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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-05-18 · 199 added, 240 removed, 150 unchanged (75% of the section changed)

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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,” or the “Company”).

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.

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• 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 (“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 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, and our ability to attract such events;

• the on-ice and on-court performance of the professional sports teams whose games we host in our venues;

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• the demand for sponsorship and suite arrangements;

• competition, for example, from other venues and sports and entertainment options, including new competing venues;

• our ability to effectively manage any impacts of the COVID-19 pandemic (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 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 );

• the extent to which attendance at our venues may be impacted by government actions, continuing 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;

• 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 as a result of a pandemic or other public health emergency due to operational challenges and other health and safety concerns (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 (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 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;

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• 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;

• enhancements or changes to existing productions and the investments associated with such 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;

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• our internal control environment and our ability to identify and remedy 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 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;

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• 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 (as defined below) and our ability to obtain additional financing, to the extent required;

• 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.

(“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 Spinco Distribution (as defined below);

• our ability to achieve the intended benefits of the MSGE Spinco Distribution;

• failure of the Company or Sphere Entertainment (as defined below) to satisfy its obligations under transition services agreements, the DDTL Facility (as defined herein) or other agreements entered into in connection with the MSGE Spinco Distribution;

(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;

• lack of operating history as a stand-alone public company and costs associated with being an independent public company;

• our status as an emerging growth company;

• the additional factors described under “Risk Factors” in the Company’s Information Statement, dated April 3, 2023 (the “Information Statement”), filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 4, 2023.

• the additional factors described under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023 filed on August 18, 2023 (the “2023 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.

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 document may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.

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 audited combined financial statements and notes thereto as of June 30, 2022 and 2021 and for the three years ended June 30, 2022, 2021 and 2020 (“Audited Combined Annual Financial Statements”) included in the Information Statement, to help provide an understanding of our financial condition, changes in financial condition and results of operations .

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 audited consolidated and combined financial statements and notes thereto as of June 30, 2023 and 2022 and for the three years ended June 30, 2023, 2022 and 2021 (“Audited Consolidated and Combined Annual Financial Statements”) included in the 2023 Form 10-K, to help provide an understanding of our financial condition, changes in financial condition and results of operations .

Business Overview

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The Garden, The Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre.

The Company’s business 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’s business also includes the original production, the Christmas Spectacular.

The Company also has an 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.

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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.

Spin-off Transaction

On April 20, 2023 (the “MSGE Spinco Distribution Date”), Sphere Entertainment Co., formerly Madison Square Garden Entertainment Corp.

(“Sphere Entertainment”), distributed approximately 67% of the outstanding common stock of MSG Entertainment, to its stockholders (the “MSGE Spinco Distribution”), with Sphere Entertainment retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of Class A common stock) (the “MSGE Retained Interest”) immediately following the MSGE Spinco Distribution.

The Company owns the traditional live entertainment business previously owned and operated by Sphere Entertainment through its Entertainment business segment, excluding Sphere, which was retained by Sphere Entertainment after the MSGE Spinco Distribution Date.

In the MSGE Spinco 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.

MSG Entertainment Distribution

On April 20, 2023 (the “MSGE Distribution Date”), Sphere Entertainment distributed approximately 67% of the outstanding common stock of the Company to its stockholders (the “MSGE Distribution”), with Sphere Entertainment retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of Class A common stock, “Class A Common Stock”) immediately following the MSGE Distribution (the “Retained Interest”).

As a result, the Company became an independent publicly traded company on April 21, 2023 through the MSGE Distribution.

Following the completion of the secondary offering by Sphere Entertainment of the Company’s Class A Common Stock on September 22, 2023, Sphere Entertainment no longer owns any of the Company’s outstanding common stock.

See Note 1 to the Company’s Audited Consolidated and Combined Annual Financial Statements for more information regarding the MSGE Distribution.

Our MD&A is organized as follows:

Results of Operations.

This section provides an analysis of our unaudited results of operations for the three and nine months ended March 31, 2023 and 2022.

This section provides an analysis of our unaudited results of operations for the three months ended September 30, 2023 and 2022.

Liquidity and Capital Resources.

This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the nine months ended March 31, 2023 and 2022, as well as certain contractual obligations and off-balance sheet arrangements.

This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the three months ended September 30, 2023 and 2022, as well as certain contractual obligations and off-balance sheet arrangements.

Seasonality of Our Business.

This section discusses the seasonal performance of our business.

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 2023.

This section should be read together with our critical accounting policies, which are discussed in the Information Statement under “Management'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 condensed combined financial statements (“financial statements”) of the Company included therein.

