Madison Square Garden Entertainment Corp. 10-Q

Item 1. Financial Statements (Unaudited) MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share data) As of September 30, June 30, 2024 2024 ASSETS Current Assets: Cash, cash equivalents, and restricted cash $ 37,613 $ 33,555 Accounts receivable, net 95,525 77,259 Related party receivables, current 20,768 17,469 Prepaid expenses and other current assets 106,490 90,801 Total current assets 260,396 219,084 Non-Current Assets: Property and equipment, net 642,338 633,533 Right-of-use lease assets 391,058 388,658 Goodwill 69,041 69,041 Indefinite-lived intangible assets 63,801 63,801 Deferred tax assets, net 81,733 68,307 Other non-current assets 101,960 110,283 Total assets $ 1,610,327 $ 1,552,707 LIABILITIES AND DEFICIT Current Liabilities: Accounts payable, accrued and other current liabilities $ 159,261 $ 203,750 Related party payables, current 43,671 42,506 Long-term debt, current 20,313 16,250 Operating lease liabilities, current 27,014 27,736 Deferred revenue 270,955 215,581 Total current liabilities 521,214 505,823 Non-Current Liabilities: Long-term debt, net of deferred financing costs 646,975 599,248 Operating lease liabilities, non-current 451,071 427,014 Other non-current liabilities 39,765 43,787 Total liabilities 1,659,025 1,575,872 Commitments and contingencies (see Note 8) Deficit: Class A Common Stock (a) 460 456 Class B Common Stock (b) 69 69 Additional paid-in-capital 26,909 33,481 Treasury stock at cost ( 4,365 shares outstanding as of September 30, 2024 and June 30, 2024) ( 140,512 ) ( 140,512 ) Retained earnings 96,282 115,603 Accumulated other comprehensive loss ( 31,906 ) ( 32,262 ) Total deficit ( 48,698 ) ( 23,165 ) Total liabilities and deficit $ 1,610,327 $ 1,552,707 _________________ (a) Class A Common Stock, $ 0.01 par value per share, 120,000 shares authorized; 45,958 and 45,556 shares issued as of September 30, 2024 and June 30, 2024, respectively. (b) Class B Common Stock, $ 0.01 par value per share, 30,000 shares authorized; 6,867 shares issued as of September 30, 2024 and June 30, 2024. See accompanying notes to the unaudited condensed consolidated financial statements. 2 MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Three Months Ended September 30, 2024 2023 Revenues (a) Revenues from entertainment offerings $ 115,081 $ 116,505 Food, beverage, and merchandise revenues 18,975 23,261 Arena license fees and other leasing revenue 4,658 2,446 Total revenues 138,714 142,212 Direct operating expenses (a) Entertainment offerings, arena license fees, and other leasing direct operating expenses ( 86,466 ) ( 90,559 ) Food, beverage, and merchandise direct operating expenses ( 11,243 ) ( 11,118 ) Total direct operating expenses ( 97,709 ) ( 101,677 ) Selling, general, and administrative expenses (a) ( 45,746 ) ( 48,822 ) Depreciation and amortization ( 13,781 ) ( 13,585 ) Restructuring credits (charges) 40 ( 11,553 ) Operating loss ( 18,482 ) ( 33,425 ) Interest income 372 851 Interest expense ( 14,043 ) ( 14,287 ) Other expense, net ( 769 ) ( 4,469 ) Loss from operations before income taxes ( 32,922 ) ( 51,330 ) Income tax benefit 13,601 659 Net loss $ ( 19,321 ) $ ( 50,671 ) Loss per share attributable to MSG Entertainment’s stockholders: Basic and diluted $ ( 0.40 ) $ ( 1.00 ) Weighted-average number of shares of common stock: Basic and diluted 48,217 50,437 _________________ (a) See Note 12 . Related Party Transactions for further information on related party arrangements. See accompanying notes to the unaudited condensed consolidated financial statements. 3 MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (in thousands) Three Months Ended September 30, 2024 2023 Net loss $ ( 19,321 ) $ ( 50,671 ) Other comprehensive income, before income taxes: Pension plans and postretirement plans 541 238 Other comprehensive income, before income taxes 541 238 Income tax expense ( 185 ) ( 41 ) Other comprehensive income, net of income taxes 356 197 Comprehensive loss $ ( 18,965 ) $ ( 50,474 ) See accompanying notes to the unaudited condensed consolidated financial statements. 4 MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended September 30, 2024 2023 OPERATING ACTIVITIES: Net loss $ ( 19,321 ) $ ( 50,671 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 13,781 13,585 Share-based compensation expense 6,262 12,965 Deferred income tax benefit ( 13,612 ) ( 659 ) Amortization of deferred financing costs 852 812 Net unrealized and realized (gains) losses on equity investments with readily determinable fair value ( 124 ) 3,901 Other non-cash adjustments 94 305 Change in assets and liabilities: Accounts receivable, net ( 18,360 ) ( 36,610 ) Related party receivables and payables, net ( 2,134 ) 44,654 Prepaid expenses and other current and non-current assets ( 6,457 ) ( 10,391 ) Accounts payable, accrued and other current, and non-current liabilities ( 64,648 ) ( 41,184 ) Deferred revenue 55,374 63,172 Operating lease right-of-use assets and lease liabilities 20,934 1,499 Net cash (used in) provided by operating activities $ ( 27,359 ) $ 1,378 INVESTING ACTIVITIES: Capital expenditures ( 5,905 ) ( 3,334 ) Proceeds from sale of investments 55 12,844 Loan to related parties — ( 65,000 ) Other investing activities ( 840 ) — Net cash used in investing activities $ ( 6,690 ) $ ( 55,490 ) FINANCING ACTIVITIES: Proceeds from revolving credit facility 55,000 73,000 Principal repayment on long-term debt ( 4,063 ) — Proceeds from related party loan — 126 Payments for debt financing costs — ( 633 ) Taxes paid in lieu of shares issued for equity-based compensation ( 12,830 ) ( 11,834 ) Stock repurchases — ( 51,386 ) Net cash provided by financing activities $ 38,107 $ 9,273 Net increase (decrease) in cash, cash equivalents, and restricted cash 4,058 ( 44,839 ) Cash, cash equivalents, and restricted cash, beginning of period 33,555 84,355 Cash, cash equivalents, and restricted cash, end of period $ 37,613 $ 39,516 Non-cash investing and financing activities: Capital expenditures incurred but not yet paid or paid by landlord $ 15,379 $ 1,291 Non-cash stock repurchases in lieu of payment of loan due from related party $ — $ 65,512 Non-cash financing lease obligation $ ( 130 ) $ — See accompanying notes to the unaudited condensed consolidated financial statements. 