Madison Square Garden Entertainment Corp. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Entertainment Corp., (formerly MSGE Spinco, Inc.) (“MSG Entertainment”) and its direct and indirect subsidiaries (collectively, “we,” “us,” “our” “MSG Entertainment,” or the “Company”). Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to: • the level of our expenses, including our corporate expenses; • the level of our revenues, which depends in part on the popularity of the Christmas Spectacular Starring the Radio City Rockettes (the “ Christmas Spectacular ”), the sports teams whose games are played at Madison Square Garden (“The Garden”), and other events which are presented in our venues; • lack of operating history as a stand-alone public company and costs associated with being an independent public company; • the on-ice and on-court performance of the professional sports teams whose games we host in our venues; • the level of our capital expenditures and other investments; • general economic conditions, especially in the New York City and Chicago metropolitan areas where we have business activities; • the demand for sponsorship and suite arrangements; • competition, for example, from other venues and sports and entertainment options, including of new competing venues; • our ability to effectively manage any impacts of a pandemic or other public health emergency (including COVID-19 variants) as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable; • the effect of any postponements or cancellations by third-parties or the Company due to operational challenges and other health and safety concerns or as a result of a pandemic or other public health emergency (such as the partial cancellation of the 2021 production of the Christmas Spectacular ); • the extent to which attendance at our venues may be impacted by government actions, renewed health concerns by potential attendees and reduced tourism; • the impact on the payments we receive under the arena license agreements that require the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”) to play their home games at The Garden (the “Arena License Agreements”) as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements, if any, at Knicks and Rangers games; • 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 NBA and NHL, or other work stoppage; • seasonal fluctuations and other variations in our operating results and cash flow from period to period; • the successful development of new live productions, enhancements or changes to existing productions and the investments associated with such development, enhancements, or changes; • business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, 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 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; • our internal control environment and our ability to identify and remedy any future material weaknesses; • the costs associated with, and the outcome of, litigation, including any negative publicity, 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, 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 Penn Station; 31 • the impact of sports league rules, regulations and/or agreements and changes thereto; • the substantial amount of debt incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under the National Properties Credit Agreement and our ability to obtain additional financing, to the extent required; • financial community perceptions of our business, operations, financial condition and the industries in which we operate; • the performance by Madison Square Garden Sports Corp. (together with its subsidiaries, as applicable, “MSG Sports”) of its obligations under various agreements with the Company and ongoing commercial arrangements, including the Arena License Agreements; • the tax-free treatment of the MSGE Distribution (as defined below); • our ability to achieve the intended benefits of the MSGE Distribution; • failure of the Company or Sphere Entertainment Co. (together with its subsidiaries, as applicable, “Sphere Entertainment”) to satisfy its obligations under transition services agreements, or other agreements entered into in connection with the MSGE Distribution; • our status as an emerging growth company; and • the additional factors described under “Risk Factors” in this Annual Report on Form 10-K. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual results or to changes in our expectations. 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 audited consolidated and combined annual financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations. Our MD&A is organized as follows: MSGE Distribution and 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 results of operations for Fiscal Year 2023 and 2022, on a consolidated and combined basis, respectively. Analysis of our results of operations for Fiscal Year 2022, including a comparison of Fiscal Year 2022 to Fiscal Year 2021, is included in the Company’s Information Statement, dated April 3, 2023 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 4, 2023. Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, as well as an analysis of our cash flows for Fiscal Year 2023 and Fiscal Year 2022. The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity, our contractual obligations and off-balance sheet arrangements that existed at June 30, 2023. Seasonality of Our Business. This section discusses the seasonal performance of our business. Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section cross-references a discussion of critical accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application . Our critical accounting policies and recently issued accounting pronouncements, are discussed included in Item 7 and 8, respectively, of this Annual Report on Form 10-K. 32 MSGE Distribution and Business Overview On April 20, 2023 (the “MSGE Distribution Date”), Sphere Entertainment distributed approximately 67% of the shares of outstanding common stock of MSG Entertainment to its stockholders (the “MSGE Distribution”), with Sphere Entertainment retaining approximately 33% of the outstanding shares of common stock of MSG Entertainment (in the form of Class A common stock) (the “MSGE Retained Interest”) immediately following the MSGE Distribution. As a result, the Company became an independent publicly traded company on April 21, 2023 through the MSGE Distribution. As of August 9, 2023, Sphere Entertainment owned approximately 17% of the outstanding common stock of the Company (in the form of Class A common stock). In the MSGE Distribution, stockholders of Sphere Entertainment received (a) one share of MSG Entertainment’s Class A common stock, par value $0.01 per share, for every share of Sphere Entertainment’s Class A common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on April 14, 2023 (the “Record Date”), and (b) one share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every share of Sphere Entertainment’s Class B common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on the Record Date. The Company is a live entertainment company comprised of iconic venues and marquee entertainment content. 