Recently Issued Accounting Pronouncements and Critical Accounting Estimates.

This section discusses accounting pronouncements that have been adopted by the Company and recently issued accounting pronouncements not yet adopted by the Company.

This section should be read together with our critical accounting policies, which are discussed in the 2023 Form 10-K under “Management's Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Estimates — Critical Accounting Estimates” and in the notes to the Audited Consolidated and Combined Financial Statements of the Company included therein.

Factors Affecting Results of Operations

The Company’s combined statements of operations for the three and nine months ended March 31, 2023 and 2022 were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Sphere Entertainment, and are presented as carve-out financial statements, because the Company was not a standalone public company prior to the MSGE Spinco Distribution.

See Note 1 to the combined financial statements included in “Part I — Item 1.

The consolidated statement of operations for the three months ended September 30, 2023 is presented on a consolidated basis, as the Company became a standalone public company on April 21, 2023.

The Company’s combined statement of operations for the three months ended September 30, 2022 was prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Sphere Entertainment, and is presented as a carve-out financial statement, because the Company was not a standalone public company prior to the MSGE Distribution.

See Note 1 to the consolidated and combined financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for additional information.

The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during the three and nine months ended March 31, 2023, as compared to the prior year period, which was impacted by fewer ticketed events at our venues in the first half of the fiscal year 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 fiscal second and third quarters of the fiscal year as a result of an increase in COVID-19 cases.

Impact of the COVID-19 Pandemic, to the Audited Combined Annual Financial Statements for more information regarding the impact of the COVID-19 pandemic on our business.

It is unclear to what extent COVID-19 concerns, including new variants, could result in new government- or league-mandated capacity, other restrictions, vaccination/mask requirements, or impact the use of and/or demand for our venues, demand for 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.

Our operating results 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 .

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.

In addition, Fiscal Year 2024 will be impacted by increased rent expenses relative to Fiscal Year 2023 due to our new corporate office lease, which runs through 2046.

Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers.

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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 condensed combined statement of operations for the three months ended September 30, 2022 includes 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 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.

Description of Business and Basis of Presentation to the condensed consolidated and combined financial statements included elsewhere in this document for additional information.

The costs to operate our business as an independent, publicly-traded company, including pursuant to terms of the transition services agreement, are expected to vary from those historical allocations.

Such costs principally relate to areas that include, but are not limited to:

• corporate personnel overhead expenses as a result of the Company operating on a stand-alone basis;

• professional fees associated with internal and external audits including compliance with Sarbanes-Oxley Act, tax, legal and other services;

• anticipated executive compensation costs related to existing and new executive management and excluding future share-based compensation expense;

• fees for preparing and distributing periodic filings with the SEC.

These costs will not be fully reflected in a complete year of the Company’s financial statements until the year ending June 30, 2024, because, for periods prior to April 20, 2023, the Company’s financial statements were presented on a carve-out basis.

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”), pursuant to which the Company had the exclusive right and obligation to sell MSG Networks advertising availabilities for a commission.

The Networks Advertising Sales Representation Agreement was terminated effective as of December 31, 2022.

As a result, after December 31, 2022, the Company no longer recognizes advertising sales commission revenue or the employee costs related to the Networks Advertising Sales Representation Agreement.

For the three months ended September 30, 2022, the Company recognized $378 of revenues under the Networks Advertising Sales Representation Agreement.

The termination of the Networks Advertising Sales Representation Agreement 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.

Results of Operations

Comparison of the three and nine months ended March 31, 2023 versus the three and nine months ended March 31, 2022

Comparison of the three months ended September 30, 2023 versus the three months ended September 30, 2022.

Three Months Ended

March 31, Change

September 30, Change

2023 2022 Amount Percentage

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Selling, general, and administrative expenses

(48,822) (40,114) (8,708) 22 %

Depreciation and amortization (13,585) (15,985) 2,400 (15) %

Loss, net on dispositions (51) — (51) NM

Restructuring charges (2,461) (5,171) 2,710 (52) %

Operating income 24,664 15,821 8,843 56 %

Restructuring charges (11,553) — (11,553) NM

Operating loss

(33,425) (11,309) (22,116) (196) %

Interest income 851 1,510 (659) (44) %

Interest expense (14,287) (11,427) (2,860) 25 %

Other income (expense), net 8,070 (8,495) 16,565 NM

Income (loss) from operations before income taxes 21,793 (4,142) 25,935 NM

Income tax expense (73) — (73) NM

Net income (loss) 21,720 (4,142) 25,862 NM

Other (expense) income, net

(4,469) 886 (5,355) NM

Loss from operations before income taxes

(51,330) (20,340) (30,990) (152) %

Income tax benefit

659 2,066 (1,407) NM

(50,671) (18,274) (32,397) (177) %

Net loss attributable to nonredeemable noncontrolling interest — (372) 372 NM

Net income (loss) attributable to MSG Entertainment’s stockholders $ 21,720 $ (3,930) $ 25,650 NM

