimated cost for MSG Sphere at The Venetian is approximately **$1.66 billion**, with **$453 million incurred** by June 30, 2020, to be financed by cash, operating cash flow, and up to **$500 million in new debt**[421](index=421&type=chunk)[426](index=426&type=chunk) - To preserve cash, the company revised the MSG Sphere construction schedule, reduced its workforce by approximately **350 full-time positions**, and furloughed approximately **6,000 venue employees**[414](index=414&type=chunk) Cash Flow Summary (in thousands of USD) | Cash Flow Activity | FY 2020 | FY 2019 | FY 2018 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities (in thousands of USD)** | $96,031 | $91,724 | $144,385 | | **Net cash used in investing activities (in thousands of USD)** | $(389,657) | $(228,063) | $(169,624) | | **Net cash provided by (used in) financing activities (in thousands of USD)** | $122,938 | $(8,621) | $15,356 | [Critical Accounting Policies](index=70&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies involve significant estimates, including impairment testing of long-lived assets and goodwill, with a **$88.6 million goodwill impairment** for Tao Group Hospitality in FY2020 due to COVID-19 - The company's long-lived and indefinite-lived assets, including goodwill, property, and equipment, comprised approximately **58% of total assets** as of June 30, 2020[453](index=453&type=chunk) - Due to COVID-19, an interim goodwill impairment test for the Tao Group Hospitality reporting unit resulted in a non-cash impairment charge of **$88.6 million** in FY2020[457](index=457&type=chunk)[461](index=461&type=chunk) - The company adopted ASU No. 2017-04, simplifying goodwill impairment accounting by removing Step 2 of the test[452](index=452&type=chunk) - The company adopted ASC Topic 842 on **July 1, 2019**, recognizing initial operating right-of-use assets of **$259.8 million** and corresponding lease liabilities[653](index=653&type=chunk)[655](index=655&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from **Tao Group Hospitality's variable-rate debt** and **foreign currency exposure** from the London MSG Sphere, with a **10% GBP/USD fluctuation** impacting net asset value by **$28.0 million** - The company has interest rate risk exposure through Tao Group Hospitality's floating-rate Senior Secured Credit Facilities borrowings[479](index=479&type=chunk)[480](index=480&type=chunk) - The company is exposed to foreign currency risk, primarily from the British pound sterling, related to the London MSG Sphere development, where a **10% GBP/USD fluctuation** would change net asset value by approximately **$28.0 million**[481](index=481&type=chunk) [Item 9A. Controls and Procedures](index=75&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of **June 30, 2020**, with no material changes in Q4 FY2020 - Management concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2020[484](index=484&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of June 30, 2020[488](index=488&type=chunk) PART III [Items 10, 11, 12, 13, and 14](index=77&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for Items 10-14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the **2020 proxy statement** - Information on directors, executive officers, corporate governance, executive compensation, security ownership, related party transactions, and principal accountant fees is incorporated by reference from the forthcoming **2020 proxy statement**[493](index=493&type=chunk)[494](index=494&type=chunk)[495](index=495&type=chunk)[496](index=496&type=chunk)[497](index=497&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=78&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including key agreements for the **MSG Sphere project** and **Tao Group Hospitality** - This section provides an index of all financial statements, schedules, and exhibits filed with the **10-K**[499](index=499&type=chunk)

Madison Square Garden Entertainment Corp. (MSGE) Q4 2020 Earnings Conference Call August 14, 2020 9:30 AM ET Company Participants Ari Danes - Investor Relations Andrew Lustgarten - President Mark FitzPatrick - Executive Vice President & Chief Financial Officer Conference Call Participants Brandon Ross - Lightshed Partners John Janedis - Wolfe Research John Belton - Evercore Ben Swinburne - Morgan Stanley Operator Good morning. My name is Christie, and I'll be your conference operator today. At this time, I ...

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 Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Class A Common Stock | MSGE | New York Stock Exchange | For the transition period from to Commi ...