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. We manage our business through one reportable segment. The Company’s portfolio of venues includes: The Garden, the Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. The Company also includes the original production, the Christmas Spectacular, and our entertainment and sports bookings business, which showcases a broad array of compelling concerts, family shows and special events, as well as a diverse mix of sporting events, for millions of guests annually. 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, the Theater at Madison Square Garden and The Chicago Theatre, and leases Radio City Music Hall and the Beacon Theatre. All of the Company’s revenues and assets are attributed to or located in the United States and are primarily concentrated in the New York City metropolitan area. Description of Our Business The Company produces, presents and hosts live entertainment events, including (i) concerts, (ii) sports events, and (iii) other live events such as family shows, performing arts events and special events, in our diverse collection of venues. The scope of our collection of venues enables us to showcase acts that cover a wide spectrum of genres and popular appeal. Although we primarily license our venues to third-party promoters for a fee, we also promote or co-promote shows. If we serve as promoters or co-promoters of a show, we have economic risk relating to the event. The Company also creates, produces and/or presents live productions that are performed in the Company’s venues. This includes the Christmas Spectacular production, which features the world-famous Rockettes and which has been performed at Radio City Music Hall for 89 years. The Company also historically owned a controlling interest in Boston Calling Events, LLC (“ BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival. The Company disposed of its controlling interest in BCE on December 2, 2022. Revenue Sources The Company earns revenue from several primary sources: ticket sales to our audiences for live events that we produce or promote/co-promote, license fees for our venues paid by third-party promoters or licensees in connection with events that we do not produce or promote/co-promote, facility and ticketing fees, concessions, sponsorships and signage, suite license fees at The Garden, merchandising and tours at certain of our venues. The amount of revenue and expense recorded by the Company for a given event depends to a significant extent on whether the Company is promoting or co-promoting the event or is licensing a venue to a third party or MSG Sports. See “— Description of Our Business — Revenue Sources — Venue License Fees” below for further discussion of our venue licensing arrangements with MSG Sports. 33 Ticket Sales and Suite Licenses For our productions and for entertainment events in our venues that we promote, we recognize revenues from the sale of tickets to our audiences. We sell tickets to the public through our box office, via our websites and ticketing agencies and through group sales. The amount of revenue we earn from ticket sales depends on the number of shows and the mix of events that we promote, the capacity of the venue used, the extent to which we can sell to fully utilize the capacity, and our ticket prices. The Garden has 21 Event Level suites, 58 Lexus Level suites, 18 Infosys Level suites, the Caesars Sportsbook Lounge, Suite Sixteen and the Hub Loft. Suite licenses at The Garden are generally sold to corporate custom ers with the majority being multi-year licenses with annual escalators. Under standard suite licenses, the licensees pay an annual license fee, which varies depending on the location of the suite. The license fee includes, for each seat in the suite, tickets for events at The Garden for which tickets are sold to the general public, subject to certain exceptions. In addition, suite holders separately pay for food and beverage service in their suites at The Garden. Revenues from the sale of suite licenses are shared between the Company and MSG Sports. Revenues for the Company’s suite license arrangements are recorded on a gross basis, as the Company is the principal in such transactions and controls the related goods or services until transfer to the customer. MSG Sports’ share of the Company’s suite license revenue is recognized in the combined statements of operations as a component of direct operating expenses. The revenue sharing expense recognized by the Company for MSG Sports’ share of suite license revenue at The Garden is based on a 67.5% allocation to MSG Sports pursuant to the Arena License Agreements. Venue License Fees For entertainment events held at our venues that we do not produce, promote or co-promote, we typically earn revenue from venue license fees charged to the third-party promoter or producer of the event. The amount of license fees we charge varies by venue, as well as by the size of the production and the number of days utilized, among other factors. Our fees typically include both the cost of renting space in our venues and costs for providing event staff, such as front-of-house and back-of-house staff, including stagehands, electricians, laborers, box office staff, ushers and security as well as production services such as staging, lighting and sound. The Company is party to 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 agreement. 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 term, adjusted pursuant to the terms of the Arena License Agreements, which is comprised of non-consecutive periods of use when MSG Sports uses The Garden generally for their professional sports teams’ preseason and regular season home games. As such, operating lease revenue is recognized ratably as events occur. The Arena License Agreements allow for certain reductions in the license fees during periods when The Garden is not available for use due to a force majeure event. As a result of the government-mandated suspension of events at The Garden due to the impact of the COVID-19 pandemic, at the beginning of Fiscal Year 2021, The Garden was not available for use. 