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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
________________________
FORM
10-Q/A
(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, 2021March 31, 2022
OR
☐
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
             to
to
Commission File Number:
001-39245
msge-20220331_g1.jpg
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)
Delaware
84-3755666
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
Two Penn Plaza
New York,NY
10121
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:(212)
465-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Trading
Symbol(s)
Name of each exchange
on which registered
Class A Common StockMSGEMSGENew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer☑☒Accelerated filer☐
Non-accelerated filer
☐☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). ☐ Yes ☒☑ No
Number of shares of common stock outstanding as of OctoberApril 29, 2021:
2022:
Class A Common Stock par value $0.01 per share
 —27,346,267 —27,324,977
Class B Common Stock par value $0.01 per share
 —6,866,754 —6,866,754


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EXPLANATORY NOTE
In accordance with Rule
12b-15
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the following Items of our Quarterly Report on Form
10-Q
for the fiscal quarter ended September 30, 2021 (the “Form
10-Q”
or the “Original Filing”) have been partially amended and the complete text of those Items, as originally filed and as amended herein, is set out in this Quarterly Report on Form
10-Q/A
(this “Form
10-Q/A”):
Explanatory Note
Part I—Item 1.Financial Statements
Part I—Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I—Item 4.Controls and Procedures
Part II—Item 1A.Risk Factors
Part IV—Item 6.Exhibits
The other Items of the Original Filing have not been amended and, accordingly, have not been repeated in this Form
10-Q/A.
Please note that the only changes to the Original Filing are those related to the matters described below and only in the items listed above. Except as described above, no changes have been made to the Original Filing, and this Form
10-Q/A
does not modify, amend or update any of the other financial information or other information contained in the Original Filing. In addition, in accordance with Securities and Exchange Commission (“SEC”) rules, this Form
10-Q/A
includes updated certifications from our Chief Executive Officer and Chief Financial Officer as Exhibits 31.1, 31.2, 32.1 and 32.2. Otherwise, the information contained in this Form
10-Q/A
is as of the date of the Original Filing and does not reflect any information or events occurring after the date of the Original Filing. Such subsequent information or events include, among others, the information and events described in our Annual Report on Form
10-K/A
for the fiscal year ended June 30, 2021, which is being filed concurrently with this Form
10-Q/A,
and the information and events described in our Current Reports on Form
8-K
filed subsequent to the date of the Original Filing. For a description of such subsequent information and events, please read our reports filed pursuant to the Exchange Act, subsequent to the date of the Original Filing, which update and supersede certain information contained in the Original Filing and this Form
10-Q/A.
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Madison Square Garden Entertainment Corp. (the “Company”) is filing this Quarterly Report on Form
10-Q/A
for the fiscal quarter ended September 30, 2021, originally filed with the SEC on November 9, 2021 (the “Original Filing Date”), to make certain changes described below.
The Company and its consolidated subsidiaries have incurred indebtedness under the following credit facilities:
the credit agreement (the “Tao Senior Credit Agreement”) of Tao Group Intermediate Holdings LLC and Tao Group Operating LLC (“Tao”),
the secured term loan facility (the “National Properties Term Loan Facility”) of MSG National Properties, LLC (“MSG National Properties”), and
the senior credit facilities (the “MSGN Credit Agreement” and collectively with the National Properties Term Loan Facility and the Tao Senior Credit Agreement, the “Credit Facilities”) of MSGN Holdings, L.P. (“MSG Networks”).
Although (a) the financing within Tao was in place well before costs associated with MSG Sphere began, (b) MSG National Properties incurred the National Properties Term Loan Facility during the
COVID-19
pandemic for the benefit of the core Entertainment business with significant restrictions on its use for MSG Sphere, and (c) the MSGN Credit Agreement was in place within MSG Networks while it was part of a separate public company that was merged with the Company in the first quarter of fiscal year 2022, subsequent to the Original Filing, the Company has determined that the application of Accounting Standards Codification (“ASC”) Topic
835-20
(Capitalization of Interest) requires that a portion of the interest incurred under the Credit Facilities should have been capitalized during the periods that the Company has been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017.
Management evaluated the quantitative and qualitative impact of this accounting error on the Company’s previously issued consolidated and combined financial statements included in the Original Filing and unaudited interim consolidated and combined financial statements included in the Original Quarterly Filing (collectively, the “previously issued financial statements”) and concluded that the error was not material to its previously issued financial statements.
In addition, the Company
re-evaluated
the effectiveness of the Company’s internal control over financial reporting and identified a control deficiency associated with the accounting error, which the Company has concluded represents a material weakness in the Company’s internal control over financial reporting as of September 30, 2021. Accordingly, the Company is filing this Form
10-Q/A
and is concurrently filing the Form
10-K/A
to amend management’s assessment of the Company’s internal control over financial reporting and its disclosure controls and procedures to indicate that they were not effective as of June 30, 2021 and September 30, 2021, respectively.
As a result of the determination to file this Form
10-Q/A
for the reasons outlined in the preceding paragraph, on February 3, 2022, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after discussion with management of the Company and Deloitte, determined that the Company will revise its (i) consolidated and combined financial statements for the fiscal years ended June 30, 2021, 2020 and 2019, included in the Company’s Annual Report on Form
10-K,
and (ii) consolidated financial statements for the fiscal quarters ended September 30, 2021 and 2020, included in the Original Filing, to correct the error related to the recognition of interest expense in accordance with ASC Topic
835-20
(Capitalization of Interest). The correction of this accounting error does not impact the Company’s previously reported revenues, operating income or adjusted operating income during any financial statement period. For a more detailed description of the correction of this accounting error refer to Note 20 –
Correction of Previously Issued Consolidated Financial Statements
to the unaudited consolidated financial statements of the Company included in Part I – Item 1 of this
Form10-Q/A.
Except as described above, no changes have been made to the Original Filing, and this Form
10-Q/A
does not modify, amend or update any of the other financial information or other information contained in the Original Filing. This Form
10-Q/A
does not reflect events that may have occurred subsequent to the Original Filing Date.
This Amendment reflects (i) new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Section 906 of the Sarbanes-Oxley Act of 2002, each of which is filed or furnished herewith, as applicable, and (ii) Exhibit 101 (Interactive Data Files) and Exhibit 104 (contained in Exhibit 101).
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
INDEX TO FORM
10-Q/A 10-Q
 
Page
Consolidated Balance Sheets as of September 30, 2021March 31, 2022 and June 30, 2021
1
Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020
3
Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020
4
Consolidated Statements of Cash Flows for the threenine months ended September 30,March 31, 2022 and 2021 and 2020
5
Consolidated Statements of Stockholders’Stockholders' Equity and Redeemable Noncontrolling Interests for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020
7
Notes to Consolidated Financial Statements
9
11
52
53
76
80
81
78
82
82
83
80
84


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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
March 31,
2022		June 30,
2021
ASSETS
Current Assets:
Cash and cash equivalents$999,063 $1,516,992 
Restricted cash21,690 22,984 
Accounts receivable, net250,853 184,613 
Net related party receivables58,835 31,916 
Prepaid income taxes3,705 12,772 
Prepaid expenses77,257 67,445 
Other current assets46,771 36,014 
Total current assets1,458,174 1,872,736 
Investments in nonconsolidated affiliates44,697 49,221 
Property and equipment, net2,707,193 2,156,292 
Right-of-use lease assets462,479 280,579 
Amortizable intangible assets, net177,069 198,274 
Indefinite-lived intangible assets63,801 63,801 
Goodwill500,181 502,195 
Other assets166,825 166,781 
Total assets$5,580,419 $5,289,879 
See accompanying notes to unaudited consolidated financial statements.
1


   
September 30,

2021
   
June 30,

2021
 
ASSETS
          
Current Assets:
          
Cash and cash equivalents
  $1,331,450   $1,516,992 
Restricted cash
   24,029    22,984 
Accounts receivable, net
   178,449    184,613 
Net related party receivables
   44,316    31,916 
Prepaid income taxes
   1,850    12,772 
Prepaid expenses
   70,639    67,445 
Other current assets
   38,388    36,014 
   
 
 
   
 
 
 
Total current assets
   1,689,121    1,872,736 
Investments in nonconsolidated affiliates
   48,140    49,221 
Property and equipment, net
   2,284,729    2,156,292 
Right-of-use
lease assets
   413,463    280,579 
Amortizable intangible assets, net
   186,169    198,274 
Indefinite-lived intangible assets
   63,801    63,801 
Goodwill
   500,181    502,195 
Other assets
   152,316    166,781 
   
 
 
   
 
 
 
Total assets
  $5,337,920   $5,289,879 
   
 
 
   
 
 
 
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
(in thousands, except per share data)
March 31,
2022		June 30,
2021
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable$40,380 $26,644 
Net related party payables, current76,075 23,173 
Current portion of long-term debt, net of deferred financing costs65,989 53,973 
Income taxes payable— 2,527 
Accrued liabilities:
Employee related costs95,185 91,853 
Other accrued liabilities310,030 210,749 
Operating lease liabilities, current67,012 73,423 
Collections due to promoters46,744 37,877 
Deferred revenue263,494 209,651 
Total current liabilities964,909 729,870 
Long-term debt, net of deferred financing costs1,584,072 1,650,628 
Operating lease liabilities, noncurrent440,319 233,556 
Defined benefit and other postretirement obligations51,424 54,179 
Other employee related costs18,059 21,193 
Collections due to promoters, noncurrent— 6,625 
Deferred tax liabilities, net185,481 200,325 
Other liabilities76,755 75,263 
Total liabilities3,321,019 2,971,639 
Commitments and contingencies (see Note 12)00
Redeemable noncontrolling interests137,778 137,834 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,341 and 27,093 shares outstanding as of March 31, 2022 and June 30, 2021, respectively273 271 
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of March 31, 2022 and June 30, 202169 69 
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2022 and June 30, 2021— — 
Additional paid-in capital2,334,271 2,294,775 
Accumulated deficit(190,793)(96,341)
Accumulated other comprehensive loss(37,010)(30,272)
Total Madison Square Garden Entertainment Corp. stockholders’ equity2,106,810 2,168,502 
Nonredeemable noncontrolling interests14,812 11,904 
Total equity2,121,622 2,180,406 
Total liabilities, redeemable noncontrolling interests and equity$5,580,419 $5,289,879 

See accompanying notes to unaudited consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETSSTATEMENTS OF OPERATIONS (Unaudited) (Continued)
(in thousands, except share and per share data)
 Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Revenues (a)
$460,127 $214,318 $1,271,076 $553,616 
Operating expenses:
Direct operating expenses (b)
262,476 110,022 724,495 301,750 
Selling, general and administrative expenses (c)
157,598 103,425 494,714 281,100 
Depreciation and amortization28,639 39,611 88,602 93,698 
Impairment and other (gains) losses, net(5,319)— (5,480)— 
Restructuring charges14,690 — 14,690 21,299 
Operating income (loss)2,043 (38,740)(45,945)(144,231)
Other income (expense):
Loss in equity method investments(1,528)(2,314)(4,509)(5,578)
Interest income774 792 2,322 2,401 
Interest expense(5,831)(6,503)(23,246)(17,038)
Miscellaneous income (expense), net(8,449)27,483 (28,096)53,932 
(15,034)19,458 (53,529)33,717 
Loss from operations before income taxes(12,991)(19,282)(99,474)(110,514)
Income tax benefit (expense)(6,315)(6,556)8,532 (15,715)
Net loss(19,306)(25,838)(90,942)(126,229)
Less: Net income (loss) attributable to redeemable noncontrolling interests(442)(6,860)4,412 (14,091)
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(902)(2,250)
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)$(94,452)$(109,888)
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(0.51)$(0.79)$(2.76)$(3.48)
Weighted-average number of common shares outstanding:
Basic and diluted34,320 34,060 34,230 34,083 
   
September 30,
2021
  
June 30,
2021
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
Current Liabilities:
         
Accounts payable
  $26,465  $26,644 
Net related party payables, current
   21,213   23,173 
Current portion of long-term debt, net of deferred financing costs
   55,228   53,973 
Income taxes payable
   1,126   2,527 
Accrued liabilities:
         
Employee related costs
   47,295   91,853 
Other accrued liabilities
   221,345   210,749 
Operating lease liabilities, current
   53,571   73,423 
Collections due to promoters
   61,652   37,877 
Deferred revenue
   265,950   209,651 
   
 
 
  
 
 
 
Total current liabilities
   753,845   729,870 
Long-term debt, net of deferred financing costs
   1,621,194   1,650,628 
Operating lease liabilities, noncurrent
   396,569   233,556 
Defined benefit and other postretirement obligations
   53,412   54,179 
Other employee related costs
   21,464   21,193 
Collections due to promoters, noncurrent
   0     6,625 
Deferred tax liabilities, net
   177,781   200,325 
Other liabilities
   77,238   75,263 
   
 
 
  
 
 
 
Total liabilities
   3,101,503   2,971,639 
   
 
 
  
 
 
 
Commitments and contingencies (see Note 11)
         
Redeemable noncontrolling interests
   140,410   137,834 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
         
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,305 and 27,093 shares outstanding as of September 30, 2021 and June 30, 2021, respectively
   273   271 
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of September 30, 2021 and June 30, 2021
   69   69 
Preferred stock, par value $0.01, 15,000 shares authorized; NaN outstanding as of September 30, 2021 and June 30, 2021
   0     0   
Additional
paid-in
capital
   2,293,157   2,294,775 
Accumulated deficit
   (175,573)   (96,341) 
Accumulated other comprehensive loss
   (35,060)   (30,272) 
   
 
 
  
 
 
 
Total Madison Square Garden Entertainment Corp. stockholders’ equity
   2,082,866   2,168,502 
Nonredeemable noncontrolling interests
   13,141   11,904 
   
 
 
  
 
 
 
Total equity
   2,096,007   2,180,406 
   
 
 
  
 
 
 
Total liabilities, redeemable noncontrolling interests and equity
  $5,337,920  $5,289,879 
   
 
 
  
 
 
 
_________________
(a)Includes revenues from related parties of $35,259 and $16,291 for the three months ended March 31, 2022 and 2021, respectively, and $70,148 and $23,752 for the nine months ended March 31, 2022 and 2021, respectively.
(b)Includes net charges from related parties of$37,198 and $36,222for the three months ended March 31, 2022 and 2021, respectively, and $117,186 and $111,409 for the nine months ended March 31, 2022 and 2021, respectively.
(c)Includes net charges to related parties of $(9,635) and $(7,638)for the three months ended March 31, 2022 and 2021, respectively, and $(27,048) and $(28,626) for the nine months ended March 31, 2022 and 2021, respectively.

See accompanying notes to unaudited consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share data)
thousands)
   
Three Months Ended
September 30,
 
  
 
 
 
   
2021
  
2020
 
Revenues
(a)
  $294,510  $170,546 
Operating expenses:
         
Direct operating expenses
(b)
   165,761   99,231 
Selling, general and administrative expenses
(c)
   174,839   81,657 
Depreciation and amortization
   29,430   28,410 
Impairment of long-lived assets
   7,818   0   
Restructuring charges
   0     19,927 
   
 
 
  
 
 
 
Operating loss
   (83,338)   (58,679) 
Other income (expense):
         
Loss in equity method investments
   (1,207)   (1,696) 
Interest income
   775   772 
Interest expense
   (9,248)   (5,273) 
Miscellaneous income (expense), net
   (2,547)   34,017 
   
 
 
  
 
 
 
    (12,227)   27,820 
   
 
 
  
 
 
 
Loss from operations before income taxes
   (95,565)   (30,859) 
Income tax benefit (expense)
   18,910   (9,457) 
   
 
 
  
 
 
 
Net loss
   (76,655)   (40,316) 
Less: Net income (loss) attributable to redeemable noncontrolling interests
   2,212   (3,889) 
Less: Net income (loss) attributable to nonredeemable noncontrolling interests
   365   (630) 
   
 
 
  
 
 
 
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $(79,232)  $(35,797) 
   
 
 
  
 
 
 
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $(2.32)  $(1.05) 
Weighted-average number of common shares outstanding:
         
Basic and diluted
   34,095   34,165 
Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Net loss$(19,306)$(25,838)$(90,942)$(126,229)
Other comprehensive income (loss), before income taxes:
Amortization of prior service credit included in net periodic benefit cost510 416 1,530 1,310 
Cumulative translation adjustments(5,912)1,499 (9,844)27,333 
Other comprehensive income (loss), before income taxes(5,402)1,915 (8,314)28,643 
Income tax benefit (expense) related to items of other comprehensive income (loss)1,024 (350)1,576 (5,334)
Other comprehensive income (loss), net of income taxes(4,378)1,565 (6,738)23,309 
Comprehensive loss(23,684)(24,273)(97,680)(102,920)
Less: Net income (loss) attributable to redeemable noncontrolling interests(442)(6,860)4,412 (14,091)
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(902)(2,250)
Comprehensive loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(21,869)$(16,695)$(101,190)$(86,579)

(a)
Includes revenues from related parties of $4,187 and $2,823 for the three months ended September 30, 2021 and 2020, respectively.
(b)
Includes net charges from related parties of $42,333 and $39,916 for the three months ended September 30, 2021 and 2020, respectively.
(c)
Includes net charges to related parties of $(7,260) and $(10,047) for the three months ended September 30, 2021 and 2020, respectively.
See accompanying notes to unaudited consolidated financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSCASH FLOWS
(Unaudited)
(in thousands)


Nine Months Ended
March 31,
20222021
Cash flows from operating activities:
Net loss$(90,942)$(126,229)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization88,602 93,698 
Impairment and other (gains) losses, net(5,480)— 
Amortization of deferred financing costs6,548 4,078 
Benefit from deferred income taxes(11,872)(37,630)
Share-based compensation expense62,321 57,421 
Loss in equity method investments4,509 5,578 
Net unrealized loss (gains) on equity investments with readily determinable fair value28,303 (52,662)
Provision for credit losses1,170 31 
Other non-cash adjustments(91)271 
Change in assets and liabilities:
Accounts receivable(64,496)(32,588)
Receivables from related parties, net of payables25,983 (6,939)
Prepaid expenses and other assets(48,773)(20,215)
Accounts payable14,926 (7,207)
Prepaid/payable for income taxes5,783 1,436 
Accrued and other liabilities8,977 (16,419)
Collections due to promoters, including noncurrent portion2,242 (6,452)
Deferred revenue54,195 21,487 
Operating lease right-of-use assets and lease liabilities24,296 8,225 
Net cash provided by (used in) operating activities$106,201 $(114,116)
Cash flows from investing activities:
Capital expenditures, net$(516,494)$(324,597)
Capitalized interest(32,202)(21,223)
Proceeds from maturity of short-term investments— 339,110 
Proceeds from sale of equity securities— 22,079 
Cash received for notes receivable— 6,328 
Other investing activities770 137 
Net cash (used in) provided by investing activities$(547,926)$21,834 
See accompanying notes to unaudited consolidated financial statements.
5
   
Three Months Ended

September 30,
 
   
2021
  
2020
 
Net loss
       $(76,655)       $(40,316) 
Other comprehensive income (loss), before income taxes:
                   
Pension plans and postretirement plan:
                   
Amounts reclassified from accumulated other comprehensive loss:
                   
Amortization of actuarial loss included in net periodic benefit cost
   510        478      
Amortization of prior service credit included in net periodic benefit cost
   0      510   0      478 
   
 
 
       
 
 
   
 
 
 
Cumulative translation adjustments
        (6,418)        13,951 
        
 
 
       
 
 
 
Other comprehensive income (loss), before income taxes
        (5,908)        14,429 
Income tax benefit (expense) related to items of other comprehensive income (loss)
        1,120        (2,732) 
        
 
 
       
 
 
 
Other comprehensive income (loss), net of income taxes
        (4,788)        11,697 
        
 
 
       
 
 
 
Comprehensive loss
        (81,443)        (28,619) 
Less: Net income (loss) attributable to redeemable noncontrolling interests
        2,212        (3,889) 
Less: Net income (loss) attributable to nonredeemable noncontrolling interests
        365        (630) 
        
 
 
       
 
 
 
Comprehensive loss attributable to Madison Square Garden Entertainment Corp.’s stockholders
       $(84,020)       $(24,100) 
        
 
 
       
 
 
 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)



Nine Months Ended
March 31,
20222021
Cash flows from financing activities:
Proceeds from issuance of term loan, net of issuance discount$— $630,500 
Proceeds from revolving credit facility— 14,500 
Taxes paid in lieu of shares issued for equity-based compensation(15,652)(8,208)
Noncontrolling interest holders’ capital contributions5,400 700 
Distributions to noncontrolling interest holders(3,367)— 
Distributions to related parties associated with the settlement of certain share-based awards(2,256)(1,771)
Put option payments to redeemable noncontrolling interest holders(895)— 
Repayments of revolving credit facility(15,000)— 
Principal repayments on long-term debt(45,750)(31,500)
Payments for financing costs— (14,623)
Net cash (used in) provided by financing activities$(77,520)$589,598 
Effect of exchange rates on cash, cash equivalents and restricted cash22 7,918 
Net (decrease) increase in cash, cash equivalents and restricted cash(519,223)505,234 
Cash, cash equivalents and restricted cash at beginning of period1,539,976 1,121,141 
Cash, cash equivalents and restricted cash at end of period$1,020,753 $1,626,375 
Non-cash investing and financing activities:
Investments and loans to nonconsolidated affiliates$731 $— 
Capital expenditures incurred but not yet paid$192,360 $67,954 
Share-based compensation capitalized in property and equipment$2,264 $4,541 

See accompanying notes to unaudited consolidated financial statements.

4
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Three Months Ended March 31, 2022
Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of December 31, 2021$342 $2,317,415 $(173,302)$(32,632)$2,111,823 $15,992 $2,127,815 $142,004 
Net loss— — (17,491)— (17,491)(1,373)(18,864)(442)
Other comprehensive loss— — — (4,378)(4,378)— (4,378)— 
Comprehensive loss— — — — (21,869)(1,373)(23,242)(442)
Share-based compensation— 18,537 — — 18,537 — 18,537 — 
Tax withholding associated with shares issued for equity-based compensation— (412)— — (412)— (412)— 
Accretion of put options— — — — — — — 587 
Put option payments to redeemable noncontrolling interest holders— — — — — — — (895)
Contributions from noncontrolling interest holders— — — — — 723 723 — 
Distribution to related parties associated with the settlement of certain share-based awards— (1,269)— — (1,269)— (1,269)(471)
Distributions to noncontrolling interest holders— — — — — (530)(530)(3,005)
Balance as of March 31, 2022$342 $2,334,271 $(190,793)$(37,010)$2,106,810 $14,812 $2,121,622 $137,778 
See accompanying notes to unaudited consolidated financial statements.

7
   
Three Months Ended
September 30,
 
   
2021
  
2020
 
Cash flows from operating activities:
         
Net loss
  $(76,655)  $(40,316) 
Adjustment to reconcile net loss to net cash used in operating activities:
         
Depreciation and amortization
   29,430   28,410 
Impairment of long-lived assets
   7,818   0   
Amortization of deferred financing costs
   2,184   485 
Benefit from deferred income taxes
   (20,036)   (9,590) 
Share-based compensation expense
   19,528   16,156 
Loss in equity method investments
   1,207   1,696 
Net unrealized loss (gains) on equity investments with readily determinable fair value
   2,460   (33,658) 
Provision for credit losses
   437   645 
Other
non-cash
adjustments
   (89)   (325) 
Change in assets and liabilities:
         
Accounts receivable
   5,546   (5,508) 
Receivables from related parties, net of payables
   (14,180)   (15,472) 
Prepaid expenses and other assets
   17,202   12,626 
Accounts payable
   191   (9,518) 
Accrued and other liabilities
   (47,232)   (45,323) 
Collections due to promoters, including noncurrent portion
   17,150   (8,498) 
Deferred revenue
   56,299   11,386 
Operating lease
right-of-use
assets and lease liabilities
   5,728   1,577 
   
 
 
  
 
 
 
Net cash provided by (used in) operating activities
  $6,988  $(95,227) 
   
 
 
  
 
 
 
Cash flows from investing activities:
         
Capital expenditures
  $(137,271)  $(113,799) 
Capitalized interest
   (9,326)   (355) 
Proceeds from maturity of short-term investments
   0     300,000 
Cash received for notes receivable
   0     6,328 
Other investing activities
   295   60 
   
 
 
  
 
 
 
Net cash (used in) provided by investing activities
  $(146,302)  $192,234 
   
 
 
  
 
 
 
See accompanying notes to unaudited consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Three Months Ended March 31, 2021
Common Stock IssuedAdditional
Paid-In
Capital		Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of December 31, 2020$340 $2,325,177 $(38,071)$(28,729)$2,258,717 $11,171 $2,269,888 $14,543 
Reversal of valuation allowance(1,747)— (1,747)— (1,747)— 
Net loss——(18,260)— (18,260)(718)(18,978)(6,860)
Other comprehensive income——— 1,565 1,565 — 1,565 — 
Comprehensive loss— — — — (16,695)(718)(17,413)(6,860)
Share-based compensation— 12,608 — — 12,608 — 12,608 — 
Tax withholding associated with shares issued for equity-based compensation— (85)— — (85)— (85)— 
Accretion of put options— — — — — — — 587 
Contribution from noncontrolling interest holders— — — — — 200 200 — 
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— — (8,728)— (8,728)8,728 
Distribution to related parties associated with the settlement of certain share-based awards granted prior to the Entertainment Distribution— (1,273)— — (1,273)— (1,273)(498)
Balance as of March 31, 2021$340 $2,327,699 $(58,078)$(27,164)$2,242,797 $10,653 $2,253,450 $16,500 
See accompanying notes to unaudited consolidated financial statements.









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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Nine Months Ended March 31, 2022
Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of June 30, 2021$340 $2,294,775 $(96,341)$(30,272)$2,168,502 $11,904 $2,180,406 $137,834 
Net income (loss)— — (94,452)— (94,452)(902)(95,354)4,412 
Other comprehensive loss— — — (6,738)(6,738)— (6,738)— 
Comprehensive income (loss)— — — — (101,190)(902)(102,092)4,412 
Share-based compensation— 62,824 — — 62,824 — 62,824 — 
Tax withholding associated with shares issued for equity-based compensation2 (15,654)— — (15,652)— (15,652)— 
Adjustment of redeemable noncontrolling interest for change in ownership— — — — — — — (7,500)
Redeemable noncontrolling interest adjustment to redemption fair value— (6,178)— — (6,178)— (6,178)7,566 
Accretion of put options— — — — — — — 1,761 
Put option payments to redeemable noncontrolling interest holders— — — — — — — (895)
Contributions from noncontrolling interest holders— — — — — 5,400 5,400 — 
Distributions to noncontrolling interest holders— — — — — (1,590)(1,590)(4,640)
Distribution to related parties associated with the settlement of certain share-based awards— (1,496)— — (1,496)— (1,496)(760)
Balance as of March 31, 2022$342 $2,334,271 $(190,793)$(37,010)$2,106,810 $14,812 $2,121,622 $137,778 
See accompanying notes to unaudited consolidated financial statements.

9
   
Three Months Ended
September 30,
 
   
2021
  
2020
 
Cash flows from financing activities:
         
Taxes paid in lieu of shares issued for equity-based compensation
  $(14,903)  $(8,071) 
Noncontrolling interest holders’ capital contribution
   872   200 
Distribution to related parties associated with the settlement of certain share-based awards
   (516)   0   
Repayments of revolving credit facility
   (15,000)   0   
Principal repayments on long-term debt
   (15,250)   (8,125) 
   
 
 
  
 
 
 
Net cash used in financing activities
  $(44,797)  $(15,996) 
   
 
 
  
 
 
 
Effect of exchange rates on cash, cash equivalents and restricted cash
   (386)   5,814 
   
 
 
  
 
 
 
Net (decrease) increase in cash, cash equivalents and restricted cash
   (184,497)   86,825 
Cash, cash equivalents and restricted cash at beginning of period
   1,539,976   1,121,141 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period
  $1,355,479  $1,207,966 
   
 
 
  
 
 
 
Non-cash
investing and financing activities:
         
Investments and loans to nonconsolidated affiliates
  $547  $0   
Capital expenditures incurred but not yet paid
  $122,469  $78,100 
Share-based compensation capitalized in property and equipment
  $751  $866 

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Nine Months Ended March 31, 2021
Common Stock IssuedAdditional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of June 30, 2020$338 $2,285,709 $51,727 $(50,473)$2,287,301 $12,203 $2,299,504 $20,600 
Cumulative effect of adoption of ASU 2016-13, credit losses(480)— (480)(480)
Reversal of valuation allowance— — 563 — 563 — 563 — 
Net loss——(109,888)— (109,888)(2,250)(112,138)(14,091)
Other comprehensive income——— 23,309 23,309 — 23,309 — 
Comprehensive loss— (86,579)(2,250)(88,829)(14,091)
Share-based compensation— 60,201 — — 60,201 — 60,201 — 
Tax withholding associated with shares issued for equity-based compensation2 (8,210)— — (8,208)— (8,208)— 
Accretion of put options— — — — — — — 1,761 
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— — (8,728)— (8,728)8,728 
Contributions from noncontrolling interest holders— — — — — 700 700 — 
Distribution to related parties associated with the settlement of certain share-based awards granted prior to the Entertainment Distribution— (1,273)— — (1,273)— (1,273)(498)
Balance as of March 31, 2021$340 $2,327,699 $(58,078)$(27,164)$2,242,797 $10,653 $2,253,450 $16,500 
See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
   
Three Months Ended September 30, 2021
 
   
Common

Stock

Issued
   
Additional

Paid-In

Capital
  
Accumulated
Deficit
  
Accumulated

Other

Comprehensive

Loss
  
Total Madison
Square Garden
Entertainment
Corp.
Stockholders’
Equity
  
Non -

redeemable

Noncontrolling

Interests
   
Total Equity
  
Redeemable

Noncontrolling

Interests
 
Balance as of June 30, 2021
  $340   $2,294,775  $(96,341)  $(30,272)  $2,168,502  $11,904   $2,180,406  $137,834 
Net loss
   —      —     (79,232)   —     (79,232)   365    (78,867)   2,212 
Other comprehensive loss
   —      —     —     (4,788)   (4,788)   —      (4,788)   —   
                    
 
 
  
 
 
   
 
 
  
 
 
 
Comprehensive loss
   —      —     —     —     (84,020)   365    (83,655)   2,212 
Share-based compensation
   —      19,692   —     —     19,692   —      19,692   —   
Tax withholding associated with shares issued for equity-based compensation
   2    (14,905)   —     —     (14,903)   —      (14,903)   —   
Adjustment of redeemable noncontrolling interest for change in ownership
   —      —     —     —     —     —      —     (7,500) 
Redeemable noncontrolling interest adjustment to redemption fair value
   —      (6,178)   —     —     (6,178)   —      (6,178)   7,566 
Accretion of put options
   —      —     —     —     —     —      —     587 
Contributions from noncontrolling interest holders
   —      —     —     —     —     872    872   —   
Distribution to related parties associated with the settlement of certain share-based awards
   —      (227)   —     —     (227)   —      (227)   (289) 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Balance as of September 30, 2021
  $342   $2,293,157  $(175,573)  $(35,060)  $2,082,866  $13,141   $2,096,007  $140,410 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
See accompanying notes to unaudited consolidated financial statements.
7
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
   
Three Months Ended September 30, 2020
 
   
Common
Stock
Issued
   
Additional

Paid-In

Capital
  
Retained
Earnings
  
Accumulated

Other

Comprehensive
Loss
  
Total Madison
Square Garden
Entertainment
Corp.
Stockholders’
Equity
  
Non -

redeemable

Noncontrolling

Interests
  
Total Equity
  
Redeemable

Noncontrolling

Interests
 
Balance as of June 30, 2020
  $338   $2,285,709  $50,246  $(48,992)  $2,287,301  $12,203  $2,299,504  $20,600 
Cumulative effect of adoption of Accounting Standards Update
2016-13,
credit losses
   —      —     (480)   —     (480)   —     (480)   —   
Reversal of valuation allowance
            2,376   —     2,376   —     2,376   —   
Net loss
   —      —     (35,797)   —     (35,797)   (630)   (36,427)   (3,889) 
Other comprehensive income
   —      —     —     11,697   11,697   —     11,697   —   
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive loss
   —      —     —     —     (24,100)   (630)   (24,730)   (3,889) 
Share-based compensation
   —      16,435   —     —     16,435   —     16,435   —   
Tax withholding associated with shares issued for equity-based compensation
   2    (8,072)   —     —     (8,070)   —     (8,070)   —   
Accretion of put options
   —      —     —     —     —     —     —     587 
Contribution from noncontrolling interest holders
   —      —     —     —     —     200   200   —   
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance as of September 30, 2020
  $340   $2,294,072  $16,345  $(37,295)  $2,273,462  $11,773  $2,285,235  $17,298 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See accompanying notes to unaudited consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following notes to consolidated financial statements (unaudited) are presented in thousands, except per share data or as otherwise noted.