5 MADISON SQUARE GARDEN ENTERTAINMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF DEFICIT (Unaudited) (in thousands) Common Stock Additional Paid-in Capital Treasury Stock Retained earnings (Accumulated deficit) Accumulated Other Comprehensive Loss Total Deficit Balance as of June 30, 2024 $ 525 $ 33,481 $ ( 140,512 ) $ 115,603 $ ( 32,262 ) $ ( 23,165 ) Net loss — — — ( 19,321 ) — ( 19,321 ) Other comprehensive income — — — — 356 356 Comprehensive loss — — — — — ( 18,965 ) Share-based compensation — 6,262 — — — 6,262 Tax withholding associated with shares issued for share-based compensation 4 ( 12,834 ) — — — ( 12,830 ) Balance as of September 30, 2024 $ 529 $ 26,909 $ ( 140,512 ) $ 96,282 $ ( 31,906 ) $ ( 48,698 ) Balance as of June 30, 2023 $ 519 $ 17,727 $ ( 25,000 ) $ ( 28,697 ) $ ( 34,021 ) $ ( 69,472 ) Net loss — — — ( 50,671 ) — ( 50,671 ) Other comprehensive income — — — — 197 197 Comprehensive loss — — — — — ( 50,474 ) Share-based compensation — 12,965 — — — 12,965 Tax withholding associated with shares issues for share-based compensation 4 ( 11,838 ) — — — ( 11,834 ) Stock repurchases, inclusive of tax — ( 874 ) ( 115,512 ) — — ( 116,386 ) Balance as of September 30, 2023 $ 523 $ 17,980 $ ( 140,512 ) $ ( 79,368 ) $ ( 33,824 ) $ ( 235,201 ) See accompanying notes to the unaudited condensed consolidated financial statements. 6 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) All amounts included in the following Notes to Condensed Consolidated Financial Statements (unaudited) are presented in thousands, except per share data or as otherwise noted. Note 1. Description of Business and Basis of Presentation Description of Business Madison Square Garden Entertainment Corp. (together with its subsidiaries, as applicable, the “Company” or “MSG Entertainment”), 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. The Company operates and reports financial information in one reportable segment. The Company’s portfolio of venues includes: Madison Square Garden (“The Garden”), The Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. The Company also owns and produces the original production, the Christmas Spectacular Starring the Radio City Rockettes (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. MSG Entertainment Distribution On April 20, 2023, Sphere Entertainment Co. (together with its subsidiaries, as applicable, “Sphere Entertainment”) distributed approximately 67 % of the outstanding common stock of the Company to its stockholders (the “Distribution”), with Sphere Entertainment retaining approximately 33 % of the outstanding common stock of the Company in the form of Class A common stock, $ 0.01 par value per share (“Class A Common Stock”) immediately following the Distribution. As a result, the Company became an independent publicly traded company on April 21, 2023. 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. Description of Business and Basis of Presentation to the Company’s audited consolidated and combined financial statements and notes thereto as of June 30, 2024 and 2023 and for the three years ended June 30, 2024, 2023 and 2022 (the “Audited Consolidated and Combined Annual Financial Statements”) included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 filed with the Securities and Exchange Commission (the “SEC”) on August 16, 2024 (the “2024 Form 10-K”) for more information regarding the Distribution. Basis of Presentation The Company reports on a fiscal year basis ending on June 30 th (“Fiscal Year”). In these unaudited condensed consolidated financial statements, the years ending and ended on June 30, 2026, June 30, 2025 and 2024, respectively, are referred to as “Fiscal Year 2026,” “Fiscal Year 2025” and “Fiscal Year 2024,” respectively. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the SEC, and should be read in conjunction with the Company’s Audited Consolidated and Combined Annual Financial Statements. In the opinion of the Company, the accompanying financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2024 and its results of operations and cash flows for the three months ended September 30, 2024 and 2023. The condensed consolidated balance sheet as of June 30, 2024 was derived from the Audited Consolidated and Combined Annual Financial Statements but does not contain all of the footnote disclosures from the Audited Consolidated and Combined Annual Financial Statements. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. As a result of the production of the Christmas Spectacular , arena license fees in connection with the use of The Garden by the New York Knicks (the “Knicks”) of the National Basketball Association and the New York Rangers (the “Rangers”) of the National Hockey League, the Company generally earns a disproportionate share of its annual revenues in the second and third quarters of its fiscal year. Reclassifications For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with GAAP. The accompanying unaudited condensed consolidated financial information for the three months ended September 30, 2023 has been revised to change the presentation of our revenue and direct operating expenses from an aggregated to a disaggregated basis. 7 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 2. Summary of Significant Accounting Policies A. Principles of Consolidation All significant intercompany accounts and balances within the Company’s consolidated businesses have been eliminated. B. Use of Estimates The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the provision for credit losses, goodwill, intangible assets, other long-lived assets, deferred tax assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, and other liabilities. In addition, estimates are used in revenue recognition, depreciation and amortization, litigation matters and other matters. Management believes its use of estimates in the financial statements to be reasonable. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s condensed consolidated financial statements in future periods. C. Revenue Recognition and Direct Operating Expenses The following reflects an update to the Company’s comprehensive revenue recognition and direct operating expense accounting policies to align with the disaggregation of revenue and direct operating expenses as presented on the condensed consolidated statements of operations. The Company generates revenue from the provision of services and sale of tangible products, as well as leasing transactions. Revenues are presented under these three categories in the condensed consolidated statements of operations, as described below. Service revenue, presented as “Revenues from entertainment offerings” primarily includes: • Ticket sales and other ticket-related revenue • Venue license fees for events held at the Company’s venues that the Company does not produce or promote/co-promote • Sponsorship and signage • Suite licenses and single night suite rentals • Advertising commissions and related service fees • Commissions related to the sale of merchandise for which the Company is not the principal in the underlying transaction Direct operating expenses related to the provision of services and leasing, presented as “Entertainment offerings, arena license fees, and other leasing direct operating expenses”, primarily include: (a) • Event production costs including direct personnel expenses • Venue operations and infrastructure costs (a) • Venue rental costs for venues not owned by the Company • Sponsorship and signage fulfillment costs • Contractual revenue sharing expenses related to suite licenses and certain internal signage • Event-related marketing and advertising costs Product revenue, presented as “Food, beverage, and merchandise revenues”, includes: • Sales of food and beverage during events held at the Company’s venues • Sales of the Company’s merchandise at the Company’s venues and via traditional retail channels Direct operating expenses related to the sale of products, presented as “Food, beverage, and merchandise direct operating expenses” include: • Costs of goods sold including direct personnel expenses • Contractual revenue sharing expenses related to food and beverage sold at events held by Madison Square Garden Sports Corp. (together with its subsidiaries, as applicable, “MSG Sports”) at The Garden Lease revenue, presented as “Arena license fees and other leasing revenue”, includes: • Rental fees related to the arena license agreements that require the Knicks and the Rangers to play their home games at The Garden (the “Arena License Agreements”) with MSG Sports 8 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) • Sublease income _________________ (a) Venue operations and infrastructure costs are not specifically allocated to each revenue category, but are instead attributed in their entirety to service revenue, which is the Company’s principal revenue category. Leasing direct operating expenses materially consist of venue operations and infrastructure costs. As a result, the Company combines service and leasing direct operating expenses within “Entertainment offerings, arena license fees, and other leasing direct operating expenses” for presentation purposes. The Company recognizes revenue when, or as, performance obligations under the terms of a contract are satisfied, which generally occurs when, or as, control of promised goods or services is transferred to customers. Revenue is measured as the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services (“transaction price”). To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the most likely amount to which the Company expects to be entitled. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and the determination of whether to include such estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information that is reasonably available. The Company accounts for taxes collected from customers and remitted to governmental authorities on a net basis and excludes these amounts from revenues. In addition, the Company defers certain costs to fulfill the Company’s contracts with customers to the extent such costs relate directly to the contracts, are expected to generate resources that will be used to satisfy the Company’s performance obligations under the contracts, and are expected to be recovered through revenue generated under the contracts. Contract fulfillment costs are expensed as the Company satisfies the related performance obligations. 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 the Company, as well as Sphere Entertainment and MSG Sports within a single arrangement. The Company also derives revenue from similar types of arrangements which are entered into by Sphere Entertainment and 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, 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 may incur 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. Principal versus Agent Revenue Recognition The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service before transfer to the customer. When the Company concludes that it controls the good or service before transfer to the customer, the Company is considered a principal in the transaction and records revenue on a gross basis. When the Company concludes that it does not control the good or service before transfer to the customer but arranges for another entity to provide the good or service, the Company acts as an agent and records revenue on a net basis in the amount it earns for its agency service. 9 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Contract Balances Amounts collected in advance of the Company’s satisfaction of its contractual performance obligations are recorded as a contract liability within deferred revenue and are recognized as the Company satisfies the related performance obligations. Amounts collected in advance of events for which the Company is not the promoter or co-promoter do not represent contract liabilities and are recorded within accrued and other current liabilities on the accompanying consolidated balance sheets. Amounts recognized as revenue for which the Company has a right to consideration for goods or services transferred to customers and for which the Company does not have an unconditional right to bill as of the reporting date are recorded as contract assets. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional. Production Costs for the Company’s Original Productions The Company defers certain costs of productions such as creative design, scenery, wardrobes, rehearsal and other related costs for the Company’s proprietary shows, reported under Prepaid expenses and other current assets and Other non-current assets. Deferred production costs are amortized on a straight-line basis over the course of a production’s performance period using the expected life of a show’s assets and are recorded as a component of Entertainment offerings, arena license fees, and other leasing direct operating expenses on the Company’s condensed consolidated statement of operations. Deferred production costs are subject to recoverability assessments whenever there is an indication of potential impairment. Revenue Sharing Expenses Revenue sharing expenses are determined based on contractual agreements between the Company and MSG Sports, primarily related to suite licenses, certain internal signage and in-venue food and beverage sales and are recorded as a component of Entertainment offerings, arena license fees, and other leasing direct operating expenses on the Company’s condensed consolidated statement of operations. D. Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements In November 2023 , the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvement to Reportable Segment Disclosures . This ASU aims to improve segment disclosures through enhanced disclosures about significant segment expenses. The standard requires disclosure of significant expense categories and amounts for such expenses, including those segment expenses that are regularly provided to the chief operating decision maker, easily computable from information that is regularly provided, or significant expenses that are expressed in a form other than actual amounts. This standard will be effective for the Company as of and for the Fiscal Year ending June 30, 2025 and is required to be applied retrospectively to all prior periods presented in the financial statements. The Company continues to evaluate the impact of the additional disclosure requirements on the Company’s consolidated financial statements . In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , a final standard on improvements to income tax disclosures which applies to all entities subject to income taxes. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be helpful to understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, assess income tax information that affects cash flow forecasts and capital allocation decisions, and identify potential opportunities to increase future cash flows. This standard will be effective for the Company in Fiscal Year 2026 and should be applied prospectively. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s consolidated financial statements . In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , requiring additional disclosures about specified categories of expenses included in certain expense captions presented on the face of the income statement. This standard will be effective for the Company as of and for the Fiscal Year ending June 30, 2028, and may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on the Company’s consolidated financial statements. Note 3. Revenue Recognition Contracts with Customers All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts with Customers , except for revenues from the Arena License Agreements, leases and subleases that are accounted for in accordance with 10 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ASC Topic 842, Leases . Disaggregation of Revenue The following table disaggregates the Company’s revenue by major source based upon the timing of satisfaction of the Company’s performance obligations to the customer for the three months ended September 30, 2024 and 2023: Three Months Ended September 30, 2024 2023 Event-related offerings (a) $ 89,182 $ 94,990 Sponsorship, signage, and suite licenses (b) 38,938 39,815 Other (c) 5,936 4,961 Total revenues from contracts with customers 134,056 139,766 Arena license fees and other leasing revenue 4,658 2,446 Total revenues $ 138,714 $ 142,212 _________________ (a) Event-related offerings revenues are recognized at a point in time. (b) See Note 2. Summary of Significant Accounting Policies and Note 4. Revenue Recognition, included in the Company’s Audited Consolidated and Combined Annual Financial Statements for further details on the pattern of recognition of sponsorship, signage, and suite license revenues. (c) Primarily consists of (i) revenues from sponsorship sales and representation agreements and (ii) venue tours. In addition to the disaggregation of the Company’s revenue as disclosed above, the following table disaggregates the Company’s revenues by revenue category , for the three months ended September 30, 2024 and 2023. Three Months Ended September 30, 2024 2023 Ticketing and venue license fee revenues (a) $ 70,206 $ 71,729 Sponsorship and signage, suite, and advertising commission revenues 42,890 43,336 Food, beverage, and merchandise revenues 18,975 23,261 Other 1,985 1,440 Total revenues from contracts with customers 134,056 139,766 Arena license fees and other leasing revenue 4,658 2,446 Total revenues $ 138,714 $ 142,212 _________________ (a) Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular and (iii) other live entertainment and sporting events. Contract Balances The following table provides information about the opening and closing contract balances from the Company’s contracts with customers as of September 30, 2024 and June 30, 2024: As of September 30, 2024 June 30, 2024 Receivables from contracts with customers, net (a) $ 100,967 $ 74,113 Contract assets, current (b) $ 7,255 $ 7,844 Deferred revenue, including non-current portion (c) $ 270,955 $ 215,581 ________________ (a) Receivables from contracts with customers, net, which are reported in Accounts receivable, net and Related party receivables, current in the Company’s condensed consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of September 30, 2024 and June 30, 2024, the Company’s receivables from contracts with customers above included $ 5,114 and $ 2,432 , respectively, related to various related parties. See Note 12. Related Party Transactions for further details on related party arrangements. (b) Contract assets, current, which are reported as Prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional. (c) Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to the customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue 11 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) recognized for the three months ended September 30, 2024 relating to the deferred revenue balance as of June 30, 2024 was $ 85,476 . Transaction Price Allocated to the Remaining Performance Obligations As of September 30, 2024, the Company’s remaining performance obligations under contracts were approximately $ 601,000 , of which 57 % is expected to be recognized over the next two years and an additional 43 % of the balance is expected to be recognized thereafter. This primarily relates to performance obligations under sponsorship and suite license agreements that have original expected durations longer than one year and for which the consideration is not variable. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Note 4. Restructuring Credits (Charges) During the three months ended September 30, 2024, the Company recorded restructuring credits of $ 40 related to adjustments for previously accrued termination benefits for certain corporate executives and employees. During the three months ended September 30, 2023, the Company recorded restructuring charges of $ 11,553 , inclusive of $ 6,788 of share-based compensation expenses, shown in accounts payable, accrued and other current liabilities and additional paid-in-capital on the condensed consolidated balance sheet. Changes to the Company’s restructuring liability through September 30, 2024 were as follows: Restructuring Liability June 30, 2024 $ 7,140 Restructuring credits ( 40 ) Payments ( 3,640 ) September 30, 2024 $ 3,460 Note 5. Investments As of September 30, 2024, the Company held an investment in Townsquare Media, Inc. (“Townsquare”). The Company also held an investment in DraftKings Inc. (“DraftKings”), which was sold during the first quarter of Fiscal Year 2024: • Townsquare is a media, entertainment and digital marketing solutions company that is listed on the New York Stock Exchange (“NYSE”) under the symbol “TSQ.” • DraftKings is a fantasy sports contest and sports gambling provider that is listed on the Nasdaq Stock Market (“NASDAQ”) under the symbol “DKNG.” As of September 30, 2024, the Company also held other equity investments held in trust under the Company’s Executive Deferred Compensation Plan. Refer to Note 10. Pension Plans and Other Postretirement Benefit Plans for further details regarding the plan The fair value of the Company’s investments in Class A common stock of Townsquare and Class A common stock of DraftKings was determined based on quoted market prices in active markets on the NYSE and NASDAQ, respectively, which are classified within Level I of the fair value hierarchy. The carrying value of the Company’s investments, which is reported under Other non-current assets in the accompanying condensed consolidated balance sheets as of September 30, 2024 and June 30, 2024, is as follows: As of September 30, 2024 June 30, 2024 Equity investments with readily determinable fair values: Townsquare Class A common stock $ 1,287 $ 1,438 Other equity investments with readily determinable fair values held in trust under the Company’s Executive Deferred Compensation Plan 5,047 4,226 Equity method investments and equity investments without readily determinable fair values (a) 708 656 Total investments $ 7,042 $ 6,320 _______________ (a) Inclusive of the Company’s investment in Oak View Group’s Crown Properties Collection, LLC ("CPC"). 12 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the realized and unrealized gain (loss) on equity investments with readily determinable fair value, which is reported in Other income (expense), net for the three months ended September 30, 2024 and 2023: Three Months Ended September 30, 2024 2023 Unrealized loss — Townsquare $ ( 101 ) $ ( 5,449 ) Unrealized gain (loss) — Executive Deferred Compensation Plan 220 ( 145 ) Realized gain from shares sold — DraftKings — 1,548 Realized gain from shares sold — Townsquare 5 — Total realized and unrealized gain (loss) $ 124 $ ( 4,046 ) Supplemental information on realized gain: Shares of common stock sold — DraftKings — 425 Cash proceeds from common stock sold — DraftKings $ — $ 12,844 Shares of common stock sold — Townsquare 5 — Cash proceeds from common stock sold — Townsquare $ 55 $ — Note 6. Property and Equipment, Net As of September 30, 2024 and June 30, 2024, property and equipment, net consisted of the following: As of September 30, 2024 June 30, 2024 Land $ 62,768 $ 62,768 Buildings 1,012,370 1,011,308 Equipment, furniture, and fixtures 350,351 348,075 Leasehold improvements 133,267 133,267 Construction in progress 29,442 10,193 Total Property and equipment $ 1,588,198 $ 1,565,611 Less: accumulated depreciation and amortization ( 945,860 ) ( 932,078 ) Property and equipment, net $ 642,338 $ 633,533 The Company recorded depreciation expense on property and equipment of $ 13,781 and $ 13,585 for the three months ended September 30, 2024 and 2023, respectively, which is recognized in Depreciation and amortization in the condensed consolidated statements of operations. Note 7. Goodwill and Intangible Assets As of September 30, 2024 and June 30, 2024, the carrying amount of goodwill was $ 69,041 . The Company’s indefinite-lived intangible assets as of September 30, 2024 and June 30, 2024 were as follows: As of September 30, 2024 June 30, 2024 Trademarks $ 61,881 $ 61,881 Photographic related rights 1,920 1,920 Total indefinite-lived intangible assets $ 63,801 $ 63,801 During the first quarter of Fiscal Year 2025, the Company performed its annual qualitative impairment test of goodwill and indefinite-lived intangible assets and determined that there were no impairments of goodwill and indefinite-lived intangibles identified as of the impairment test date. 13 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 8. Commitments and Contingencies Commitments See Note 11. Commitments and Contingencies, included in the Company’s Audited Consolidated and Combined Annual Financial Statements, for details on the Company’s commitments. The Company’s commitments as of June 30, 2024 included a total of $ 323,178 (primarily related to contractual obligations). During the three months ended September 30, 2024, the Company did not have any material changes in its non-cancelable contractual obligations (other than activities in the ordinary course of business). See Note 9. Credit Facilities for details of the principal repayments required under the Company’s credit facilities. Delayed Draw Term Loan Facility 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. See Note 11. Commitments and Contingencies to the Company’s Audited Consolidated and Combined Annual Financial Statements for more information