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 Agreements. The Knicks and the Rangers each completed their 2021-2022 82-game regular seasons, with the Rangers advancing to the playoffs. Facility and Ticketing Fees For all public and ticketed events held in our venues aside from MSG Sports home games, we also earn additional revenues on substantially all tickets sold, whether we promote/co-promote the event or license the venue to a third party. These revenues are earned in the form of certain fees and assessments, including the facility fees we charge, and vary by venue. Concessions We sell food and beverages during substantially all events held at our venues. In addition to concession-style sales of food and beverages, which represent the majority of our concession revenues, we also generate revenue from catering for our suites at The Garden. Pursuant to the Arena License Agreements related to the use of The Garden by MSG Sports, the Company shares with MSG Sports revenues and related expenses associated with sales of food and beverages (including suite catering) during Knicks and Rangers games at The Garden. Revenue generated from in-venue food and beverage sales at MSG Sports’ events is recognized by the Company on a gross basis, with a corresponding revenue sharing expense for MSG Sports’ share of such sales recorded within direct operating 34 expense. The Arena License Agreements require the Company to pay 50% of the net proceeds generated from in-venue food and beverage sales to MSG Sports. Merchandise We earn revenues from the sale of merchandise related to our proprietary productions and other live entertainment events that take place at our venues. The majority of our merchandise revenues are generated through on-site sales during performances of our productions and other live events. We also generate revenues from sales of our Christmas Spectacular merchandise, such as ornaments and apparel, through traditional retail channels. Revenues associated with Christmas Spectacular merchandise are generally recorded on gross basis (as principal). Typically, revenues from our merchandise sales at our non-proprietary events relate to sales of merchandise provided by the artist, the producer or promoter of the event and are generally subject to a revenue sharing arrangement and are generally recorded on a net basis (as agent). Pursuant to the Arena License Agreements, the Company receives 30% of revenues, net of taxes and credit card fees, recorded on a net basis (agent), from the sale of MSG Sports teams merchandise sold at The Garden. Signage and Sponsorship We earn revenues through the sale of signage space and sponsorship rights in connection with our venues, productions and other live entertainment events. Signage revenues generally involve the sale of advertising space at The Garden during entertainment events and otherwise in our venues. We also earn our revenues through the sale of outdoor signage around the Madison Square Garden complex and Penn Station. Sponsorship agreements may require us to use the name, logos and other trademarks of sponsors in our advertising and in promotions for our venues, productions and other live entertainment events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to use the name, logos and other trademarks of our productions, events and venues in connection with their own advertising and in promotions in our venues or in the community. Under the Arena License Agreements, the Company shares certain sponsorship and signage revenues with MSG Sports. Pursuant to these agreements, MSG Sports has the rights to sponsorship and signage revenue that is specific to Knicks and Rangers events. The Company and MSG Sports also entered into sponsorship sales representation agreements, under which the Company has the right and obligation to sell and service sponsorships for the sports teams of MSG Sports, in exchange for a commission. Expenses Our principal expenses are payments made to performers of our productions, staging costs and day-of-event costs associated with events, and advertising costs. In addition, our expenses include costs associated with the ownership, lease, maintenance and operation of our venues, along with our corporate and other supporting functions. Performer Payments Our proprietary productions are performed by talented actors, dancers, singers, musicians and entertainers. In order to attract and retain this talent, we are required to pay our performers an amount that is commensurate with both their abilities and the demand for their services from other entertainment companies. Our productions typically feature ensemble casts (such as the Rockettes), where most of our performers are paid based on a standard “scale,” pursuant to collective bargaining agreements we negotiate with the performers’ unions. Certain performers, however, have individually negotiated contracts. Staging Costs Staging costs for our proprietary events as well as other events that we promote include the costs of sets, lighting, display technologies, special effects, sound and all of the other technical aspects involved in presenting a live entertainment event. These costs vary substantially depending on the nature of the particular show, but tend to be highest for large-scale theatrical productions, such as the Christmas Spectacular . For concerts we promote, the performer usually provides a fully produced show. Along with performer salaries, the staging costs associated with a given production are an important factor in the determination of ticket prices. Day-of-Event Costs For days in which the Company stages its productions, promotes an event or provides one of our venues to a third-party promoter under a license fee arrangement, the event is charged the variable costs associated with such event, including box office staff, stagehands, ticket takers, ushers, security, and other similar expenses. In situations where we provide our venues to a third-party promoter under a license fee arrangement, day-of-event costs are typically included in the license fees charged to the promoter. Under the Arena License Agreements related to the use of The Garden by MSG Sports, the Company is 35 reimbursed for day-of-event costs (as defined under the Arena License Agreements). The Company records such reimbursements as reductions to direct operating expenses. Venue Usage The Company’s consolidated and combined financial statements include expenses associated with the ownership, maintenance and operation of The Garden, which the Company and MSG Sports use in their respective operations. Revenue Sharing Expenses As discussed above, MSG Sports’ share of the Company’s suites licenses, venue signage and certain sponsorship and concessions revenue is reflected within direct operating expense as revenue sharing expenses. Marketing and Advertising Costs We incur significant costs promoting our productions and other events through various advertising campaigns, including advertising on social and digital platforms, television, outdoor platforms and radio, and in newspapers. In light of the intense competition for entertainment events, such expenditures are a necessity to drive interest in our productions and encourage members of the public to purchase tickets to our shows. Other Expenses The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional f ees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses. Operating expenses also include corporate overhead costs and venue operating expenses. Venue operating expenses include the non-event related costs of operating the Company’s venues, and include such costs as rent for the Company’s leased venues, real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venues. Factors Affecting Results of Operations In addition to the discussion under the section “Factors Affecting Comparability” below, the operating results of our business are largely dependent on our ability to attract concerts and other events to our venues, revenues under various agreements entered into with MSG Sports, and the continuing popularity of the Christmas Spectacular at Radio City Music Hall. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games we host at The Garden. Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers. Weak economic conditions may lead to lower demand for suite licenses and tickets to our live productions, concerts, family shows and other events, which would also negatively affect concession and merchandise sales, and lower levels of sponsorship and venue signage. These conditions may also affect the number of concerts, family shows and other events that take place in the future. An economic downturn could adversely affect our business and results of operations. The Company may explore additional opportunities to expand our presence in the entertainment industry. Any new investment may not initially contribute to operating income, but is intended to become operationally profitable over time. Factors Affecting Comparability MSGE Distribution The activities from April 21, 2023 to June 30, 2023 included in the statement of operations for the year ended June 30, 2023 are prepared on a consolidated basis, as the Company became a standalone public company on April 21, 2023. The Company's combined statements of operations for the years ended June 30, 2022 and 2021, as well as the financial information for the period of July 1, 2022 to April 20, 2023 that is included in the results of operations for the year ended June 30, 2023 were prepared on a standalone basis derived from the consolidated financial statements and accounting records of the Company’s former parent, Sphere Entertainment, and are presented as carve-out financial statements as MSG Entertainment was not a standalone public company prior to the MSGE Distribution. The combined statements of operations for the year ended June 30, 2022 and 2021, as well as the financial information for the period of July 1, 2022 to April 20, 2023 that is included in the results of operations for the year ended June 30, 2023, include allocations for certain support functions that were provided on a centralized basis and not historically recorded at the business unit level by Sphere Entertainment, such as expenses related to executive management, finance, legal, human resources, government affairs, information technology, and venue operations among others. As part of the MSGE Distribution, certain corporate and operational support functions were transferred to the Company and therefore, charges were reflected in order to burden all business units comprising Sphere Entertainment’s historical operations. These expenses were allocated on the basis 36 of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined assets, headcount or other measures of the Company and Sphere Entertainment, which are recorded as a reduction of either direct operating expenses or selling, general and administrative expenses. Management believes the assumptions underlying the combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined financial statements do not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position and cash flows had it been a separate, standalone company during the periods presented. Actual costs that would have been incurred if the Company had been a separate, standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. See Note 1. Description of Business and Basis of Presentation to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for additional information. Impact of the COVID-19 Pandemic on Our Business The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during Fiscal Year 2023, as compared to Fiscal Year 2022, which was materially impacted by fewer ticketed events at our venues in the first half of Fiscal Year 2022 due to the lead-time required to book touring acts and artists and the postponement or cancellation of select events (including the partial cancellation of the 2021 production of the Christmas Spectacular ) during the second and third quarters of the Fiscal Year 2022 as a result of an increase in COVID-19 cases. It is unclear to what extent COVID-19, including variants thereof, or another pandemic or public health emergency, could result in new government- or league-mandated capacity or other restrictions, vaccination/mask requirements, or impact the use of and/or demand for our venues and our sponsorship and advertising assets, deter our employees and vendors from working at our venues (which may lead to difficulties in staffing) or otherwise materially impact our operations. 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 “Item 1A. Risk Factors” included elsewhere in this Form 10-K for further details. Advertising Sales Representation Agreement Termination Prior to December 31, 2022, the Company was a party to an advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) with Sphere Entertainment’s subsidiary, MSGN Holdings, L.P. (“MSG Networks LP”), pursuant to which the Company had the exclusive right and obligation to sell MSG Networks LP advertising availabilities for a commission. The Networks Advertising Sales Representation Agreement was terminated effective as of December 31, 2022. For Fiscal Years 2023, 2022, and 2021 , the Company recognize d $8,802, $20,878 and $13,698 of revenues, respectively, under the advertising sales representation agreement with MSG Networks. The termination of the Networks Advertising Sales Representation Agreement has impacted the operating results of the Company for Fiscal Year 2023 and will impact the operating results of the Company on a go forward basis. As a result, after December 31, 2022, the Company no longer recognizes advertising sales commission revenue or the employee costs related to the MSG Networks LP advertising sales agency. 37 Results of Operations Consolidated and Combined Results of Operations Comparison of Fiscal Year 2023 versus Fiscal Year 2022 The table below sets forth, for the periods presented, certain historical financial information. Years Ended June 30, Change 2023 2022 Amount Percentage Revenues $ 851,496 $ 653,490 $ 198,006 30 % Direct operating expenses (499,929) (417,301) (82,628) 20 % Selling, general and administrative expenses (180,216) (167,132) (13,084) 8 % Depreciation and amortization (60,463) (69,534) 9,071 (13) % Gains, net on dispositions 4,361 — 4,361 NM Restructuring charges (10,241) (5,171) (5,070) 98 % Operating income (loss) 105,008 (5,648) 110,656 NM Interest expense, net (44,625) (45,960) 1,335 (3) % Loss on extinguishment of debt — (35,629) 35,629 (100) % Other income (expense), net 17,389 (49,033) 66,422 (135) % Income (loss) from operations before income taxes 77,772 (136,270) 214,042 157 % Income tax (expense) benefit (1,728) 70 (1,798) NM Net income (loss) 76,044 (136,200) 212,244 156 % Less: Net loss attributable to nonredeemable noncontrolling interests (553) (2,864) 2,311 (81) % Net income (loss) attributable to MSG Entertainment’s stockholders $ 76,597 $ (133,336) $ 209,933 157 % ________________ NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful. Revenues Revenues for Fiscal