Note 1. Description of Business and Basis of Presentation
Entertainment Distribution and Merger with MSG Networks Inc.
Madison Square Garden Entertainment Corp. (together with its subsidiaries, the “Company” or “MSG Entertainment”) was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports”), formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of MSG Entertainment to MSG Sports’ stockholders (the “Entertainment Distribution”), which occurred on April 17, 2020 (the “Entertainment Distribution Date”). See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K,
as amended by Form 10-K/A filed on February 9, 2022 (the “Form 10-K”) for more information regarding the Entertainment Distribution. As part of the Entertainment Distribution, the Company has entered into various agreements with MSG Sports as detailed in Note 18.19.
On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to the Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time
multiplied
by 0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time
multiplied
by 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.
Description of Business
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment brands; regional sports and entertainment networks; popular dining and nightlife offerings; and a premier music festival. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences.
The Company is comprised of 3 reportable segments: Entertainment, MSG Networks and Tao Group Hospitality.
•The Entertainment segment includes the Company’s portfolio of venues: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. In addition, the Company has unveiled its vision for state-of-the-art venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Entertainment segment also includes the original production, the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival. This segment also includes our bookings business, which features a variety of live entertainment and sports experiences.
•The MSG Networks segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. MSG Networks serves the New York Designated Market Area (“DMA”), as well as other portions of New York, New Jersey, Connecticut and
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders, New Jersey Devils and Buffalo Sabres of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants and Buffalo Bills of the National Football League.
•The Tao Group Hospitality segment features the Company’s controlling interest in TAO Group Holdings LLC, a hospitality group with globally-recognized entertainment dining and nightlife brands including: Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan and Omnia.
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Garden and The Chicago Theatre. The Company leases Radio City Music Hall and the Beacon Theatre. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in Las Vegas, New York, Southern California, London, Singapore, Sydney and various other domestic and international locations.
Basis of Presentation
The Company reports on a fiscal year basis ending on June 30th (“Fiscal Year”). In these consolidated financial statements, the years ended on June 30, 2022, 2021 and 2020 are referred to as “Fiscal Year 2022,” “Fiscal Year 2021” and “Fiscal Year 2020”, respectively.
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instruction of Rule 10-01 of Regulation S-X of Securities and Exchange Commission (“SEC”), and should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes thereto for Fiscal Year 2021 included in the Form 10-K and the Company’s consolidated financial statements and notes thereto for the three and six months ended December 31, 2021 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2021. The consolidated financial statements as of March 31, 2022 and for the three and nine months ended March 31, 2022 and 2021 presented herein are unaudited; however, in the opinion of management, the financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. As a result of the production of the Christmas Spectacular and arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden, the Company generally earns a disproportionate share of its annual revenues in the second and third quarters of its fiscal year. In addition, the Company’s operating results since the third quarter of Fiscal Year 2020 have been negatively impacted due to the COVID-19 pandemic.
The Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control. As a result, all prior period balances in these consolidated financial statements (including share activities) were retrospectively adjusted as if MSG Entertainment and MSG Networks Inc. had been operating as a single company.
Description of Business12
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment brands; regional sports and entertainment networks; popular dining and nightlife offerings; and a premier music festival. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences.
The Company is comprised of 3 reportable segments: Entertainment, MSG Networks and Tao Group Hospitality.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The Entertainment segment includes the Company’s portfolio of venues: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. In addition, the Company has unveiled its vision for
state-of-the-art
venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Entertainment segment also includes the original production, the
Christmas Spectacular Starring the Radio City Rockettes
(“
Christmas Spectacular
”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival. This segment also includes our bookings business, which features a variety of live entertainment and sports experiences.
The MSG Networks segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. MSG Networks serves the New York Designated Market Area (“DMA”), as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders, New Jersey Devils and Buffalo Sabres of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants and Buffalo Bills of the National Football League.
The Tao Group Hospitality segment features the Company’s controlling interest in TAO Group Holdings LLC, a hospitality group with globally-recognized entertainment dining and nightlife brands including: Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan and Omnia.
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Garden and The Chicago Theatre. The Company leases Radio City Music Hall and the Beacon Theatre. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in Las Vegas, New York, Southern California, London, Singapore, Sydney and various other domestic and international locations.
Basis of Presentation
The Company reports on a fiscal year basis ending on June 30th. In these consolidated financial statements, the year ending on June 30, 2022 is referred to as “Fiscal Year 2022,” and the years ended on June 30, 2021 and 2020 are referred to as “Fiscal Year 2021” and “Fiscal Year 2020”, respectively.
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instruction of Rule
10-01
of Regulation
S-X
of Securities and Exchange Commission (“SEC”), and should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K.
The consolidated financial statements as of September 30, 2021 and for the three months ended September 30, 2021 and 2020 presented herein are unaudited; however, in the opinion of management, the financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. As a result of the production of the
Christmas Spectacular
and arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden, the Company generally earns a disproportionate share of its annual revenues in the second and third quarters of its fiscal year. In addition, the Company’s operating results since the third quarter of Fiscal Year 2020 have been negatively impacted due to the
COVID-19
pandemic.
10
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
As discussed above, the Merger has been accounted for as a transaction between entities under common control and resulted in a change in reporting entity for purposes of U.S. GAAP. The results of operations for the eight days ended July 8, 2021 from MSG Networks were immaterial and the Company has included these results in the period for the threenine months ended September 30, 2021.March 31, 2022. The following table provides the impact of the change in reporting entity on the results of operations for the three and nine months September 30, 2020ended March 31, 2021 in accordance with Accounting Standards Codification (“ASC”) Subtopic
250-10-50-6:
Three Months EndedNine Months Ended
March 31, 2021
Decrease in net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders48,038 163,203 
Increase (decrease) in other comprehensive income (loss)$1,257 $(4,956)
Decrease in net loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders (basic and diluted)$2.28 $8.16 
Decrease in net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $53,758 
Decrease in other comprehensive income
  $(2,606) 
Decrease in net loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders (basic and diluted)
  $2.63 
Impact of the
COVID-19
Pandemic
The Company’s operations and operating results have been and may continue to be, materially impacted by the
COVID-19
pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all operations of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have resumed, it isFiscal Year 2022 has also been impacted by the pandemic, with fewer ticketed events at our venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not clear when we will fully returnimpacted by COVID-19) due to normal operations.the lead-time required to book touring acts and artists, and an increase in cases due to a COVID-19 variant, which resulted in a number of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in
mid-March
March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from
mid-February
February through
mid-May
May 2021 with certain safety protocols and social distancing. Beginning in
mid-May
May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. For all events hosted at our New York performance venues with 100% capacity prior to August 17, 2021, guests were required to provide proof of full vaccination or a negative
COVID-19
test, depending on the requirements of that venue and/or preference of the performer. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, areincluding our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older were required to show proof of at least one vaccination shot. Guests are also required to wear masks unless they showprovide proof that they are fully vaccinatedhad received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols). Children under age 12 can attend events with a vaccinated adult, but ages 2 to 11 need to wear a mask while inside our venues. In addition, effective August 20, 2021, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or canceledcancelled. For the nine months ended March 31, 2022 and whileas of this date, live events arehave been permitted to be held at all of our performance venues as of the date of this filing and we are continuing to host and book new events, due to the lead-time required to book touring acts and artists, which is the majorityevents. As a result of our Entertainment business, we expect that ouran increase in cases of a COVID-19 variant, select bookings will continue to be impacted through the 2021 calendar year. We continue to actively pursue
one-time
were postponed or multi-night performancescancelled at our performance venues asin the touring market ramps up.second and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact toof the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the
Christmas Spectacular
, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals. While the 2021 production of the
Christmas Spectacular
is currently
on-sale,
the current production is scheduled for 160 shows, as compared with 199 shows for the 2019 production, which was the last production presented prior to the impact of the
COVID-19
pandemic.Festival.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers
2020-21
regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License AgreementsAgreements. The Knicks and full
the Rangers each completed their 2021-2022 82-game
regular seasons, forwith the
2021-22
NBA and NHL seasons are scheduled. Rangers advancing to the playoffs.
13
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
As a result of the
COVID-19
pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by
COVID-19),
and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, expects a return to normalized levels ofits advertising revenue and certain operating expenses, including rights fees expense.expense, reflect the same.
Disruptions caused by the
COVID-19
pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to governmentgovernment actions taken in response to the
COVID-19
pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in
mid-March
March 2020. Additionally, three3 venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. During Fiscal Year 2022, Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and duringreduced demand from guests, including corporate and private event cancellations and postponements in the first quartersecond and third quarters.As of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Effective August 17, 2021, workers and customers in New York City indoor dining facilities are required to show proofthe date of at least one vaccination shot. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, butthis filing, Tao Group Hospitality is continuing to operateoperating without capacity restrictions in domestic and key international markets.
It is unclear how long and to what extent
COVID-19
concerns, including with respect to new variants, will continue to impactcould result in new government andor league-mandated capacity restrictions or vaccination/mask requirements or impact the use of and/or demand for our entertainment and dining and nightlife venues, and demand for our sponsorship and advertising assets, or deter our employees and vendors from working at our venues (which may lead to difficulties in staffing). or otherwise materially impact our operations.
Impairment and other (gains) losses, net
For the three months ended September 30, 2021, Tao Group HospitalityMarch 31, 2022, the Company recorded other gains of $5,319 primarily from extinguishment of lease liabilities associated with a Hakkasan venue. For the nine months ended March 31, 2022, the Company recorded other net gains of $5,480 primarily from the extinguishment and modifications of lease liabilities associated with a Hakkasan venues, offset by an impairment charge forof long-lived assets of $7,818 due to decisions made by management to cease operations atand certain Hakkasan venues subsequent to the Hakkasan acquisition date, resulting in the impairment of the respective
right-of-use
asset assets and a leasehold improvement. There were no other material impairment charges recorded by the Company for the three months ended September 30, 2021 and 2020.improvements. The duration and impact of the
COVID-19
pandemic may result in future impairment charges that management will evaluate as facts and circumstances evolve over time. Refer to Note 8,9, Note 910 and Note 1011 for further detail of the Company’s intangible assets, long-lived assets and goodwill.
Note 2. Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of Madison Square Garden Entertainment Corp. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated financial statements of the Company include the accounts from Tao Group Hospitality and BCE, in which the Company has controlling voting interests. The Company’s consolidation criteria are based on authoritative accounting guidance for voting interest or variable interest entities. Tao Group Hospitality and BCE are consolidated with the equity owned by other stockholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying consolidated balance sheets, and the other stockholders’ portion of net income (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying consolidated statements of operations and consolidated statements of comprehensive income (loss), respectively.
See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K,
regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality.
12
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, provision for credit losses, valuation of investments,
14


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
goodwill, intangible assets, other long-lived assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, tax accruals and other assets and liabilities. In addition, estimates are used in revenue recognition, rights fees, income tax, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the financial statements to be reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Summary of Significant Accounting Policies
The following is an update to the Company’sCompany's Summary of Significant Accounting Policies, disclosed in its Annual Report on Form
10-K
for the year ended June 30, 2021. 10-K. The update primarily reflects specific policies for the MSG Networks segment in connection with the Merger.
Revenue Recognition — Media Affiliation Fee and Advertising Revenues
The MSG Networks segment generates revenues principally from affiliation fees charged to cable, satellite, telephone and other platforms (“Distributors”) for the right to carry its networks, as well as from the sale of advertising. The MSG Networks advertising revenue is largely derived from the sale of inventory in its live professional sports programming.programming, and as such, a significant share of this revenue has historically been earned in the second and third fiscal quarters. Due to the
COVID-19
pandemic, the NBA and NHL
2020-21
regular seasons were delayed and primarily occurred during the third and fourth quarters of Fiscal Year 2021 and will affect the comparability in the second, third and the fourth fiscal quarters of Fiscal Year 2022.
Affiliation fee revenue is earned from Distributors for the right to carry the MSG Networks segment’s networks under contracts, commonly referred to as “affiliation agreements.” The performance obligation under its affiliation agreements is satisfied as MSG Networks provides its programming over the term of the affiliation agreement.
Affiliation fee revenue is the predominant revenue stream of the MSG Networks segment. Substantially all of the MSG Networks’ affiliation agreements are sales-based and usage-based royalty arrangements, the revenue for which is recognized as the sale or usage occurs. The transaction price is represented by affiliation fees that are generally based upon contractual rates applied to the number of the Distributor’s subscribers who receive or can receive the MSG Networks programming. Such subscriber information is generally not received until after the close of the reporting period, and in these cases, the Company estimates the number of subscribers. Historical adjustments to recorded estimates have not been material.
In addition to affiliation fee revenue, the MSG Networks segment also earns advertising revenue primarily through the sale of commercial time and other advertising inventory during its live professional sports programming. In general, these advertising arrangements either do not exceed one year or are primarily multi-year media banks, the elements of which are agreed upon each year. Advertising revenue is recognized as advertising is aired. In certain advertising arrangements, the Company guarantees specified viewer ratings for its programming. In such cases, the promise to deliver the guaranteed viewer ratings by airing the advertising represents MSG Networks’ performance obligation. A contract liability is recognized as deferred revenue to the extent any
13
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
guaranteed viewer ratings are not met and the customer is expected to exercise a contractual right for additional advertising time. The related revenue is subsequently recognized as revenue either when MSG Networks provides the required additional advertising time, or additional performance requirements become remote, which may be at the time the guarantee obligation contractually expires.
Direct Operating Expenses
Direct operating expenses from the MSG Networks segment primarily represent media rights fees and other direct programming and production costs, such as the salaries of
on-air
personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities. The professional team media rights acquired under media rights agreements to telecast various sporting events and other programming for exhibition on MSG Networksthe segment’s networks are typically expensed on a straight-line basis over the applicable annual contract or license period.
Advertising Expenses15


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Advertising costs are typically charged to expense when incurred. The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors (see discussion below), that involve the exchange of advertising and promotional benefits, for the segment’s services. Total advertising costs, which are primarily related to the aforementioned nonmonetary transactions and classified in selling, general and administrative expenses, were $4,489 and $4,685 for the three months ended September 30, 2021 and 2020, respectively.

Noncash ConsiderationNonmonetary Transactions
The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors, that involve the exchange of products or services, such as advertising and promotional benefits, for the segment’s services. For arrangements that are subject to sales based and usage-based royalty guidance, MSG Networks measures noncash consideration that it receives at fair value as the sale or usage occurs. For other arrangements, the MSG Networks segment measures the estimated fair value of the noncash consideration that it receives at contract inception. If the MSG Networks segment cannot reasonably estimate the fair value of the noncash consideration, the segment measures the fair value of the consideration indirectly by reference to the standalone selling price of the services promised to the customer in exchange for the consideration as revenues. Total advertising costs for MSG Networks, which includes the aforementioned nonmonetary transactions and which are classified in selling, general and administrative expenses, were $14,521 and $35,193 for the three and nine months ended March 31, 2022, respectively, and $12,852 and $23,029 for the three and nine months ended March 31, 2021, respectively.
Interest Capitalization
For significant long term construction projects, such as MSG Sphere, the Company begins to capitalize qualified interest costcosts once activities necessary to get the asset ready for its intended use have commenced. The Company calculates qualified interest capitalization using the average amount of accumulated expenditures during the period the asset is being prepared for its intended use and a capitalization rate which is derived from the Company’s weighted average borrowing rate during such time, in the absence of specific borrowings related to the significant long term construction projects. The Company ceases capitalization on any portions substantially completed and ready for their intended use.
See Note 9 for further details on interest capitalization during the three and nine months ended March 31, 2022 and 2021.

Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”ASU”)
No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
. This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance. This standard was adopted by the Company in the first quarter of Fiscal Year 2022. The adoption of the standard had no impact on the Company’s consolidated financial statements.
14
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Recently Issued Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU
2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU
2021-01,
which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
Note 3. Acquisition
Acquisition of Hakkasan
See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K,
regarding the details of Tao Group Hospitality’s acquisition of the business (“Hakkasan”) of Hakkasan USA, Inc., a Delaware corporation (“Hakkasan Parent”) on April 27, 2021. During the three months ended September 30, 2021, the Company completed the finalization of a working capital adjustment and net debt against agreed upon targets. As a result, the initial determination of approximately 18% noncontrolling interest ownership of common equity interests in TaoTAO Group
Sub-Holdings
LLC owned by the Hakkasan Parent was subsequently revised to approximately 15%. The Company continuescontinued to own a 77.5% controlling interest in TaoTAO Group Holdings LLC, which, after the ownership adjustments, translatestranslated to an approximately 66% indirect controlling interest in TaoTAO Group Sub-Holdings LLC.
Sub-Holdings
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
As of March 31, 2022, the Company’s ownership interest in TAO Group Holdings LLC had increased to 77.8% in connection with investor put transactions at TAO Group Holdings LLC. The Company’s ownership interest in TAO Group Holdings LLC increased further to 79.1% as of April 1, 2022, when the Company completed investor call transactions at TAO Group Holdings LLC. Tao Group Hospitality’s results will continue to be consolidated in the financial results of the Company.
The Company’s purchase price allocation (“PPA”) for the Hakkasan acquisition is pending finalization of deferred taxes and could be subject to further revision if additional information becomes available. The Company’s PPA and measurement period adjustment for the Hakkasan acquisition is presented below:
Fair Value Recognized as of Acquisition Date (as previously reported)
Measurement Period Adjustment (a)
Fair Value Recognized as of September 30, 2021 as adjusted (b)
Cash and cash equivalents$16,737 $— $16,737 
Property and equipment, net33,393 — 33,393 
Right-of-use lease assets44,818 — 44,818 
Amortizable intangible assets, net47,170 (7,020)40,150 
Other assets12,641 — 12,641 
Accrued expenses and other current liabilities(15,957)1,534 (14,423)
Operating lease liabilities(52,025)— (52,025)
Other liabilities(13,655)— (13,655)
Total identifiable net assets acquired73,122 (5,486)67,636 
Goodwill3,378 (2,014)1,364 
Redeemable noncontrolling interests$(76,500)$7,500 $(69,000)
_________________
(a)During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in TAO Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534.
(b)No additional adjustments were recorded during the three months ended March 31, 2022.
   
Fair Value
Recognized as of
Acquisition Date
(as previously
reported)
   
Measurement
Period
Adjustment 
(a)
   
Fair Value
Recognized as
of September

30, 2021 as

adjusted
 
Cash and cash equivalents
  $16,737   $—     $16,737 
Property and equipment, net
   33,393    —      33,393 
Right-of-use
lease assets
   44,818    —      44,818 
Amortizable intangible assets, net
   47,170    (7,020)    40,150 
Other assets
   12,641    —      12,641 
Accrued expenses and other current liabilities
   (15,957)    1,534    (14,423) 
Operating lease liabilities
   (52,025)    —      (52,025) 
Other liabilities
   (13,655)    —      (13,655) 
   
 
 
   
 
 
   
 
 
 
Total identifiable net assets acquired
   73,122    (5,486)    67,636 
Goodwill
   3,378    (2,014)    1,364 
Redeemable noncontrolling interests
  $(76,500)   $7,500   $(69,000) 
Note 4. Restructuring Charges
During the three months ended March 31, 2022, the Company underwent organizational changes. These measures included termination of certain employees and executives. For the three months ended March 31, 2022, the Company recorded $14,690 for restructuring charges related to the termination benefits provided to employees, inclusive of $4,589 of share-based compensation expenses, none of which have been paid as of March 31, 2022 and are shown in accrued severance and additional paid-in-capital on the balance sheet, respectively. The Company recorded $21,299 of restructuring charges during the nine months ended March 31, 2021, all of which has been paid as of March 31, 2022. Such costs are reflected in restructuring charges in the accompanying consolidated and combined statements of operations.

(a)
During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in Tao Group
Sub-Holdings
LLC was reduced from approximately
18
% as initially estimated to approximately
15
%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company
wrote-off
a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534.

0
15
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 4.5. Revenue Recognition
Contracts with Customers
See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K,
and “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for more information regarding the details of the Company’s revenue recognition policies. All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, except for $2,316 and $748 of revenues from Arena License Agreements, leases and subleases whichthat are accounted for in accordance with ASC Topic 842 of $31,052 and $62,564 for the three and ninemonths ended September 30,March 31, 2022, respectively, and $12,186 and $15,267 for the three and ninemonths ended March 31, 2021, and 2020, respectively.
The following table presents the activity in the allowance for credit losses for the threenine months ended September 30, 2021:
March 31, 2022:
Beginning balance, June 30, 2021$6,449 
Provision for expected credit losses1,170 
Write-offs(2,322)
Ending balance, March 31, 2022$5,297 
Beginning balance
  $6,449 
Provision for expected credit losses
   437 
Write-offs
   (986) 
   
 
 
 
Ending balance
  $5,900 
   
 
 
 
Disaggregation of Revenue
The following table disaggregatestables disaggregate the Company’s revenue by major source and reportable segment based upon the timing of transfer of goods or services to the customer, in accordance with ASC Subtopic
606-10-50-5,
for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:
Three Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$90,899 $— $100,150 $— $191,049 
Sponsorship, signage and suite licenses (b)
55,609 2,688 1,372 (633)59,036 
Media related, primarily from affiliation agreements (c)
— 163,247 — — 163,247 
Other (d)
17,025 1,634 7,050 (9,966)15,743 
Total revenues from contracts with customers$163,533 $167,569 $108,572 $(10,599)$429,075 

Three Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$3,710 $— $11,378 $(570)$14,518 
Sponsorship, signage and suite licenses (b)
4,217 1,555 648 — 6,420 
Media related, primarily from affiliation agreements (c)
— 174,657 — — 174,657 
Other (d)
10,844 1,641 764 (6,712)6,537 
Total revenues from contracts with customers$18,771 $177,853 $12,790 $(7,282)$202,132 
18
   
Three Months Ended

September 30, 2021
 
   
Entertainment
   
MSG
Networks
   
Tao Group

Hospitality
   
Eliminations
  
Total
 
Event-related and entertainment dining and nightlife offerings
(a)
  $22,580   $0     $108,690   $(181)  $131,089 
Sponsorship, signage and suite licenses
(b)
   7,776    636    135    0     8,547 
Media related, primarily from affiliation agreements
(c)
   0      140,471    0      0     140,471 
Other
(d)
   1,567    366    10,639    (485)   12,087 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total revenues from contracts with customers
  $31,923   $141,473   $119,464   $(666)  $292,194 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
16

Table of Contents


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$268,391 $— $317,081 $(838)$584,634 
Sponsorship, signage and suite licenses (b)
113,565 5,111 1,997 (1,154)119,519 
Media related, primarily from affiliation agreements (c)
— 459,920 — — 459,920 
Other (d)
31,914 3,992 26,044 (17,511)44,439 
Total revenues from contracts with customers$413,870 $469,023 $345,122 $(19,503)$1,208,512 
   
Three Months Ended

September 30, 2020
 
   
Entertainment
   
MSG
Networks
   
Tao Group

Hospitality
   
Eliminations
  
Total
 
Event-related and entertainment dining and nightlife offerings
(a)
  $727   $0     $5,660   $0    $6,387 
Sponsorship, signage and suite licenses
(b)
   2,460    284    72    (232)   2,584 
Media related, primarily from affiliation agreements
(c)
   0      156,651    0      0     156,651 
Other
(d)
   3,620    428    1,489    (1,361)   4,176 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total revenues from contracts with customers
  $6,807   $157,363   $7,221   $(1,593)  $169,798 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Nine Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$5,439 $— $26,217 $(613)$31,043 
Sponsorship, signage and suite licenses (b)
12,740 2,247 1,134 (211)15,910 
Media related, primarily from affiliation agreements (c)
— 476,672 — — 476,672 
Other (d)
17,735 2,536 3,151 (8,698)14,724 
Total revenues from contracts with customers$35,914 $481,455 $30,502 $(9,522)$538,349 
_________________
(a)Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.
(b)See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(a)
Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.
(c)See “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for further details on the pattern of recognition of Media affiliation fee and advertising revenues in the MSG Networks segment.
(b)
See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K
for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(c)
See “ — Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues for further details on the pattern of recognition of Media affiliation fee and advertising revenues in the MSG Networks segment.
(d)
Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) Tao Group Hospitality’s managed venue revenues, and (iii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $410 and $1,195 for the three months ended September 30, 2021 and 2020, respectively, that are eliminated in consolidation.
(d)Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) Tao Group Hospitality’s managed venue revenues, and (iii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $9,621 and $17,016 for the three and nine months ended March 31, 2022, respectively, and $6,637 and $8,456 for the three and nine months ended March 31, 2021, respectively, that are eliminated in consolidation.
In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following table disaggregatestables disaggregate the Company’s consolidated revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of ASC Subtopic
280-10-50-38
to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic
606-10-50-5
for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:
19
17


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$46,867 $— $— $— $46,867 
Sponsorship and signage, suite, and advertising commission revenues (b)
79,631 — — (10,253)69,378 
Revenues from entertainment dining and nightlife offerings (c)
— — 108,572 (346)108,226 
Food, beverage and merchandise revenues36,344 — — — 36,344 
Media networks revenues (d)
— 167,569 — — 167,569 
Other691 — — — 691 
Total revenues from contracts with customers$163,533 $167,569 $108,572 $(10,599)$429,075 

Three Months ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$2,747 $— $— $— $2,747 
Sponsorship and signage, suite, and advertising commission revenues (b)
14,954 — — (6,637)8,317 
Revenues from entertainment dining and nightlife offerings (c)
— — 12,790 (645)12,145 
Food, beverage and merchandise revenues246 — — — 246 
Media networks revenues (d)
— 177,853 — — 177,853 
Other824 — — — 824 
Total revenues from contracts with customers$18,771 $177,853 $12,790 $(7,282)$202,132 

Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$172,844 $— $— $— $172,844 
Sponsorship and signage, suite, and advertising commission revenues (b)
161,046 — — (18,169)142,877 
Revenues from entertainment dining and nightlife offerings (c)
— — 345,122 (1,334)343,788 
Food, beverage and merchandise revenues78,032 — — — 78,032 
Media networks revenues (d)
— 469,023 — — 469,023 
Other1,948 — — — 1,948 
Total revenues from contracts with customers$413,870 $469,023 $345,122 $(19,503)$1,208,512 
(Continued)20
   
Three Months ended

September 30, 2021
 
   
Entertainment
   
MSG
Networks
   
Tao Group

Hospitality
   
Eliminations
  
Total
 
Ticketing and venue license fee revenues
(a)
  $16,836   $0     $0     $0    $16,836 
Sponsorship and signage, suite, and advertising commission revenues
(b)
   10,813    0      0      (410)   10,403 
Revenues from entertainment dining and nightlife offerings
(c)
   0      0      119,464    (256)   119,208 
Food, beverage and merchandise revenues
   3,923    0      0      0     3,923 
Media networks revenues
(d)
   0      141,473    0      0     141,473 
Other
   351    0      0      0     351 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total revenues from contracts with customers
  $31,923   $141,473   $119,464   $(666)  $292,194 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
   
Three Months ended

September 30, 2020
 
   
Entertainment
   
MSG
Networks
   
Tao Group

Hospitality
   
Eliminations
  
Total
 
Ticketing and venue license fee revenues
(a)
  $730   $0     $0     $0    $730 
Sponsorship and signage, suite, and advertising commission revenues
(b)
   5,859    0      0      (1,427)   4,432 
Revenues from entertainment dining and nightlife offerings
(c)
   0      0      7,221    (166)   7,055 
Food, beverage and merchandise revenues
   0      0      0      0     0   
Media networks revenues
(d)
   0      157,363    0      0     157,363 
Other
   218    0      0      0     218 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total revenues from contracts with customers
  $6,807   $157,363   $7,221   $(1,593)  $169,798 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
(a)
Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events.
(b)
Amounts include revenues from sponsorship sales and representation agreements with MSG Sports and advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $410 and $1,195 for the three months ended September 30, 2021 and 2020, respectively, that are eliminated in consolidation.
(c)
Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
(d)
Primarily consist of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.
18

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$4,445 $— $— $— $4,445 
Sponsorship and signage, suite, and advertising commission revenues (b)
29,943 — — (8,667)21,276 
Revenues from entertainment dining and nightlife offerings (c)
— — 30,502 (855)29,647 
Food, beverage and merchandise revenues139 — — — 139 
Media networks revenues (d)
— 481,455 — — 481,455 
Other1,387 — — — 1,387 
Total revenues from contracts with customers$35,914 $481,455 $30,502 $(9,522)$538,349 
_________________
(a)Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events.
(b)Amounts include (i) revenues from sponsorship sales and representation agreements with MSG Sports and (ii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $9,621 and $17,016 for the three and nine months ended March 31, 2022, respectively, and $6,637 and $8,456 for the three and nine months ended March 31, 2021, respectively, that are eliminated in consolidation.
(c)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
(d)Primarily consist of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. The following table provides information about contract balances from the Company’s contracts with customers as of September 30, 2021March 31, 2022 and June 30, 2021:
March 31,June 30,
20222021
Receivables from contracts with customers, net (a)
$253,584 $185,112 
Contract assets, current (b)
$17,722 $7,052 
Contract assets, non-current (b)
$585 $87 
Deferred revenue, including non-current portion (c)
$264,233 $210,187 
_________________
(a)Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of March 31, 2022 and June 30, 2021, the Company’s receivables from contracts with customers above included $10,041 and $4,848, respectively, related to various related parties. See Note 19 for further details on related party arrangements.
(b)Contract assets, which are reported as Other current assets or Other assets (non-current portion) in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
21
   