regarding the DDTL Facility. On July 14, 2023, Sphere Entertainment drew down 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 1,923 shares of the Company’s Class A Common Stock held by Sphere Entertainment, as permitted as payment under the DDTL Facility. Such shares have been classified by the Company pursuant to the Stock Repurchase Program (as defined and further explained in Note 13. Additional Financial Information ) as treasury shares and are no longer outstanding on the date of repayment. Legal Matters The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company. Note 9. Credit Facilities See Note 12. Credit Facilities, included in the Company’s Audited Consolidated and Combined Annual Financial Statements for more information regarding the Company’s credit facilities. The following table summarizes the presentation of the outstanding balances under the Company’s credit agreements as of September 30, 2024 and June 30, 2024: As of September 30, 2024 June 30, 2024 Current Portion National Properties Term Loan Facility $ 20,313 $ 16,250 Current portion of long-term debt $ 20,313 $ 16,250 As of September 30, 2024 June 30, 2024 Principal Unamortized Deferred Financing Costs Net Principal Unamortized Deferred Financing Costs Net Non-current Portion National Properties Term Loan Facility $ 601,250 $ ( 8,814 ) $ 592,436 $ 609,375 $ ( 9,624 ) $ 599,751 National Properties Revolving Credit Facility 55,000 ( 461 ) 54,539 — ( 503 ) ( 503 ) Long-term debt, net of deferred financing costs $ 656,250 $ ( 9,275 ) $ 646,975 $ 609,375 $ ( 10,127 ) $ 599,248 14 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) National Properties Facilities General. MSG National Properties, LLC (“MSG National Properties”), MSG Entertainment Holdings and certain subsidiaries of MSG National Properties are party to a credit agreement dated June 30, 2022 (as amended, the “National Properties Credit Agreement”) with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto, providing for a five-year , $ 650,000 senior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year , $ 150,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Facilities”). Up to $ 25,000 of the National Properties Revolving Credit Facility is available for the issuance of letters of credit. As of September 30, 2024, outstanding letters of credit were $ 18,826 and the remaining balance available under the National Properties Revolving Credit Facility was $ 76,174 . 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, 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 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 September 30, 2024 was 7.45 %. 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. The principal obligations under the National Properties Revolving Credit Facility are due at the maturity of the facil ity. 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. Covenants. 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 was set at a ratio of 2 :1 before stepping up to 2.5 :1 in the fiscal quarter ended 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, which stepped down to 5.5 :1 in the fiscal quarter ended June 30, 2024 and steps down to 4.5 :1 in the fiscal quarter ending June 30, 2026. As of September 30, 2024, 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. 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”). 15 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. Interest payments and loan principal repayments made by the Company under the National Properties Credit Agreement were as follows: Interest Payments Principal Repayments Three Months Ended Three Months Ended September 30, September 30, 2024 2023 2024 2023 National Properties Facilities $ 13,277 $ 13,193 $ 4,063 $ — The carrying value and fair value of the Company’s debt reported in the accompanying condensed consolidated balance sheets were as follows: As of September 30, 2024 June 30, 2024 Carrying Value (a) Fair Value Carrying Value (a) Fair Value National Properties Facilities $ 676,563 $ 672,630 $ 625,625 $ 622,497 ________________ (a) The total carrying value of the Company’s debt as of September 30, 2024 and June 30, 2024 is equal to the current and non-current principal payments for the Company’s credit agreements excluding unamortized deferred financing costs of $ 9,275 and $ 10,127 , respectively. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar instruments for which the inputs are readily observable. Note 10. Pension Plans and Other Postretirement Benefit Plans See Note 13. Pension Plans and Other Postretirement Benefit Plans, included in the Company’s Audited Consolidated and Combined Annual Financial Statements for more information regarding the Pension Plans, Postretirement Plan, the Madison Square Garden 401(k) Savings Plans, The Madison Square Garden 401(k) Savings Plan (the “401(k) Plan”), the MSG Entertainment Holdings, LLC Excess Savings Plan (together with the 401(k) Plan, the “Savings Plans”), together with the associated excess savings plan, and the Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”). Defined Benefit Pension Plans and Other Postretirement Benefit Plans The following table presents components of net periodic benefit cost for the Pension Plans and Postretirement Plan included in the accompanying condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023. Service cost is recognized in direct operating expenses and selling, general and administrative expenses. All other components of net periodic benefit cost are reported in Other expense, net. Pension Plans Postretirement Plan Three Months Ended Three Months Ended September 30, September 30, 2024 2023 2024 2023 Service cost $ 18 $ 17 $ 5 $ 6 Interest cost 1,668 1,469 30 24 Expected return on plan assets ( 1,292 ) ( 1,091 ) — — Recognized actuarial loss 446 238 6 — Net periodic cost $ 840 $ 633 $ 41 $ 30 Contributions for Qualified Defined Benefit Pension Plans During the three months ended September 30, 2024, the Company contributed $ 3,300 to a non-contributory, qualified cash balance retirement plan covering the Company’s non-union employees. 