Nine Months Ended

March 31, Change

2023 2022 Amount Percentage

Revenues $ 703,561 $ 475,150 $ 228,411 48 %

Direct operating expenses (397,398) (292,198) (105,200) 36 %

Selling, general and administrative expenses (127,537) (128,725) 1,188 (1) %

Depreciation and amortization (46,369) (49,166) 2,797 (6) %

Gains, net on dispositions 4,361 — 4,361 NM

Restructuring charges (9,820) (5,171) (4,649) 90 %

Operating income (loss) 126,798 (110) 126,908 NM

Interest income 5,804 5,145 659 13 %

Interest expense (38,055) (39,804) 1,749 (4) %

Other income (expense), net 6,784 (27,742) 34,526 (124) %

Income (loss) from operations before income taxes 101,331 (62,511) 163,842 NM

Income tax expense (804) — (804) NM

Net income (loss) 100,527 (62,511) 163,038 NM

Net loss attributable to nonredeemable noncontrolling interest (553) (579) 26 (4) %

Net income (loss) attributable to MSG Entertainment’s stockholders $ 101,080 $ (61,932) $ 163,012 NM

Net loss attributable to MSG Entertainment’s stockholders

$ (50,671) $ (17,902) $ (32,769) (183) %

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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.

Revenues for the three and nine months ended March 31, 2023 increased $7,241 and $228,411, respectively, as compared to the prior year periods.

Revenues for the three months ended September 30, 2023 decreased $4,240 as compared to the prior year period.

The changes in revenues were attributable to the following:

Three Months Ended Nine Months Ended

March 31, 2023 March 31, 2023

Three Months Ended

September 30,

Decrease in event-related revenues

Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements 2,716

Increase in revenues from the presentation of the Christmas Spectacular

Increase in venue-related sponsorship, signage and

suite license fee revenues 1,872 18,958

Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements 1,547 5,515

(Decrease) increase in event-related revenues

Decrease in agency commission due to termination of Network Ad Sales agreement (9,621) (8,213)

Other net increases 1,314

$ 7,241 $ 228,411

For the three months ended March 31, 2023, the increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher food, beverage and merchandise sales, suite license fee revenues and single event suite sales at Knicks and Rangers games.

For the nine months ended March 31, 2023, the increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher food, beverage and merchandise sales and higher suite license fees revenues at Knicks and Rangers games and higher suite license fee revenues 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 (due to the COVID-19 pandemic).

The Company had 181 Christmas Spectacular performances during this year’s holiday season, of which seven took place in the third quarter of Fiscal Year 2023, as compared to 101 performances in the prior year’s holiday season (due to the partial cancellation of the 2021 production as a result of an increase in COVID-19 cases), all of which took place in the second quarter of Fiscal Year 2022.

For this year’s holiday 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.

For the three months ended March 31, 2023, the increase in revenues from the presentation of the Christmas Spectacular production was due to the seven performances that took place in the current year period as compared to no performances in the third quarter of Fiscal Year 2022.

For the nine months ended March 31, 2023, the increase in revenues from the presentation of the Christmas Spectacular production was primarily due to higher ticket-related revenues.

This reflected the increase in the number of performances as compared to the prior year period described above, and, to a lesser extent, higher per-show paid attendance.

For the three months ended March 31, 2023, the increase in venue-related sponsorship, signage and suite license fee revenues was primarily due to higher suite sales.

For the nine months ended March 31, 2023, 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.

For the three months ended March 31, 2023, the decrease in event-related revenues primarily reflects lower revenues from concerts of $10,656, which was partially offset by an increase in revenues from other sporting and live entertainment events (excluding the Knicks and Rangers) of $10,129.

The decrease in revenues from concerts was due to a decrease in the number of concerts at the Company’s venues as compared to the prior year period, partially offset by higher per-concert revenues.

The increase in revenues from other sporting and live entertainment events (excluding the Knicks and Rangers) was due to higher per-event revenue and a higher number of events at the Company’s venues as compared to the prior year period.

For the nine months ended March 31, 2023, the increase in event-related revenues primarily reflects higher revenues from concerts of $77,416, which 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 (due to the COVID-19 pandemic).