September 30,
2021
   
June 30,
2021
 
Receivables from contracts with customers, net
(a)
  $189,958   $185,112 
Contract assets, current
(b)
   8,598    7,052 
Contract assets,
non-current
(b)
   94    87 
Deferred revenue, including
non-current
portion
(c)
   266,941    210,187 

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(a)
(c)Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the nine months ended March 31, 2022 relating to the contract liability balance (primarily deferred revenue) as of June 30, 2021 was $126,473.
Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of September 30, 2021 and June 30, 2021, the Company’s receivables from contracts with customers above included $11,512 and $4,848, respectively, related to various related parties. See Note 18 for further details on related party arrangements.
(b)
Contract assets, which are reported as Other current assets or Other assets
(non-current
portion) in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
(c)
Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the three months ended September 30, 2021 relating to the contract liability balance (primarily deferred revenue) as of June 30, 2021 was $20,408.
Transaction Price Allocated to the Remaining Performance Obligations
The following table depicts the estimated revenue expected to be recognized, based on current projections, and expectations of our business resuming, in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2021.March 31, 2022. This primarily relates to performance obligations under sponsorship and suite license arrangements and to a lesser extent,
non-variable
affiliation fee arrangements that have original expected durations longer than one year and the consideration is not variable. For arrangements with variable consideration, such variability is based on the Company’s ability to deliver the underlying benefits as dictated by the related contractual provisions. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Fiscal Year 2022 (remainder)  $125,176 
Fiscal Year 2023   120,864 
Fiscal Year 2024   99,307 
Fiscal Year 2025   70,132 
Fiscal Year 2026   54,383 
Thereafter   65,865 
      
   $535,727 
      
19
Fiscal Year 2022 (remainder)$74,248 
Fiscal Year 2023183,766 
Fiscal Year 2024151,275 
Fiscal Year 2025101,176 
Fiscal Year 202670,259 
Thereafter87,174 
$667,898 
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 5.6. Computation of Earnings (Loss)Loss per Common Share
The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss)loss per common share attributable to the Company’s stockholders (“EPS”).
Three Months EndedNine Months Ended
 March 31,March 31,
 2022202120222021
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders (numerator):
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)(94,452)$(109,888)
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— (8,728)
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders for EPS:$(17,491)$(26,988)$(94,452)$(118,616)
Weighted-average shares (denominator):
Weighted-average shares for basic and diluted EPS (a)
34,320 34,060 34,230 34,083 
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(0.51)$(0.79)$(2.76)$(3.48)
_________________
(a)All restricted stock units and stock options were excluded from the above table because the Company reported a net loss for the periods presented and, therefore, their impact on reported loss per share would have been antidilutive. See Note 16 for further detail.
22
   
Three Months Ended
September 30,
 
   
2021
   
2020
 
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders (numerator):
          
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $(79,232)   $(35,797) 
Weighted-average shares (denominator):
          
Weighted-average shares for basic and diluted EPS
(a)
   34,095    34,165 
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $(2.32)   $(1.05) 


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(a)
All restricted stock units and stock options were excluded from the above table because the Company reported a net loss for the periods presented and, therefore, their impact on reported loss per share would have been antidilutive. See Note 15 for further detail.
Note 6.7. Cash, Cash Equivalents and Restricted Cash
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
As of
March 31,
2022		June 30,
2021		March 31,
2021		June 30,
2020
Captions on the consolidated balance sheets:
Cash and cash equivalents$999,063 $1,516,992 $1,601,765 $1,103,392 
Restricted cash (a)
21,690 22,984 24,610 17,749 
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows$1,020,753 $1,539,976 $1,626,375 $1,121,141 
   
As of
 
   
September 30,

2021
   
June 30,

2021
   
September 30,

2020
   
June 30,

2020
 
Captions on the consolidated balance sheets:
                    
Cash and cash equivalents
  $1,331,450   $1,516,992   $1,180,159   $1,103,392 
Restricted cash
(a)
   24,029    22,984    27,807    17,749 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows
  $1,355,479   $1,539,976   $1,207,966   $1,121,141 
   
 
 
   
 
 
   
 
 
   
 
 
 
_________________
(a)
See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K
for more information regarding the nature of restricted cash.
20
(a)See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, for more information regarding the nature of restricted cash.
Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 7.8. Investments in Nonconsolidated Affiliates
The Company’s investments in nonconsolidated affiliates, which are accounted for under the equity method of accounting and equity investments without readily determinable fair values in accordance with ASC Topic 323,
Investments—Investments - Equity Method and Joint Ventures
and ASC Topic 321,
Investments—Investments - Equity Securities
, respectively, consisted of the following:
Ownership PercentageInvestment
March 31, 2022
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %$32,387 
Others5,313 
Equity securities without readily determinable fair values (a)
6,997 
Total investments in nonconsolidated affiliates$44,697 
June 30, 2021
Equity method investments:
SACO30 %$36,265 
Others6,204 
Equity securities without readily determinable fair values (a)
6,752 
Total investments in nonconsolidated affiliates$49,221 
_________________
(a)In accordance with the ASC Topic 321, Investments - Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values. Under the measurement alternative, equity securities without readily determinable fair values are accounted for at cost, adjusted for impairment and changes resulting from observable price fluctuations in orderly transactions for the identical or a similar investment of the same issuer. For the three and nine months ended March 31, 2022 and 2021, the Company did not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values.
23
   
Ownership
Percentage
  
Investment
 
September 30, 2021
         
Equity method investments:
         
SACO Technologies Inc. (“SACO”)
   30%  $34,873 
Others
       6,390 
Equity securities without readily determinable fair values
(a)
       6,877 
       
 
 
 
Total investments in nonconsolidated affiliates
      $48,140 
       
 
 
 
June 30, 2021
         
Equity method investments:
         
SACO
   30%  $36,265 
Others
       6,204 
Equity securities without readily determinable fair values
(a)
       6,752 
       
 
 
 
Total investments in nonconsolidated affiliates
      $49,221 
       
 
 
 


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(a)
In accordance with the ASC Topic 321, Investments—Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values. Under the measurement alternative, equity securities without readily determinable fair values are accounted for at cost, adjusted for impairment and changes resulting from observable price fluctuations in orderly transactions for the identical or a similar investment of the same issuer. For the three months ended September 30, 2021 and 2020, the Company did not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values.
Equity Investments with Readily Determinable Fair Value
In addition to the investments discussed above, the Company holds investments of (i) 3,208 shares of the common stock of Townsquare Media, Inc. (“Townsquare”), and (ii) 869 shares of common stock of DraftKings Inc. (“DraftKings”). Townsquare is a media, entertainment and digital marketing solutions company that is listed on the New York Stock Exchange (“NYSE”) under the symbol “TSQ.” DraftKings is a fantasy sports contest and sports gambling provider that is listed on the NASDAQ Stock Market (“NASDAQ”) under the symbol “DKNG” for its common stock. The fair value of the Company’s investments in Class A common stock of Townsquare and Class A common stock of DraftKings are determined based on quoted market prices in active markets on the NYSE and NASDAQ, respectively, which are classified within Level I of the fair value hierarchy. As a holder of Class C common stock of Townsquare, the Company is entitled to convert at any time all or any part of the Company’s shares into an equal number of shares of Class A common stock of Townsquare, subject to restrictions set forth in Townsquare’s certificate of incorporation.
21
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The cost basis and the carrying fair value of these investments, which are reported under Other assets in the accompanying consolidated balance sheets as of September 30, 2021March 31, 2022 and June 30, 2021, are as follows:
March 31, 2022
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare Class A common stock583 $4,221 $7,458 
Townsquare Class C common stock2,625 19,001 33,574 
DraftKings common stock869 6,036 16,929 
Total$29,258 $57,961 
   
September 30, 2021
 
Equity Investment with Readily Determinable Fair Values
  
Shares /Units

Held
   
Cost Basis
   
Carrying
value

/ Fair value
 
Townsquare Class A common stock
   583   $4,221   $7,621 
Townsquare Class C common stock
   2,625    19,001    34,309 
DraftKings common stock
   869    6,036    41,874 
        
 
 
   
 
 
 
Total
       $29,258   $83,804 
        
 
 
   
 
 
 

June 30, 2021
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare Class A common stock583 $4,221 $7,435 
Townsquare Class C common stock2,625 19,001 33,469 
DraftKings common stock869 6,036 45,360 
Total$29,258 $86,264 

   
June 30, 2021
 
Equity Investment with Readily Determinable Fair Values
  
Shares / Units

Held
   
Cost
Basis
   
Carrying
value

/ Fair value
 
Townsquare Class A common stock
   583   $4,221   $7,435 
Townsquare Class C common stock
   2,625    19,001    33,469 
DraftKings common stock
   869    6,036    45,360 
        
 
 
   
 
 
 
Total
       $29,258   $86,264 
        
 
 
   
 
 
 
The following table summarizes the realized and unrealized gain (loss) on equity investments with readily determinable fair value for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:

Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Unrealized gain (loss)— Townsquare$(1,732)$13,057 $129 $20,083 
Unrealized gain (loss) — DraftKings(6,956)12,842 (28,432)34,906 
Realized gain (loss) — DraftKings— 332 — (2,327)
$(8,688)$26,231 $(28,303)$52,662 

   
Three Months Ended
September 30,
 
   
2021
   
2020
 
Unrealized gain — Townsquare
  $1,027   $610 
Unrealized gain (loss) — DraftKings
   (3,487)    33,048 
   
 
 
   
 
 
 
   $(2,460)   $33,658 
   
 
 
   
 
 
 
22
24

Table of Contents


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 8.9. Property and Equipment
As of September 30, 2021March 31, 2022 and June 30, 2021, property and equipment consisted of the following:
  
September 30,

2021
   
June 30,

2021
 March 31,
2022		June 30,
2021
Land
  $148,468   $150,750 Land$146,344 $150,750 
Buildings
   998,811    996,295 Buildings997,340 996,295 
Equipment
   408,051    405,835 Equipment426,857 405,835 
Aircraft
   38,090    38,090 Aircraft38,093 38,090 
Furniture and fixtures
   38,299    40,660 Furniture and fixtures39,592 40,660 
Leasehold improvements
   225,032    214,678 Leasehold improvements232,931 214,678 
Construction in progress
(a)
   1,342,832    1,194,525 
Construction in progress (a)
1,786,817 1,194,525 
  
 
   
 
 3,667,974 3,040,833 
   3,199,583    3,040,833 
Less accumulated depreciation and amortization
   (914,854)    (884,541) Less accumulated depreciation and amortization(960,781)(884,541)
  
 
   
 
 $2,707,193 $2,156,292 
  $2,284,729   $2,156,292 
  
 
   
 
 
_________________
(a)Interest is capitalized during the construction period for significant long term construction projects. The Company capitalizes interest within the Entertainment segment in connection with the construction of MSG Sphere in Las Vegas. For the three and nine months ended March 31, 2022, the Company capitalized $12,272 and $32,202 of interest, respectively. As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and nine months ended March 31, 2021 have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $13,312 and $21,223, respectively.

(a)
Interest is capitalized during the construction period for significant long term construction projects. The Company capitalizes interest within the Entertainment segment in connection with the construction of MSG Sphere in Las Vegas. For the three months ended September 30, 2021 and 202
0
, the company capitalized $9,326 and $355 of interest, respectively. 
The increase in Construction in progress is primarily associated with the development and construction of MSG Sphere in Las Vegas. The property and equipment balances above include $122,469$192,360 and $106,990 of capital expenditure accruals (primarily related to MSG Sphere construction) as of September 30, 2021March 31, 2022 and June 30, 2021, respectively, which are reflected in Other accrued liabilities in the accompanying consolidated balance sheets.
Depreciation and amortization expense on property and equipment was $25,120$24,273 and $24,661$75,494 for the three and nine months ended September 30, 2021March 31, 2022, respectively, and 2020, respectively.
For$21,695 and $68,284 for the three and nine months ended September 30,March 31, 2021, respectively.
During the nine months ended March 31, 2022, Tao Group Hospitality recorded an impairment charge for leasehold improvements of $3,269 due to decisions made by management to cease operations at certain venues subsequent to the Hakkasan acquisition date.
Refer to Note 10 for further detail of the Company’s impairment related to leases.
23
25


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 9.10. Leases
The Company’s leases primarily consist of certain live-performance venues, entertainment dining and nightlife venues, corporate office space, storage and, to a lesser extent, office and other equipment. The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made available by the lessor for the Company’s use. The Company’s assessment of the lease term reflects the
non-cancellable
term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the Company is reasonably certain to exercise. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations and consolidated statements of cash flows over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of the fixed minimum payment obligations over the lease term. A corresponding ROUright-of-use (“ROU”) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.
The Company includes fixed payment obligations related to
non-lease
components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and
non-lease
components together as a single lease component. ROU assets associated with finance leases are presented separate from ROU assets associated with operating leases and are included within Property and equipment, net on the Company’s consolidated balance sheet. For purposes of measuring the present value of the Company’s fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in the underlying leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment surrounding the associated lease.
For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments. For leases with a term of 12 months or less (“short-term leases”), any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the consolidated balance sheet. Variable lease costs for both operating and finance leases, if any, are recognized as incurred and such costs are excluded from lease balances recorded on the consolidated balance sheet. In addition, the Company excluded its ground lease with Las Vegas Sands Corp. (“Sands”) associated with MSG Sphere in Las Vegas from the ROU asset and lease liability balance recorded on the consolidated balance sheet as the ground lease will have no fixed rent. Under the ground lease agreement, Sands will receive priority access to purchase tickets to events at the venue for inclusion in hotel packages or other uses, as well as certain rent-free use of the venue to support its Expo Center business. If certain return objectives are achieved, Sands will receive 25% of the
after-tax
cash flow in excess of such objectives. The ground lease is for a term of 50 years, commencing upon substantial completion of the MSG
Sphere Sphere.
.
As of September 30, 2021,March 31, 2022, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 0.50.3 years to 20.435.0 years. In certain instances, leases include options to renew, with varying option terms in each case. The exercise of lease renewal options is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.
24
Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2021March 31, 2022 and June 30, 2021:
26


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
  
Line Item in the Company’s Consolidated
Balance Sheet
  
September 30,

2021
   
June 30,

2021
 Line Item in the Company’s Consolidated Balance SheetMarch 31,
2022		June 30,
2021
Right-of-use
assets:
         Right-of-use assets:
Operating leases
  
Right-of-use
lease assets
  $413,463   $280,579 Operating leasesRight-of-use lease assets$462,479 $280,579 
     
 
   
 
 
Lease liabilities:
         Lease liabilities:
Operating leases, current
  
Operating lease liabilities, current
  $53,571   $73,423 Operating leases, currentOperating lease liabilities, current$67,012 $73,423 
Operating leases, noncurrent
  
Operating lease liabilities, noncurrent
   396,569    233,556 Operating leases, noncurrentOperating lease liabilities, noncurrent440,319 233,556 
     
 
   
 
 
Total lease liabilities
     $450,140   $306,979 Total lease liabilities$507,331 $306,979 
     
 
   
 
 
The following table summarizes the activity recorded within the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020:
2021:
Three Months Ended
Line Item in the Company’s Consolidated and Combined Statement of OperationsMarch 31,
20222021
Operating lease costDirect operating expenses$10,181 $6,959 
Operating lease costSelling, general and administrative expenses8,043 6,428 
Variable lease costDirect operating expenses1,712 978 
Variable lease costSelling, general and administrative expenses16 14 
Total lease cost$19,952 $14,379 
Nine Months Ended
Line Item in the Company’s Consolidated Statement of OperationsMarch 31,
20222021
Lease cost, operating leasesDirect operating expenses$32,140 $19,911 
Lease cost, operating leasesSelling, general and administrative expenses22,187 19,331 
Variable lease costDirect operating expenses3,804 1,569 
Variable lease costSelling, general and administrative expenses45 52 
Total lease cost$58,176 $40,863 
   
Line Item in the Company’s Consolidated
Statement of Operations
  
Three Months Ended
September 30,
 
   
2021
   
2020
 
Lease cost, operating leases
  
Direct operating expenses
  $11,636   $6,407 
Lease cost, operating leases
  
Selling, general and administrative expenses
   6,421    6,493 
Variable lease cost
  
Direct operating expenses
   1,086    276 
Variable lease cost
  
Selling, general and administrative expenses
   14    23 
      
 
 
   
 
 
 
Total lease cost
     $19,157   $13,199 
      
 
 
   
 
 
 
Supplemental Information
For the threenine months ended September 30,March 31, 2022 and 2021, and 2020, cash paid for amounts included in the measurement of operating lease liabilities was $14,159$47,009 and $14,140,$40,787, respectively.For the threenine months ended September 30, 2021,March 31, 2022, the Company recorded new operating lease liabilities of $167,070$337,590 arising from obtaining
right-of-use
lease assets for two locations including (i) the renewal of the Radio City Music Hall lease as well asand Beacon Theatre leases, and to a venuelesser extent, reflecting (ii) leases associated with MSG Sphere development, net of tenant incentives. In October 2021,incentives, (iii) a lease agreement with the existing landlord for the Company’s New York corporate office space, which extended the term for certain existing office space in use, and (iv) an aviation lease. For the nine months ended March 31, 2022, the Company received approximately $7,500$15,580 of the aforementioned tenant incentives.incentives, through a cash receipt from the landlord and payments by the landlord for capital expenditures on behalf of the Company. For the threenine months ended September 30, 2020,March 31, 2021, the Company did not enter into new leases.
During
27

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In November 2021, the Company executed an agreement with the existing landlord for its New York corporate office space pursuant to which it will be relocating from the space that the Company currently occupies to newly renovated office space within the same building. The Company will not be involved in the design or construction of the new space for purposes of the Company’s buildout prior to obtaining possession, which is expected to occur in Fiscal Year 2024. Upon obtaining possession of the space, the new lease is expected to result in an additional lease obligation and right of use asset. While lease payments under the new lease agreement will be recognized as a lease expense on a straight-line basis over the lease term, the Company will begin paying full rent in the second half of Fiscal Year 2026 due to certain tenant incentives included in the arrangement. Base rent payments will increase every five years beginning in Fiscal Year 2031 in accordance with the terms of the lease. The Company anticipates entering into a new sublease agreement with MSG Sports for a lease term equivalent to the November 2021 agreement that the Company entered into with the existing landlord. The future lease payments related to this new lease for the next five fiscal years and thereafter are expected to be as follows:
Fiscal Year 2022$— 
Fiscal Year 2023— 
Fiscal Year 2024— 
Fiscal Year 202510,121 
Fiscal Year 202619,023 
Thereafter (Fiscal Year 2027 to Fiscal Year 2046)1,026,207 
Total lease payments$1,055,351 
For the three months ended September 30, 2021,March 31, 2022, the Company recorded a
non-cash
impairment charge net gain of $4,549 was$5,074 resulting from the extinguishment of lease liabilities associated with a Hakkasan venue of Tao Group Hospitality. For the nine months ended March 31, 2022 the Company recorded forother net gains of $2,151 primarily from the
extinguishment of lease liabilities and right-of-use
lease assets associated with certain Hakkasan venues of Tao Group Hospitality due to decisions made by management to cease operations at certain venues subsequent to the Hakkasan acquisition date.operations.
As of September 30, 2021,March 31, 2022, the weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet was 11.112.6 years. The weighted average discount rate was 6.71%6.41% as of September 30, 2021March 31, 2022 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard, (ii) upon entering a new lease or (iii) the period in which the lease term expectation was modified.
25
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Maturities of operating lease liabilities as of September 30, 2021March 31, 2022 are as follows:
Fiscal Year 2022 (remainder)$10,571 
Fiscal Year 202377,668 
Fiscal Year 202478,861 
Fiscal Year 202556,572 
Fiscal Year 202633,254 
Thereafter500,083 
Total lease payments757,009 
Less imputed interest249,678 
Total lease liabilities$507,331 
Fiscal Year 2022 (remainder)
  $35,369 
Fiscal Year 2023
   80,695 
Fiscal Year 2024
   76,696 
Fiscal Year 2025
   50,857 
Fiscal Year 2026
   33,168 
Thereafter
   389,721 
   
 
 
 
Total lease payments
   666,506 
Less imputed interest
   216,366 
   
 
 
 
Total lease liabilities
  $450,140 
   
 
 
 
Lessor Arrangements
In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed annual license fees scheduled to be paid monthly over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games. Operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the
28


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Arena License Agreements, the lease terms relate to
non-consecutive
periods of use when MSG Sports uses The Garden for their professional
sports
teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the
COVID-19
pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021, and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from
mid-February
February through
mid-May
May 2021 when it became available at 100% seating capacity. The Company recorded $1,328$29,616 and $58,798 of revenues under the Arena License Agreements for the three and nine months ended September 30,March 31, 2022, respectively, and $11,443 and $13,028 for the three and nine months ended March 31, 2021. In addition, the Company recorded revenues from third party and related party lease and sublease arrangements of $1,436 and third-party lease revenues of $988 and $748$3,766 for the three and nine months ended September 30,March 31, 2022, respectively, and $743 and $2,239 for the three and nine months ended March 31, 2021, and 2020, respectively.
Note 10.11. Goodwill and Intangible Assets
The carrying amount of goodwill as of September 30, 2021March 31, 2022 and June 30, 2021 are as follows:
EntertainmentMSG NetworksTao Group HospitalityTotal
Balance as of June 30, 2021$74,309 $424,508 $3,378 $502,195 
Measurement period adjustment (a)
— — (2,014)(2,014)
Balance as of March 31, 2022$74,309 $424,508 $1,364 $500,181 
   
Entertainment
   
MSG
Networks
   
Tao Group
Hospitality
   
Total
 
Balance as of June 30, 2021
  $74,309   $424,508   $3,378   $502,195 
Measurement period adjustment
(a)
   0      0      (2,014)    (2,014) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2021
  $74,309   $424,508   $1,364   $500,181 
   
 
 
   
 
 
   
 
 
   
 
 
 
_________________
(a)
(a)During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment in connection with the acquisition of Hakkasan by Tao Group Hospitality. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in Tao Group
Sub-Holdings
LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480 as noted above, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company
wrote-off
a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534. See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K
regarding the details of the acquisition of Hakkasan.
26
Table of ContentsHakkasan by Tao Group Hospitality. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in TAO Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480 as included above, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534, also included above. See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, regarding the details of the acquisition of Hakkasan. No additional adjustments were recorded during the three months ended March 31, 2022.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
During the first quarter of Fiscal Year 2022, the Company performed its annual impairment test of goodwill and determined that there were 0no impairments of goodwill identified as of the impairment test date.
The carrying amount of indefinite-lived intangible assets, all of which are within the Entertainment segment, as of September 30, 2021March 31, 2022 and June 30, 2021 were as follows:
Trademarks$61,881 
Photographic related rights1,920 
Total$63,801 
Trademarks
  $61,881 
Photographic related rights
   1,920 
   
 
 
 
Total
  $63,801 
   
 
 
 
During the first quarter of Fiscal Year 2022, the Company performed its annual impairment test of indefinite-lived intangible assets and determined that there were 0no impairments of indefinite-lived intangibles identified as of the impairment test date.
29


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company’s intangible assets subject to amortization are as follows:
September 30, 2021
  
Gross
   
Accumulated

Amortization
   
Net
 
March 31, 2022March 31, 2022GrossAccumulated
Amortization		Net
Trade names
  $113,269   $(26,906)   $86,363 Trade names$112,990 $(29,661)$83,329 
Venue management contracts
   85,616    (19,046)    66,570 Venue management contracts85,512 (22,085)63,427 
Affiliate relationships
   83,044    (57,086)    25,958 Affiliate relationships83,044 (58,816)24,228 
Non-compete
agreements
   9,000    (7,304)    1,696 Non-compete agreements9,000 (8,087)913 
Festival rights
   8,080    (2,831)    5,249 Festival rights8,080 (3,100)4,980 
Other intangibles
   4,217    (3,884)    333 Other intangibles4,217 (4,025)192 
  
 
   
 
   
 
 $302,843 $(125,774)$177,069 
  $303,226   $(117,057)   $186,169 
  
 
   
 
   
 
 
June 30, 2021GrossAccumulated
Amortization		Net
Trade names$121,000 $(25,605)$95,395 
Venue management contracts85,700 (17,518)68,182 
Affiliate relationships83,044 (56,221)26,823 
Non-compete agreements9,000 (6,913)2,087 
Festival rights8,080 (2,696)5,384 
Other intangibles4,217 (3,814)403 
$311,041 $(112,767)$198,274 
June 30, 2021
  
Gross
   
Accumulated

Amortization
   
Net
 
Trade names
  $121,000   $(25,605)   $95,395 
Venue management contracts
   85,700    (17,518)    68,182 
Affiliate relationships
   83,044    (56,221)    26,823 
Non-compete
agreements
   9,000    (6,913)    2,087 
Festival rights
   8,080    (2,696)    5,384 
Other intangibles
   4,217    (3,814)    403 
   
 
 
   
 
 
   
 
 
 
   $311,041   $(112,767)   $198,274 
   
 
 
   
 
 
   
 
 
 
27
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Amortization expense for intangible assets was $4,310$4,366 and $3,749$13,108 for the three and nine months ended September 30,March 31, 2022, respectively, and $17,916 and $25,414 for three and nine month ended March 31, 2021, and
2020
, respectively.
Note 11.12. Commitments and Contingencies
Commitments
See Note 12 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K,
for details on the Company’s
off-balance
sheet commitments. The Company’s
off-balance
sheet commitments as of June 30, 2021 also included a total of $3,646,250 of contract obligations (primarily related to media rights agreements) from the MSG Networks segment, as a result of the Merger, (primarily related to media rights agreements) as follows:
Fiscal Year 2022$276,707 
Fiscal Year 2023273,370 
Fiscal Year 2024253,485 
Fiscal Year 2025246,013 
Fiscal Year 2026249,584 
Thereafter2,347,091 
$3,646,250 
Fiscal Year 2022
  $276,707 
Fiscal Year 2023
   273,370 
Fiscal Year 2024
   253,485 
Fiscal Year 2025
   246,013 
Fiscal Year 2026
   249,584 
Thereafter
   2,347,091 
   
 
 
 
   $3,646,250 
   
 
 
 
During the three and nine months ended September 30, 2021,March 31, 2022, the Company did not have any material changes in its non-cancelable contractual obligations other than activities in the ordinary course of business. See Note 1314 for details of the principal repayments required under the Company’s various credit facilities, including the MSG Networks Senior Secured Credit Facilities (as defined below), and Note 910 for details on the commitments under the Company’s lease obligations.
30


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Legal Matters
FifteenNaN complaints were filed in connection with the Merger by purported stockholders of the Company and MSG Networks Inc.
NineNaN of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.
On May 27, 2021, a complaint captioned
Hollywood Firefighters’ Pension Fund et al.
v.
James Dolan, et al.
, 2021-0468-KSJM, was filedNaN complaints involved allegations of fiduciary breaches in connection with the Court of Chancery of the State of Delaware by purported stockholders of the Company against the Company, its Board of Directors (the “Board”), certain Dolan family stockholdersnegotiation and MSG Networks Inc. The complaint purported to allege derivative claims on behalf of the Company and claims on behalf of a putative class of Company stockholders concerning the Merger. Plaintiffs alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the Delaware General Corporation Law (the “DGCL”), that the Board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the Merger were misleading or incomplete. Plaintiffs sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummationapproval of the Merger and an award of damages in the event the transaction was consummated and plaintiffs’ attorneys’ fees. On June 15, 2021, plaintiffs filed a brief in support of their motion seeking a preliminary injunction enjoining the Company’s stockholder vote and consummation of the Merger, which the defendants opposed. The Court of Chancery denied the plaintiffs’ preliminary injunction motion on July 2, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
On June 9, 2021, a complaint captioned
Timothy Leisz
v.
MSG Networks Inc. et al.
, 2021-0504-KSJM, was filed in the Court of Chancery of the State of Delaware by a purported stockholder of MSG Networks Inc. against MSG Networks Inc., the MSG Networks Inc. board of directors, certain Dolan family stockholders and the Company. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The MSG Networks Inc. plaintiff alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the DGCL, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the merger were misleading or incomplete. Plaintiff sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiff’s attorneys’ fees. On June 21, 2021, plaintiff filed a brief in support of his motion seeking a preliminary injunction enjoining the MSG Networks Inc. stockholder vote and consummation of the Merger, which defendants opposed. The Court of Chancery denied the plaintiff’s preliminary injunction motion on July 2, 2021.
On July 6, 2021, a complaint captioned
Stevens et al.
v.
Dolan et al.
, 2021-0575, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages in the event the transaction was consummated, and plaintiffs’ attorneys’ fees.
On July 6, 2021, a complaint captioned
The City of Boca Raton Police and Firefighters’ Retirement System
v.
MSG Networks Inc.
, 2021-0578, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against MSG Networks Inc. The complaint purported to seek to enforce plaintiff’s right to inspect certain of MSG Networks Inc.’s books and records under Section 220 of the DGCL. The complaint was voluntarily dismissed on August 10, 2021.
On August 11, 2021, a stockholder derivative complaint captioned
City of Miramar Retirement Plan and Trust Fund for General Employees et al. v. Dolan et al.,
2021-0692 was filed in the Court of Chancery of the State of Delaware by purported stockholders of the Company. The complaint purported to allege derivative claims on behalf of the Company and direct claims on behalf of a putative class of Company stockholders. Plaintiffs alleged that the Board and the Company’s majority stockholders violated their fiduciary duties by failing to protect the Company’s interest in connection with the Merger. Plaintiffs sought, among other relief, an award of damages to the purported class and Company including interest, and plaintiffs’ attorneys’ fees.
On August 31, 2021, a complaint captioned
Murray
v.
Dolan et al.
, 2021-0748, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks stockholders concerning the Merger. Plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages, and plaintiffs’ attorneys’ fees.
All of the above complaints have since either been dismissed or consolidated into one of two remaining litigations.
On September 10, 2021, the Court of Chancery entered an order consolidating the2 derivative complaints in the
Hollywood Firefighters
and
City of Miramar
actions.filed by purported Company stockholders. The new consolidated action is captioned:
In re Madison Square Garden Entertainment Corp. Stockholders Litigation
, C.A. No. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative allegations for breachclaims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties that were present in the
Hollywood Firefighters
and
City course of Miramar
complaintsnegotiating and abandonsapproving the direct claims in those prior complaints.Merger. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021, and are currently engaged in responding to the consolidated plaintiffs’ discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
On September 27, 2021, the Court of Chancery entered an order consolidating thefour complaints in the
Leisz
,
Stevens
,
Cityfiled by purported stockholders of Boca Raton
, and
Murray
complaints.MSG Networks Inc. The new consolidated action is captioned:
In re MSG Networks Inc. Stockholder Class
Action Litigation
, C.A. No. 2021-0575-KSJM. The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. prior to the Merger. Plaintiffs allege that the MSG Networks Inc. board of directors and majoritycontrolling stockholders breached their fiduciary duties in negotiating and approving the Merger. The Company is not named as a defendant. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants to the MSG Networks Inc. consolidated action filed answers to the complaint on December 30, 2021 and are currently engaged in responding to the plaintiffs’ discovery requests.Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
On March 3, 2022 the Court of Chancery approved a case schedule, governing the two consolidated actions, which set tentative trial dates for April 2023.
We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been made in our consolidated financial statements.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Note 12.13. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value within Level I of the fair value hierarchy on a recurring basis using observable inputs that reflect quoted prices for identical assets in active markets. These assets include (i) cash equivalents in money market accounts, and time deposits and U.S. treasury bills, and (ii) equity investments with readily determinable fair value:
31
   
Line Item on Consolidated
Balance Sheet
  
September 30,

2021
   
June 30,

2021
 
Assets:
             
Money market accounts and time deposits
(a)

  Cash and cash equivalents  $1,166,105   $1,361,729 
Equity investments with readily determinable fair value
(b)
  Other assets   83,804    86,264 
      
 
 
   
 
 
 
Total assets measured at fair value
     $1,249,909   $1,447,993 
      
 
 
   
 
 
 
(a)
The carrying amount of the Company’s cash equivalents in money market accounts and time deposits approximate fair value due to their short-term maturities.
(b)
See Note 7 for more information on the Company’s equity investments with readily determinable fair value in Townsquare and DraftKings.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Line Item on Consolidated Balance SheetMarch 31,
2022		June 30,
2021
Assets:
Money market accounts, time deposits and U.S. treasury bills (a)
Cash and cash equivalents$938,703 $1,361,729 
Equity investments with readily determinable fair value (b)
Other assets57,961 86,264 
Total assets measured at fair value$996,664 $1,447,993 
_________________
(a)The carrying amount of the Company’s cash equivalents in money market accounts, time deposits, and U.S. treasury bills approximate fair value due to their short-term maturities.
(b)See Note 8 for more information on the Company’s equity investments with readily determinable fair value in Townsquare and DraftKings.
In addition to the table above, the carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
March 31, 2022June 30, 2021
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Liabilities
Current and non-current portion of long-term debt under the MSG Networks Term Loan Facility (a)
$1,010,625 $1,000,519 $1,047,750 $1,042,510 
Current and non-current portion of long-term debt under the National Properties Term Loan Facility (a)
$641,875 $645,084 $646,750 $669,386 
Current and non-current portion of long-term debt under the Tao Credit Facilities (a)
$25,000 $24,862 $43,750 $43,851 
_________________
(a)On October 11, 2019, MSGN Holdings, L.P., certain MSGN Holdings, L.P. subsidiaries and certain MSG Networks Inc. subsidiaries entered into an amended and restated credit facility consisting of a $1,100,000 five-year term loan facility and a $250,000 five-year revolving credit facility. On May 23, 2019, TAO Group Intermediate Holdings LLC and TAO Group Operating LLC entered into a $40,000 five-year term loan facility and a $25,000 five-year term revolving facility. In November 2020, MSG National Properties and certain subsidiaries of the Company entered into a five-year $650,000 term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 14 for more information and outstanding balances on this long-term debt.
   