16 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Defined Contribution Plans For the three months ended September 30, 2024 and 2023, expenses related to the Savings Plans and Union Savings Plan included in the accompanying condensed consolidated statements of operations are as follows: Three Months Ended September 30, 2024 2023 Savings Plans $ 2,024 $ 2,034 Union Savings Plan $ 82 $ 50 Executive Deferred Compensation See Note 13. Pension Plans and Other Postretirement Benefit Plans, included in the Company’s Audited Consolidated and Combined Annual Financial Statements, for more information regarding the Company’s Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). The Company recorded compensation expense of $ 220 for the three months ended September 30, 2024 and a compensation cost credit of $ 145 for the three months ended September 30, 2023, within Selling, general, and administrative expenses to reflect the remeasurement of the Deferred Compensation Plan liability. In addition, the Company recorded a gain of $ 220 for the three months ended September 30, 2024 and a loss of $ 145 for the three months ended September 30, 2023, within Other expense, net to reflect remeasurement of the fair value of assets under the Deferred Compensation Plan. The following table summarizes amounts recognized related to the Deferred Compensation Plan in the condensed consolidated balance sheets: As of September 30, 2024 June 30, 2024 Deferred Compensation Plan assets (included in Other non-current assets) $ 5,047 $ 4,226 Deferred Compensation Plan liabilities (included in Other non-current liabilities) $ ( 5,063 ) $ ( 4,226 ) Note 11. Share-based Compensation The Company has two share-based compensation plans: the 2023 Employee Stock Plan and the 2023 Stock Plan for Non-Employee Directors. See Note 14. Share Based Compensation, included in the Company’s Audited Consolidated and Combined Annual Financial Statements, for more information on these plans. Share-based compensation expense for the Company’s restricted stock units (“RSUs”) and performance stock units (“PSUs”) are recognized in the condensed consolidated statements of operations as a component of direct operating expenses or selling, general, and administrative expenses. The following table summarizes the Company’s share-based compensation expense: Three Months Ended September 30, 2024 2023 Share-based compensation expense (a) $ 6,262 $ 6,177 Fair value of awards vested (b) $ 29,022 $ 26,400 ________________ (a) The expense shown excludes $ 6,788 for the three months ended September 30, 2023, which was reclassified to Restructuring charges in the condensed consolidated statements of operations a s detailed in Note 4. Restructuring Credits (Charges). (b) To fulfill required statutory tax withholding obligations for the applicable income and other employment taxes, RSUs and PSUs with an aggregate value of $ 12,808 and $ 11,817 were retained by the Company during the three months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024 and 2023 all RSUs and stock options were excluded from the anti-dilutive calculation because the Company reported a net loss for the period and, therefore, their impact on reported loss per share would have been antidilutive. As of September 30, 2024, there was $ 55,333 of unrecognized compensation cost related to unvested RSUs and PSUs held by the Company’s direct employees. The cost is expected to be recognized over a weighted-average period of approximately 2.5 years. Award Activity RSUs During the three months ended September 30, 2024 and 2023 , 433 and 562 RSUs were granted and 416 and 476 RSUs vested, 17 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) respectively. PSUs During the three months ended September 30, 2024 and 2023, 386 and 506 PSUs were granted and 305 and 241 PSUs vested, respectively. Note 12. Related Party Transactions As of September 30, 2024 , members of the Dolan family, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, and members of the Dolan family including trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”) collectively beneficially owned 100 % of the Company’s outstanding Class B Common Stock, $ 0.01 par value per share (“Class B Common Stock”) and approximately 4.1 % of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of September 30, 2024) . Such shares of Class A Common Stock and Class B Common Stock, collectively, represent approximately 63.6 % of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan Family Group are also the controlling stockholders of Sphere Entertainment, MSG Sports, and AMC Networks Inc. See Note 17. Related Party Transactions, included in the Company’s Audited Consolidated and Combined Annual Financial Statements for a description of the Company’s current related party arrangements. There have been no material changes in such related party arrangements except as described below. In the third quarter of Fiscal Year 2024, the Company entered into a commercial agreement with CPC, under which CPC provides sponsorship sales services. The Company recorded commission expense of $ 494 and $ 0 for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and June 30, 2024, prepaid expenses associated with this arrangement were $ 6,998 and $ 5,993 , respectively, and are reported under Prepaid expenses and other current assets, and Other non-current assets in the accompanying condensed consolidated balance sheets. The Company provided a notice of termination with respect to the commercial agreement on September 20, 2024 and is currently negotiating the related wind down. From time to time the Company enters into arrangements with 605, LLC (“605”). James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and his spouse, Kristin A. Dolan, owned 605 until September 13, 2023. Kristin A. Dolan is also the founder and was the Chief Executive Officer of 605. 