See “— Introduction —Factors Affecting Results of Operations” for more information .

For the three months ended September 30, 2023, the decrease in event-related revenues primarily reflects (i) lower revenues from concerts of $7,317 and (ii) lower revenues from other live entertainment and sporting events of $953.

The decrease in event-related revenues from concerts was due to a decrease in the number of events at the Company’s venues as compared to the prior year period, partially offset by higher per-concert revenues in the current year period.

For the three months ended September 30, 2023, 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.

Direct operating expenses

Direct operating expenses for the three and nine months ended March 31, 2023 increased $5,171 and $105,200, respectively, as compared to the prior year periods.

Direct operating expenses for the three months ended September 30, 2023 increased $15 as compared to the prior year period.

The changes in direct operating expenses were attributable to the following:

Three Months Ended Nine Months Ended

March 31, 2023 March 31, 2023

Three Months Ended

September 30,

Increase in expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements $ 2,380

Increase in direct operating expenses associated with the Arena License Agreements 507

Increase in direct operating expenses associated with the Christmas Spectacular

(Decrease) increase in event-related direct operating expenses (4,515) 43,129

(Decrease) increase in venue operating costs (570) 6,057

Other net (decreases) increases (306) 2,172

$ 5,171 $ 105,200

For the three and nine months ended March 31, 2023, 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 fees and, to a lesser extent, the increase in Knicks’ and Rangers’ food and beverage sales.

For the three and nine months ended March 31, 2023, the increase in expenses associated with the Arena License Agreements primarily reflects an increase in food and beverage costs associated with the increase in Knicks’ and Rangers’ food and beverage sales.

For the three and nine months ended March 31, 2023, the increase in direct operating expenses associated with the Christmas Spectacular production was primarily due to the increase in the number of performances as compared to the prior year periods.

For the three months ended March 31, 2023, the decrease in event-related direct operating expenses reflects lower direct operating expenses from concerts of $6,785, which was primarily due to the decrease in the number of concerts held at the Company’s venues as compared to the prior year period, partially offset by higher direct operating expenses from other sporting and live entertainment events (excluding the Knicks and Rangers) of $2,269, which was primarily due to the increase in the number of sporting events held at the Company’s venues as compared to the prior year period.

For the nine months ended March 31, 2023, the increase in event-related direct operating expenses reflects higher direct operating expenses from concerts

of $39,637, which was primarily due to the increase in the number of events held at the Company’s venues as compared to the prior year period.

Decrease in event-related direct operating expenses

Other net increases

For the three months ended September 30, 2023, the increase in direct operating expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects direct operating expenses incurred as a result of the increase in suite license fee revenues.

For the three months ended September 30, 2023, the decrease in event-related direct operating expenses reflects (i) lower direct operating expenses from concerts of $4,219, and (ii) lower direct operating expenses from other live entertainment and sporting events of $518.

The decrease in event-related direct operating expenses from concerts was due to a decrease in the number of events at the Company’s venues as compared to the prior year period, partially offset by higher per-concert expenses in the current year period.

Selling, general, and administrative expenses

For the three months ended March 31, 2023 selling, general and administrative expenses decreased $2,905 to $44,122 as compared to the prior year period, and for the nine months ended March 31, 2023, selling, general and administrative expenses decreased $1,188 to $127,537 as compared to the prior year period.

The decrease is primarily due to lower employee compensation and related benefits, partially offset by other net increases.

(Loss) gains, net on dispositions

(Loss) gains, net on dispositions for the three months ended March 31, 2023, was a loss of $51 as compared to zero in the prior year period.

(Loss) gains, net on dispositions for the nine months ended March 31, 2023 was a gain of $4,361 as compared to zero in the prior year period.

The (loss) gains for the nine months ended March 31, 2023 were due to the gain on sale of the Company’s controlling interest in Boston Calling Events, LLC (“BCE Disposition”) , partially offset by the net loss on the disposal of a corporate aircraft.

For the three months ended September 30, 2023 selling, general, and administrative expenses increased $8,708 to $48,822 as compared to the prior year period.

Results for the Fiscal 2024 first quarter reflect MSG Entertainment on a fully standalone basis.

Results for the Fiscal 2023 first quarter reflect the allocation of corporate and administrative costs based on the accounting requirements for the preparation of carve-out financial 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 the prior year period.

This was the primary driver of the overall increase in selling, general and administrative expenses, partially offset by the impact of the Company’s transition services agreement with Sphere Entertainment.