September 30, 2021
   
June 30, 2021
 
   
Carrying

Value
   
Fair

Value
   
Carrying

Value
   
Fair

Value
 
Liabilities
                    
Current and
non-current
portion of long-term debt under the MSG Networks Term Loan Facility
(a)
  $1,035,375   $1,030,200   $1,047,750   $1,042,510 
Current and
non-current
portion of long-term debt under the National Properties Term Loan Facility
(a)
  $645,125   $662,866   $646,750   $669,386 
Current and
non-current
portion of long-term debt under the Tao Credit Facilities
(a)
  $27,500   $27,599   $43,750   $43,851 
(a)
On October 11, 2019, MSGN Holdings L.P., certain MSGN Holdings L.P. subsidiaries and certain MSG Networks Inc. subsidiaries entered into an amended and restated credit facility consisting of a $
1,100,000
five-year term loan facility and a $250,000 five-year revolving credit facility. On May 23, 2019, Tao Group Intermediate Holdings LLC and Tao Group Operating LLC entered into a $40,000 five-year term loan facility and a $25,000 five-year term revolving facility. In November 2020, MSG National Properties and certain subsidiaries of the Company entered into the National Properties Term Loan Facility, providing a five-year $650,000 term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 13 for more information and outstanding balances on this long-term debt.
Note 13.14. Credit Facilities
MSG Networks Senior Secured Credit Facilities
On September 28, 2015, MSGN L.P,Holdings, L.P. (“MSGN L.P.”), MSGN Eden, LLC, an indirect subsidiary of the Company (through the Merger) and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P. (collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. entered into a credit agreement (the “MSGN Former Credit Agreement”) with a syndicate of lenders. The MSGN Former Credit Agreement provided MSGN L.P. with senior secured credit facilities that consisted of: (a) an initial $1,550,000 term loan facility and (b) a $250,000 revolving credit facility.
On October 11, 2019, MSGN L.P., the MSGN Holdings Entities and certain subsidiaries of MSGN L.P. amended and restated the MSGN Former Credit Agreement in its entirety (the “MSGN Credit Agreement”). The MSGN Credit Agreement provides MSGN L.P. with senior secured credit facilities (the(as amended, the “MSG Networks Senior Secured Credit Facilities”) consisting
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
of: (i) an initial $1,100,000 term loan facility (the “MSGN Term Loan Facility”) and (ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility”), each with a term of five years. Proceeds from the MSGN Term Loan Facility were used by MSGN L.P. to repay outstanding indebtedness under the MSGN Former Credit Agreement. Up to $35,000 of the MSGN Revolving Credit Facility is available for the issuance of letters of credit. Subject to the satisfaction of certain conditions and limitations, the MSGN Credit Agreement allows for the addition of incremental term and/or revolving loan commitments and incremental term and/or revolving loans.
Borrowings under the MSGN Credit Agreement bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio) (the “MSGN Base Rate”), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total net leverage ratio) (the “MSGN Eurodollar Rate”). Upon a payment default in respect of principal, interest or
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
other amounts due and payable under the MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00% per annum. The MSGN Credit Agreement requires that MSGN L.P. pay a commitment fee ranging from 0.225% to 0.30% (determined based on a total net leverage ratio) in respect of the average daily unused commitments under the MSGN Revolving Credit Facility. MSGN L.P. will also be required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit. The interest rate on the MSGN Term Loan Facility as of September 30, 2021March 31, 2022 was 1.58%1.96%.
The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. All borrowings under the MSGN Credit Agreement are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties. As of September 30, 2021,March 31, 2022, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants. As of September 30, 2021,March 31, 2022, there were 0no letters of credit issued and outstanding under the MSGN Revolving Credit Facility. As of September 30, 2021,March 31, 2022, there was $1,035,375$1,010,625 outstanding under the MSGN Term Loan Facility, and 0no borrowings under the MSGN Revolving Credit Facility.
All obligations under the MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s existing and future direct and indirect domestic subsidiaries that are not designated as excluded subsidiaries or unrestricted subsidiaries (the “MSGN Subsidiary Guarantors,” and together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P.
Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily repay outstanding loans under the MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurodollar loans). The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024. MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
In addition to the financial covenants discussed above, the MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative covenants, and events of default. The MSGN Credit Agreement contains certain restrictions on the ability of MSGN L.P. and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the MSGN Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) changing their lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified material agreements; (viii) merging or consolidating; (ix) making certain dispositions; and (x) entering into agreements that restrict the granting of liens. The MSGN Holdings Entities are also subject to customary passive holding company covenants. The Merger did not result in a change of control or acceleration of debt payments under the MSGN Credit Agreement.
33
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
National Properties Term Loan Facility
On November 12, 2020, MSG National Properties, LLC (“MSG National Properties”) an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a five-year5-year $650,000 senior secured term loan facility (the “National Properties Term Loan Facility”). The proceeds of the National Properties Term Loan Facility may be used to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group.
The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. From the closing date untilFollowing the first anniversary of the National Properties Term Loan Facility,closing of the minimum liquidity threshold is $450,000, which is reduced each quarter by the amount of cash usage, subject to a minimum liquidity floor of $200,000. After the first anniversary,facility in November 2021, the minimum liquidity level iswas reduced to $200,000. If at any time the total leverage ratio of MSG National Properties and its restricted subsidiaries is less than 5.00 to 1.00 as of the end of any four consecutive fiscal quarter period or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000.
As of March 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.
Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans under the National Properties Term Loan Facility at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) subject to a prepayment premium equal to (i) for the initial 18 month18-month period following the facility’s effective date, 2.0% of the principal amount prepaid
plus
the amount of interest that would have been payable on such principal amount from the date of such prepayment through the end of such
18-month
period, (ii) after the initial 18 month18-month period but on or prior to the three year anniversary of the effective date, 2.0% of the principal amount prepaid, (iii) after the three year anniversary but on or prior to the four year anniversary of the effective date, 1.0% of the principal amount prepaid and (iv) after the 4th anniversary, 0%. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments in an aggregate amount equal to 1.00% per annum (0.25% per quarter), with the balance due at the maturity of the facility. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of September 30, 2021March 31, 2022 was 7.00%. As of September 30, 2021,March 31, 2022, there was $645,125$641,875 outstanding under the National Properties Term Loan Facility.
All obligations under the National Properties Term Loan Facility are guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden, BCE and certain other excluded subsidiaries (the “Subsidiary Guarantors”).
All obligations under the National Properties Term Loan Facility, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Garden or the leasehold interests in Radio City Music Hall and the Beacon Theatre. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including prepayments in an amount equal to a specified percentage of excess cash flow in any fiscal year and prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), in each case subject to certain exceptions.
In addition to the minimum liquidity covenant, the National Properties Term Loan Facility and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The National Properties Term Loan Facility contains certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the National Properties Term Loan Facility, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the ability of MSG National Properties to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii) engage in certain transactions with affiliates;
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions. As of September 30, 2021,March 31, 2022, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
Tao Credit Facilities
On May 23, 2019, TaoTAO Group Intermediate Holdings LLC (“TAOIH” or “Intermediate Holdings”) and TaoTAO Group Operating LLC (“TAOG” or “Senior Borrower”), entered into a credit agreement (the “Tao Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a letter of credit issuer, and the lenders party thereto. Together the Tao Senior Credit Agreement and a $49,000 intercompany subordinated credit agreement that matures in August 2024 (the “Tao Subordinated Credit Agreement”) between a subsidiary of the Company and TaoTAO Group
Sub-Holdings
LLC, a subsidiary of TaoTAO Group Hospitality,Holdings, LLC, replaced the Senior Borrower’sBorrower���s prior credit agreement dated January 31, 2017 (“2017 Tao Credit Agreement”). On June 15, 2020, the Company entered into the second amendment to the Tao Subordinated Credit Agreement, which provided an additional $22,000 of intercompany loan borrowing availability under the Tao Subordinated Credit Agreement. The net intercompany loan outstanding balance under the Tao Subordinated Credit Agreement, as amended, was $63,000 as of September 30, 2021.March 31, 2022. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement, as amended, have been eliminated in the consolidated financial statements in accordance with ASC Topic 810,
Consolidation.
.
The Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “Tao Senior Secured Credit Facilities”) consisting of: (i) an initial $40,000 term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a $25,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit. All borrowings under the Tao Revolving Credit Facility, including, without limitation, amounts drawn under the revolving line of credit are subject to the satisfaction of customary conditions. The Tao Senior Secured Credit Facilities were obtained without recourse to the Company or any of its affiliates (other than TAOG, TAOIH and its subsidiaries and in respect of a certain reserve account, each as discussed below).
The Tao Senior Credit Agreement requires TAOIH to comply with a maximum total leverage ratio of 4.00:1.00 and a maximum senior leverage ratio of 3.00:1.00 from the closing date until December 31, 2021 and a maximum total leverage ratio of 3.50:1.00 and a maximum senior leverage ratio of 2.50:1.00 from and after December 31, 2021. In addition, there is a minimum fixed charge coverage ratio of 1.25:1.00 for TAOIH. On August 6, 2020, TAOG and TAOIH entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct wholly owned subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. TheThere was no balance held in the reserve account was approximately $3,200 as of September 30, 2021.March 31, 2022. As of September 30, 2021,March 31, 2022, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Tao Senior Credit Agreement.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
All obligations under the Tao Senior Credit Agreement are guaranteed by MSG Entertainment Group, TAOIH and TAOIH’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG, (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or unrestricted subsidiaries) (the “Tao Subsidiary Guarantors,” and together with TAOIH, the “Tao Guarantors”). All obligations under the Tao Senior Credit Agreement, including the guarantees of those obligations, are secured by the reserve account noted above and substantially all of the assets of TAOG and each Tao Guarantor (collectively, “Tao Collateral”), including, but not limited to, a pledge of the equity interests in TAOG held directly by TAOIH and the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Borrowings under the Tao Senior Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to 2.50% per annum (determined based on a total leverage ratio) (the “Tao Base Rate”), or (b) a Eurocurrency rate plus an additional rate ranging from 2.50% to 3.50% per annum (determined based on a total leverage ratio) (the “Tao Eurocurrency Rate”), provided that through DecemberMarch 31, 2021,2022, the additional rate used in calculating the floating rate iswas (i) 1.50% per annum for borrowings bearing the Tao Base Rate, and (ii) 2.50% per annum for borrowings bearing the Eurocurrency Rate. The Tao Senior Credit Agreement requires TAOG to pay a commitment fee of 0.50% in respect of the daily unused commitments under the Tao Revolving Credit Facility. TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Tao Senior Credit Agreement. The interest rate on the Tao Senior Credit Agreement as of September 30, 2021March 31, 2022 was 2.59%2.96%. There was 0no borrowing outstanding under the Tao Revolving Credit Facility as of September 30, 2021.March 31, 2022. Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available as of September 30, 2021March 31, 2022 was $24,250. As of September 30, 2021,March 31, 2022, there was $27,500$25,000 outstanding under the Tao Term Loan Facility.
In addition to the financial covenants described above, the Tao Senior Credit Agreement and the related security agreements contain certain customary representations and warranties, affirmative covenants and events of default. The Tao Senior Credit Agreement contains certain restrictions on the ability of TAOIH, TAOG and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Tao Senior Credit Agreement, including, without limitation, the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) engaging in certain transactions with affiliates; (vi) amending specified agreements; (vii) merging or consolidating; (viii) making certain dispositions; and (ix) entering into agreements that restrict the granting of liens. Intermediate Holdings is subject to a customary passive holding company covenant.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily repay outstanding loans under the Tao Senior Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). The initial Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 30, 2019 through March 31, 2024 with a final maturity date on May 23, 2024. TAOG is required to make mandatory prepayments of the Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
Principal Repayments
Long-term debt maturities over the next five years for the outstanding balance under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as of September 30, 2021March 31, 2022 were:
MSG Networks Senior Secured Credit FacilitiesNational Properties Term Loan FacilityTao Credit FacilitiesTotal
Fiscal Year 2022 (remainder)$12,375 1,625 $2,500 $16,500 
Fiscal Year 202366,000 6,500 10,000 82,500 
Fiscal Year 202482,500 6,500 12,500 101,500 
Fiscal Year 2025849,750 6,500 — 856,250 
Fiscal Year 2026— 620,750 — 620,750 
Thereafter— — — — 
$1,010,625 $641,875 $25,000 $1,677,500 
35
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
   
MSG Networks
Senior Secured
Credit Facilities
   
National
Properties Term
Loan Facility
   
Tao Credit
Facilities
   
Total
 
Fiscal Year 2022 (remainder)
  $37,125    4,875   $5,000   $47,000 
Fiscal Year 2023
   66,000    6,500    10,000    82,500 
Fiscal Year 2024
   82,500    6,500    12,500    101,500 
Fiscal Year 2025
   849,750    6,500    0      856,250 
Fiscal Year 2026
   0      620,750    0      620,750 
Thereafter
   0      0      0      0   
   
 
 
   
 
 
   
 
 
   
 
 
 
   $1,035,375   $645,125   $27,500   $1,708,000 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the outstanding balances under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as well as the related deferred financing costs in the accompanying consolidated balance sheets as of September 30, 2021March 31, 2022 and June 30, 2021:
                                                                                                                   
   
September 30, 2021
  
June 30, 2021
 
   
Principal
   
Unamortized
Deferred
Financing
Costs
  
Net
(a)
  
Principal
   
Unamortized
Deferred
Financing
Costs
  
Net
(a)
 
Current portion
                           
MSG Networks Senior Secured Credit Facilities
  $49,500   $(1,250)  $48,250  $49,500   $(1,255)  $48,245 
National Properties Term Loan Facility
   6,500    (6,783)   (283)   6,500    (6,783)   (283) 
Tao Credit Facilities
   7,500    (239)   7,261   6,250    (239)   6,011 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Current portion of long-term debt, net of deferred financing costs
(a)
  $63,500   $(8,272)  $55,228  $62,250   $(8,277)  $53,973 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
   
September 30, 2021
   
June 30, 2021
 
   
Principal
   
Unamortized
Deferred
Financing
Costs
  
Net
(a)
   
Principal
   
Unamortized
Deferred
Financing
Costs
  
Net
(a)
 
Noncurrent portion
                            
MSG Networks Senior Secured Credit Facilities
  $985,875   $(2,405)  $983,470   $998,250   $(2,715)  $995,535 
National Properties Term Loan Facility
   638,625    (21,123)   617,502    640,250    (22,819)   617,431 
Tao Credit Facilities
   20,000    (416)   19,584    22,500    (475)   22,025 
Tao Revolving Credit Facility
(b)
   0      0     0      15,000    0     15,000 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
 
Long-term debt, net of deferred financing costs
  $1,644,500   $(23,944)  $1,620,556   $1,676,000   $(26,009)  $1,649,991 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
 
(a)
In addition to the outstanding balance associated with the MSG Networks Senior Secured Credit Facilities, the Tao Term Loan Facility, the Tao Revolving Credit Facility and the National Properties Term Loan Facility disclosed above, the Company’s long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets of $1,621,194 and $1,650,628 September 30, 2021 and June 30, 2021, respectively, also includes $637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder.
(b)
Unamortized deferred financing costs associated with MSGN Revolving Credit Facility and Tao Revolving Credit Facility are presented under the captions Other current assets and Other assets in the accompanying consolidated balance sheets.
36

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
March 31, 2022June 30, 2021
PrincipalUnamortized Deferred Financing Costs
Net
PrincipalUnamortized Deferred Financing Costs
Net
Current portion
MSG Networks Senior Secured Credit Facilities$57,750 $(1,239)$56,511 $49,500 $(1,255)$48,245 
National Properties Term Loan Facility6,500 (6,783)(283)6,500 (6,783)(283)
Tao Term Loan Facility10,000 (239)9,761 6,250 (239)6,011 
Current portion of long-term debt, net of deferred financing costs$74,250 $(8,261)$65,989 $62,250 $(8,277)$53,973 

March 31, 2022June 30, 2021
PrincipalUnamortized Deferred Financing Costs
Net (a)
PrincipalUnamortized Deferred Financing Costs
Net (a)
Noncurrent portion
MSG Networks Senior Secured Credit Facilities$952,875 $(1,788)$951,087 $998,250 $(2,715)$995,535 
National Properties Term Loan Facility635,375 (17,731)617,644 640,250 (22,819)617,431 
Tao Term Loan Facility15,000 (296)14,704 22,500 (475)22,025 
Tao Revolving Credit Facility— — — 15,000 — 15,000 
Long-term debt, net of deferred financing costs$1,603,250 $(19,815)$1,583,435 $1,676,000 $(26,009)$1,649,991 
_________________
(a)In addition to the outstanding balance associated with the MSG Networks Senior Secured Credit Facilities, the Tao Term Loan Facility, the Tao Revolving Credit Facility and the National Properties Term Loan Facility disclosed above, the Company’s long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets of $1,584,072 and $1,650,628 as of March 31, 2022 and June 30, 2021, respectively, also includes $637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder that matures in April 2023.
Unamortized deferred financing costs associated with MSGN Revolving Credit Facility and Tao Revolving Credit Facility are presented under the captions Other current assets and Other assets in the accompanying consolidated balance sheets.
Supplemental cash flows information
During the threenine months ended September 30,March 31, 2022 and 2021, and 2020, interest payments and loan principal repayments made by the Company under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility, and Tao Senior Credit Agreement for term loan and revolving credit facilities were as follows:
37


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
  
Interest Payments
   
Loan Principal Repayments
 
Interest Payments (a)
Loan Principal Repayments
  
Three Months Ended
   
Three Months Ended
 Nine Months EndedNine Months Ended
  
September 30,
2021
   
September 30,
2020
   
September 30,
2021
   
September 30,
2020
 March 31, 2022March 31, 2021March 31, 2022March 31, 2021
MSG Networks Senior Secured Credit Facilities
  $4,427   $4,782   $12,375   $6,875 MSG Networks Senior Secured Credit Facilities$13,238 $14,102 $37,125 $26,125 
National Properties Term Loan Facility
   11,585    0      1,625    0   National Properties Term Loan Facility34,917 11,643 4,875 1,625 
Tao Credit Facilities
   241    334    16,250    1,250 Tao Credit Facilities589 826 18,750 3,750 
  
 
   
 
   
 
   
 
 $48,744 $26,571 $60,750 $31,500 
  $16,253   $5,116   $30,250   $8,125 
  
 
   
 
   
 
   
 
 
_________________
(a)See Note 2 and Note 9 for further details on interest capitalization during the three and nine months ended March 31, 2022, and 2021. Interest payments, net of capitalized interest, were $16,542 and $5,348 for the nine months ended March 31, 2022 and 2021.
Note 14.15. Pension Plans and Other Postretirement Benefit Plan
See Note 1415 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K
for more information regarding the Company’s defined benefit pension plans (“MSGE Pension Plans”), postretirement benefit plan (“MSGE Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “Savings Plans”), and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”).
Through the Merger, the Company also sponsors (i) a
non-contributory,
qualified defined benefit pension plan covering certain of its union employees, (ii) an unfunded
non-contributory,
non-qualified
frozen excess cash balance plan covering certain employees who participated in an underlying qualified plan, and (iii) an unfunded noncontributory,
non-qualified
frozen defined benefit pension plan for the benefit of certain employees who participated in an underlying qualified plan (collectively the “MSGN Pension Plans”, and together with MSGE Pension Plans, the “Pension Plans”). MSG Networks also sponsors a contributory welfare plan which provides certain postretirement healthcare benefits to certain employees hired prior to January 1, 2001 (the “MSGN Postretirement Plan”, and together with MSGE Postretirement Plan, the “Postretirement Plans”).
Defined Benefit Pension Plans and Postretirement Benefit Plan
Plans
The following tables present components of net periodic benefit cost for the Pension Plans and Postretirement Plans included in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021. Service cost is recognized in direct operating expenses and selling, general and administrative expenses. All other components of net periodic benefit cost are reported in miscellaneous expense, net.
Pension PlansPostretirement Plans
Three Months EndedThree Months Ended
March 31,March 31,
2022202120222021
Service cost$118 $121 $16 $22 
Interest cost1,190 1,101 20 19 
Expected return on plan assets(1,719)(1,509)— — 
Recognized actuarial loss501 396 9 20 
Net periodic benefit cost$90 $109 $45 $61 
38
37

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Pension PlansPostretirement Plans
Nine Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Service cost$354 $365 $48 $66 
Interest cost3,570 3,304 60 57 
Expected return on plan assets(5,157)(4,527)— — 
Recognized actuarial loss1,503 1,250 27 60 
Net periodic (benefit) cost$270 $392 $135 $183 

   
Pension Plans
   
Postretirement Plans
 
   
Three Months Ended
September 30,
   
Three Months Ended

September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Service cost
  $118   $121   $16   $22 
Interest cost
   1,190    1,102    20    19 
Expected return on plan assets
   (1,719)    (1,509)    0      0   
Recognized actuarial loss
   501    458    9    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Net periodic (benefit) cost
  $90   $172   $45   $41 
Defined Contribution Pension Plans
For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, expenses related to the Savings Plans and Union Savings Plan included in the accompanying consolidated statements of operations are as follows:
Savings PlansUnion Savings Plan
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
March 31,March 31,March 31,March 31,
20222021202220212022202120222021
$2,095 $241 $6,589 $3,318 $24 $17 $45 $36 
Savings Plans
  
Union Savings Plan
Three Months Ended
  
Three Months Ended
September 30,
  
September 30,
                2021                
  
                2020                
  
                2021                
  
                2020                
$2,019 $1,405 $14 $9
Note 15.16. Share-based Compensation
See Note 1516 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K
for more information regarding MSG Sports equity award programs (the “MSG Sports Stock Plans”) and MSG Entertainment equity award programs. Prior to the Merger, share-based compensation awards were also granted under the MSG Networks Inc. 2010 Employee Stock Plan, as amended, and the MSG Networks Inc. 2010 Stock Plan for
Non-Employee
Directors (collectively, “MSGN Equity Incentive Plans”). Upon exercise of stock options or vesting of time-based restricted stock units and performance condition based restricted stock units, collectively referred to as “RSUs,” under MSGN Equity Incentive Plans, shares were either issued from MSG Networks Inc.’s unissued reserved stock or from treasury stock.
At the Effective Time, each RSU for MSG Networks Inc.’s common stock was converted into 0.172 RSUs for the Company’s Class A Common Stock and each outstanding stock option for MSG Networks Inc.’s common stock was converted into 0.172 options for Class A Common Stock. The exercise price of stock options was adjusted by dividing the exercise price of the MSG Networks Inc.’s stock options by 0.172 (rounded up to the nearest whole cent). All outstanding performance-based vesting RSU or stock option awards for which the performance period had not been completed were converted into time-based (nonperformance based) vesting RSUs or stock option awards, respectively, based on the 100% target number of shares included in the terms of the original award (“Performance Award Conversion”).
Share-based compensation expense was $19,528$18,622 and $16,156$62,321 for the three and nine months ended September 30,March 31, 2022, respectively, and $11,437 and $57,421 for the three and nine months ended March 31, 2021, respectively. The total share-based compensation expense as shown for the three and 2020, respectively.nine month periods ended March 31, 2022 includes $4,589 which was reclassified to restructuring cost on the face of the Consolidated Statements of Operations, as detailed in Note 4. In addition, capitalized share-based compensation expense was $751$2,264 and $866$4,541 for the threenine months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
RSUs and stock options information is presented herein as if the Company and MSG Networks Inc. had been combined for all periods presented, unless otherwise noted.
39
38

Table of Contents


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including (i) Company employees and (ii) MSG Sports employees that received share-based awards prior to the Entertainment Distribution) of the Company’s RSUs for the threenine months ended September 30, 2021:
March 31, 2022:
 Number ofWeighted-Average
Fair Value 
Per Share at
Date of Grant
 Nonperformance
Based Vesting
RSUs
(In Thousands)		Performance
Based Vesting
RSUs
(In Thousands)
Unvested award balance, June 30, 2021683 701 $76.15 
Granted445 422 $79.07 
Performance Award Conversion223 (223)$82.63 
Vested(391)(77)$85.22 
Forfeited(29)(27)$76.39 
Unvested award balance, March 31, 2022931 796 $75.15 
   
Number of
   
Weighted-Average

Fair Value

Per Share at

Date of Grant
 
   
Nonperformance

Based Vesting

RSUs

(In Thousands)
   
Performance

Based Vesting

RSUs

(In Thousands)
 
Unvested award balance, June 30, 2021   683    701   $76.15 
Granted
   445    422   $79.07 
Performance Award Conversion
   223    (223)   $82.63 
Vested
   (326)    (77)   $87.67 
Forfeited
   (1)    (4)   $75.47 
   
 
 
   
 
 
      
Unvested award balance, September 30, 2021
   1,024    819   $75.01 
   
 
 
   
 
 
      
The fair value of RSUs that vested during the threenine months ended September 30, 2021March 31, 2022 was $32,213.$36,940. Upon delivery, RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 189205 of these RSUs, with an aggregate value of $15,189,$16,336, were retained by the Company during the threenine months ended September 30, 2021,March 31, 2022, of which 6 of these RSUs, with an aggregate value of $477, related to MSG Sports employees.
Stock Options Award Activity
Compensation expense for the Company’s existing stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. Stock options generally vest over a three years’year service period and expire 7.5 to 10 years from the date of grant.
The following table summarizes activity related to the Company’s stock options held by employees for the threenine months ended September 30, 2021:March 31, 2022:
Number of
Time Vesting Options
(In Thousands)		Number of
Performance
Based Vesting Options
(In Thousands)		Weighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Term (In Years)Aggregate Intrinsic Value
(In Thousands)
Balance as of June 30, 2021409 315 $103.88 
Performance Award Conversion315 (315)$109.76 
Balance as of March 31, 2022724 — $103.88 3.71$1,781 
Exercisable as of March 31, 2022597 — $108.29 3.45$1,781 
   
Number of

Time
Vesting
Options

(In
Thousands)
   
Number of

Performance

Based
Vesting
Options

(In
Thousands)
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Remaining
Contractual
Term (In
Years)
   
Aggregate
Intrinsic
Value

(In
Thousands)
 
Balance as of June 30, 2021
   409    315  $103.88           
Performance Award Conversion
   315    (315)  $109.76           
   
 
 
   
 
 
               
Balance as of September 30, 2021
   724    —    $103.88    4.21   $780 
   
 
 
   
 
 
               
Exercisable as of September 30, 2021
   597    0    $108.29    3.95   $780 
39
40


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 16.17. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
Three Months Ended March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of December 31, 2021$(44,596)$11,964 $(32,632)
Other comprehensive loss— (5,912)(5,912)
Amounts reclassified from accumulated other comprehensive loss (a)
510 — 510 
Income tax benefit (expense)2,675 (1,651)1,024 
Other comprehensive income (loss)3,185 (7,563)(4,378)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)


Three Months Ended March 31, 2021
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of December 31, 2020$(39,598)$10,869 $(28,729)
Other comprehensive income— 1,499 1,499 
Amounts reclassified from accumulated other comprehensive loss (a)
416 — 416 
Income tax expense(76)(274)(350)
Other comprehensive income340 1,225 1,565 
Balance as of March 31, 2021$(39,258)$12,094 $(27,164)
Nine Months Ended March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2021
$(45,425)$15,153 $(30,272)
Other comprehensive loss— (9,844)(9,844)
Amounts reclassified from accumulated other comprehensive loss (a)
1,530 — 1,530 
Income tax benefit (expense)2,484 (908)1,576 
Other comprehensive income (loss)4,014 (10,752)(6,738)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)
41
   
Three Months Ended September 30, 2021
 
   
Pension Plans
and

Postretirement

Plan
   
Cumulative
Translation
Adjustments
   
Accumulated

Other

Comprehensive

Loss
 
Balance as of June 30, 2021
  $(45,425)   $15,153   $(30,272) 
Other comprehensive income (loss) before reclassifications
   —      (6,418)    (6,418) 
Amounts reclassified from accumulated other comprehensive loss
(a)
   510    0      510 
Income tax benefit (expense)
   (94)    1,214    1,120 
   
 
 
   
 
 
   
 
 
 
Other comprehensive income (loss)
   416    (5,204)    (4,788) 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2021
  $(45,009)   $9,949   $(35,060) 
   
 
 
   
 
 
   
 
 
 
40

Table of Contents


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended March 31, 2021
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2020$(40,248)$(10,225)$(50,473)
Other comprehensive income— 27,333 27,333 
Amounts reclassified from accumulated other comprehensive loss (a)
1,310 — 1,310 
Income tax expense(320)(5,014)(5,334)
Other comprehensive income990 22,319 23,309 
Balance as of March 31, 2021$(39,258)$12,094 $(27,164)
_____________
(a)Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Miscellaneous income (expense), net in the accompanying consolidated statements of operations.
   