Year 2023 increased $198,006 as compared to Fiscal Year 2022. The net increase in revenue was attributable to the following: Increase in event-related revenues $ 95,393 Increase in revenues from the presentation of the Christmas Spectacular 74,668 Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements 35,537 Increase in venue-related sponsorship, signage and suite license fee revenues 16,998 Decrease in revenues due to the disposition of Boston Calling Events, LLC during the current fiscal year (18,559) Decrease in commissions due to termination of the Networks Advertising Sales Representation Agreement (12,076) Other net increases 6,045 $ 198,006 The increase in event-related revenues reflects (i) higher revenues from concerts of $92,889 and (ii) higher revenues from other live entertainment and other sporting events of $2,504 during Fiscal Year 2023. The increase in revenue from concerts was primarily due to an increase in the number of concerts held at the Company’s venues, including the impact from the return of live events in the fiscal first quarter as compared to limited live events held in the first quarter of Fiscal Year 2022 (due to the COVID-19 pandemic) and higher per-concert revenue during Fiscal Year 2023. The Company had 181 Christmas Spectacular performances during the 2022-23’s holiday season as compared to 101 performances in the prior year’s holiday season due to the partial cancellation of the 2021 production. For the 2022-23 holiday 38 season, approximately 930,000 tickets were sold, representing an over 25% increase in attendance on a per-show basis as compared to the prior year. The increase in revenues from the presentation of the Christmas Spectacular production was primarily due to higher ticket-related revenues, as compared to the prior year period. This reflected the increase in the number of performances and, to a lesser extent, higher per-show paid attendance, both as compared to the prior year period. The increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher suite license fee revenues and to a lesser extent higher food beverage and merchandise at Knicks and Rangers games. The increase in suite license fee revenues also reflects the return of live events at the Company’s venues in the fiscal first quarter as compared to limited live events held during the first quarter of Fiscal Year 2022 (due to the COVID-19 pandemic). The increase in venue-related sponsorship, signage, and suite license fee revenues was primarily due to the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 and higher suite sales. Direct operating expenses Direct operating expenses for Fiscal Year 2023 increased $82,628 as compared to Fiscal Year 2022. The net increase in direct operating expenses was attributable to the following: Increase in event-related direct operating expenses, as discussed below $ 47,883 Increase in expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements 26,945 Increase in direct operating expenses associated with the Christmas Spectacular 11,790 Increase in direct operating expenses associated with the Arena License Agreements 7,502 Increase in venue operating costs 6,242 Decrease in direct operating expenses due to the disposition of Boston Calling Events, LLC in the current fiscal year (19,650) Other net increases 1,916 $ 82,628 The increase in event-related direct operating expenses reflects (i) higher direct operating expenses from concerts of $48,373, partially offset by (ii) lower direct operating expenses form other sporting and live entertainment events of $489 during Fiscal Year 2023. The increase in event-related direct operating expenses primarily reflects an increase in the number of concerts held at the Company’s venues as compared to the prior year period. The increase in direct operating expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects the increase in suite license fee revenues related to Knicks’ and Rangers’ games at The Garden. The increase in direct operating expenses associated with the Christmas Spectacular was primarily due to the increase in the number of performances as compared to the prior year periods. Selling, general, and administrative expenses Selling, general, and administrative expenses for Fiscal Year 2023 increased $13,084, or 8%, to $180,216 as compared to Fiscal Y ear 2022. Results for Fiscal Year 2022 reflect the allocation of corporate and administrative costs based on the accounting requirements for the preparation of carve-out statements. These results do not include all of the expenses that would have been incurred by MSG Entertainment had it been a standalone public company for Fiscal Year 2022. Fiscal Year 2023 reflects the impact of carve-out accounting through the April 20, 2023 spin-off date and, thereafter, reflects the results of the Company on a fully standalone basis. The increase in selling, general, and administrative expenses were mainly due to additional professional fees and employee compensation and benefits, offset by carve out allocations and the impact of the Company’s transition services agreement with Sphere Entertainment. 39 Gains (loss), net on dispositions Gains (loss), net on dispositions for Fiscal Year 2023 was a gain of $4,361 as compared to $0 in Fiscal Year 2022. The gain was due to the gain on sale of the Company’s controlling interest in Boston Calling Events, LLC (the “BCE Disposition”), partially offset by the net loss on the disposal of a corporate aircraft during Fiscal Year 2023. Depreciation and amortization Depreciation and amortization for Fiscal Year 2023 decreased $9,071, or 13%, to $60,463 as compared to Fiscal Year 2022 primarily due to certain intangible assets being fully amortized and the disposal of a corporate aircraft during Fiscal Year 2023. Restructuring charges Restructuring charges for Fiscal Year 2023 increased $5,070, to $10,241 as compared to the prior year period. The restructuring charges relate to the termination benefits provided due to a workforce reduction of certain executives and employees as part of Sphere Entertainment’s cost reduction program implemented in Fiscal Year 2023. Operating Income Operating income for Fiscal Year 2023 improved $110,656 to $105,008 as compared to an operating loss of $5,648 in Fiscal Year 2022. The improvement in operating income was primarily due to the increase in revenues, and, to a lesser extent a decrease in depreciation and amortization, offset by higher direct operating expenses and selling, general and administration expenses. Interest expense, net Interest expense, net for Fiscal Year 2023 was $44,625 as compared to $45,960 in Fiscal Year 2022, a decrease of $1,335, as a result of decrease in amortization of deferred financing costs following the refinancing of MSG National Properties, LLC’s (“MSG National Properties”) prior term loan facility in June 2022 and the absence of notes payable to BCE following the BCE Disposition, partially offset by an increase in interest rates. Loss on extinguishment of debt For Fiscal Year 2023, the Company did not incur any losses on the extinguishment of debt as compared to a loss of $35,629 in Fiscal Year 2022 due to the extinguishment of MSG National Properties’ prior term loan facility in June 2022. Other income (expense), net For Fiscal Year 2023, other income, net was $17,389 as compared to other expense, net of $49,033 for Fiscal Year 2022, an improvement of $66,422. The change was primarily due to (i) an increase in unrealized gains of $43,619 and $22,273 associated with the investments in DraftKings Inc. (“DraftKings”) and Townsquare Media, Inc. (“Townsquare”), respectively, and (ii) realized gains of $2,608 and $975 associated with the Company’s sale of investments in DraftKings and Townsquare, respectively, in Fiscal Year 2023, partially offset by a $281 increase in other pension costs. Income taxes Income tax expense for Fiscal Year 2023 of $1,728 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) a decrease in the valuation allowance of $34,147 and offset by (ii) tax expense of $3,861 related to nondeductible officers’ compensation and (iii) state income tax expense of $13,033. Income tax benefit for Fiscal Year 2022 of $70 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) an increase in the valuation allowance of $31,679 and (ii) tax expense of $8,125 related to nondeductible officers’ compensation, partially offset by (iii) state income tax benefit of $12,141. See Note 16. Income Taxes to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate. Adjusted operating income (loss) (“AOI”) The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) before the following adjustments, which is referred to as adjusted operating income (loss) (“AOI”), a financial measure not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). We define adjusted operating income (loss) as operating income (loss) excluding: (i) 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, 40 (iii) share-based compensation expense, (iv) restructuring charges or credits, (v) merger and acquisition-related costs, including litigation expenses, (vi) gains or losses on sales or dispositions of businesses and associated settlements, (vii) the impact of purchase accounting adjustments related to business acquisitions, (viii) gains and losses related to the remeasurement of liabilities under MSG Entertainment’s Executive Deferred Compensation Plan, and (ix) amortization for capitalized cloud computing arrangement costs. 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's operating performance . Management believes that this adjustment is beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Sports. In addition, this adjustment is included under the Company’s debt covenant compliance calculations and is a component of the performance measures used to evaluate, and compensate, senior management of the Company. The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. The Company eliminates merger and acquisition-related costs, when applicable, 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. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the MSG Entertainment’s Executive Deferred Compensation Plan, provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the remeasurement of liabilities under the MSG Entertainment’s Executive Deferred Compensation Plan are recognized in Operating (income) loss whereas gains and losses related to the remeasurement of the assets under the MSG Entertainment’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Other income (expense), net, which is not reflected in Operating income (loss). The Company believes AOI is an appropriate measure for evaluating the operating performance of the Company on a consolidated and combined basis. AOI 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 AOI measures as the most important indicators of its business performance and evaluates management’s effectiveness with specific reference to these indicators. AOI 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 AOI 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 AOI. The following is a reconciliation of operating income to adjusted operating income: Years Ended June 30, Change 2023 2022 Amount Percentage Operating income (loss) $ 105,008 $ (5,648) $ 110,656 NM Non-cash portion of arena license fees from MSG Sports (a) (26,545) (27,754) 1,209 Share-based compensation expense 29,521 37,746 $ (8,225) Depreciation and amortization 60,463 69,534 $ (9,071) Restructuring charges 10,241 5,171 $ 5,070 Gains, net on dispositions (4,361) — $ (4,361) Amortization for capitalized cloud computing arrangement costs 600 39 $ 561 Remeasurement of deferred compensation plan liabilities 121 46 $ 75 Adjusted operating income $ 175,048 $ 79,134 $ 95,914 121 % ________________ NM (not meaningful) — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero 41 values are considered not meaningful. (a) This adjustment represents the non-cash portion of operating lease revenue related to the Company’s Arena License Agreements with MSG Sports. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Operating income on a GAAP basis includes lease income of (i) $41,524 and $40,319 collected in cash for Fiscal Years 2023 and 2022, respectively, and (ii) a non-cash portion of $26,545 and $27,754 for Fiscal Years 2023 and 2022, respectively. Net loss attributable to nonredeemable noncontrolling interests For Fiscal Year 2023, the Company posted a net loss attributable to nonredeemable noncontrolling interests of $553 in comparison to a net loss attributable to nonredeemable noncontrolling interests of $2,864 for Fiscal Year 2022. These amounts represent the share of net loss of BCE that is not attributable to the Company, prior to the BCE Disposition on December 2, 2022. Comparison of Fiscal Year 2022 versus the Fiscal Year 2021 Analysis of our results of operations for Fiscal Year 2022, including a comparison of Fiscal Year 2022 to Fiscal Year 2021, is included in the Company’s Information Statement, dated April 3, 2023, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 4, 2023. Liquidity and Capital Resources Overview Sources of Liquidity Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under the National Properties Revolving Credit Facility (as defined below). Our principal uses of cash include working capital-related items (including funding our operations), capital spending, share repurchases, debt service, investments and related loans and advances to affiliates that we may fund from time to time. 