Depreciation and amortization

For the three months ended September 30, 2023, depreciation and amortization decreased $2,400, or 15%, to $13,585 as compared to the prior year period 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 the three months ended March 31, 2023 decreased $2,710 to $2,461 as compared to the prior year period.

For the nine months ended March 31, 2023 restructuring charges increased $4,649 to $9,820 as compared to the prior year period.

The restructuring charges relate to 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 (loss)

For the three months ended March 31, 2023, operating income was $24,664 as compared to $15,821 in the prior year period, an increase of $8,843.

The increase in operating income was primarily due to an increase in revenues, a decrease in selling, general and administrative expenses, and lower restructuring charges as compared to the prior year period, partially offset by higher direct operating expenses as discussed above.

For the nine months ended March 31, 2023, operating income was $126,798 as compared to a $110 operating loss in the prior year period, an improvement of $126,908.

The improvement in operating income was primarily due to an increase in revenues, partially offset by higher direct operating expenses as discussed above.

For the three months ended September 30, 2023, the Company recorded restructuring charges of $11,553 r elated to termination benefits for certain corporate executives and employees.

No amounts were recorded as restructuring charges during the comparative prior year period.

Operating loss

For the three months ended September 30, 2023, operating loss was $33,425 as compared to $11,309 in the prior year period, an increase of $22,116.

The increase in operating loss was primarily due to restructuring charges, an increase in selling, general, and administrative expenses, and a decrease in revenues as compared to the prior year period.

Interest income

For the three and nine months ended March 31, 2023, interest income increased $941 and $659, respectively, as compared to the prior year periods primarily due to higher interest rates, partially offset by the absence of the interest income in the current year from the subordinated credit agreement the Company entered into with TAO Group Sub-Holdings, LLC, a wholly-owned subsidiary of Sphere Entertainment, which was fully repaid on June 9, 2022.

Interest expense

For the three months ended March 31, 2023, interest expense increased $414, as compared to the prior year period primarily due to increase in interest rates, partially offset by decrease in amortization of deferred financing costs following the extinguishment of MSG National Properties prior term loan facility in June 2022 and the absence of notes payable to BCE following the BCE Disposition.

For the nine months ended March 31, 2023, interest expense decreased $1,749, as a result of decrease in amortization of deferred financing costs following the extinguishment of 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 increase in interest rate.

Other income (expense), net

For the three and nine months ended March 31, 2023, other income, net, increased $16,565 and $34,526, as compared to the prior year period primarily due to unrealized gains as compared to unrealized losses in the prior year periods associated with the Company’s investments in DraftKings Inc.

For the three months ended September 30, 2023, interest income decreased $659, as compared to the prior year period primarily due to the impact of the MSGE Distribution, which impacted the year over year comparability since the prior year period included carve-out allocation costs and due to lower average balances in the Company’s cash, cash equivalents and restricted cash, partially offset by higher interest rates.

Interest expens e

For the three months ended September 30, 2023, interest expense increased $2,860, as compared to the prior year period primarily due to higher interest expense incurred under the National Properties Credit Facilities.

Other (expense) income, net

For the three months ended September 30, 2023, other expense, net was $4,469 as compared to other income, net of $886 for the three months ended September 30, 2022, a decline of $5,355.

The change was primarily due to (i) an increase in unrealized loss of $2,466 associated with the investment in Townsquare Media, Inc., (ii) lower gains of $2,265 associated with the investment in DraftKings Inc., and (iii) higher net periodic benefit costs of $1,026 associated with the Cash Balance Pension Plan.

Income tax expense

Income tax expense for the three and nine months ended March 31, 2023 of $73 and $804, respectively reflects an effective income tax of 0% and 1%, respectively, due to an equal and offsetting tax impact of a valuation allowance.

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.

Income tax benefit for the three months ended September 30, 2023 and 2022 of $659 and $2,066, respectively reflects an effective tax rate of 1% and 10%, respectively.

The estimated annual effective tax rate is lower than the statutory federal tax rate of 21% primarily due to the offset of the valuation allowance.

The estimated annual effective tax rate is revised on a quarterly basis.

Adjusted operating income (“AOI”)

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(iv) restructuring charges or credits,

(v) merger and acquisition-related costs, including litigation expenses,

(v) merger, spin-off, and acquisition-related costs, including merger-related litigation expenses,

(vi) gains or losses on sales or dispositions of businesses and associated settlements,

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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.

The Company eliminates merger, spin-off, 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 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 executive deferred compensation plan are recognized in Operating (income) loss whereas gains and losses related to the remeasurement of the assets under the 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 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 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.