Three Months Ended September 30, 2020
 
   
Pension Plans
and

Postretirement

Plan
   
Cumulative
Translation
Adjustments
   
Accumulated

Other

Comprehensive

Loss
 
Balance as of June 30, 2020
  $(38,767)   $(10,225)   $(48,992) 
Other comprehensive income before reclassifications
   —      13,951    13,951 
Amounts reclassified from accumulated other comprehensive loss
(a)
   478    0      478 
Income tax expense
   (163)    (2,569)    (2,732) 
   
 
 
   
 
 
   
 
 
 
Other comprehensive income
   315    11,382    11,697 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2020
  $(38,452)   $1,157   $(37,295) 
   
 
 
   
 
 
   
 
 
 
(a)
Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Miscellaneous income (expense), net in the accompanying consolidated statements of operations.
Note 17.18. Income Taxes
For the periods prior to the Entertainment Distribution, the Company filed consolidated income tax returns with MSG Sports. The income tax provision included in these periods has been calculated using the separate return basis, as if the Company filed a separate tax return. In addition, although the Company and MSG Networks did not file consolidated returns for periods prior to the Merger, income tax expense or benefit and deferred tax assets and liabilities have been presented on a combined basis for all historical periods, as described in Note 1.
In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or tax expense recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis.
Income tax benefitexpense for the three months ended September 30, 2021March 31, 2022 of $18,910$6,315 differs from the income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $9,823 to write off the deferred tax for certain transaction costs associated with the Merger and (ii) tax expense of $2,859$4,444 related to nondeductible officers’ compensation, (ii) state income tax expense of $3,243 and (iii) tax expense of $381 related to noncontrolling interests, partially offset by (i) state(iv) a tax benefit of $1,312 resulting from a decrease in the valuation allowance.
Income tax benefit for the nine months ended March 31, 2022 of $8,532 differs from the income tax benefit of $8,174 and (ii) tax benefit of $1,711 resulting from a change in the estimated applicable tax rate used to measure deferred taxes.
Income tax expense for the three months ended September 30, 2020 of $9,457 differs from income tax benefits derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $6,746$10,213 related to nondeductible officers’ compensation, (ii) tax expense of $9,742 to write off the deferred tax for certain transaction costs associated with the Merger, partially offset by (iii) a tax benefit of $3,772 resulting from a decrease in the valuation allowance, (iv) a tax benefit of $1,998 resulting from a change in the estimated applicable tax rate used to measure deferred taxes, (ii)(v) state income tax benefit of $1,824 and (vi) tax benefit of $737 related to noncontrolling interests.

Income tax expense for the three months ended March 31, 2021 of $6,556 differs from the income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $7,540$7,154 resulting from an increase in the valuation allowance, (ii) tax expense of $1,592 relating to noncontrolling interests and (iii) tax expense of $1,456$1,285 related to nondeductible officers’ compensation, partially offset by state income tax benefit of $231.

Income tax expense for the nine months ended March 31, 2021 of $15,715 differs from the income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $25,713 resulting from an increase in the valuation allowance, (ii) tax expense of $6,846 resulting from a change in the estimated applicable tax rate used to measure deferred taxes, (iii) tax expense of $6,796 related to nondeductible officers’ compensation, and (iv) tax expense of $949$3,432 related to noncontrolling interests, partially offset by state income tax benefit of $1,735.$5,497.
42


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax asset will not be realized. As of September 30, 2021,March 31, 2022, based on current facts and circumstances, management believes that it is more likely than not that the Company will not realize the benefit for a portion of its deferred tax asset.Accordingly, a partial valuation allowance has been recorded as of September 30, 2021. March 31, 2022.The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis.
During the threenine months ended September 30, 2021March 31, 2022 the Company received income tax refunds, net of payments, of $(9,143).$3,887. During the threenine months ended September 30, 2020,March 31, 2021, the Company made income tax payments, net of $23,960.
41
refunds, of $77,393.
Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 18.19. Related Party Transactions
As of September 30, 2021,March 31, 2022, members of the Dolan family including trusts for members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially owned 100% of the Company’s outstanding Class B Common Stock and approximately 5.0% of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of the date hereof). Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 72.6% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Sports and AMC Networks Inc. (“AMC Networks”).
Current Related Party Arrangements
The Company is party to the following agreements and/or arrangements with MSG Sports:
•Media rights agreements with MSG Sports pursuant to which the Company has the exclusive media rights to Knicks and Rangers games in their local markets.
•Sponsorship sales and service representation agreements pursuant to which the Company has the exclusive right and obligation to sell MSG Sports’ sponsorships for an initial stated term of
ten years
for a commission;
•A team sponsorship allocation agreement, pursuant to which MSG Sports continues receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the Entertainment Distribution Date;
•Arena License Agreements pursuant to which the Company (i) provides MSG Sports the right to use The Garden for games of the Knicks and Rangers for a
35-year
term in exchange for venue license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sale of food and beverage sales and catering services during the Knicks and Rangers games for a portion of net profits (as defined under the Arena License Agreements), (v) provides day of game services that were historically provided prior to the Entertainment Distribution, and (vi) provides other general services within The Garden;
•Transition Services Agreement (the “TSA”) pursuant to which the Company provides certain corporate and other transition services to MSG Sports, such as information technology, accounting, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions, in exchange for service fees. MSG Sports also provides certain transition services to the Company, in exchange for service fees;
•Sublease agreement, pursuant to which the Company subleases office space to MSG Sports;
•Group ticket sales representation agreement, pursuant to which the Company appointed MSG Sports as its sales and service representative to sell group ticket packages related to Company events in exchange for a commission;
•Single night rental commission agreement, pursuant to which MSG Sports may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual Company events in exchange for a commission;
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
•Aircraft time sharing agreements (discussed below); and
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
•Other agreements with MSG Sports entered into in connection with the Entertainment Distribution such as a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements.
Further, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman and Chief Executive Officer and the Company’s President with MSG Sports and (ii) the Company’s Vice Chairman with MSG Sports and AMC Networks. Prior to April 1, 2022, the Company also shared such costs for the Company’s former President with MSG Sports.
The Company is a party to various aircraft arrangements. Pursuant to certain Aircraft Support Services Agreements (the “Support Agreements”), the Company provides certain aircraft support services to entities controlled by (i) James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, (ii) Charles F. Dolan, a director, and certain of his children, who are siblings of James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M. Dolan, and (iii)(ii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan.
The Company entered intois party to reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and Kristin A. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling2k LLC (collectively, “CFD”), an entity owned and controlled by Deborah Dolan-Sweeney, the daughter of Charles F. Dolan and the sister of James L. Dolan, pursuant to which the Company has agreed from time to time to make its aircraft available to each of Q2CCFD and CFD and Q2C, and CFD havehas agreed from time to time to make their aircraft available to the Company. Pursuant to the terms of the agreements, Q2C and/oragreement, CFD may lease on a
non-exclusive,
“time “time sharing” basis, the Company’s Gulfstream Aerospace G550certain Company aircraft.
The Company is also party to a dry lease agreement and a time sharing agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F. Dolan, the son of Charles F. Dolan and the brother of James L. Dolan, pursuant to which the Company may lease on a
non-exclusive
basis Brighid Air’sAir has agreed from time to time to make its Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”). available to the Company on a non-exclusive basis. In connection with the dry lease agreement, the Company also entered into a Flight Crew Services Agreement (the “Flight Crew Agreement”) with Dolan Family Office, LLC (“DFO”), an entity owned and controlled by Charles F. Dolan, pursuant to which the Company may utilize pilots employed by DFO for purposes of flying the Challenger when the Company is leasing that aircraft under the Company’s dry lease agreement with Brighid Air.
The Company was also party to (i) a reciprocal time sharing/dry lease agreement with Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and Kristin A. Dolan, his spouse and a director of the Company, pursuant to which the Company from time to time made its aircraft available to Q2C, and Q2C, from time to time made its aircraft available to the Company, and (ii) an aircraft support services agreement with an entity controlled by James L. Dolan, pursuant to which the Company provided certain aircraft support services. These agreements were no longer effective as of December 21, 2021.
The Company and each of MSG Sports and AMC Networks are party to certain aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make aircraft available to MSG Sports and/or AMC Networks for lease on a “time sharing” basis. Additionally, the Company, MSG Sports and AMC Networks have agreed on an allocation of the costs of certain aircraft and helicopter use by their shared executives.
In addition to the aircraft arrangements described above, certain executives of the Company are party to aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).
From time to time the Company enters into arrangements with 605, LLC. James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and his spouse, Kristin A. Dolan (a director of the Company), own 50% of 605, LLC. Kristin A. Dolan is also the founder and Chief Executive Officer of 605, LLC. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.
As of September 30, 2021March 31, 2022 and June 30, 2021, BCEthe Company had $637$853 and $792, respectively, of notes payable with respect to a loan received by BCE from its noncontrolling interest holder. See Note 13 14for further information.
44
43


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company has also entered into certain commercial agreements with its equity method investment nonconsolidated affiliates in connection with MSG Sphere. For the threenine months ended September 30,March 31, 2022 and 2021, the Company recorded $83,318 and 2020, the Company recorded $8,677 and $13,077,$32,654, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of September 30, 2021March 31, 2022 and June 30, 2021, accrued capital expenditures associated with related parties were $9,824$25,482 and $6,921, respectively, and are reported under other accrued liabilities in the accompanying consolidated balance sheets.
Revenues and Operating Expenses (Credits)
The following table summarizes the composition and amounts of the transactions with the Company’s affiliates. These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020:
2021:
Three Months Ended March 31,Nine Months Ended March 31,
2022202120222021
Revenues$35,259 $16,291 $70,148 $23,752 
Operating expenses (credits):
Direct operating — media rights fees$40,948 $35,007 $122,206 $108,971 
Direct operating — revenue sharing expenses1,075 181 3,060 277 
Direct operating — reimbursement under Arena License Arrangement(6,812)(174)(13,276)(1,415)
General and administrative with MSG Sports — net of TSA credits(9,159)(8,476)(28,888)(29,379)
Direct operating — origination, master control and technical services1,232 1,208 3,648 3,576 
Other operating expenses, net279 838 3,388 753 
   
Three Months Ended September 30,
 
   
2021
   
2020
 
Revenues
  $4,187   $2,823 
Operating expenses (credits):
          
Direct operating — media rights fees
  $40,445   $39,541 
Direct operating — revenue sharing expenses
   854    81 
Direct operating — reimbursement under Arena License Arrangement
   (340)    (890) 
Direct operating and general and administrative — net credits with MSG Sports
   (9,216)    (10,180) 
Direct operating — origination, master control and technical services
   1,208    1,184 
Other operating expenses, net
   2,122    133 
Revenues
In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed annual license fees scheduled to be paid monthly over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games, asgames. As further detailed in Note 9. Operating10, operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to
non-consecutive
periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. Asevent (including when events at The Garden were suspended as a result of government-mandated suspension of events at The Garden beginning on March 13, 2020assembly limitations and closures due to the impact ofCOVID-19 pandemic) and that the
COVID-19
pandemic, license fees be reduced when The Garden is available with certain capacity restrictions (including when The Garden was not available at 10% seating capacity from February through May 2021 as a result of government-mandated assembly limitations due to the COVID-19 pandemic). As of July 1, 2021, the Knicks and Rangers began paying the full amounts provided for use by MSG Sports from the effective date of thetheir respective Arena License Agreements through the first quarter of Fiscal Year 2021 and, accordingly, the Company did
0t
record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021.Agreements. The Company recorded $1,328recorded $29,616 and $58,798 of revenuesrevenues under the Arena License Agreements for the three and nine months ended September 30, 2021.March 31, 2022, respectively.
45


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In addition to the Arena License Agreements discussed above, the Company’s revenues from related parties also included revenue fromprimarily reflected sponsorship sales and service representation agreements with MSG Sports of $2,348 and $2,204 $7,027 and $14,207 during the three and nine months ended September 30,March 31, 2022, respectively and $4,442 and $9,088 during the three and nine months ended March 31, 2021, and 2020, respectively. The Company also earned $611 and $619 of sublease revenue from related parties of $611 and $1,834 during the three and nine months ended September 30,March 31, 2022, respectively and $611 and $1,840 during the three and nine months ended March 31, 2021, and 2020, respectively. These related party revenues were partially offset by approximately $124$3,225 and $6,351 of merchandise revenue sharing with MSG Sports during the three and nine months ended September 30, 2021.March 31, 2022, respectively.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Media Rights Fees
TheMSG Networks’ media rights agreements with MSG Sports, effective as of July 1, 2015, provide the MSG Networks segment with the exclusive media rights to Knicks and Rangers games in their local markets.
Revenue Sharing Expenses
In connection with the Entertainment Distribution, revenue sharing expenses include MSG Sports’ share of the Company’s suite license arrangements and certain venue signage agreements entered into by the Company, as well as profit sharing expenses related to
in-venue
food and beverage sales in connection with the Arena License Agreements.
Corporate General and Administrative Expenses, netwith MSG Sports — MSG SportsNet of TSA Credits
The Company’s corporate overhead expenses that are charged to MSG Sports are primarily related to centralized functions, including information technology, accounting, accounts payable, payroll, tax, legal, human resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and reporting, and internal audit.
For the three months ended September 30, 2021 and 2020, direct operating and generalGeneral and administrative operating expenses net –with MSG Sports, onnet of TSA credits included in the table above primarily reflect charges from the Company to MSG Sports pursuant to the TSA TSA of $9,216$9,159 and $10,179,$28,888 for the three and nine months ended March 31, 2022, respectively, and $8,476 and $29,379 for the three and nine months ended March 31, 2021, respectively.
Direct operatingOperating — origination, master controlOrigination, Master Control and technical servicesTechnical Services
AMC Networks provides certain origination, master control, and technical services to the MSG Networks segment.
Other Operating Expenses, net
The Company and its related parties enter into transactions with each other in the ordinary course of business. Amounts charged to the Company for other transactions with its related parties are net of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L. Dolan, the Executive Chairman, Chief Executive Officer and a director of the Company, for office space and the cost of certain technology services. In addition, other operating expenses include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and CFD, (ii) time sharing and/or dry lease agreements with MSG Sports, AMC Networks and Brighid Air and (iii) commission under the group ticket sales representation agreement with MSG Sports. The reciprocal aircraft arrangement between the Company and Q2C and the related aircraft support services arrangement between them was no longer effective as of December 21, 2021.
46


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 19.20. Segment Information
The Company is comprised of
3
reportable segments: Entertainment, MSG Networks and Tao Group Hospitality. In determining its reportable segments, the Company assessed the guidance of ASC
280-10-50-1,
which provides the definition of a reportable segment. In accordance with the FASB’s guidance, the Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its CODM.Chief Operating Decision Maker (“CODM”). The Company has evaluated this guidance and determined that there are 3 reportable segments. In addition, the Company incurs
non-capitalizable
content development and technology costs associated with the Company’s MSG Sphere initiative, which are reported in “Entertainment.” In addition to event-related operating expenses, Entertainment also includes other expenses such as (a) corporate and supporting department operating costs that are attributable to MSG Sphere development and
(b) non-event
related operating expenses for the Company’s venues such as (i) rent for the Company’s leased venues, (ii) real estate taxes, (iii) insurance, (iv) utilities, (v) repairs and maintenance, (vi) labor related to the overall management of the venues, and (vii) depreciation and amortization expense related to the Company’s performance venues and certain corporate property, equipment and leasehold improvements. Additionally, the Company does not allocate any purchase accounting adjustments related to business acquisitions to the reporting segments.
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Table of Contents
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company evaluates segment performance based on several factors, of which the key financial measure is operating income (loss) before (i) adjustments to remove the impact of
non-cash
straight-line leasing revenue associated with the Arena License Agreements with MSG Sports, (ii) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets, (iii) amortization for capitalized cloud computing arrangement costs, (iv) share-based compensation expense or benefit, (v) restructuring charges or credits, (vi) merger and acquisition-related costs, andincluding litigation expenses, (vii) gains or losses on sales or dispositions of businesses and associated settlements, and (viii) the impact of purchase accounting adjustments related to business acquisitions, which is referred to as adjusted operating income (loss), a
non-GAAP
measure. In addition to excluding the impact of the items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated adjusted operating income (loss). Because it is based upon operating income (loss), adjusted operating income (loss) also excludes interest expense (including cash interest expense) and other
non-operating
income and expense items. Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. In addition, the Company believes that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of
non-cash
leasing revenue provides investors with a clearer picture of the Company’sCompany's operating performance. We eliminate merger and acquisition-related costs because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a
non-recurring
nature, thereby enhancing comparability.
The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance. The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance, and evaluates management’s effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Information as to the operations of the Company’s reportable segments is set forth below.

   
Three Months Ended September 30, 2021
 
   
Entertainment
  
MSG
Networks
   
Tao
Group
Hospitality
   
Purchase

accounting
adjustments
  
Inter-segment

eliminations
  
Total
 
Revenues
  $34,239  $141,473   $119,464   $0    $(666)  $294,510 
Direct operating expenses
   36,302   68,423    61,093    85   (142)   165,761 
Selling, general and administrative expenses
   92,962   47,975    34,094    0     (192)   174,839 
Depreciation and amortization
   19,656   1,797    6,378    1,599   0     29,430 
Impairment of long-lived assets
   0     0      7,818    0     0     7,818 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Operating income (loss)
  $(114,681)  $23,278   $10,081   $(1,684)  $(332)  $(83,338) 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Loss in equity method investments
                         (1,207) 
Interest income
                         775 
Interest expense
                         (9,248) 
Miscellaneous expense, net
(a)
                         (2,547) 
                         
 
 
 
Loss from operations before income taxes
                        $(95,565) 
                         
 
 
 
Reconciliation of operating loss to adjusted operating income:
 
        
Operating income (loss)
  $(114,681)  $23,278   $10,081   $(1,684)  $(332)  $(83,338) 
Add back:
                           
Non-cash
portion of arena license fees from MSG Sports
   (543)   0      0      0     0     (543) 
Share-based compensation
   10,143   7,474    1,911    0     0     19,528 
Depreciation and amortization
   19,656   1,797    6,378    1,599   0     29,430 
Amortization for capitalized cloud computing arrangement costs
   41   44    0      0     0     85 
Merger and acquisition related costs
   13,992   23,200    0      0     0     37,192 
Impairment of long-lived assets
   —     —      7,818    —     —     7,818 
Other purchase accounting adjustments
   0     0      0      85   0     85 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Adjusted operating income (loss)
  $(71,392)  $55,793   $26,188   $0    $(332)  $10,257 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Other information:
                           
Capital expenditures
  $133,538  $1,449   $2,284   $0    $0    $137,271 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
   
Three Months Ended September 30, 2020
 
   
Entertainment
  
MSG
Networks
   
Tao Group
Hospitality
  
Purchase

accounting
adjustments
  
Inter-segment

eliminations
  
Total
 
Revenues
  $7,555  $157,363   $7,221  $0    $(1,593)  $170,546 
Direct operating expenses
   23,615   65,072    9,828   924   (208)   99,231 
Selling, general and administrative expenses
   52,650   22,527    7,603   0     (1,123)   81,657 
Depreciation and amortization
   22,014   1,828    1,046   3,522   0     28,410 
Restructuring charges
   19,927   0      0     0     0     19,927 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Operating income (loss)
  $(110,651)  $67,936   $(11,256)  $(4,446)  $(262)  $(58,679) 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Loss in equity method investments
                        (1,696) 
Interest income
                        772 
Interest expense
                        (5,273) 
Miscellaneous income, net
(a)
                        34,017 
                        
 
 
 
Loss from operations before income taxes
                       $(30,859) 
                        
 
 
 
Reconciliation of operating loss to adjusted operating loss:
 
        
Operating income (loss)
  $(110,651)  $67,936   $(11,256)  $(4,446)  $(262)  $(58,679) 
Add back:
                          
Share-based compensation
   10,433   4,627    1,096   0     0     16,156 
Depreciation and amortization
   22,014   1,828    1,046   3,522   0     28,410 
Restructuring charges
   19,927   0      0     0     0     19,927 
Other purchase accounting adjustments
   0     0      0     924   0     924 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted operating income (loss)
  $(58,277)  $74,391   $(9,114)  $0    $(262)  $6,738 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Other information:
                          
Capital expenditures
  $111,399  $1,741   $659  $0    $0    $113,799 
(a)
Miscellaneous income (expense), net includes the following:
Three Months Ended March 31, 2022
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$194,585 $167,569 $108,572 $— $(10,599)$460,127 
Direct operating expenses110,688 87,174 63,783 1,622 (791)262,476 
Selling, general and administrative expenses

94,603 32,237 40,376 — (9,618)157,598 
Depreciation and amortization18,522 1,764 6,490 1,863 — 28,639 
Impairment and other (gains) losses, net(245)— (5,074)— — (5,319)
Restructuring charges14,238 452 — — — 14,690 
Operating income (loss)$(43,221)$45,942 $2,997 $(3,485)$(190)$2,043 
Loss in equity method investments(1,528)
Interest income774 
Interest expense(5,831)
Miscellaneous expense, net(a)(8,449)
Loss from operations before income taxes$(12,991)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(43,221)$45,942 $2,997 $(3,485)$(190)$2,043 
Add back:
Non-cash portion of arena license fees from MSG Sports(12,073)— — — — (12,073)
Share-based compensation10,399 1,758 1,876 — — 14,033 
Depreciation and amortization18,522 1,764 6,490 1,863 — 28,639 
Amortization for capitalized cloud computing costs38 43 — — — 81 
Merger and acquisition related costs1,647 866 247 — — 2,760 
Impairment and other (gains) losses, net(245)— (5,074)— — (5,319)
Restructuring charges14,238 452 — — — 14,690 
Other purchase accounting adjustments— — — 1,622 — 1,622 
Adjusted operating income (loss)$(10,695)$50,825 $6,536 $— $(190)$46,476 
Other information:
Capital expenditures$200,958 $320 $5,295 $— $— $206,573 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months Ended March 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$30,957 $177,853 $12,790 $— $(7,282)$214,318 
Direct operating expenses24,644 74,392 10,480 887 (381)110,022 
Selling, general and administrative expenses67,286 31,743 11,025 — (6,629)103,425 
Depreciation and amortization19,081 1,833 1,130 17,567 — 39,611 
Operating income (loss)$(80,054)$69,885 $(9,845)$(18,454)$(272)$(38,740)
Loss in equity method investments(2,314)
Interest income792 
Interest expense(6,503)
Miscellaneous income, net(a)27,483 
Loss from operations before income taxes$(19,282)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(80,054)$69,885 $(9,845)$(18,454)$(272)$(38,740)
Add back:
Non-cash portion of arena license fees from MSG Sports(7,564)— — — — (7,564)
Share-based compensation6,799 3,324 1,314 — — 11,437 
Depreciation and amortization19,081 1,833 1,130 17,567 — 39,611 
Merger and acquisition related costs11,267 1,238 2,764 — — 15,269 
Other purchase accounting adjustments— — — 887 — 887 
Adjusted operating income (loss)$(50,471)$76,280 $(4,637)$— $(272)$20,900 
Other information:
Capital expenditures$102,026 $447 $295 $— $— $102,768 
49

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended March 31, 2022
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$476,434 $469,023 $345,122 $— $(19,503)$1,271,076 
Direct operating expenses294,333 241,521 185,756 4,745 (1,860)724,495 
Selling, general and administrative expenses279,081 117,404 115,155 — (16,926)494,714 
Depreciation and amortization57,202 5,317 19,111 6,972 

— 88,602 
Impairment and other (gains) losses, net(245)— (4,699)(536)— (5,480)
Restructuring charges14,238 452 — — — 14,690 
Operating income (loss)$(168,175)$104,329 $29,799 $(11,181)$(717)$(45,945)
Loss in equity method investments(4,509)
Interest income2,322 
Interest expense(23,246)
Miscellaneous expense, net(a)(28,096)
Loss from operations before income taxes$(99,474)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(168,175)$104,329 $29,799 $(11,181)$(717)$(45,945)
Add back:
Non-cash portion of arena license fees from MSG Sports(23,962)— — — — (23,962)
Share-based compensation36,697 15,290 5,745 — — 57,732 
Depreciation and amortization57,202 5,317 19,111 6,972 — 88,602 
Amortization for capitalized cloud computing costs45 131 — — — 176 
Merger and acquisition related costs17,095 24,941 247 — — 42,283 
Impairment and other (gains) losses, net(245)— (4,699)(536)— (5,480)
Restructuring charges14,238 452 — — — 14,690 
Other purchase accounting adjustments— — — 4,745 — 4,745 
Adjusted operating income (loss)$(67,105)$150,460 $50,203 $— $(717)$132,841 
Other information:
Capital expenditures$500,714 $2,369 $16,566 $— $— $519,649 
50
   
Three Months Ended
September 30,
 
   
2021
   
2020
 
Unrealized gain (loss) on equity investments with readily determinable fair value, see Note 7 for further details.
  $(2,460)   $33,658 
Non-service
cost components of net periodic pension and postretirement benefit costs
   (8)    (91) 
Others, net
   (79)    450 
   
 
 
   
 
 
 
Total
  $(2,547)   $34,017 
   
 
 
   
 
 
 

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended March 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$51,181 $481,455 $30,502 $— $(9,522)$553,616 
Direct operating expenses71,668 196,497 31,288 2,735 (438)301,750 
Selling, general and administrative expenses185,666 75,962 27,759 — (8,287)281,100 
Depreciation and amortization60,341 5,463 3,739 24,155 — 93,698 
Restructuring charges21,299 — — — — 21,299 
Operating income (loss)$(287,793)$203,533 $(32,284)$(26,890)$(797)$(144,231)
Loss in equity method investments(5,578)
Interest income2,401 
Interest expense(17,038)
Miscellaneous income, net(a)53,932 
Loss from operations before income taxes$(110,514)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(287,793)$203,533 $(32,284)$(26,890)$(797)$(144,231)
Add back:
Non-cash portion of arena license fees from MSG Sports(8,740)— — — — (8,740)
Share-based compensation39,606 14,217 3,598 — — 57,421 
Depreciation and amortization60,341 5,463 3,739 24,155 — 93,698 
Merger and acquisition related costs11,479 1,238 2,764 — — 15,481 
Impairment and other (gains) losses, net— — — — — — 
Restructuring charges21,299 — — — — 21,299 
Other purchase accounting adjustments— — — 2,735 — 2,735 
Adjusted operating income (loss)$(163,808)$224,451 $(22,183)$— $(797)$37,663 
Other information:
Capital expenditures$320,370 $2,980 $1,247 $— $— $324,597 

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
_________________
(a)Miscellaneous income (expense), net includes the following:
Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Unrealized gain (loss) on equity investments with readily determinable fair value, see Note 8 for further details.$(8,688)$26,231 $(28,303)$52,662 
Non-service cost components of net periodic pension and postretirement benefit costs(9)(27)(25)(147)
Others, net248 1,279 232 1,417 
Total$(8,449)$27,483 $(28,096)$53,932 
Concentration of Risk
Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenue and assets are concentrated in the New York City metropolitan area.
Accounts receivable, net on the accompanying consolidated balance sheets as of September 30, 2021March 31, 2022 and June 30, 2021 include amounts due from the following individual customers, all derived from the MSG Networks segment, which accounted for the noted percentages of the gross balance:
March 31, 2022June 30, 2021
Customer A16 %17 %
Customer B12 %16 %
Customer C11 %15 %
   
September 30, 2021
  
June 30, 2021
 
Customer A
   16%   16% 
Customer B
   16%   15% 
Customer C
   13%   17% 
Revenues in the accompanying consolidated statements of operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 include amounts from the following individual customers, which accounted for the noted percentages of the total:
Three Months EndedNine Months Ended
March 31, 2022March 31, 2021March 31, 2022March 31, 2021
Customer 19 %20 %10 %23 %
Customer 29 %19 %9 %22 %
   
Three Months Ended
 
   
September 30, 2021
  
September 30, 2020
 
Customer 1
   15%   26% 
Customer 2
   13%   24% 
Customer 3
   10%   19% 
The accompanying consolidated balance sheets as of September 30, 2021March 31, 2022 and June 30, 2021 include the following approximate amounts that are recorded in connection with the Company’s license agreement with the New Jersey Devils:
   
September 30, 2021
   
June 30, 2021
 
Prepaid expenses
  $700   $1,400 
Other current assets
   3,700    3,700 
Other assets
   30,400    31,100 
   
 
 
   
 
 
 
   $34,800   $36,200 
   
 
 
   
 
 
 
March 31, 2022June 30, 2021
Prepaid expenses$650 $1,400 
Other current assets2,700 3,700 
Other assets30,000 31,100 
$33,350 $36,200 
49
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 20. Correction of Previously Issued Consolidated Financial Statements
Subsequent to the issuance of the Company’s consolidated financial statements as of September 30, 2021 and 2020 (the “previously issued financial statements”), management
re-evaluated
the Company’s historical application of ASC Topic
835-20,
Capitalization of Interest
(“ASC
835-20”)
and concluded interest costs incurred on the Company’s outstanding indebtedness during the previously reported periods should have been subject to capitalization as part of the cost of constructing the Las Vegas MSG Sphere project (the “project”) since inception of the project because the project meets the definition of a long-term “qualifying asset”, as prescribed by ASC
835-20
(the “accounting error”). Management evaluated the quantitative and qualitative impact of this accounting error and concluded it was not material to the Company’s previously issued financial statements. Notwithstanding this conclusion, management has revised the accompanying consolidated financial statements and related notes included herein to correct this accounting error for all periods presented. The correction of this accounting error had not effect on the Company’s previously reported revenues and operating loss.
The following tables present the effect of correcting this accounting error, net of income tax benefits, on the Company’s previously issued financial statements:
The effect of the correction of the error noted above on the Company’s previously issued consolidated balance sheets as of September 30, 2021 and June 30, 2021 is as follows:

