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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Entertainment Corp. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Entertainment,” or the “Company”), including the impact of the COVID-19 pandemic on our future operations, our anticipated operational cash burn on a go-forward basis, cost-cutting measures the Company may or may not pursue to preserve cash and financial flexibility, the potential for future impairment charges, the timing and costs of new venue construction, our plans to pursue additional debt financing and negotiate amendments to Tao Group Hospitality’s credit facility, increased investment in personnel, content and technology for the MSG Spheres, and increased expenses of being a standalone public company. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to: our ability to effectively manage the impacts of the COVID-19 pandemic and the government actions taken in response;

the level of our expenses and our operational cash burn rate, including our corporate expenses as a stand-alone publicly traded company;

our ability to successfully design, construct, finance and operate new venues in Las Vegas, London and other markets, and the investments, costs and timing associated with those efforts, including the impact of the temporary suspension of construction and any other construction delays and/or cost overruns;

the level of our revenues, which depends in part on the popularity of the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”) and other entertainment and sports events which are presented in our venues;

the level of our capital expenditures and other investments;

general economic conditions, especially in the New York City, Las Vegas, Chicago and London metropolitan areas where we have (or plan to have) business activities;

the demand for sponsorship arrangements and for advertising;

competition, for example, from other venues and other sports and entertainment options, including the construction of new competing venues;

changes in laws, guidelines, bulletins, directives, policies and agreements, and regulations under which we operate;

any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;

seasonal fluctuations and other variations in our operating results and cash flow from period to period;

the successful development of new live productions or attractions, enhancements or changes to existing productions and the investments associated with such development, enhancements, or changes, as well as investment in personnel, content and technology for the MSG Spheres;

business, reputational and litigation risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches of our information security;

activities or other developments (such as pandemics, including the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venues;

the continued popularity and success of Tao Group Hospitality entertainment dining and nightlife venues, as well as its existing brands, and the ability to successfully open and operate new entertainment dining and nightlife venues;

the ability of Boston Calling Events, LLC (“BCE”) to attract attendees and performers to its future festivals;

the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;

our ability to successfully integrate acquisitions, new venues or new businesses into our operations;

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the operating and financial performance of our strategic acquisitions and investments, including those we do not control;

the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;

the impact of governmental regulations or laws, including changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions and the ability to maintain necessary permits or licenses;

the impact of any government plans to redesign New York City’s Pennsylvania Station;

a default by our subsidiaries under their respective credit facilities;

financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;

the ability of our investees and others to repay loans and advances we have extended to them;

our status as an emerging growth company;

the tax-free treatment of the Entertainment Distribution (as defined below);

our ability to achieve the intended benefits of the Entertainment Distribution;

the performance by MSG Sports of its obligations under various agreements with the Company related to the Entertainment Distribution and ongoing commercial arrangements;

lack of operating history as an operating company and costs associated with being an independent public company; and

the additional factors described under “Part I – Item 1A. Risk Factors” included in this Annual Report on Form 10-K.

We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

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Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section includes a discussion of accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are discussed in the notes to our consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K. See Note 2 to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of the accounting for leases in connection with the adoption of ASC Topic 842, Leases in fiscal year 2020.

license fee payments under the Arena License Agreements;

sponsorships, suite licenses and in-venue advertising;

the 2020 production of the Christmas Spectacular; and

the 2020 Boston Calling Music Festival.

While we have reduced certain operating expenses as a result of the COVID-19 pandemic (including (i) direct event expenses at our performance venues during the period our business operations are suspended, (ii) advertising and promotional spending for

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suspended and cancelled games and events and (iii) certain direct operating and SG&A expenses, including at our Tao Group Hospitality business), these expense reductions are not nearly enough to fully offset the revenue losses. We are building a state-of-the-art venue in Las Vegas, called MSG Sphere. This is a complex construction project with cutting-edge technology that relies on subcontractors obtaining components from a variety of sources around the world. In April, the Company announced that it was suspending construction of MSG Sphere due to COVID-19 related factors that were outside of its control, including supply chain issues. As the ongoing effects of the pandemic have continued to impact its business operations, the Company has revised its processes and construction schedule, and has resumed work with a lengthened timetable that enables the Company to better preserve cash in the near-term. The Company remains committed to bringing MSG Sphere to Las Vegas and, based on its new construction schedule, now expects to open the venue in calendar year 2023. A subsidiary of the Company is party to arena license agreements (the “Arena License Agreements”) with subsidiaries of MSG Sports that require the Knicks of the NBA and the Rangers of the NHL to play their home games at The Garden. Under the Arena License Agreements, the Knicks and the Rangers pay an annual license fee in connection with their respective use of The Garden. For each, the license fee for the initial contract year ending June 30, 2020 was to be prorated based on the number of games scheduled to be played at The Garden between the Entertainment Distribution date and the end of that contract year. The license fee for the first full contract year ending June 30, 2021 is approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees will be 103% of the license fees for the immediately preceding contract year. The teams are not required to pay the license fee during a period in which The Garden is unavailable for home games due to a force majeure event (including the government-mandated suspension of events at The Garden as a result of the disruptions caused by the COVID-19 pandemic). As a result, we have not received any license fee payments under the Arena License Agreements from the period following the Entertainment Distribution through the year ended June 30, 2020, and will continue to not receive any lease payments during the government mandated suspension of events at The Garden as a result of the disruptions caused by the COVID-19 pandemic. If, due to a force majeure event, capacity at The Garden is limited to 1,000 or fewer attendees, the teams may schedule and play home games at The Garden with amounts payable to the Company under the Arena License Agreements reduced by up to 80%. After The Garden becomes available following a force majeure event, future rent payments due under the Arena License Agreements will be payable by the Knicks and the Rangers even if the NBA or NHL seasons do not resume simultaneously or at all, and payments may be partially reduced in accordance with terms of the Arena License Agreements if The Garden opens with materially limited capacity greater than 1,000 attendees.

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pending necessary approvals. Also included in this segment is the original production, the Christmas Spectacular, as well as the Company’s controlling interest in BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. The Entertainment segment also includes our booking business.

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the capacity of the venue used, the extent to which we can sell to fully utilize the capacity and our ticket prices. During Fiscal Year 2017, we implemented significant changes to how we sell Christmas Spectacular tickets. By eliminating block sales to third party brokers, we brought a significant number of tickets back in-house, which created the opportunity for more customers to buy tickets to the production directly from us.

Aug 31, 2020


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