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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 (loss) to adjusted operating income for the three and nine months ended March 31, 2023 as compared to the prior year period:

The following is a reconciliation of operating loss to adjusted operating income (loss) for the three months ended September 30, 2023 as compared to the prior year period:

Three Months Ended

March 31, Change

September 30, Change

2023 2022 Amount Percentage

Operating income $ 24,664 $ 15,821 $ 8,843 56 %

Operating loss $ (33,425) $ (11,309) $ (22,116) (196) %

Non-cash portion of arena license fees from MSG Sports (a)

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Depreciation and amortization 13,585 15,985 (2,400) (15) %

Share-based compensation 8,014 8,789 (775) (9) %

Restructuring charges 2,461 5,171 (2,710) (52) %

Loss, net on dispositions 51 — 51 NM

Amortization for capitalized cloud computing arrangement costs 65 12 53 NM

Remeasurement of deferred compensation plan liabilities 126 — 126 NM

Adjusted operating income $ 38,030 $ 33,727 $ 4,303 13 %

Nine Months Ended

March 31, Change

2023 2022 Amount Percentage

Operating income (loss) $ 126,798 $ (110) $ 126,908 NM

Non-cash portion of arena license fees from MSG Sports (a)

Share-based compensation (excluding share-based compensation in restructuring charges)

6,177 7,410 (1,233) (17) %

Depreciation and amortization 46,369 49,166 (2,797) (6) %

Share-based compensation 21,980 29,868 (7,888) (26) %

Restructuring charges 9,820 5,171 4,649 90 %

Gains, net of dispositions (4,361) — (4,361) NM

Amortization for capitalized cloud computing arrangement costs 169 12 157 NM

Restructuring charges 11,553 — 11,553 NM

Merger, spin-off , and acquisition-related costs (b)

2,035 — 2,035 NM

Amortization for capitalized cloud computing arrangement costs — 75 (75) (100) %

Remeasurement of deferred compensation plan liabilities (145) (154) 9 NM

Adjusted operating income $ 175,829 $ 60,145 $ 115,684 192 %

Adjusted operating (loss) income

$ (715) $ 11,488 $ (12,203) NM

_________________

NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero 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.

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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) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836 of revenue collected in cash for the three and nine months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962 for the three and nine months ended March 31, 2022, respectively.

Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests

For the three and nine months ended March 31, 2023, the Company recorded $0 and $553 of net loss attributable to nonredeemable noncontrolling interests as compared to $212 and $579 of net loss attributable to nonredeemable noncontrolling interests for the three and nine months ended March 31, 2022.

These amounts represent the share of net loss of BCE that is not attributable to the Company.

Operating income on a GAAP basis includes lease income of (i) $829 of revenue collected in cash for the three months ended September 30, 2023, and $805 of revenue collected in cash for the three months ended September 30, 2022, and (ii) a non-cash portion of $495 for the three months ended September 30, 2023, and $519 for the three months ended September 30, 2022.

(b) This adjustment represents non-recurring costs incurred and paid by the Company for the sale of the Retained Interest by Sphere Entertainment.

NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful .

Net loss attributable to nonredeemable noncontrolling interests

For the three months ended September 30, 2023, the Company recorded $0 of net loss attributable to nonredeemable noncontrolling interests as compared to $372 of net loss attributable to nonredeemable noncontrolling interests for the three months ended September 30, 2022.

These amounts represent the share of net loss of BCE that were not attributable to the Company.

The Company disposed of its controlling interest in BCE on December 2, 2022.

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Sources and Uses of Liquidity

As further described in “Item 2.

- Management’s Discussion and Analysis - Introduction,” on April 20, 2023, the Company completed the MSGE Spinco Distribution.

Although the information set forth in this Quarterly Report on Form 10-Q generally is as of March 31, 2023 and does not give effect to the MSGE Spinco Distribution, the information set forth in this section also focuses on the liquidity and capital resources of the Company following the MSGE Spinco Distribution.

Our primary sources of liquidity are cash and cash equivalents, cash flows from our business operations 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, debt service, investments and related loans and advances that we may fund from time to time.

In addition, prior to October 20, 2024, we may be required to advance up to $65,000 to Sphere Entertainment under the delayed draw term loan facility entered into on April 20, 2023 (the “DDTL Facility”).

We may also use cash to repurchase our common stock.

We may also use cash to continue to repurchase shares of our Class Common A Stock pursuant to the share repurchase program authorized by our Board of Directors on March 29, 2023, of which there was $110,000 remaining as of September 30, 2023.