605 provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business. In August 2022, a subsidiary of Sphere Entertainment entered into a three-year agreement with 605, valued at $ 750 , covering several customer analysis projects per year in connection with events held at our venues, which was assigned to the Company in connection with the Distribution. Pursuant to this arrangement, the Company recognized $ 34 of expense for the three months ended September 30, 2023. On September 13, 2023, 605 was sold to iSpot.tv, and James L. Dolan and Kristin A. Dolan now hold a minority interest in iSpot.tv. As a result, as of September 13, 2023, 605 is no longer considered to be a related party. Revenues and Operating Expenses The following table summarizes the composition and amounts of the transactions with the Company’s affiliates. The significant components of these amounts are discussed below. These amounts are reflected in revenues and operating expenses in the accompanying condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023: Three Months September 30, 2024 2023 Revenues $ 7,883 $ 5,159 Operating expenses (credits): Revenue sharing expenses $ 1,150 $ 1,152 Reimbursement under Arena License Arrangements ( 73 ) ( 429 ) Cost reimbursement from MSG Sports ( 8,387 ) ( 9,861 ) Cost reimbursement from Sphere Entertainment ( 22,993 ) ( 30,336 ) Other operating (credits) expenses, net ( 1,117 ) 553 Total operating expenses (credits), net (a) $ ( 31,420 ) $ ( 38,921 ) _________________ (a) Of the total operating expenses (credits), net, $ 1,294 and $ 1,310 for the three months ended September 30, 2024 and 2023 , respectively, are included in direct operating expenses in the accompanying condensed consolidated statements of operations, and $( 32,714 ) and $( 40,231 ) for the three months ended September 30, 18 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2024 and 2023 , respectively , are included in selling, general, and administrative expenses. Revenues The Company recorded $ 1,324 of revenues under the Arena License Agreements for the three months ended September 30, 2024 . In addition to the Arena License Agreements, during the three months ended September 30, 2024, the Company’s revenues from related parties primarily reflected sponsorship sales and service representation agreements of $ 2,751 , and merchandise sharing revenues of $ 247 , with MSG Sports. The Company also earned sublease revenue from related parties of $ 3,561 during the three months ended September 30, 2024 . The Company recorded $ 1,324 of revenues under the Arena License Agreements for the three months ended September 30, 2023 . In addition, during the three months ended September 30, 2023, the Company recorded revenues under sponsorship sales and service representation agreements of $ 2,763 , and merchandise sharing revenues of $ 196 , with MSG Sports. The Company also earned sublease revenue from related parties of $ 759 during the three months ended September 30, 2023 . Note 13. Additional Financial Information The following table provides a summary of the amounts recorded as cash, cash equivalents, and restricted cash: As of September 30, 2024 June 30, 2024 Cash and cash equivalents $ 37,307 $ 33,255 Restricted cash 306 300 Total cash, cash equivalents, and restricted cash $ 37,613 $ 33,555 The Company’s cash, cash equivalents, and restricted cash are classified within Level I of the fair value hierarchy as it is valued using observable inputs that reflect quoted prices for identical assets in active markets. The Company’s restricted cash includes cash deposited in escrow accounts. The Company has deposited cash in an interest-bearing escrow account related to credit support, debt facilities, and collateral to workers compensation and general liability insurance obligations. Prepaid expenses and other current assets consisted of the following: As of September 30, 2024 June 30, 2024 Prepaid revenue sharing expense $ 66,765 $ 54,326 Other prepaid expenses 20,189 19,632 Current contract assets 7,255 7,844 Inventory (a) 4,087 3,871 Other 8,194 5,128 Total prepaid expenses and other current assets $ 106,490 $ 90,801 _________________ (a) Inventory is mostly comprised of food and liquor for the venues. Other non-current assets consisted of the following: As of September 30, 2024 June 30, 2024 Unbilled lease receivable (a) $ 89,352 $ 98,473 Investments (b) 7,042 6,320 Deferred costs 3,723 3,649 Other 1,843 1,841 Total other non-current assets $ 101,960 $ 110,283 _________________ (a) Unbilled lease receivable relates to the amounts recorded under the Arena License Agreement. (b) See Note 5. Investments for more information on long-term investments. 19 MADISON SQUARE GARDEN ENTERTAINMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Accounts payable, accrued and other current liabilities consisted of the following: As of September 30, 2024 June 30, 2024 Accounts payable $ 21,018 $ 26,594 Accrued payroll and employee related liabilities 30,579 71,145 Cash due to promoters 65,013 67,697 Accrued expenses 42,651 38,314 Total accounts payable, accrued and other current liabilities $ 159,261 $ 203,750 Other expense, net includes the following: Three Months Ended September 30, 2024 2023 Gains from shares sold — DraftKings $ — $ 1,548 Gains from shares sold - TSQ 5 — Net unrealized loss on equity investments with readily determinable fair value ( 101 ) ( 5,449 ) Other ( 673 ) ( 568 ) Total other expense, net $ ( 769 ) $ ( 4,469 ) Income Taxes During the three months ended September 30, 2024 and September 30, 2023, the Company made income tax payments of $ 381 and $ 0 , respectively. Income tax benefit for the three months ended September 30, 2024 of $ 13,601 , reflects an effective tax rate of 41 %. The estimated annual effective tax rate exceeds the statutory federal tax rate of 21% primarily due to state taxes and excess tax deficiencies related to share-based compensation. The Company expects to utilize its net operating losses during Fiscal Year 2025 and as such will become a federal taxpayer by the end of Fiscal Year 2025. Income tax benefit for the three months ended September 30, 2023 of $ 659 , reflects an effective tax rate of 1 %. The estimated annual effective tax rate is lower than the statutory federal tax rate of 21% primarily due to a decrease in the valuation allowance, partially offset by state taxes. Stock Repurchase Program 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 (the “Stock Repurchase Program”). Pursuant to the Stock Repurchase Program, 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 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. The Company did not repurchase any shares of Class A Common Stock under the plan in the three months ended September 30, 2024. As of September 30, 2024, the Company had approximately $ 110,000 remaining available for repurchases. Note 14. Subsequent Events In October 2024, the Company paid down $ 30,000 of outstanding principal under the National Properties Revolving Credit Facility. On November 7, 2024 the Company paid down the remaining outstanding principal balance of $ 25,000 under the National Properties Revolving Credit Facility. 20