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, 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. As of June 30, 2023, the Company’s unrestricted cash and cash equivalents balance was $76,089. The principal balance of the Company’s total debt outstanding as of June 30, 2023 was $659,279 and the Company had $74,518 of available borrowing capacity under its revolving credit facility. We believe we have sufficient liquidity from cash and cash equivalents available borrowing capacity under our credit facilities and cash flows from operations to fund our operations, and satisfy any obligations for the foreseeable future. See Note 12. Credit Facilities to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of the National Properties Facilities. On March 29, 2023, our Board authorized a share repurchase program to repurchase up to $250,000 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 or private transactions, block trades or such other manner as the Company may determine (including through repayment by Sphere Entertainment of the DDTL Facility (as defined below) with shares of the Company’s Class A common stock) in accordance with applicable insider trading and other securities laws and regulations. On June 27, 2023, the Company repurchased 840 shares of Class A Common Stock from the Sphere Entertainment for $25,000 in a private transaction, pursuant to a Stock Purchase Agreement, dated June 21, 2023, between the Company and the Sphere Entertainment. On April 20, 2023, a subsidiary of the Company, MSG Entertainment Holdings, LLC (“MSG Entertainment Holdings”), entered into a delayed draw term loan facility (the “DDTL Facility”) with Sphere Entertainment. Pursuant to the DDTL Facility, MSG Entertainment Holdings committed to lend up to $65,000 in delayed draw term loans to Sphere Entertainment on an unsecured basis until October 20, 2024. On July 14, 2023, Sphere Entertainment drew down on the full amount of $65,000 under the DDTL Facility. On August 9, 2023, Sphere Entertainment repaid the full principal amount of the DDTL Facility and accrued interest and commitment fees by delivering to MSG Entertainment Holdings 1,923 shares of MSG Entertainment Class A common stock. 42 Financing Agreements On June 30, 2022, MSG National Properties, MSG Entertainment Group, LLC and certain subsidiaries of MSG National Properties entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and letter of credit issuers party thereto (the “National Properties Credit Agreement”), providing for a five-year, $650,000 senior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Facilities”). In connection with the MSGE Distribution, the National Properties Credit Agreement was amended to replace MSG Entertainment Group, LLC with MSG Entertainment Holdings as the parent guarantor. As of June 30, 2023, outstanding letters of credit were $8,382 and the remaining balance available under the National Properties Revolving Credit Facility was $74,518. Borrowings under the current National Properties Facilities bear interest at a floating rate, which at the option of MSG National Properties may be either (a) a base rate plus an applicable margin ranging from 1.50% to 2.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties Base Rate”), or (b) Term SOFR plus an applicable margin ranging from 2.50% to 3.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties SOFR Rate”). The National Properties Credit Agreement requires MSG National Properties to pay a commitment fee ranging from 0.30% to 0.50% in respect of the daily unused commitments under the National Properties Revolving Credit Facility. MSG National Properties 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 National Properties Credit Agreement. The interest rate on the National Properties Facilities as of June 30, 2023 was 7.70%. Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans under the National Properties Facilities and terminate commitments under the National Properties Revolving Credit Facility, at any time, in whole or in part, subject only to customary breakage costs in the case of prepayment of Term SOFR loans. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments beginning with the fiscal quarter ended March 31, 2023, in an aggregate amount equal to 2.50% per annum (0.625% per quarter), stepping up to 5% per annum (1.25% per quarter) in the fiscal quarter ending September 30, 2025, with the balance due at the maturity of the facility on June 30, 2027. The National Properties Facilities will mature on June 30, 2027. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments beginning with the fiscal quarter ending March 31, 2023, in an aggregate amount equal to 2.50% per annum (0.625% per quarter), stepping up to 5.0% per annum (1.25% per quarter) in the fiscal quarter ending September 30, 2025, with the balance due at the maturity of the facility. The principal obligations under the National Properties Revolving Credit Facility are due at the maturity of the facility. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including 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), subject to certain exceptions. The National Properties Credit Agreement includes financial covenants requiring MSG National Properties and its restricted subsidiaries to maintain a specified minimum liquidity level, a specified minimum debt service coverage ratio and specified maximum total leverage ratio. The minimum liquidity level is set at $50,000, and is tested based on the level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter over the life of the National Properties Facilities. The debt service coverage ratio covenant began testing in the fiscal quarter ended December 31, 2022, and is set at a ratio of 2:1 before stepping up to 2.5:1 in the fiscal quarter ending September 30, 2024. The leverage ratio covenant began testing in the fiscal quarter ended June 30, 2023. It is tested based on the ratio of MSG National Properties and its restricted subsidiaries’ consolidated total indebtedness to adjusted operating income, with an initial maximum ratio of 6:1, stepping down to 5.5:1 in the fiscal quarter ending June 30, 2024 and 4.5:1 in the fiscal quarter ending June 30, 2026. As of June 30, 2023, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Credit Agreement. In addition to the financial covenants discussed above, the National Properties Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The National Properties Credit Agreement 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 Credit Agreement, 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; (viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions. 43 All obligations under the National Properties Facilities are guaranteed by MSG Entertainment Holdings and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden and certain other excluded subsidiaries (the “Subsidiary Guarantors”). All obligations under the National Properties Facilities, 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. See Note 12. Credit Facilities to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the National Properties Credit Agreement, such as the scheduled repayment requirement of $16,250 in Fiscal Year 2024 and $16,250 in Fiscal Year 2025. Letters of Credit The Company uses letters of credit to support its business operations. As of June 30, 2023, the Company had letters of credit outstanding for an aggregate of $8,382 issued under the National Properties Revolving Credit Facility. Cash Flow Discussion As of June 30, 2023, cash, cash equivalents and restricted cash totaled $84,355, as compared to $62,573 as of June 30, 2022. The following table summarizes the Company’s cash flow activities for Fiscal Years 2023 and 2022: Years Ended June 30, 2023 2022 Net cash provided by operating activities $ 135,694 $ 95,351 Net cash provided by investing activities 30,305 45,440 Net cash used in financing activities (144,217) (396,287) Net increase (decrease) in cash, cash equivalents and restricted cash $ 21,782 $ (255,496) Operating Activities Net ca sh provided by operating activities for Fiscal Year 2023 improved by $40,343 to $135,694 as compared to Fiscal Year 2022, primarily due to (i) the increase in net income and (ii) net changes in working capital assets and liabilities, which included an increase in accounts receivable and deferred revenue, a decrease in accounts payable, accrued and other current and non-current liabilities, a decrease in related party receivables, net of payables, and a decrease on operating lease right-of-use assets and lease liabilities, partially offset by higher non-cash add backs mainly for net unrealized gain on equity investments with readily determinable fair value and gains, net on dispositions recognized in Fiscal Year 2023. Investing Activities Net cash provided by investing activities for Fiscal Year 2023 declined by $15,135 to $30,305 as compared to Fiscal Year 2022 primarily due to (i) the absence of proceeds received from a related party loan receivable in the current year period, offset by (ii) proceeds received from the dispositions of BCE and the corporate aircraft. Financing Activities Net cash used in financing activities for Fiscal Year 2023 declined by $252,070 to $144,217 as compared to Fiscal Year 2022 primarily due to (i) lower net transfers to Sphere Entertainment and Sphere Entertainment’s subsidiaries in the current year period as compared to Fiscal Year 2022, (ii) the absence of debt extinguishment costs and deft financing fees in Fiscal Year 2023, offset by (iii) stock repurchases in Fiscal Year 2023. 44 Contractual Obligations As of June 30, 2023, the approximate future payments under our contractual obligations were as follows: Payments Due by Period (c) Total Year 1 Years 2-3 Years 4-5 More Than 5 Years Leases (a) $ 354,237 $ 38,324 39,426 45,715 $ 230,772 Debt repayments (b) 659,279 16,250 49,054 593,975 — Total future contractual obligation payments $ 1,013,516 $ 54,574 $ 88,480 $ 639,690 $ 230,772 _________________ (a) Includes contractually obligated minimum lease payments for operating leases having an initial noncancellable term in excess of one year for the Company’s venues, including various corporate offices. These commitments are presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 9. Leases to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for more information. (b) See Note 12. Credit Facilities to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding the principal repayments required under the National Properties Credit Agreement. (c) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 13. Pension Plans and Other Postretirement Benefit Plans to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for more information on the future funding requirements under our pension obligations. Off Balance Sheet Arrangements As of June 30, 2023, the Company had the following off balance sheet arrangements: Commitments June 30, 2024 June 30, 2025 June 30, 2026 June 30, 2027 June 30, 2028 Thereafter Total Contractual obligations $ 11,225 $ 12,588 $ 16,276 $ 39,207 $ 39,563 $ 799,225 $ 918,084 Letters of credit 8,382 — — — — — 8,382 Total commitments $ 19,607 $ 12,588 $ 16,276 $ 39,207 $ 39,563 $ 799,225 $ 926,466 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 Company 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 disproportionately lower. Recently Issued Accounting Pronouncements and Critical Accounting Estimates Recently Issued Accounting Pronouncements See Note 2. Summary of Significant Accounting Policies to the consolidated and combined financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements. Critical Accounting Estimates Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. In addition to the critical accounting estimates disclosed below, see Note 17. Related Party Transactions to the consolidated and combined financial statements 45 included elsewhere in this Annual Report on Form 10-K for further details on corporate allocations recorded in the consolidated and combined financial statements. The preparation of the Company’s consolidated and combined financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Management believes its use of estimates in the consolidated and combined financial statements to be reasonable. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition – Arrangements with Multiple Performance Obligations The Company enters into arrangements with multiple performance obligations, such as multi-year sponsorship agreements which may derive revenues for both the Company as well as MSG Sports within a single arrangement. The Company also derives revenue from similar types of arrangements which are entered into by MSG Sports. Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term. The performance obligations included in each sponsorship agreement vary and may include advertising and other benefits such as, but not limited to, signage at The Garden and the Company’s other venues, digital advertising, and event or property specific advertising, as well as non-advertising benefits such as suite licenses and event tickets. To the extent the Company’s multi-year arrangements provide for performance obligations that are consistent over the multi-year contractual term, such performance obligations generally meet the definition of a series as provided for under the accounting guidance. If performance obligations are concluded to meet the definition of a series, the contractual fees for all years during the contract term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied. The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company’s satisfaction of its respective performance obligation. The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated relative standalone selling price of the performance obligation. The Company’s process for determining its estimated standalone selling prices involves management’s judgment and considers multiple factors including company specific and market specific factors that may vary depending upon the unique facts and circumstances related to each performance obligation. Key factors considered by the Company in developing an estimated standalone selling price for its performance obligations include, but are not limited to, prices charged for similar performance obligations, the Company’s ongoing pricing strategy and policies, and consideration of pricing of similar performance obligations sold in other arrangements with multiple performance obligations. The Company incurs costs such as commissions to obtain its multi-year sponsorship agreements. The Company assesses such costs for capitalization on a contract by contract basis. To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated customer life depending on the facts and circumstances surrounding the contract. The contract asset is amortized over the estimated useful life.