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.

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and global economic and market conditions could adversely impact our ability to do so at that time.

As of March 31, 2023, the Company’s unrestricted cash and cash equivalents balance was $122,731.

The principal balance of the Company’s total debt outstanding as of March 31, 2023 was $673,205 and the Company had $64,908 of available borrowing capacity under its revolving credit facility.

We regularly monitor and assess our ability to meet our net funding and investing requirements.

As of September 30, 2023, the Company’s unrestricted cash and cash equivalents balance was $37,179.

The principal balance of the Company’s total debt outstanding as of September 30, 2023 was $732,405 and the Company had $44,254 of available borrowing capacity under its revolving credit facility.

The principal balance of the Company’s total debt outstanding was reduced to $728,343 on October 2, 2023, upon completion of the required quarterly principal payment under the Company’s National Properties Term Loan Facility (as defined below).

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.

On March 29, 2023, the Company’s Board of Directors 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 with shares of the Company’s Class A Common Stock) 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.

In October 2023, the Company repaid $35,000 under the National Properties Revolving Credit Facility, as further discussed below.

Financing Agreements

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National Properties Facilities

On June 30, 2022, MSG National Properties, LLC (“MSG National Properties”), Sphere Entertainment Group, LLC (formerly known as MSG Entertainment Group, LLC, “Sphere Entertainment Group”) 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 L/C issuers party thereto (the “National Properties Credit Agreement”), providing for a five-year, $650,000 senior secured term loan facility (as amended, 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”).

MSG National Properties, LLC (“MSG National Properties”), MSG Entertainment Holdings, LLC (“MSG Entertainment Holdings”) and certain subsidiaries of MSG National Properties are party to a credit agreement dated June 30, 2022 with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto (as amended, 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”).

On September 15, 2023, the National Properties Credit Agreement was amended to, among other things, increase the National Properties Revolving Credit Facility by $50,000 to $150,000.

Up to $25,000 of the National Properties Revolving Credit Facility is available for the issuance of letters of credit.

As of March 31, 2023 outstanding letters of credit were $7,992 and the remaining balance available under the National Properties Revolving Credit Facility was $64,908 .

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”).

As of September 30, 2023 outstanding letters of credit were $15,646 and the remaining balance available under the National Properties Revolving Credit Facility was $44,254 .

In October 2023, the Company made a principal repayment of $35,000 under the National Properties Revolving Credit Facility.

Interest Rates.

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) adjusted Term SOFR (i.e., Term SOFR plus 0.10%) 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”).

As of September 30, 2023, the additional rate used in calculating the floating rate was (i) 2.50% per annum for borrowings bearing the National Properties Base Rate, and (ii) 5.42% per annum for borrowings bearing 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 March 31, 2023 was 7.41%.

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 ending 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 interest rate on the National Properties Facilities as of September 30, 2023 was 7.92%.

Principal Repayments.

Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans under the National Properties Facilities or 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 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 ended 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.

On October 2, 2023, MSG National Properties made principal repayments of $4,062 under the National Properties Term Loan Facility.

The principal obligations under the National Properties Revolving Credit Facility are due at the maturity of the facil ity.

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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 ending 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 begins testing in the fiscal quarter ending June 30, 2023.

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 March 31, 2023, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Credit Agreement.

As of September 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.

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and (x) make certain dispositions.

As of March 31, 2023, all obligations under the National Properties Facilities were guaranteed by Sphere Entertainment Group 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”).

In connection with the MSGE Spinco Distribution, on April 18, 2023, the National Properties Credit Agreement was amended to change the parent guarantor from Sphere Entertainment Group to MSG Entertainment Holdings, LLC, a subsidiary of the Company and the direct parent of MSG National Properties.

Guarantors and Collateral.

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.

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Contractual Obligations

During the nine months ended March 31, 2023, the Company’s off-balance sheet commitments increased by a total of $6,478 of contractual obligations offset by an immaterial decrease in marketing partnerships agreement-related commitments.

The increase in contractual obligations primarily relates to future performances at The Garden.

During the three months ended September 30, 2023, the Company did not have any material changes in its non-cancelable contractual obligations (other than activities in the ordinary course of business).

Commitments and Contingencies, to the 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.

Financial Statements” of this Quarterly Report on Form 10-Q for further details on the Company’s contractual obligations.

Cash Flow Discussion

As of March 31, 2023, cash, cash equivalents and restricted cash totaled $122,981, as compared to $62,573 as of June 30, 2022.