   
September 30, 2021
  
June 30, 2021
 
   
As
Previously
Issued
  
Adjustment
   
As Revised
  
As
Previously
Issued

  
Adjustment
   
As Revised
 
Property and equipment, net
  $2,226,175  $58,554   $2,284,729 $ 2,107,064 $ 49,228 $ 2,156,292 
Total assets
   5,279,366   58,554    5,337,920   5,240,651   49,228    5,289,879 
Deferred tax liabilities, net
   167,180   10,601    177,781   191,429   8,896    200,325 
Total liabilities
   3,090,902   10,601    3,101,503   2,962,743   8,896    2,971,639 
Additional
paid-in
capital
   2,279,180   13,977    2,293,157   2,280,798   13,977    2,294,775 
Accumulated deficit
   (209,549)   33,976    (175,573)   (122,696)   26,355    (96,341)) 
Total Madison Square Garden Entertainment Corp.
stockholders’ equity
   2,034,913   47,953    2,082,866   2,128,170   40,332    2,168,502 
Total equity
   2,048,054   47,953    2,096,007   2,140,074   40,332    2,180,406 
Total liabilities, redeemable noncontrolling interests and equity
   5,279,366   58,554    5,337,920   5,240,651   49,228    5,289,879 

50
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The effect of the correction of the error noted above on the Company’s previously issued consolidated statements of operations for the three months ended September 30, 2021 and 2020 is as follows:
   
September 30, 2021
  
September 30, 2020
 
(in thousands)  
As
Previously
Issued

  
Adjustment
  
As
Revised
  
As
Previously
Issued

  
Adjustment
  
As Revised
 
Interest expense
  $(18,574)  $9,326  $(9,248)  $(5,628)  $355  $(5,273) 
Loss from operations before income taxes
   (104,891)   9,326   (95,565)   (31,214)   355   (30,859) 
Income tax benefit (expense)
   20,615   (1,705)   18,910   (9,392)   (65)   (9,457) 
Net loss
   (84,276)   7,621   (76,655)   (40,606)   290   (40,316) 
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders
   (86,853)   7,621   (79,232)   (36,087)   290   (35,797) 
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders
   (2.55)   0.22   (2.32)   (1.06)   0.01   (1.05) 
The effect of the correction of the error noted above on the Company’s previously issued consolidated statements of comprehensive loss for the three months ended September 30, 2021 and 2020 is as follows:
   
September 30, 2021
  
September 30, 2020
 
(in thousands)  
As
Previously
Issued

  
Adjustment
   
As
Revised
  
As
Previously
Issued
  
Adjustment
   
As Revised
 
Net loss
  $(84,276)  $7,621   $(76,655)  $(40,606)  $290   $(40,316) 
Comprehensive loss
   (89,064)   7,621    (81,443)   (28,909)   290    (28,619) 
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders
   (91,641)   7,621    (84,020)   (24,390)   290    (24,100) 
The effect of the correction of the error noted above on the Company’s previously issued consolidated statements of cash flows for the three months ended September 30, 2021 and 2020 is as follows:
   
September 30, 2021
  
September 30, 2020
 
(in thousands)  
As
Previously
Issued

  
Adjustment
  
As Revised
  
As
Previously
Issued
  
Adjustment
  
As Revised
 
Net loss
  $(84,276)  $
7,621
  $(76,655)  $(40,606)  $290  $(40,316) 
Benefit from deferred income taxes
   (21,741)   1,705   (20,036)   (9,655)   65   (9,590) 
Net cash provided by (used in) operating activities
   (2,338)   9,326   6,988   (95,582)   355   (95,227) 
Capitalized interest
   0     (9,326)   (9,326)   0     (355)   (355) 
Net cash used in investing activities
   (136,976)   (9,326)   (146,302)   192,589   (355)   192,234 
51

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Item 2.
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 and COVID-19 variants on our future operations, our ability to realize the benefits of the Merger with MSG Networks cost-cutting measures the Company may or may not pursue to preserve cash and financial flexibility and the ability to maintain such cost savings,Inc., the timing and costs of new venue construction and the development of related content, our expansion plan for Tao Group Hospitality, our plans to negotiate amendments to the National Properties Term Loan Facility or Tao Group Hospitality’s credit facility, and the status of the
non-carriage
of MSG Networksour networks by Comcast.Comcast Corporation (“Comcast”). 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(including COVID-19 variants) as well as the actions taken in response by governmental authorities andor certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues as they are permitted to continue to operate;
•the effect of any show postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic due to operational challenges and other health and safety concerns (such as the partial cancellation of the 2021 production of the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”);
•the extent to which attendance at our venues may be impacted by government actions, continuing health concerns by potential attendees and reduced tourism;
•risks related to the Merger, as defined herein, with MSG Networks Inc., including, but not limited to: failure to realize the expected benefits of the Merger, business disruption following the Merger and the risk of the litigation relating to the Merger;
Merger;
the extent to which attendance at our venues may be suppressed due to government actions, continuing health concerns by potential attendees and reduced tourism;
•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements at games of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers games;
(the “Rangers”) of the National Hockey League (the “NHL”);
•the level of our expenses and our operational cash burn rate, including our corporate expenses;
•our ability to successfully design, construct, finance and operate new entertainment venues in Las Vegas and other markets, and the investments, costs and timing associated with those efforts, including the impact of the temporary suspension of construction and inflation 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
, the sports teams whose games are played at The Garden and broadcast on our networks, the appeal of our Tao Group Hospitality venues, and other entertainment and other events which are presented in our venues or broadcast on our networks;
•the demand for our MSG Networks programming among cable, satellite, telephone and other platforms (“Distributors”) and the subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors;
•our ability to develop and successfully execute MSG Networks’ strategy for a direct-to-consumer offering;
•the ability of our Distributors to maintain, or minimize declines in, subscriber levels;
•the impact of subscribers selecting Distributors’ packages that do not include our networks or Distributors that do not carry our networks at all;
•the security of our MSG Networks program signal and electronic data;
•the
on-ice
and
on-court
performance of the professional sports teams whose games we broadcast on our networks and host in our venues;
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•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) significant business activities;
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•the demand for sponsorship arrangements and advertising and viewer ratings for our networks;
•competition, for example, from other venues and other sports and entertainment and nightlife options and other regional sports and entertainment networks, including the construction of new competing venues;
•the relocation or insolvency of professional sports teams with which we have a media rights agreement;
•our ability to maintain, obtain or produce content, together with the cost of such content;
•our ability to renew or replace our media rights agreements with professional sports teams through MSG Networks Inc.;
•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, including the unions representing players and officials of the National Basketball Association (“NBA”)NBA and National Hockey League (“NHL”),NHL, or other work stoppage due to
COVID-19
or otherwise;
•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 MSG Sphere;
•business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our Networks business or disclosure of confidential 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 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, including the Merger with MSG Networks Inc. and our acquisition of Hakkasan through Tao Group Hospitality;
•the operating and financial performance of our strategic acquisitions and investments, including those we do not control;
•our internal control environment, remediation of the material weakness, and our ability to identify any future material weaknesses;
•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, changes in how those regulations and laws are interpreted, including with respect to the legalization of sports gaming, as well as 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;
•the impact of sports league rules, regulations and/or agreements and changes thereto;
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•the substantial amount of debt incurred, and any default, by our subsidiaries under their respective credit facilities;
•financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate;
•the ability of our investees and others to repay loans and advances we have extended to them;
•the
tax-free
treatment of the Entertainment Distribution (as defined below);
•our ability to achieve the intended benefits of the Entertainment Distribution and the Merger with MSG Networks;
Networks Inc.;
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•the performance by MSG Sports of its obligations under various agreements with the Company related to the Entertainment Distribution and ongoing commercial arrangements, including the Arena License Agreements;
•lack of operating history as an operating company and costs associated with being an independent public company; and
•the additional factors described under “Risk Factors” in the Company’s Annual Report on Form
10-K
for the year ended June 30, 2021.2021, as amended by the Company’s Annual Report on Form 10-K/A filed on February 9, 2022 (the “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.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited financial statements and accompanying notes thereto included in this Quarterly Report on Form
10-Q,
as well as the Company’s Annual Report on Form
10-K
for the year ended June 30, 2021 to help provide an understanding of our financial condition, changes in financial condition and results of operations
.
Unless the context otherwise requires, all references to “we,” “us,” “our,” “MSG Entertainment,”
or the “Company” refer collectively to Madison Square Garden Entertainment Corp., a holding company, and its direct and indirect subsidiaries through which substantially all of our operations are conducted. Through the period ended April 17, 2020, the Company operated and reported financial information as one reportable segment. Following the distribution of all the outstanding common stock of MSG Entertainment Distributionto stockholders of Madison Square Garden Sports Corp. (the “Entertainment Distribution”) on April 17, 2020 and the Merger with MSG Networks Inc. on July 9, 2021, the Company has three segments (the Entertainment business, the Tao Group Hospitality business, and the MSG Networks business). See Note 1920 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for further discussion of the Company’s segment reporting. As disclosed in Note 20 to the consolidated financial statements, the Company’s consolidated financial statements as of September 30, 2021 and June 30, 2021 and for the three months ended September 30, 2021 and September 30, 2020 have been revised to give effect to the correction of an error related to capitalized interest associated with the Company’s outstanding indebtedness in accordance with ASC Topic
835-20.
As a result, the Management’s Discussion and Analysis of the Company’s Financial Condition and Results of Operation set forth below has been revised to give effect to the correction of the accounting error, which was not material to any period presented. Otherwise, the information contained in this MD&A is as of the date of the Original Filing and does not reflect any information or events occurring after the date of the Original Filing.
This MD&A is organized as follows:
Business Overview.
This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
Results of Operations.
This section provides an analysis of our unaudited results of operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 on both a consolidated basis and a segment basis.
Liquidity and Capital Resources.
This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the threenine months ended September 30,March 31, 2022 and 2021, and 2020, as well as certain contractual obligations and
off-balance
sheet arrangements.
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Seasonality of Our Business.
This section discusses the seasonal performance of our Entertainment segment.
Recently Issued Accounting Pronouncements and Critical Accounting Policies.
This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company’s annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of Fiscal Year 2022. This section should be read together with our critical accounting policies, which are discussed in our Annual Report on Form
10-K
for the year ended June 30, 2021 under “Item. 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Policies — Critical Accounting Policies” and in the notes to the consolidated financial statements of the Company included therein.
Business Overview
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment brands; regional sports and entertainment networks; popular dining and nightlife offerings; and a premier music festival that, together, entertain millions of guests each year. The Company’s portfolio of venues includes: Madison Square Garden (“The Garden,Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. In addition, the Company unveiled its vision for a
state-of-the-art
venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Company also includes the original production, the
Christmas Spectacular
, as well as BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. MSG Networks produces, develops and acquires content for multiple distribution platforms, including content originating from the Company’s venues, and is comprised of the
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Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. Tao Group Hospitality is a hospitality group with globally-recognized entertainment dining and nightlife brands.
Merger with MSG Networks Inc.
On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to that certain Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time
multiplied by
0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time
multiplied by
0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.
Beginning this fiscal year, theThe Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control.
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Factors Affecting Results of Operations
Impact of the
COVID-19
Pandemic on Our Business
The Company’s operations and operating results have been and may continue to be, materially impacted by the
COVID-19
pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all operations of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have resumed, it isFiscal Year 2022 has also been impacted by the pandemic, with fewer ticketed events at our venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not clear when we will fully returnimpacted by COVID-19) due to normal operations.the lead-time required to book touring acts and artists, and an increase in cases due to a COVID-19 variant, which resulted in a number of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in
mid-March
March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from
mid-February
February through
mid-May
May 2021 with certain safety protocols and social distancing. Beginning in
mid-May
May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. For all events hosted at our New York performance venues with 100% capacity prior to August 17, 2021, guests were required to provide proof of full vaccination or a negative
COVID-19
test, depending on the requirements of that venue and/or preference of the performer. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, areincluding our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older were required to show proof of at least one vaccination shot. Guests are also required to wear masks unless they showprovide proof that they are fully vaccinatedhad received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols). Children under age 12 can attend events with a vaccinated adult, but ages 2 to 11 need to wear a mask while inside our venues. In addition, effective August 20, 2021, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
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For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or canceledcancelled. For the nine months ended March 31, 2022 and whileas of this date, live events arehave been permitted to be held at all of our performance venues as of the date of this filing and we are continuing to host and book new events, due to the lead-time required to book touring acts and artists, which is the majorityevents. As a result of our Entertainment business, we expect that ouran increase in cases of a COVID-19 variant, select bookings will continue to be impacted through the 2021 calendar year. We continue to actively pursue
one-time
were postponed or multi-night performancescancelled at our performance venues asin the touring market ramps up.second and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact toof the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the
Christmas Spectacular
, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals. While the 2021 production of the
Christmas Spectacular
is currently
on-sale,
the current production is scheduled for 160 shows, as compared with 199 shows for the 2019 production, which was the last production presented prior to the impact of the
COVID-19
pandemic.Festival.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. UnderAs discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the Arena License Agreements,entirety of the Knicks and Rangers 2020-21 regular seasons, which materially impacted the Rangers pay an annual license fee in connection with their respective use of The Garden. The license fee for the first full contract year ending June 30, 2021 was 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 when events at The Garden were suspended by government mandate as a result of the
COVID-19
pandemic). As a result,payments we did not receive any license fee paymentsreceived under the Arena License Agreements from the period following the Entertainment Distribution through November 2020.for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License AgreementsAgreements. The Knicks and full
the Rangers each completed their 2021-2022 82-game
regular seasons, forwith the
2021-22
NBA and NHL seasons are scheduled. Rangers advancing to the playoffs. See “Item. 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations — Revenue Sources—Sources — Entertainment — Venue License Fees” on the Company’s AnnualForm 10-K and Note 10 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-K
for the year ended June 30, 2021 10-Q for further information on revenue recognition under the Arena License Agreements.
As a result of the
COVID-19
pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by
COVID-19),
and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, expects a return to normalized levels ofits advertising revenue and certain operating expenses, including rights fees expense.expense, reflect the same.
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Disruptions caused by the
COVID-19
pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to governmentgovernment actions taken in response to the
COVID-19
pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in
mid-March
March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. During Fiscal Year 2022, Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and duringreduced demand from guests, including corporate and private event cancellations and postponements in the first quartersecond and third quarters. As of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Effective August 17, 2021, workers and customers in New York City indoor dining facilities are required to show proofthe date of at least one vaccination shot. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, butthis filing, Tao Group Hospitality is continuing to operateoperating without capacity restrictions in domestic and key international markets.
It is unclear how long and to what extent
COVID-19
concerns, including with respect to new variants, will continue to impactcould result in new government andor league-mandated capacity restrictions or vaccination/mask requirements or impact the use of and/or demand for our entertainment and dining and nightlife venues, and demand for our sponsorship and advertising assets, or deter our employees and vendors from working at our venues (which may lead to difficulties in staffing).
During Fiscal Year 2021, the
COVID-19
pandemic or otherwise materially impactedimpact our revenues, most significantly because, for the majority of the year, we were not generating revenue from (i) ticketed events at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre, (ii) suite licenses, (iii) the 2020 production of the
Christmas Spectacular
and (iv) the 2021 Boston Calling Music Festival. In addition, we generated substantially reduced revenue in connection with (i) sponsorship and advertising, (ii) payments under the Arena License Agreements, (iii) food and beverage sales and catering services at Knicks and Rangers games and
(iv) non-ticketed
events such as the Big East Tournament in March 2021.operations.
As a result of the material impact
COVID-19
had on our revenues during Fiscal Year 2021, we took several actions to improve our financial flexibility, reduce operating costs and preserve liquidity, including (i) revising our construction schedule for MSG Sphere with(which has an anticipated opening date in the second half of calendar year 2023,2023), (ii) making significant cuts in both Entertainment and Tao Group Hospitality venue and corporate headcounts (we have since begun rehiring), and (iii) having our wholly-owned subsidiary, MSG National Properties, LLC (“MSG National Properties”) enter into a five-year $650,000 senior secured term loan facility (“National Properties Term Loan Facility”). See Note 14 to the audited consolidated and combined financial statements included in “— Item 81. Financial Statements” of this AnnualQuarterly Report on Form
10-K
10-Q for further details on the National Properties Term Loan Facility.
In August 2020, Tao Group Hospitality entered into an amendment to the Tao Senior Credit Agreement, which suspended certain financial covenants through December 31, 2021 and increased the minimum liquidity requirement. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. In addition, in connection with the amendment, our wholly-owned subsidiary MSG Entertainment Group, LLC (“MSG Entertainment Group”) entered into a guarantee agreement, which also included a minimum liquidity requirement for MSG Entertainment Group. See Note 14 to the consolidated and combined financial statements included in “— Item 81. Financial Statements” of this AnnualQuarterly Report on Form
10-K
10-Q for more information regarding the amendment to the Tao Senior Credit Agreement. Tao Group Hospitality may need to seek
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covenant waivers in the future. Tao Group Hospitality’s failure to obtain debt covenant waivers could trigger a violation of these covenants and lead to default, acceleration of all of its outstanding debt and a demand for payment under the guarantee of MSG Entertainment Group, which would negatively impact the liquidity of Tao Group Hospitality and the Company.
The Company is building its first MSG Sphere in Las Vegas. This is a complex construction project with cutting-edge technology, which relies on subcontractors obtaining components from a variety of sources around the world. In April 2020, 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 continued to impact its business operations, in August 2020, the Company disclosed that it had resumed full construction with a lengthened timetable to better preserve cash through the
COVID-19
pandemic. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in the second half of calendar year 2023.
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In December 2020, the Company terminated its construction agreement with AECOM and assumed the role of construction manager to gain greater transparency and control over the construction process, including direct engagement and supervision of subcontractors. AECOM continues to support MSG Sphere at The Venetian through a services agreement that facilitates their ongoing involvement through MSG Sphere’s completion. As the construction manager of the project, we aim to aggressively manage the cost of the project in this volatile environment to minimize any potential cost increases.
For more information about the risks to the Company as a result of the
COVID-19
pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors
—
General Risk Factors
—
Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the
COVID-19
Pandemic and Actions Taken in Response by Governmental Authorities and Certain Professional Sports Leagues
.” of the Company’s Annual Report on Form
10-K 10-K.
for the year ended June 30, 2021.
For the three months ended September 30, 2021, the Company’s operations and operating results were still materially impacted by the
COVID-19
pandemic and actions taken in response by governmental authorities. While the Company has started to see an increase in events held at its venues and in demand for its hospitality business, it is not clear when the Company will fully return to normal business operations.
Factors Related to the MSG Networks Business
As further discussed under Note 2 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q,
the financial performance of MSG Networks business is affected by the affiliation agreements the Company negotiates with Distributors (including rates, terms, and conditions as well as the ability to renew such agreements), the number of subscribers of our Distributors that receive MSG Networks, and also by the advertising rates we charge advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams carried on the Company’s networks as well as the cost and the attractiveness of the Company’s programming content.
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Consolidated Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2021March 31, 2022 versus the Three and Nine Months Ended September 30, 2020
March 31, 2021
The tabletables below setsset forth, for the periods presented, certain historical financial information.
Three Months Ended
March 31,
Change (a)
20222021AmountPercentage
Revenues$460,127 $214,318 $245,809 115 %
Direct operating expenses262,476 110,022 152,454 139 %
Selling, general and administrative expenses157,598 103,425 54,173 52 %
Depreciation and amortization28,639 39,611 (10,972)(28)%
Impairment and other (gains) losses, net(5,319)— (5,319)NM
Restructuring charges14,690 — 14,690 NM
Operating income (loss)2,043 (38,740)40,783 NM
Other expense:
Loss in equity method investments(1,528)(2,314)786 (34)%
Interest expense, net (a)
(5,057)(5,711)654 11 %
Miscellaneous income (expense), net(8,449)27,483 (35,932)NM
Loss from operations before income taxes(12,991)(19,282)6,291 NM
Income tax expense(6,315)(6,556)241 4 %
Net loss(19,306)(25,838)6,532 NM
Less: Net loss attributable to redeemable noncontrolling interests(442)(6,860)6,418 NM
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(655)NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)$769 NM
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Nine Months Ended
  
Three Months Ended
September 30,
   
Change
 March 31,Change
  
2021
   
2020
   
Amount
   
Percentage
 20222021AmountPercentage
Revenues
  $294,510   $170,546   $123,964    73% Revenues$1,271,076 $553,616 $717,460 130 %
Direct operating expenses
   165,761    99,231    66,530    67% Direct operating expenses724,495 301,750 422,745 140 %
Selling, general and administrative expenses (“SG&A”)
   174,839    81,657    93,182    114% 
Selling, general and administrative expensesSelling, general and administrative expenses494,714 281,100 213,614 76 %
Depreciation and amortization
   29,430    28,410    1,020    4% Depreciation and amortization88,602 93,698 (5,096)(5)%
Impairment of long-lived assets
   7,818    —      7,818    NM 
Impairment and other (gains) losses, netImpairment and other (gains) losses, net(5,480)— (5,480)NM
Restructuring charges
   —      19,927    (19,927)    NM Restructuring charges14,690 21,299 (6,609)(31)%
  
 
   
 
   
 
   
Operating loss
   (83,338)    (58,679)    (24,659)    (42)% Operating loss(45,945)(144,231)98,286 68 %
Other income (expense):
        Other income (expense):
Loss in equity method investments
   (1,207)    (1,696)    489    29% Loss in equity method investments(4,509)(5,578)1,069 19 %
Interest income (expense), net
   (8,473)    (4,501)    (3,972)    NM 
Interest expense, net (a)
Interest expense, net (a)
(20,924)(14,637)(6,287)(43)%
Miscellaneous income (expense), net
   (2,547)    34,017    (36,564)    NM Miscellaneous income (expense), net(28,096)53,932 (82,028)NM
  
 
   
 
   
 
   
Loss from operations before income taxes
   (95,565)    (30,859)    (64,706)    NM Loss from operations before income taxes(99,474)(110,514)11,040 10 %
Income tax benefit (expense)
   18,910    (9,457)    28,367    NM Income tax benefit (expense)8,532 (15,715)24,247 NM
  
 
   
 
   
 
   
Net loss
   (76,655)    (40,316)    (36,339)    (90)% Net loss(90,942)(126,229)35,287 28 %
Less: Net income (loss) attributable to redeemable noncontrolling interests
   2,212    (3,889)    6,101    NM Less: Net income (loss) attributable to redeemable noncontrolling interests4,412 (14,091)18,503 NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests
   365    (630)    995    NM 
  
 
   
 
   
 
   
Less: Net loss attributable to nonredeemable noncontrolling interestsLess: Net loss attributable to nonredeemable noncontrolling interests(902)(2,250)1,348 NM
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders
  $(79,232)   $(35,797)   $(43,435)    (121)% Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(94,452)$(109,888)$15,436 14 %
  
 
   
 
   
 
   
_________________
(a)As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and nine months ended March 31, 2021 have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $13,312 and $21,223, respectively.
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, the Company’s operations and operating results were materially impacted by the
COVID-19
pandemic and actions taken in response by governmental authorities. See “— Introduction — Factors Affecting Results of Operations — Impact of the
COVID-19
Pandemic on Our Business” for more information. Also, see “ — Factors Affecting Results of Operations” under Business Segment Results for more information surrounding the factors affecting comparability of each business segment’s results.
Depreciation and amortization
Depreciation and amortization for the three months ended March 31, 2022 was $28,639 as compared to $39,611 in the prior year period, a decrease of $10,972, or 28%. For the nine months ended March 31, 2022, depreciation and amortization was $88,602 as compared to $93,698 in the prior year period, a decrease of $5,096, or 5%. The decreases are primarily attributable to the absence of $14,280 of accelerated amortization expense for certain venue management contracts as a result of Tao Group Hospitality converting certain venues to operational that were previously under management contracts during the prior three and nine month periods. Such decreases are offset by an increase in depreciation and amortization due to the acquisition of Hakkasan in April 2021.
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Impairment and other (gains) losses, net
For the three months ended March 31, 2022, the Company recorded other gains of $5,319 primarily from extinguishment of lease liabilities associated with a Hakkasan venue with the Tao Group Hospitality segment.
Restructuring charges
For the three months ended March 31, 2022, restructuring charges of $14,690 related to the termination of benefits provided to certain employees and executives as a result of organizational changes.
Operating income (loss)
The following is a summary of changes in operating income (loss) by segmentssegment for the three and nine months ended September 30, 2021March 31, 2022 as compared to the prior year period.
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Changes attributable to
  
Operating income (loss)
 
Entertainment
  $(4,030) 
MSG Networks
   (44,658) 
Tao Group Hospitality
   21,337 
Purchase accounting adjustments
   2,762 
Inter-segment eliminations
   (70) 
  
 
 
 
MSG Entertainment Corp. total
  $(24,659) 
  
 
 
 
For the Three Months Ended March 31, 2022
Changes attributable toOperating income (loss)
Entertainment segment (a)
$36,833 
MSG Networks segment (a)
(23,943)
Tao Group Hospitality segment (a)
12,842 
Purchase accounting adjustments14,969 
Inter-segment eliminations82 
Total$40,783 
See “Business Segment Results” for a more detailed discussion of
For the operating results of our segments.Nine Months Ended March 31, 2022
Changes attributable toOperating income (loss)
Entertainment segment (a)
$119,618 
MSG Networks segment (a)
(99,204)
Tao Group Hospitality segment (a)
62,083 
Purchase accounting adjustments15,709 
Inter-segment eliminations80 
Total$98,286 
Loss in equity method investments
_________________
(a)See “Business Segment Results” for a more detailed discussion of the operating results of our segments.
ForInterest expense, net
Net interest expense was $5,057 for the three months ended September 30, 2021, loss in equity method investments decreased $489, or 29%, to $1,207March 31, 2022, as compared to the prior year period. The year-over-year decrease in loss was primarily due to higher earnings from an investment held by Tao Group Hospitality.
Interest income (expense), net
For the three months ended September 30, 2021, net interest expense was $8,473 as compared to $4,501$5,711 in the prior year period, an increasea net decrease of net$654, or 11%. The decrease was primarily due to a decrease in interest expense of $3,972. The increase in net interest incomeapproximately $1,700 due to lower debt balances in the current year period, partially offset by lower interest capitalization related to MSG Sphere construction of $1,040. The Company capitalized approximately $12,272 of interest for the three months ended March 31, 2022 as compared to $13,312 in the prior year period.
For the nine months ended March 31, 2022, net interest expense was $20,924 as compared to $14,637 in the prior year period, a net increase of $6,287 or 43%. The increase was primarily due to an increase in interest expense of $13,270 associated withapproximately $17,200 due to the entry into the National Properties Term Loan Facility which was entered in the second quarter of Fiscal Year 2021, and is therefore not reflected in the prior year period.on November 12, 2020. The increase was partially offset by higher interest capitalization related to MSG Sphere construction of approximately $8,900.$11,000. The Company capitalized approximately $9,300$32,202 of interest for the nine months ended March 31, 2022 as compared to $21,223 in the prior year period.
Miscellaneous income (expense), net
Net miscellaneous expense for the three months ended September 30, 2021March 31, 2022 was $8,449, as compared to approximately $400net miscellaneous income of $27,483 in the prior period.
Miscellaneous income (expense)year period, a decrease of $35,932, or 131%, net
For the three months ended September 30, 2021, net miscellaneous income decreased $36,564, primarily due to thean increase in unrealized loss of $19,800 associated with the investmentsCompany’s investment in DraftKings Inc. (“DraftKings”), which the Company recorded an unrealized loss of $3,487$6,956 for the three months ended September 30, 2021March 31, 2022 as compared to an unrealized gain of $33,048$12,842 in the prior year period.
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For the nine months ended March 31, 2022, net miscellaneous expense was $28,096 as compared to net miscellaneous income of $53,932, a decrease of $82,028, primarily due to an increase in unrealized losses of $63,300 and $19,950, associated with the investments in DraftKings and Townsquare Media, Inc., respectively.
Income taxes
See Note 1718 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for discussions of the Company’s income taxes.
Adjusted operating income
The following are the reconciliations of operating lossincome (loss) to adjusted operating income for the three and nine months ended September 30, 2021March 31, 2022 as compared to the prior year period:
Three Months Ended
March 31,Change
20222021AmountPercentage
Operating income (loss)$2,043 $(38,740)$40,783 NM
Non-cash portion of arena license fees from MSG Sports(12,073)(7,564)
Share-based compensation14,033 11,437 
Depreciation and amortization (a)
28,639 39,611 
Amortization for capitalized cloud computing costs81 — 
Merger and acquisition related costs2,760 15,269 
Impairment and other (gains) losses, net(5,319)— 
Restructuring charges14,690 — 
Other purchase accounting adjustments1,622 887 
Adjusted operating income$46,476 $20,900 $25,576 122 %
Nine Months Ended
March 31,Change
20222021AmountPercentage
Operating loss$(45,945)$(144,231)$98,286 68 %
Non-cash portion of arena license fees from MSG Sports(23,962)(8,740)
Share-based compensation57,732 57,421 
Depreciation and amortization (a)
88,602 93,698 
Amortization for capitalized cloud computing costs176 — 
Merger and acquisition related costs42,283 15,481 
Impairment and other (gains) losses, net(5,480)— 
Restructuring charges14,690 21,299 
Other purchase accounting adjustments4,745 2,735 
Adjusted operating income$132,841 $37,663 $95,178 NM
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Three Months Ended
September 30,
   
Change
 
   
2021
   
2020
   
Amount
   
Percentage
 
Operating loss
  $(83,338)   $(58,679)   $(24,659)    (42)% 
Non-cash
portion of arena license fees from MSG Sports
   (543)    —       
Share-based compensation
   19,528    16,156     
Depreciation and amortization
(a)
   29,430    28,410     
Amortization for capitalized cloud computing arrangement costs
   85    —       
Merger and acquisition related costs
   37,192    —       
Impairment of long-lived assets
(b)
   7,818    —       
Restructuring charges
   —      19,927     
Other purchase accounting adjustments
   85    924     
  
 
 
   
 
 
     
Adjusted operating income
  $10,257   $6,738   $3,519    52% 
  
 
 
   
 
 
     
(a)
Depreciation and amortization includes purchase accounting adjustments of $1,599 and $3,522 for the three months ended September 30, 2021 and 2020, respectively.
(b)
For the three months ended September 30, 2021, the Company recorded a
non-cash
impairment charge of $7,818 associated with Tao Group Hospitality. This impairment charge included impairment charges associated with certain Tao Group Hospitality due to decisions made by management to cease operations at certain Hakkasan venues subsequent to the Hakkasan acquisition date, resulting in the impairment of the respective
right-of-use
asset and a leasehold improvement.
For the three months ended September 30, 2021, adjusted operating income increased $3,519, 52%, to $10,257. The increases in adjusted operating loss were attributable to the following:
_________________
   
Three Months

Ended September

30, 2021
 
Increase in adjusted operating loss of the Entertainment segment
(a)
  $(13,115) 
Decrease in adjusted operating income of the MSG Networks segments
(a)
   (18,598) 
Increase in adjusted operating income of the Tao Group Hospitality segment
(a)
   35,302 
Inter-segment eliminations
   (70) 
  
 
 
 
  $3,519 
  
 
 
 
(a)
See “ — Business Segment Results” for a more detailed discussion of the operating results of our segments.
Net loss attributable to redeemable(a)    Depreciation and nonredeemable noncontrolling interests
For the three months ended September 30, 2021, the Company recorded $2,212amortization includes purchase accounting adjustments of net loss attributable to redeemable noncontrolling interests$1,863 and $365 of net loss attributable to nonredeemable noncontrolling interests as compared to $3,889 of net loss attributable to redeemable noncontrolling interests and $630 of net loss attributable to nonredeemable noncontrolling interests$17,567 for the three months ended September 30, 2020. These amounts representMarch 31, 2022 and 2021, respectively, and $6,972 and $24,155 for the sharenine months ended March 31, 2022 and 2021, respectively. The decrease in purchase accounting adjustments related depreciation and amortization for the three and nine months ended March 31, 2022 reflect the absence of net loss from$14,280 of accelerated amortization expense for the Company’s investments inthree and nine months ended March 31, 2021 for certain venue management contracts as a result of Tao Group Hospitality and BCEconverting certain venues to operational that are not attributable to the Company.were previously under management contracts.
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Business Segment Results
Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating loss for the Company’s Entertainment segment.
   
Three Months Ended
         
   
September 30,
   
Change
 
   
2021
   
2020
   
Amount
   
Percentage
 
Revenues
  $34,239   $7,555   $26,684    NM 
Direct operating expenses
   36,302    23,615    12,687    54% 
Selling, general and administrative expenses
   92,962    52,650    40,312    77% 
Depreciation and amortization
   19,656    22,014    (2,358)    (11)% 
Restructuring charges
   —      19,927    (19,927)    NM 
  
 
 
   
 
 
   
 
 
   
Operating loss
  $(114,681)   $(110,651)   $(4,030)    (4)% 
Reconciliation to adjusted operating loss:
        
Non-cash
portion of arena license fees from MSG Sports
   (543)    —       
Share-based compensation
   10,143    10,433     
Depreciation and amortization
   19,656    22,014     
Amortization for capitalized cloud computing arrangement costs
   41    —       
Merger and acquisition related costs
   13,992    —       
Restructuring charges
   —      19,927     
  
 
 
   
 
 
     
Adjusted operating loss
  $(71,392)   $(58,277)   $(13,115)    (23)% 
  
 
 
   
 
 
     
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Adjusted operating income for the three months endedMarch 31, 2022 improved $25,576, to $46,476. For the nine months ended March 31, 2022, adjusted operating income increased $95,178, to $132,841. These increases in adjusted operating income were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in adjusted operating income of the Entertainment segment (a)
$39,776 $96,703 
Decrease in adjusted operating income of the MSG Networks segments (a)
(25,455)(73,991)
Increase in adjusted operating income of the Tao Group Hospitality segment (a)
11,173 72,386 
Inter-segment eliminations82 80 
$25,576 $95,178 
_________________
(a)See “ — Business Segment Results” for a more detailed discussion of the operating results of our segments.
Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests
For the three months endedMarch 31, 2022, the Company recorded $442 of net loss attributable to redeemable noncontrolling interests and $1,373 of net loss attributable to nonredeemable noncontrolling interests as compared to $6,860 of net loss attributable to redeemable noncontrolling interests and $718 of net loss attributable to nonredeemable noncontrolling interests for the three months ended March 31, 2021. For the nine months ended March 31, 2022, the Company recorded $4,412 of net income attributable to redeemable noncontrolling interests and $902 of net loss attributable to nonredeemable noncontrolling interests as compared to $14,091 of net loss attributable to redeemable noncontrolling interests and $2,250 of net loss attributable to nonredeemable noncontrolling interests for the nine months ended March 31, 2021. These amounts represent the share of net income (loss) from the Company’s investments in Tao Group Hospitality and BCE that are not attributable to the Company.
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Business Segment Results
Entertainment
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income (loss) for the Company’s Entertainment segment. 
Three Months Ended
March 31,Change
20222021AmountPercentage
Revenues$194,585 $30,957 $163,628 NM
Direct operating expenses110,688 24,644 86,044 NM
Selling, general and administrative expenses94,603 67,286 27,317 41 %
Depreciation and amortization18,522 19,081 (559)(3)%
Impairment and other (gains) losses, net(245)— (245)NM
Restructuring charges14,238 — 14,238 NM
Operating loss$(43,221)$(80,054)$36,833 46 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports(12,073)(7,564)
Share-based compensation10,399 6,799 
Amortization for capitalized cloud computing arrangement costs38 — 
Merger and acquisition related costs1,647 11,267 
Depreciation and amortization18,522 19,081 
Impairment and other (gains) losses, net(245)— 
Restructuring charges14,238 — 
Adjusted operating loss$(10,695)$(50,471)$39,776 79 %
Nine Months Ended
March 31,Change
20222021AmountPercentage
Revenues$476,434 $51,181 $425,253 NM
Direct operating expenses294,333 71,668 222,665 NM
Selling, general and administrative expenses279,081 185,666 93,415 50 %
Depreciation and amortization57,202 60,341 (3,139)(5)%
Impairment and other (gains) losses, net(245)— (245)NM
Restructuring charges14,238 21,299 (7,061)(33)%
Operating loss$(168,175)$(287,793)$119,618 42 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports(23,962)(8,740)
Share-based compensation36,697 39,606 
Depreciation and amortization57,202 60,341 
Amortization for capitalized cloud computing costs45 — 
Merger and acquisition related costs17,095 11,479 
Impairment and other (gains) losses, net(245)— 
Restructuring charges14,238 21,299 
Adjusted operating loss$(67,105)$(163,808)$96,703 59 %
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_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
Impact of the
COVID-19
Pandemic
For the threenine months ended September 30,March 31, 2022 and 2021, the Entertainment segment operations and operating results were materially impacted by the
COVID-19
pandemic and the actions taken in response by governmental authorities. While the numberAs of this date, live events are permitted to be held at the Company’sall of our performance venues has startedwithout capacity restrictions and we are continuing to increase, it is not clear when the Company will fully return to normal business operations.host and book new events. See “—
Introduction
—
Factors Affecting Results of Operations
—
Impact of the
COVID-19
Pandemic on Our Business
” for more information.
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Revenues
ForRevenues for the three months ended September 30, 2021,March 31, 2022 increased $163,628 to $194,585 as compared to the prior year period. For the nine months ended March 31, 2022, revenues increased $26,684$425,253 to $34,239$476,434 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in event-related revenues, as discussed below
  $20,660 Increase in event-related revenues, as discussed below$63,411 $164,044 
Increase in venue-related signage and sponsorship revenues due to the return of events at the Company’s venues during the current year period as compared to no events held in the prior year period due to the
COVID-19
pandemic
   2,663 
Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements
   1,726 Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements51,090 98,101 
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below
   1,328 Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below18,173 45,770 
Decrease in inter-segment revenues on advertising sales commission from MSG Networks, which is eliminated on consolidated basis
   (785) 
Increase in suite license fee revenues, due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)Increase in suite license fee revenues, due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)14,659 28,119 
Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)7,831 15,129 
Increase in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidationIncrease in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidation2,984 8,556 
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG SportsIncrease in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports2,585 5,119 
Increase in revenues from the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in the prior year periods as a result of the COVID-19 pandemic
Increase in revenues from the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in the prior year periods as a result of the COVID-19 pandemic
139 55,348 
Other net increases
   1,092 Other net increases2,756 5,067 
  
 
 $163,628 $425,253 
  $26,684 
  
 
 
For the three and nine months ended September 30, 2021,March 31, 2022, the increase in event-related revenues reflects (i) higher revenues from concerts of $16,501,$49,960 and $124,566, respectively, and (ii) higher revenues from other sporting and live entertainment events of $4,159,$13,451 and $39,478, respectively, primarily due to the return of events atto the Company’s venues during the current year period as compared to no live events held in the prior year period due to the
COVID-19
pandemic. pandemic (except for Knicks and Rangers home games). See “—
Introduction
—
Factors Affecting Results of Operations
—
Impact of the
COVID-19
Pandemic on Our Business
” for more information.
For the three and nine months ended September 30, 2021,March 31, 2022, the Knicks and Rangers playedhosted a total of two preseasoncombined 38 and 75 pre-season and regular season games at The Garden andwithout any capacity restrictions. As a result, the Company recorded $1,328 of revenues$29,616 and $58,978 in arena license fees under the Arena License Agreements. No Rangers preseason games were played at The Garden duringAgreements for the three and nine months ended March 31, 2022. In the prior year, period due tocapacity restrictions, use limitations and social distancing requirements were in place for the delayed startentirety of the
Knicks and Rangers 2020-21
NHL regular seasons, as a result ofwhich materially impacted the
COVID-19
pandemic. Therefore, the Company did not recognize any arena license fees from MSG Sports pursuant to payments we received under the Arena License Agreements induring Fiscal Year 2021.
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Direct operating expenses
Direct operating expenses for the three months ended March 31, 2022 increased $86,044 to $110,688 as compared to the prior year period.
Direct operating expenses
For the threenine months ended September 30, 2021,March 31, 2022, direct operating expenses increased $12,687, or 54%,$222,665 to $36,302$294,333 as compared to the prior year period. The net increases were attributable to the following:
Increase in event-related direct operating expenses, as discussed below
  $9,726 
Increase in direct operating expenses associated with venue operating costs
   2,726 
Increase in direct operating expenses associated with revenue sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License Agreements
   1,281 
Other net decreases
   (1,046) 
  
 
 
  $12,687 Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
  
 
 
Increase in direct operating expenses associated with revenue or profit sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License AgreementsIncrease in direct operating expenses associated with revenue or profit sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License Agreements$36,938 $70,916 
Increase in event-related direct operating expenses, as discussed belowIncrease in event-related direct operating expenses, as discussed below34,033 85,603 
Increase in direct operating expenses associated with the Arena License AgreementsIncrease in direct operating expenses associated with the Arena License Agreements7,649 13,821 
Increase in direct operating expenses associated with venue operating costsIncrease in direct operating expenses associated with venue operating costs7,633 12,981 
(Decrease) increase in direct operating expenses associated with the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in Fiscal Year 2021 as a result of the COVID-19 pandemic
(Decrease) increase in direct operating expenses associated with the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in Fiscal Year 2021 as a result of the COVID-19 pandemic
(116)39,406 
Other net (decreases) increasesOther net (decreases) increases(93)(62)
$86,044 $222,665 
For the three and nine months ended September 30, 2021,March 31, 2022, the increase in event-related direct operating expenses reflects (i) higher direct operating expenses from concerts of $7,265$26,403 and $62,650, respectively, and (ii) higher direct operating expenses from other sporting and live entertainment events of $2,461,$7,629 and $22,953, respectively, primarily due to the return of events atto the Company’s venues during the current year period as compared to no live events held in the prior year period due to the
COVID-19 pandemic (except for Knicks and Rangers home games).
pandemic.
Selling, general and administrative expenses
ForSelling, general and administrative expenses for the three months ended September 30, 2021,March 31, 2022 increased $27,317, or 41% to $94,603 as compared to the prior year period. The increase primarily reflects (i) higher employee compensation and related benefits of $30,632, which included the impact of severance-related costs attributable to separation agreements in the current year period, and (ii) higher professional fees of $2,129, inclusive of costs for MSG Sphere development, partially offset by lower expenses related to the Merger of $9,620.

For the nine months ended March 31, 2022, selling, general and administrative expenses increased $40,312,$93,415, or 77%50%, to $92,962$279,081 as compared to the prior year period. This increase primarily reflects an increase of $18,763 in other(i) higher employee compensation and related benefits of $58,477, which is net of a decrease in share-based compensation of $3,164 and expenses(ii) an increase in the current year period relatedprofessional fees of $15,077, inclusive of merger and acquisition costs of $5,772 and, to the Company’s acquisition ofa lesser extent, initiatives for MSG Networks Inc. of $13,992.
Sphere development.

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Depreciation and amortization
Depreciation and amortization for the three and nine months ended September 30, 2021,March 31, 2022, decreased $2,358,$559 or 11%3% to $19,656$18,522, and $3,139, or 5% to $57,202, as compared to the prior year period primarily due to lower depreciation expense due toas a result of certain assets in The Garden being fully depreciated and amortized, and disposal of certain assets in the prior year period.
Operating loss
Operating loss
For for the three months ended September 30, 2021, operating lossMarch 31, 2022, was $114,681$43,221 as compared to $110,651a loss of $80,054 in the prior year period, an increaseimprovement in operating loss of $4,030.$36,833, or 46%. For the nine months ended March 31, 2022, operating loss was $168,175 as compared to a loss of $287,793 in the prior year period, an improvement of $119,618 or 42%. The increaseimprovements in operating loss waswere primarily due to increases in revenues offset by higher direct operating expenses and selling, general and administrative expenses and, direct operating expenses, largely offset by (i) an increase in revenues, (ii)to a lesser extent, the impact of restructuring charges in the prior year period and (iii) lower depreciation and amortization expenses,periods, as discussed above.
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Adjusted operating loss
Adjusted operating loss
For for the three months ended September 30, 2021,March 31, 2022 was $10,695 as compared to adjusted operating loss was $71,392 as compared to $58,277of $50,471 in the prior year period, an improvement of $39,776. The improvement in adjusted operating loss was lower than the improvement in operating loss of $36,833 primarily due to (i) the increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $4,509, and (ii) a decrease in share-based compensation of $3,600, both of which are excluded in the calculation of adjusted operating income (loss). For the nine months ended March 31, 2022, adjusted operating loss was $67,105 as compared to $163,808 in the prior year period, an improvement in adjusted operating loss of $13,115.$96,703. The increaseimprovement in adjusted operating loss was higherlower than the increaseimprovement in operating loss of $4,030$119,618 primarily due to (i) nonrecurring expensesrestructuring charges of $19,927 in the restructuring charges$21,299 in the prior year period as compared to merger and acquisition related costs of $13,992$17,095 in the current year period, (ii) the increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $15,222, and (ii)(iii) a decrease in depreciation and amortizationshare-based compensation of $2,358,$2,909, which are excluded in the calculation of adjusted operating loss.
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MSG Networks
The tabletables below setsset forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Networks segment.
Three Months Ended
  
Three Months Ended
September 30,
   
Change
 March 31,Change
  
2021
   
2020
   
Amount
   
Percentage
 20222021AmountPercentage
Revenues
  $141,473   $157,363   $(15,890)    (10)% Revenues$167,569 $177,853 $(10,284)(6)%
Direct operating expenses
   68,423    65,072    3,351    5% Direct operating expenses87,174 74,392 12,782 17 %
Selling, general and administrative expenses
   47,975    22,527    25,448    113% Selling, general and administrative expenses32,237 31,743 494 2 %
Depreciation and amortization
   1,797    1,828    (31)    (2)% Depreciation and amortization1,764 1,833 (69)(4)%
  
 
   
 
   
 
   
Restructuring chargesRestructuring charges452 — 452 NM
Operating income
  $23,278   $67,936   $(44,658)    (66)% Operating income$45,942 $69,885 $(23,943)(34)%
Reconciliation to adjusted operating income:
        Reconciliation to adjusted operating income:
Share-based compensation
   7,474    4,627     Share-based compensation1,758 3,324 
Depreciation and amortization
   1,797    1,828     Depreciation and amortization1,764 1,833 
Amortization for capitalized cloud computing arrangement costs
   44    —       Amortization for capitalized cloud computing arrangement costs43 — 
Merger and acquisition related costs
   23,200    —       Merger and acquisition related costs866 1,238 
  
 
   
 
     
Restructuring chargesRestructuring charges452 — 
Adjusted operating income
  $55,793   $74,391   $(18,598)    (25)% Adjusted operating income$50,825 $76,280 $(25,455)(33)%
  
 
   
 
     
Nine Months Ended
March 31,Change
20222021AmountPercentage
Revenues$469,023 $481,455 $(12,432)(3)%
Direct operating expenses241,521 196,497 45,024 23 %
Selling, general and administrative expenses117,404 75,962 41,442 55 %
Depreciation and amortization5,317 5,463 (146)(3)%
Restructuring charges452 — 452 NM
Operating income$104,329 $203,533 $(99,204)(49)%
Reconciliation to adjusted operating income:
Share-based compensation15,290 14,217 
Depreciation and amortization5,317 5,463 
Amortization for capitalized cloud computing arrangement costs131 — 
Merger and acquisition related costs24,941 1,238 
Restructuring charges452 — 
Adjusted operating income$150,460 $224,451 $(73,991)(33)%
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Factors Affecting Results of Operations
Due to the
COVID-19
pandemic, in March 2020, the
2019-20
NHL and NBA seasons were suspended. The leagues resumed play during the summer of 2020, with the Rangers and Islanders participating in the NHL’s return to play and the Islanders advancing to the
2019-20
playoffs. The NHL and NBA subsequently completed their shortened 2019-20202019-20 seasons in September and October 2020, respectively, which resulted in a delayed start to the shortened
2020-21
NBA and NHL seasons.
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For the 2021-22 seasons, MSG Networks aired full regular season telecast schedules for its five professional teams across both the NBA and NHL. See “—
Introduction
—
Factors Affecting Results of Operations
—
Impact of the
COVID-19
Pandemic on Our Business
” for more information.
Revenues
Revenues for the three months ended September 30, 2021March 31, 2022 decreased $15,890,$10,284, or 10%6% to $167,569 as compared to the prior year period. Revenues for the nine months ended March 31, 2022 decreased $12,432, or 3%, to $141,473$469,023 as compared to the prior year period. The net decreaseschanges in revenues were attributable to the following:
Decrease in affiliation fee revenue
  $(12,265) 
Decrease in advertising revenue
   (3,562) 
Other net decreases
   (63) 
  
 
 
 
  $(15,890) 
  
 
 
 
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Decrease in affiliation fee revenue$(20,579)$(48,958)
Increase in advertising revenue9,855 34,600 
Other net increases440 1,926 
$(10,284)$(12,432)
For the three months ended September 30,March 31, 2022, the decrease in affiliation fee revenue was primarily due to the impact of the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2021, and a decrease in subscribers of approximately 7% (excluding the impact of the non-renewal with Comcast). These decreases were partially offset by the absence of net unfavorable affiliate adjustments of approximately $5,800 recorded in the prior year quarter and the impact of higher affiliation rates. For the nine months ended March 31, 2022, the decrease in affiliation fee revenue was primarily due to the impact of (i) a decrease in subscribers of approximately 6.5%7% (excluding the impact of a previously disclosed
the non-renewal
with a small Connecticut-based distributorComcast) and (ii) the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2020), (ii) an increase in net affiliate adjustments of approximately $5,200 primarily related to accruals for potential affiliate fee rebates and, (iii) to a lesser extent, the impact of the aforementioned
non-renewal.
2021. These decreases were partially offset by the impact of higher affiliation rates.
We currently expect to record accruals for potential affiliate fee rebates in the second quarter of Fiscal Year 2022 atrates and a lower level compared to this quarter.
For the three months ended September 30, 2021, the decrease in advertising revenue primarily reflects the impact in the prior year periodnet unfavorable affiliate adjustments of live telecasts related to the New York Rangers’ and Islanders’ participation in the
2019-20
NHL return to play, as well as the Islanders’ advancement to the
2019-20
playoffs, as compared with the impact of live telecasts related to
2021-22
NHL preseason telecasts in the current year period.approximately $3,600.
Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date. The financial impact of Comcast’s
non-carriage
of MSG Networks will depend on many factors including if, when and on what terms Comcast and the Company reach a new carriage agreement and the extent to which Comcast subscribers switch to other Distributors that carry MSG Networks. As of October 1, 2021 Comcast’s
non-carriage
has reduced MSG Networks’ subscribers by approximately 10% and, subject to the foregoing factors, has and is expected to reduce MSG Networks’ revenue by a comparable percentage for so long as MSG Networks’ carriage agreement with Comcast is not renewed. In addition, during any period of
non-carriage,
MSG Networks’ segment operating income and AOI have been and are expected to be reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.
For the three months ended March 31, 2022, the increase in advertising revenue primarily reflected the impact of higher per-game advertising sales from the telecast of live professional sports programming and, to a lesser extent, an increase in advertising sales related to the Company’s non-ratings based advertising initiatives. These increases were partially offset by the impact of fewer live professional sports telecasts as compared with the prior year period. For the nine months ended March 31, 2022, the increase in advertising revenue was primarily the impact of (i) a greater number of live NBA and NHL telecasts in the current year period as compared with the prior year period (ii) higher per-game advertising sales from the telecast of live professional sports programming and (iii) increased advertising sales related to the Company’s non-ratings based advertising initiatives. As a result of the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast fewer NBA and NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period.

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Direct operating expenses

Direct operating expenses for the three months ended September 30, 2021March 31, 2022 increased $3,351,$12,782, or 5%17%, to $68,423$87,174 as compared to the prior year period. The increase wasFor the nine months ended March 31, 2022, direct operating expenses increased $45,024, or 23%, to $241,521 as compared to the prior year period. For the three and nine months ended March 31, 2022, the increases were primarily due to higher rights fees expenses of $2,542$9,950 and $32,850, respectively, and, to a lesser extent, an increase in other programming and production-related costs of $809.$2,832 and $12,174, respectively. The increases in rights fees were primarily due to the net impact of lower media rights fees in the prior year period as a result of fewer NBA and NHL games made available for exclusive broadcast by MSG Networks during the shortened 2020-21 NBA and NHL regular seasons, and annual contractual rate increases. The increase in rights fees expensesthe three month period was partially offset by the impact of the compressed timing of the shortened 2020-21 NBA and NHL regular seasons. The increase in other programming and production-related costs was primarily due to annual contractual rate increases and the impact of net lower reductions in media rights fees relateda return to the
2020-21
seasonsmore normalized levels of production-related costs for NBA and NHL away game telecasts in the current year quarter as compared with reductionsperiod and expenses related to mobile sports gaming programming, partially offset by other net cost decreases. The increase in the
2019-20
seasons nine month period ended was also due to the impact of fewer NBA and NHL games in the prior year quarter.period, as compared with a regular NBA and NHL telecast schedule in the current year period.

Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended September 30, 2021March 31, 2022 increased $25,448,$494, or 113%2%, to $47,975$32,237 as compared to the prior year period primarily due to approximately $24,900 in costs inperiod. For the current year quarter related to the Merger, including the impact of executive separation agreements.
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Operating income
Operating income for the threenine months ended September 30, 2021 decreased $44,658,March 31, 2022, selling, general and administrative expenses increased $41,442, or 65.7%55%, to $23,278$117,404 as compared to the prior year period due toperiod. The increase in selling, general and administrative expenses for the three months ended March 31, 2022 primarily reflects higher advertising sales commissions of approximately $3,000, which are eliminated in consolidation, offset by lower employee compensation and related benefits of approximately $2,300, as well as other net decreases. For the nine months ended March 31, 2022, the increase in selling, general and administrative expenses was due to higher (i) advertising sales commissions of approximately $8,600, which are eliminated in consolidation and lower revenues(ii) advertising, and marketing expenses of approximately $6,700. In addition, for the nine months ended March 31, 2022, the increase in selling, general and administrative expenses also reflected approximately $25,400 of merger and acquisition costs that occurred primarily during the first quarter of Fiscal Year 2022, inclusive of the impact of executive separation agreements and share based compensation expense.
Operating income
Operating income for the three months ended March 31, 2022 decreased $23,943, or 34% to $45,942 as compared to the prior year period. The decrease in operating income for three months ended March 31, 2022 was primarily due to the increase in direct operating expenses and the decrease in revenues. For the nine months ended March 31, 2022, operating income decreased $99,204, or 49%, to $104,329 as compared to the prior year period. The decrease in operating income for the nine months ended March 31, 2022 was primarily due to the increase in direct operating expenses and selling, general and administrative expenses, and, to a lesser extent the increasedecrease in direct operating expenses, as discussed above.
revenues.

Adjusted operating income
Adjusted operating income for the three months ended September 30, 2021March 31, 2022 decreased $18,598,$25,455, or 25%33%, to $55,793$50,825 as compared to the prior year period, which is consistent with the decrease in operating income of $23,943, as discussed above. For the nine months ended March 31, 2022, adjusted operating income decreased $73,991, or 33%, to $150,460 as compared to the prior year period. The decrease in adjusted operating income for the nine months ended March 31, 2022 was lower than the decrease in operating income of $44,658$99,204 primarily due to the merger and acquisition-related costs of $23,200$25,400 recorded in the current year period, and the increase in share-based compensation of $2,847 mainly related to the impact of executive separation agreements in connection with the Merger, which are excluded in the calculation of adjusted operating income,
income.
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Tao Group Hospitality
The tabletables below setsset forth, for the periods presented, certain historical financial information and a reconciliation of operating income (loss) to adjusted operating income (loss) for the Company’s Tao Group Hospitality segment.
Three Months Ended
  
Three Months Ended
September 30,
   
Change
 March 31,Change
  
2021
   
2020
   
Amount
   
Percentage
 20222021AmountPercentage
Revenues
  $119,464   $7,221   $112,243    NM Revenues$108,572 $12,790 $95,782 NM
Direct operating expenses
   61,093    9,828    51,265    NM Direct operating expenses63,783 10,480 53,303 NM
Selling, general and administrative expenses
   34,094    7,603    26,491    NM Selling, general and administrative expenses40,376 11,025 29,351 NM
Depreciation and amortization
   6,378    1,046    5,332    NM Depreciation and amortization6,490 1,130 5,360 NM
Impairment of long-lived assets
   7,818    —      7,818    NM 
Impairment and other (gains) losses, netImpairment and other (gains) losses, net(5,074)— (5,074)NM
  
 
   
 
   
 
   
Operating income (loss)
  $10,081   $(11,256)   $21,337    NM Operating income (loss)$2,997 $(9,845)$12,842 NM
Reconciliation to adjusted operating income (loss):
        Reconciliation to adjusted operating income (loss):
Share-based compensation
   1,911    1,096     Share-based compensation1,876 1,314 
Depreciation and amortization
   6,378    1,046     Depreciation and amortization6,490 1,130 
Impairment of long-lived assets
   7,818    —       
Merger and acquisition related costsMerger and acquisition related costs247 2,764 
Impairment and other (gains) losses, netImpairment and other (gains) losses, net(5,074)— 
  
 
   
 
     
Adjusted operating income (loss)
  $26,188   $(9,114)   $35,302    NM Adjusted operating income (loss)$6,536 $(4,637)$11,173 NM
  
 
   
 
     
Nine Months Ended
March 31,Change
20222021AmountPercentage
Revenues$345,122 $30,502 $314,620 NM
Direct operating expenses185,756 31,288 154,468 NM
Selling, general and administrative expenses115,155 27,759 87,396 NM
Depreciation and amortization19,111 3,739 15,372 NM
Impairment and other (gains) losses, net(4,699)— (4,699)NM
Operating income (loss)$29,799 $(32,284)$62,083 NM
Reconciliation to adjusted operating income (loss):
Share-based compensation5,745 3,598 
Depreciation and amortization19,111 3,739 
Merger and acquisition related costs247 2,764 
Impairment and other (gains) losses, net(4,699)— 
Adjusted operating income (loss)$50,203 $(22,183)$72,386 NM
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
Disruptions caused by the
COVID-19
pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. InFor the prior year period, due to government actions taken in response to the
COVID-19
pandemic, virtually allmajority of Fiscal Year 2021, Tao Group Hospitality’s venues closed for approximately three months starting in
mid-March.
Certain venues then resumedconducted limited operations, subject to significant regulatory requirements, which included limits on capacity, curfews and social distancing requirements for outdoor and indoor dining.dining, while certain venues remained closed for the entire fiscal year. At the beginning of Fiscal Year 2022, government-mandated capacity restrictions were lifted in Tao Group Hospitality’s key U.S. markets. During the nine months ended March 31, 2022, operations were impacted by an increase in cases due to a COVID-19 variant which resulted in reduced operating schedules and reduced demand from guests, including corporate and private event cancellations and postponements in the second and third quarters. See “—
Introduction
—
Factors Affecting Results of Operations
—
Impact of the
COVID-19
Pandemic on Our Business
” for more information.
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As of September 30, 2021, 51March 31, 2022, 56 of Tao Group Hospitality’s venues (26 legacy Tao Group Hospitality venue and 30 Hakkasan venues acquired in connection with the April 27, 2021 transaction) were open for outdoor dining, limited or full capacity indoor dining (depending on the market), and delivery/takeout, (23 legacy Tao Group Hospitality venues and 28 Hakkasan venues acquired in connection with the April 27, 2021 transaction), inclusive of Tao Asian Bistro & Lounge at Mohegan Sun,Lavo Ristorante in Los Angeles, a venue that first opened in March 2021,2022, while 10four venues remained closed (five(three legacy Tao Group Hospitality venues and fiveone Hakkasan venues)venue). OurAs of the date of this filing, Tao Group Hospitality’s domestic venues continueno longer require guests to beprovide proof of COVID-19 vaccination before entering and Tao Group Hospitality is operating under various governmental safety protocols such as vaccine mandates, curfews,without capacity limitationsrestrictions in domestic and social distancing depending on the location.key international markets.
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Revenues
Revenues for the three months ended September 30, 2021March 31, 2022 increased $112,243$95,782 to $119,464$108,572 as compared to the prior year periodperiod. For the nine months ended March 31, 2022, revenues increased $314,620 to $345,122 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in revenues due to Hakkasan, acquired in April 2021$47,171 $158,102 
Increase in revenues at venues subject to capacity restrictions in the prior year period (a)
33,801 96,529 
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the COVID-19 pandemic13,151 55,942 
Other net increases1,659 4,047 
$95,782 $314,620 
_________________
Increase in revenues due to Hakkasan, acquired in April 2021
  $59,352 
Increase in revenues at venues subject to capacity restrictions in the prior year period
   26,273 
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the
COVID-19
pandemic
   25,548 
Other net increases
   1,070 
  
 
 
 
  $112,243 
  
 
 
 
(a) Includes the increases in revenues from converting previously managed venues to self-operated venues of $9,524 and $29,739 for the three and nine months ended March 31, 2022 as compared to the prior year periods.
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Direct operating expenses
Direct operating expenses for the three months ended September 30, 2021March 31, 2022 increased $51,265$53,303 to $61,093$63,783 as compared to the prior year periodperiod. For the nine months ended March 31, 2022, direct operating expenses increased $154,468, to $185,756 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in direct operating expenses due to Hakkasan, acquired in April 2021$25,352 $77,832 
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the COVID-19 pandemic12,563 34,251 
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the COVID-19 pandemic11,313 32,333 
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the COVID-19 pandemic2,745 8,027 
Other net increases1,330 2,025 
$53,303 $154,468 
Increase in direct operating expenses due to Hakkasan, acquired in April 2021
  $27,866 
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the
COVID-19
pandemic
   10,165 
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the
COVID-19
pandemic
   10,110 
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the
COVID-19
pandemic
   2,679 
Other net increases
   445 
  
 
 
 
  $51,265 
  
 
 
 
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended September 30, 2021,March 31, 2022 increased $26,491$29,351 to $34,094$40,376 as compared to the prior year period. TheFor the nine months ended March 31, 2022, selling, general and administrative expenses increased $87,396 to $115,155 as compared to the prior year period. For the three and nine months ended March 31, 2022, the increases were primarily due to higher (i) selling, general, and administrative expenses of $14,723 incurred byfrom the Hakkasan operations acquired in April 2021 of $14,340 and $45,036, respectively, (ii) employee compensation and related benefits, inclusive of an increase in share-based compensation, of $4,186,$6,231 and $16,871, respectively, (iii) professional fees, restaurant expenses, as well as supplies, utilities, general liability insurance,
pre-opening
expenses and repairs and maintenance of $3,855,$5,560 and $12,365, respectively, and (iv) marketing costs of $2,133,$2,622 and (v) various other$7,112, respectively. The increases were partially offset by a decrease in professional fees primarily related to the prior year period’s temporary office closure. All increases were significantly driven by the acquisition of Hakkasan, in April 2021of $2,261 and the prior year period’s operations being disrupted from the
COVID-19$690, respectively.
pandemic.
Depreciation and amortization
Depreciation and amortization for the three months ended September 30, 2021March 31, 2022 increased $5,332$5,360 to $6,378$6,490 as compared to the prior year periodperiod. For the nine months ended March 31, 2022, depreciation and amortization increased $15,372 to $19,111 as compared to the prior year period. The increases were primarily due to the acquisition of Hakkasan acquired in April 2021.
Impairment of long-lived assets
and other (gains) losses, net
Impairment of long-lived assets forFor the three months ended September 30, 2021March 31, 2022, the Company recorded net gains of $7,818 was due to decisions made by management to cease operations at certain$5,074 from extinguishment of lease liabilities associated with a Hakkasan venues subsequent to the Hakkasan acquisition date, resulting in the impairment of the respective
right-of-use
asset and a leasehold improvement.venue.
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Operating income (loss)
Operating income for the three months ended September 30, 2021March 31, 2022 was $10,081$2,997 as compared to thean operating loss of $11,256$9,845 in the prior year period, an improvementincrease in operating income of $21,337. The$12,842. For the nine months ended March 31, 2022, operating income was $29,799 as compared to an operating loss of $32,284 in the prior year period, an increase in operating income wasof $62,083. The increases in operating income for the three and nine months ended March 31, 2022 were primarily due to the acquisition of Hakkasan in April 2021, increased revenues and the net recovery of impairment of long-lived assets, partially offset by an increase in direct operations, selling, general and administrative expenses, and depreciation and amortization, and impairment of long-lived assets, as discussed above. All increased operations were significantly driven by the acquisition of Hakkasan in April 2021 and the prior year period disruptions caused by the
COVID-19
pandemic.
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Adjusted operating income (loss)
Adjusted operating income for the three months ended September 30, 2021March 31, 2022 was $26,188$6,536 as compared to an adjusted operating loss of $9,114$4,637 in the prior year period, an improvementincrease in adjusted operating income of $35,302.$11,173. For the nine months ended March 31, 2022, adjusted operating income was $50,203, as compared to adjusted operating loss of $22,183 in the prior year period, an increase in adjusted operating income of $72,386. The increase in adjusted operating income for the three months ended March 31, 2022 was higher as compared to the increase in operating income primarily due to increasedthe higher depreciation and amortization, andoffset by the net recovery of impairment of long-lived assets, as discussed above.
For the nine months ended March 31, 2022, the increase in adjusted operating income was higher than the increase in operating income primarily due to increased depreciation and amortization, as discussed above.
Liquidity and Capital Resources
Overview
The Company’s operations and operating results have been and may continue to be, materially impacted by the
COVID-19
pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all operations of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have resumed, it isFiscal Year 2022 has also been impacted by the pandemic, with fewer ticketed events at our venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not clear when we will fully returnimpacted by COVID-19) due to normal operations.the lead-time required to book touring acts and artists, and an increase in cases due to a COVID-19 variant, which resulted in a number of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in
mid-March
March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from
mid-February
February through
mid-May
May 2021 with certain safety protocols and social distancing. Beginning in
mid-May
May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. For all events hosted at our New York performance venues with 100% capacity prior to August 17, 2021, guests were required to provide proof of full vaccination or a negative
COVID-19
test, depending on the requirements of that venue and/or preference of the performer. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, areincluding our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older were required to show proof of at least one vaccination shot. Guests are also required to wear masks unless they showprovide proof that they are fully vaccinatedhad received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols). Children under age 12 can attend events with a vaccinated adult, but ages 2 to 11 need to wear a mask while inside our venues. In addition, effective August 20, 2021, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or canceledcancelled. For the nine months ended March 31, 2022 and whileas of this date, live events arehave been permitted to be held at all of our performance venues as of the date of this filing and we are continuing to host and book new events, due to the lead-time required to book touring acts and artists, which is the majorityevents. As a result of our Entertainment business, we expect that ouran increase in cases of a COVID-19 variant, select bookings will continue to be impacted through the 2021 calendar year. We continue to actively pursue
one-time
were postponed or multi-night performancescancelled at our performance venues asin the touring market ramps up.second and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact toof the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the
Christmas Spectacular
, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals. While the 2021 production of the
Christmas Spectacular
is currently
on-sale,
the current production is scheduled for 160 shows, as compared with 199 shows for the 2019 production, which was the last production presented prior to the impact of the
COVID-19
pandemic.Festival.
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The Company has long-term arena license agreements (the “ArenaArena License Agreements”)Agreements with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers
2020-21
regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License AgreementsAgreements. The Knicks and full
the Rangers each completed their 2021-2022 82-game
regular seasons, forwith the
2021-22
NBA and NHL seasons are scheduled. Rangers advancing to the playoffs.
As a result of the
COVID-19
pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by
COVID-19),
and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, expects a return to normalized levels ofits advertising revenue and certain operating expenses, including rights fees expense.expense, reflect the same.
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Disruptions caused by the
COVID-19
pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to governmentgovernment actions taken in response to the
COVID-19
pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in
mid-March
March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. During Fiscal Year 2022, Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and duringreduced demand from guests, including corporate and private event cancellations and postponements in the first quartersecond and third quarters.As of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Effective August 17, 2021, workers and customers in New York City indoor dining facilities are required to show proofthe date of at least one vaccination shot. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, butthis filing, Tao Group Hospitality is continuing to operateoperating without capacity restrictions in domestic and key international markets.
It is unclear how long and to what extent
COVID-19
concerns, including with respect to new variants, will continue to impactcould result in new government andor league-mandated capacity restrictions or vaccination/mask requirements or impact the use of and/or demand for our entertainment and dining and nightlife venues, and demand for our sponsorship and advertising assets, or deter our employees and vendors from working at our venues (which may lead to difficulties in staffing). or otherwise materially impact our operations.
Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under our MSGN Credit Agreement. Our principal uses of cash include working capital-related items (including funding our operations), capital spending (including our construction of MSG Sphere at The Venetian in Las Vegas, as described below), debt service, investments and related loans and advances that we may fund from time to time, and mandatory purchases from prior acquisitions. We may also use cash to repurchase our common stock. Our decisions as to the use of our available liquidity will be based upon the ongoing review of the funding needs of the business, the optimal allocation of cash resources, and the timing of cash flow generation. To the extent that we desire to access alternative sources of funding through the capital and credit markets, challenging U.S. and global economic and market conditions could adversely impact our ability to do so at that time.
We regularly monitor and assess our ability to meet our net funding and investing requirements.requirements, including the construction of MSG Sphere at The Venetian. We believe we have sufficient liquidity including $1,331,450 infrom cash and cash equivalents ($999,063 as of September 30, 2021,March 31, 2022) and future cash flows from operations to fund our operations, service the MSGN Credit Agreement, the National Properties Term Loan Facility and the Tao Credit Facilities and pursuefor the developmentforeseeable future, as well as complete the construction of the new venues discussed below over the next 12 months.MSG Sphere at The Venetian. The Company may seek to raise capital to fund additional content, which would be expected to generate significant revenue for MSG Sphere. See Note 1314 to the consolidated financial statements included in “—Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for a discussion of the MSGN Credit Agreement, the National Properties Term Loan Facility and the Tao Revolving Credit Facilities. Our cash and cash equivalents includeat March 31, 2022 included approximately $283,000$244,000 in advance cash proceeds primarily related to tickets, suites, and, to a lesser extent, sponsorships.

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On March 31, 2020, the Company’s Board of Directors authorized, effective following the Entertainment Distribution, a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased to date.
Tao Group Hospitality’s principal uses of cash include working capital related-items (including funding its operations), investments in new venues,
tax-related
cash distributions, interest expense payments and repayment of debt. Tao Group Hospitality plans to continue to grow its business through the opening of new venues and acquisitions.
MSG Sphere
The Company has made significant progress on MSG Sphere at The Venetian, its
state-of-the-art
entertainment venue under construction in Las Vegas.
The Company expects the venue to have a number of significant revenue streams, including a wide variety of content such as attractions, concert residencies and corporate and select sporting events, as well as sponsorship and premium hospitality opportunities. As a result, we anticipate that MSG Sphere at The Venetian will generate substantial revenue and adjusted operating income on an annual basis.
MSG Sphere at The Venetian is a complex construction project that has become even more challenging due to the global impact of
COVID-19.
In April 2020, the Company announced that it was suspending construction due to
COVID-19-related
factors outside of its control, including supply chain issues. As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it resumed construction with a lengthened timetable. The Company
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remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in the second half of calendar year 2023. As with any major construction project, the construction of MSG Sphere is subject to potential delays, unexpected complications or cost fluctuations.
On August 23, 2021, we announced that our cost estimate inclusive of core technology and soft costs, for MSG Sphere at The Venetian was approximately $1,865,000. This cost estimate was net of $75,000 that the Sands has agreed to pay to defray certain construction costs and also excludes the impacts of changes in inflation and significant capitalized and
non-capitalized
costs for items such as content creation, internal labor, capitalized interest, and furniture and equipment. Relative to our cost estimate above, our actual construction costs for MSG Sphere at The Venetian incurred through September 30, 2021March 31, 2022 were approximately $976,000,$1,327,000, which is net of $65,000 received from Sands. In addition, the amount of construction costs incurred as of September 30, 2021March 31, 2022 includes approximately $121,000$177,600 of accrued expenses that were not yet paid as of that date.
With regard to MSG Sphere at The Venetian, the Company plans to finance the construction of the venue from
cash-on-hand
and cash flows from operations. If the Company’s
cash-on-hand
and cash flows from operations are not sufficient to finance the remaining construction costs of MSG Sphere at The Venetian, the Company would need to access additional capital, including potential incremental debt. There is no assurance that the Company will be able to obtain such capital.

While the Company plans to self-fund the construction of MSG Sphere at The Venetian, under the right terms it would consider third-party financing alternatives. The Company’s intention for any future venues is to utilize several options, such as
non-recourse
debt financing, joint ventures, equity partners and a managed venue model.

For additional information regarding the Company’s capital expenditures, including those related to MSG Sphere, see Note 21 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K.
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere. The Company submitted a planning applicationapplications to the local planning authority in March 2019 and that process, which will require various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time.
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We will continue to explore additional domestic and international markets where we believe next-generation venues such as the MSG Sphere can be successful.
Financing Agreements
See Note 14 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s debt obligations and various financing agreements.

MSGN Credit Facility

MSG Networks has made principal repayments aggregating to $64,625$89,375 through September 30, 2021March 31, 2022 under the MSGN Credit Agreement. The MSGN Term Loan Facility amortizes quarterly in accordance with its terms. As of September 30, 2021,March 31, 2022, there was $1,035,375$1,010,625 outstanding under the MSGN Term Loan Facility, and no borrowings under the MSGN Revolving Credit Facility. As of September 30, 2021,March 31, 2022, the Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants of the MSGN Credit Agreement. The scheduled repayments for the remainder of Fiscal Year 2022 are $37,125.$12,375.
National Properties Term Loan Facility
The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. From the closing date untilFollowing the first anniversary of the National Properties Term Loan Facility,closing of the minimum liquidity threshold is $450,000, which is reduced each quarter by the amount of cash usage, subject to a minimum liquidity floor of $200,000. After the first anniversary,facility in November 2021, the minimum liquidity level iswas reduced to $200,000. If at any time the total leverage ratio of MSG National Properties and its restricted subsidiaries is less than 5.00 to 1.00 as of the end of any four consecutive fiscal quarter periods or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000.
As of March 31, 2022, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.

TheMSG National Properties has made principal obligationsrepayments aggregating to 8,125 through March 31, 2022 under the National Properties Term Loan Facility, are to be repaidwhich amortizes quarterly in quarterly installments in an aggregate amount equal to 1.00% per annum (0.25% per quarter),accordance with the balance due at the maturity of the facility. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of September 30, 2021 was 7.00%.its terms. As of September 30, 2021,March 31, 2022, there was $645,125
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$641,875 outstanding under the National Properties Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022 are $4,875.
$1,625.

In addition to the minimum liquidity covenant, the National Properties Term Loan Facility and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. As of September 30, 2021,March 31, 2022, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
Tao Senior Secured Credit Facilities
As of September 30, 2021,March 31, 2022, there was $27,500$25,000 outstanding amount drawn on the Tao Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022 are $5,000.$2,500. As of September 30, 2021,March 31, 2022, Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available was $24,250.
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Disruptions caused by the
COVID-19
pandemic have had, and are likely to continue tomay in the future have, a significant and negative impact on Tao Group Hospitality’s operations and financial performance. On August 6, 2020, TAOIH and TAOG entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder through December 31, 2021, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. TheThere was no balance held in the reserve account was approximately $3,200 as of September 30, 2021.March 31, 2022. As of September 30, 2021,March 31, 2022, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Tao Senior Credit Agreement.
On June 15, 2020, the Tao Subordinated Credit Agreement was amended to provide an additional $22,000 of borrowing capacity.
As of September 30, 2021,March 31, 2022, the outstanding balance under the Tao Subordinated Credit Agreement was $63,000. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810,
 Consolidation
. If recovery from the pandemic takes longer than currently estimated,were to have significant negative impact on Tao Group Hospitality’s operations and financial performance in the future, Tao Group Hospitality may need to seek covenant waivers in the future.waivers. Tao Group Hospitality’s failure to obtain covenant waivers could trigger a violation of these covenants and lead to default and acceleration of all of its outstanding debt, which could have a material adverse effect on liquidity.
See Note 13 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for discussions of the Company’s debt obligations and various financing agreements.
Letters of Credit
The Company uses letters of credit to support its business operations. As of September 30, 2021,March 31, 2022, the Company had a total of $7,806$8,447 of letters of credit outstanding, which included two letters of credit for an aggregate of $750 issued under the Tao Revolving Credit Facility.
Contractual Obligations
The Company did not have any material changes in its contractual obligations since the end of Fiscal Year 2021 other than (i) a total of approximately $3,646,250 in contract obligations (primarily related to media rights agreements) that are now included as a part of the Company’s contractual obligation in connection with the Merger with MSG Networks on July 9, 2021, and (ii) activities in the ordinary course of business. See Notes 11
Note 12to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for further details on the timing and amount of payments under various media rights agreements.
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Cash Flow Discussion

As of September 30, 2021,March 31, 2022, cash, cash equivalents and restricted cash totaled $1,355,479,$1,020,753, as compared to $1,539,976 as of June 30, 2021. The following table summarizes the Company’s cash flow activities for the threenine months ended September 30, 2021March 31, 2022 and 2020:
   
Three Months Ended
September 30,
 
   
2021
   
2020
 
Net loss
  $(76,655)   $(40,316) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
   42,939    3,819 
  
 
 
   
 
 
 
Subtotal
  $(33,716)   $(36,497) 
Changes in working capital assets and liabilities
   40,704    (58,730) 
  
 
 
   
 
 
 
Net cash provided by (used in) operating activities
  $6,988   $(95,227) 
Net cash provided by (used in) investing activities
   (146,302)    192,234 
Net cash used in financing activities
   (44,797)    (15,996) 
Effect of exchange rates on cash, cash equivalents and restricted cash
   (386)    5,814 
  
 
 
   
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
  $(184,497)   $86,825 
  
 
 
   
 
 
 
2021:
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Nine Months Ended March 31,
20222021
Net loss$(90,942)$(126,229)
Adjustments to reconcile net loss to net cash provided by operating activities174,010 70,785 
Subtotal$83,068 $(55,444)
Changes in working capital assets and liabilities23,133 (58,672)
Net cash provided by (used in) operating activities$106,201 $(114,116)
Net cash (used in) provided by investing activities(547,926)21,834 
Net cash (used in) provided by financing activities(77,520)589,598 
Effect of exchange rates on cash, cash equivalents and restricted cash22 7,918 
Net (decrease) increase in cash, cash equivalents and restricted cash$(519,223)$505,234 
Operating Activities
Net cash provided by operating activities for the threenine months ended September 30, 2021March 31, 2022 increased by $102,215$220,317 to $6,988$106,201 as compared to net cash used in operating activities of $114,116 in the prior year period primarily due to a lower net loss in the current year period and changes in working capital assets and liabilities, which included (i) higher cash collection associated with deferred revenue account including collections due to promoters, and (ii) higher cash collections from accounts receivables.increase in payables, including related party payable. Our higher operatinglower net loss in the current year period was largely offset
reflects significant non-cash
expenses items such as (i) alower deferred income tax benefits of $11,872 in the current year period as compared to $37,630 in the prior year period, and (ii) net unrealized loss of $28,303 as compared to net unrealized gain of $52,662 in the comparable period, (ii) a higher provision for deferred income taxes and (iii) a current period impairment of long-lived assets.prior year period.
Investing Activities
Net cash used in investing activities for the threenine months ended September 30, 2021March 31, 2022 increased by $338,536$569,760 to $146,302$547,926 as compared to the prior year periodperiod primarily due to an increase in capital expenditures in the current year period, and to a lesser extent, the absence of proceeds from the maturity of short-term investments in the prior year period and, to a lesser extent, an increase in capital expenditures, inclusive of capitalized interest, in the current year period.
Financing Activities
Net cash used in financing activities for the threenine months ended September 30, 2021March 31, 2022 increased by $28,801$667,118 to $44,797$77,520 as compared to cash provided by financing activities of $589,598 in prior year period due to the absence of proceeds received from the National Properties Term Loan Facility of $630,500 during the prior year period primarily due to (i) repayment of the outstanding Tao Revolving Credit Facility balance in the current year period, (ii) higher scheduled principal payments to our MSG Networks Senior Secured Credit Facilities, and (iii) an increase of taxes paid in lieu of shares issued for share-based compensation.
November 2020.
Seasonality of Our Business
The revenues the Company earns from the
Christmas Spectacular
and arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden generally means the Entertainment segment earns a disproportionate share of its revenues and operating income in the second and third quarters of the Company’s fiscal year with the first fiscal quarter being disproportionally lower.

As a result of the foregoing, the Company’s revenue and operating income are disproportionally higher in the fiscal second and third quarter of the fiscal year and lower in the first quarter of the fiscal year.
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Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form
10-Q
for discussion of recently issued accounting pronouncements.
Critical Accounting Policies
There have been no other material changes to the Company’s critical accounting policies from those set forth in Note 2. Summary of Significant Accounting Policies of the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form
10-K.
The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of Fiscal Year 2022.
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Impairment of Long-Lived and Indefinite-Lived Assets
Goodwill is tested annually for impairment as of August 31
st
and at any time upon the occurrence of certain events or substantive changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is one level below the operating segment level. As of September 30, 2021,March 31, 2022, the Company had three operating and reportable segments consistent with the process the Company’s management followed in making decisions and allocating resources to the business.
For purposes of evaluating goodwill for impairment, the Company has three reporting units: Entertainment, MSG Networks and Tao Group Hospitality.
The goodwill balance reported on the Company’s consolidated balance sheet as of September 30, 2021March 31, 2022 by reporting unit was as follows:
Entertainment$74,309 
MSG Networks424,508 
Tao Group Hospitality1,364 
$500,181 
Entertainment
  $74,309 
MSG Networks
   424,508 
Tao Group Hospitality
   1,364 
  
 
 
 
  $500,181 
  
 
 
 
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year 2022 annual impairment test. These assessments considered factors such as:
•macroeconomic conditions;
•industry and market considerations;
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•cost factors;
•overall financial performance of the reporting units;
•other relevant company-specific factors such as changes in management, strategy or customers; and
•relevant reporting unit specific events such as changes in the carrying amount of net assets.
During the first quarter of Fiscal Year 2022, the Company performed its most recent annual impairment tests of goodwill and determined that there were no impairmentimpairments of goodwill identified for any of its reporting units as of the impairment test date. Based on these impairment tests, the Company’s reporting units had sufficient safety margins, representing the excess of the estimated fair value of each reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill allocated to each respective reporting unit). The Company believes that if the fair value of the reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
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Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31
st
and at any time upon the occurrence of certain events or substantive changes in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of September 30, 2021:
March 31, 2022:
Trademarks$61,881 
Photographic related rights1,920 
$63,801 
Trademarks
  $61,881 
Photographic related rights
   1,920 
  
 
 
 
  $63,801 
  
 
 
 
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform the qualitative assessment of impairment for the photographic related rights and the trademarks. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair values of the intangible assets. Examples of such events and circumstances include:
•cost factors;
•financial performance;
•legal, regulatory, contractual, business or other factors;
•other relevant company-specific factors such as changes in management, strategy or customers;
•industry and market considerations; and
•macroeconomic conditions.
During the first quarter of Fiscal Year 2022, the Company performed its most recent annual impairment test of the identifiable indefinite-lived intangible assets and determined that there were no impairments identified. Based on these impairment tests, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value. The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K.
Potential Interest Rate Risk Exposure
The Company, through its subsidiaries MSGN L.P. and MSG National Properties, and as a result of the consolidation of Tao Group Hospitality, has potential interest rate risk exposure related to borrowings incurred under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities.
Borrowings under the National Properties Term Loan Facility and Tao Senior Secured Credit Facilities incur interest, depending on election by MSG National Properties and TAOG, at a floating rate based upon LIBOR, the U.S. Federal Funds Rate or the U.S. Prime Rate, plus, in the case of TAOG, an additional spread which is dependent upon the total leverage ratio at the time for Tao Senior Secured Credit Facilities. In addition, borrowings under the MSG Networks Senior Secured Credit Facilities bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total net leverage ratio). Accordingly, the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities are subject to interest rate risk with respect to the tenor of any borrowings incurred. See Note 14 to the consolidated financial
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statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information on the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities.
For the twelve months ended March 31, 2022, the interest rate on the MSG Networks Senior Secured Credit Facilities ranged from 1.58% to 1.96% and was approximately 1.96% as of March 31, 2022. The interest rate on the Tao Senior Secured Credit Facilities ranged from 2.59% to 2.96% and it was 2.96% as of March 31, 2022. In addition, the interest rate on National Properties Term Loan Facility was 7.00% as of March 31, 2022 and has been unchanged since inception. The effect of a hypothetical 100 basis point increase in floating interest rates prevailing as of March 31, 2022 and continuing for a full year would increase interest expense by $14,800, on the outstanding balances under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Senior Secured Credit Facilities.
Foreign Currency Exchange Rate Exposure
We are exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through our net investment position initiated with our acquisition of land in London in the second quarter of fiscal year 2018 for future MSG Sphere development and through cash and invested funds which will be deployed in the construction of our London venue. We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations by entering into foreign currency forward exchange contracts with financial institutions. If we were to enter into such hedging transactions, the market risk resulting from foreign currency fluctuations is unlikely to be entirely eliminated. We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During the past twelve months ended March 31, 2022, the GBP/USD exchange rate ranged from 1.3003 to 1.4218 as compared to GBP/USD exchange rate of 1.3548 as of March 31, 2022, a fluctuation range of approximately 4.95%. As of March 31, 2022, a uniform hypothetical 4.57% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $8,300 in the Company’s net asset value.
Item 4.
Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act, as of September 30, 2021. Our Chief Executive OfficerMarch 31, 2022. Based on that evaluation and Chief Financial Officer previously evaluated and concluded that our disclosure controls and procedures were effective as of September 30, 2021. As a result of the material weakness in our internal control over financial reporting, previously disclosed under Part II, “Item 9A, Controls and Procedures” in the Form 10-K/A filed on February 9, 2022, our Chief Executive Officer and Chief Financial Officer, have updated their evaluation and now concludeconcluded that the Company’sCompany's disclosure controls and procedures were not effective as of September 30, 2021 due to a material weakness in the Company’s internal control over financial reporting described below.March 31, 2022.
Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that the consolidated and combined financial statements as originally issued in the Original Filing and as revisedincluded in this Quarterly Report on Form
10-Q/A
10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
Remediation Plan and Status
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As of September 30, 2021,March 31, 2022, the material weakness previously disclosed has not yet been fully remediated.
In response to the material weakness in the Company’s internal control over financial reporting, management has designed and implemented control activities related to the identification, calculation, and disclosure of capitalized interest expense. We will continue to work towards full remediation of this material weakness to improve our internal control over financial reporting.
The material weakness cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described above.
Changes in Internal Control over Financial Reporting
Other than the material weakness described above, there were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules
13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934) during the fiscal quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Fifteen complaints were filed in connection with the Merger by purported stockholders of the Company and MSG Networks Inc.
Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Merger and have since been consolidated into two remaining litigations.
On September 10, 2021, the Court of Chancery entered an order consolidating two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Merger. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021, and are currently engaged in responding to the consolidated plaintiffs’ discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
On September 27, 2021, the Court of Chancery entered an order consolidating four complaints filed by purported stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. No. 2021-0575-KSJM. The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. prior to the Merger. Plaintiffs allege that the MSG Networks Inc. board of directors and controlling stockholders breached their fiduciary duties in negotiating and approving the Merger. The Company is not named as a defendant. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants to the MSG Networks Inc. consolidated action filed answers to the complaint on December 30, 2021 and are currently engaged in responding to the plaintiffs’ discovery requests.Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
On March 3, 2022 the Court of Chancery approved a case schedule, governing the two consolidated actions, which set tentative trial dates for April 2023.
We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been made in our consolidated financial statements.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form
10-K
for the fiscal year ended June 30, 2021, as amended by Form 10-K/A filed on February 9, 2022 (the “Form 10-K”), which could materially affect the Company’s business, financial condition or future results. The risks described in our Annual Report onthe Form
10-K
are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition or future results.
We Are Required to Assess Our Internal Control Over Financial Reporting on an Annual Basis and Our Management Has Identified a Material Weakness. If Our Remediation of the Material Weakness Is Not Effective, or We Identify Additional Material Weaknesses or Other Adverse Findings in the Future, Our Ability to Report Our Financial Condition or Results of Operations Accurately or Timely May Be Adversely Affected, Which May Result in a Loss of Investor Confidence in Our
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Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
Subsequent to the Original Filing, managementManagement of the Company evaluated an immaterial accounting error related to interest costs that should have been capitalized for the MSG Sphere project at the Venetian in the fiscal years ended June 30, 2021, 2020 and 2019 and in the fiscal quarter ended September 30, 2021, as prescribed by Accounting Standards Codification (“ASC”) Topic
835-20
(
Capitalization of Interest
). As a result of the accounting error, the Company has
re-evaluated
the effectiveness of the Company’s internal control over financial reporting and identified a material weakness in the Company’s internal control over financial reporting as of June 30, 2021, and September 30, 2021.2021, December 31, 2021 and March 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. For further discussion regarding the accounting error and the correction of such error to the Company’s previously issued consolidated and combined financial statements, see Note 2023 –
Correction of Previously Issued Consolidated and Combined Financial Statements
to the consolidated and combined financial statements of the Company included in Part
I-Itemthe Form 10-K.
1 of this Form
10-Q/A.
Our management may be unable to conclude in future periods that our disclosure controls and procedures are effective due to the effects of various factors, which may, in part, include unremediated material weaknesses in internal controls over financial reporting. For further discussion of the material weakness, see Part I—“Part I — Item 4. Controls and Procedures.Procedures” of this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in those reports is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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Management is committed to maintaining a strong internal control environment and believes its remediation efforts will represent an improvement in existing controls. Management anticipates that the new controls, as implemented and when tested for a sufficient period of time, will remediate the material weakness. We may not be successful in promptly remediating the material weaknesses identified by management, or be able to identify and remediate additional control deficiencies, including material weaknesses, in the future.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As of March 31, 2022, the Company has the ability to repurchase up to $350 million of the Company’s Class A Common Stock under the Class A Common Stock share repurchase program authorized by the Company’s Board of Directors on March 31, 2020. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased to date.

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Item 6.
Exhibits

(a)Index to Exhibits
(a)
Index to Exhibits
EXHIBIT

NO.
DESCRIPTION
10.1
10.1
10.2Form of Madison Square Garden Entertainment Corp. Restricted Stock Units Agreement in respect of Restricted Stock Units granted under the MSG Networks Inc. 2010 Employee Stock Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly’s Current Report on Form 10-Q for the quarter ended September 30, 20218-K filed on November 9, 2021)March 29, 2022).†
10.2
10.3
10.4EmploymentSeparation Agreement, dated as of August 27, 2021,May3, 2022, between Madison Square Garden Entertainment Corp. and Andrea Greenberg (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form Joseph F. Yospe.10-Q for the quarter ended September 30, 2021 filed on November 9, 2021). †
31.1
10.5Madison Square Garden Entertainment Corp. Policy Concerning Certain Matters Relating to Madison Square Garden Sports Corp. and AMC Networks Inc., Including Responsibilities of Overlapping Directors and Officers (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form
10.6Sixth Amendment to Lease Agreement, dated December 4, 1997, between RCPI Landmark Properties, L.L.C. and Radio City Productions LLC, dated July 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 2, 2021). +
31.1Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
31.2
32.1
32.1
32.2
32.2
101
101The following materials from Madison Square Garden Entertainment Corp. Quarterly Report on Form
10-Q/A
10-Q for the quarter ended September 30, 2021,March 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated Statementsstatements of comprehensive loss, (iv) consolidated statements of cash flows, (v) consolidated statements of equity and redeemable noncontrolling interests, and (vi) notes to consolidated financial statements.
104
104The cover page from the Company’s Quarterly Report on Form
10-Q/A
10-Q for the quarter ended September 30, 2021March 31, 2022 formatted in Inline XBRL and contained in Exhibit 101.
_________________
†    This exhibit is a management contract or a compensatory plan or arrangement.
†
This exhibit is a management contract or a compensatory plan or arrangement.
+
Certain confidential information - identified by bracketed asterisks “[*****]” - has been omitted from this exhibit pursuant to Item 601(b)(10) of Regulation
S-K
because it is both (i) not material and (ii) would be competitively harmful to the Registrant if publicly disclosed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9
th
day of FebruaryMay 2022.
Madison Square Garden Entertainment Corp.
By:
/s/S/    DAVID F. BYRNES
Name:Name:David F. Byrnes
Title:Title:Executive Vice President and
Chief Financial Officer

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