The following table summarizes the Company’s cash flow activities for the nine months ended March 31, 2023 and 2022:

Nine Months Ended

Net cash provided by operating activities $ 132,341 $ 60,338

Net cash provided by (used in) investing activities 13,261 (13,060)

Net cash used in financing activities (85,194) (150,035)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 60,408 $ (102,757)

As of September 30, 2023, cash, cash equivalents and restricted cash totaled $39,516, as compared to $84,355 as of June 30, 2023.

The following table summarizes the Company’s cash flow activities for the three months ended September 30, 2023 and 2022:

Three Months Ended

September 30,

Net cash provided by (used in) operating activities

$ 1,378 $ (57,326)

Net cash used in investing activities

(55,490) (1,036)

Net cash provided by financing activities

9,273 102,096

Net (decrease) increase in cash, cash equivalents and restricted cash

$ (44,839) $ 43,734

Operating Activities

Net cash provided by operating activities for the nine months ended March 31, 2023 improved by $72,003 to $132,341 as compared to the prior year period, primarily due to the increase in net income, partially offset by (i) changes in working capital assets and liabilities, which included 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, (ii) a decrease in net unrealized loss on equity investments with readily determinable fair value, (iii) lower share-based compensation expense, and (iv) gains, net on dispositions recognized in the current year period.

Net cash provided by operating activities for the three months ended September 30, 2023 improved by $58,704 to $1,378 as compared to the prior year period, primarily due to (i) increase in related parties receivables and payables net, and (ii) increase in deferred revenue, partially offset by (i) increase in accounts receivable, net, and (ii) a decrease in accounts payable, accrued and other current and non-current liabilities.

Investing Activities

Net cash provided by investing activities for the nine months ended March 31, 2023 improved by $26,321 to $13,261 as compared to the prior year period (i) proceeds received from the dispositions of BCE and the corporate aircraft and (ii) proceeds received from the sale of investments, partially offset by the absence of proceeds received from a related party loan receivable in the current year period.

Net cash used in investing activities for the three months ended September 30, 2023 increased by $54,454 to $55,490 as compared to the prior year period primarily due to a loan to a related party under the DDTL facility, partially offset by additional proceeds received from the sale of investments in the current year period as compared to the prior year period.

Financing Activities

Net cash used in financing activities from continuing operations for the nine months ended March 31, 2023 decreased by $64,841 to $(85,194) as compared to the prior year period primarily due to lower net transfers to Sphere Entertainment and Sphere Entertainment’s subsidiaries in the current year period as compared to the prior year period.

Net cash provided by financing activities for the three months ended September 30, 2023 decreased by $92,823 to $9,273 as compared to the prior year period primarily due to (i) a decrease in net transfers from Sphere Entertainment and Sphere Entertainment’s subsidiaries under carve-out accounting principles, (ii) increase in stock repurchases, and (iii) increase in taxes paid in lieu of shares for equity based compensation in the current period, partially offset by proceeds received from revolving credit facility in the current period.

Seasonality of Our Business

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Critical Accounting Estimates

There have been no material changes to the Company’s critical accounting policies.

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 2023.

Impairment of Goodwill 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 March 31, 2023, the Company had one operating and reportable segment, consistent with the way management makes decisions and allocates resources to the business.

For purposes of evaluating goodwill for impairment, the Company has one reporting unit.

The goodwill balance reported on the Company’s condensed combined balance sheet as of March 31, 2023 was $69,041.

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 estimate of the fair value of the Company’s reporting unit is 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 its reporting unit for the Fiscal Year 2023 annual impairment test.

These assessments considered factors such as:

• macroeconomic conditions;

• industry and market considerations;

• cost factors;

• overall financial performance of the reporting units;

• other relevant company-specific factors such as changes in management, strategy or customers;

• relevant reporting unit specific events such as changes in the carrying amount of net assets.

During the first quarter of Fiscal Year 2023, the Company performed its most recent annual impairment test of goodwill and determined that there was no impairment of goodwill identified for its reporting unit as of the impairment test date.

Based on this impairment test, the Company’s reporting unit had sufficient safety margins, representing the excess of the estimated fair value of the reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill).

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.

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 condensed combined balance sheet as of March 31, 2023:

March 31, 2023

Trademarks $ 61,881

Photographic related rights 1,920

Total indefinite-lived intangibles $ 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;

• macroeconomic conditions.

During the first quarter of Fiscal Year 2023, the Company performed its most recent annual impairment test of 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.

There have been no material changes to the Company’s critical accounting estimates.

In addition to the critical accounting estimates disclosed below, see Note 17.

Related Party Transactions to the 2023 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis