UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

________________________

(Mark One)


			☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2021~~2022


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39245

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

(Exact name of registrant as specified in its charter)


Delaware						84-3755666
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Two Penn Plaza

New York

10121

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (212) 465-6000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	MSGE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Number of shares of common stock outstanding as of January 31, ~~2022:~~2023:


Class A Common Stock par value $0.01 per share	—	~~27,340,882~~27,687,166
Class B Common Stock par value $0.01 per share	—	6,866,754

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

INDEX TO FORM 10-Q


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of December 31, ~~2021~~2022 and June 30, ~~2021~~2022			1

Condensed Consolidated Statements of Operations for the three and six months ended December 31, ~~2021~~2022 and ~~2020~~2021			2

C ondensed Consolidated Statements of Comprehensive Income (Loss ) for the three and six months ended December 31, 2022 and 2021			3

Condensed Consolidated Statements of ~~Comprehensive Income (Loss)~~Cash Flows for the ~~three and~~ six months ended December 31, ~~2021~~2022 and ~~2020~~2021			4

C ondensed Consolidated ~~Statement~~Statements of ~~Cash Flows~~Stockholders' Equity and Redeemable Noncontrolling Interests for the three and six months ended December 31, ~~2021~~2022 and ~~2020~~2021			5

~~Consolidated Statements of Stockholders' Equity and Redeemable Noncontrolling Interests for the three and six months ended December 31, 2021 and 2020~~			7

Notes to Condensed Consolidated Financial Statements			117

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			5437

Item 3. Quantitative and Qualitative Disclosures About Market Risk			7961

Item 4. Controls and Procedures			8062

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			8163

~~Item 1A. Risk Factors~~			82

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			8364

Item 6. Exhibits			8465

~~Table of Contents~~

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in ~~thousands)~~thousands, except per share data)

December 31,
2021 June 30,
2021
ASSETS
Current Assets:
Cash and cash equivalents $ 1,258,105 $ 1,516,992
Restricted cash 23,914 22,984
Accounts receivable, net 190,491 184,613
Net related party receivables 48,929 31,916
Prepaid income taxes 1,850 12,772
Prepaid expenses 69,476 67,445
Other current assets 42,637 36,014
Total current assets 1,635,402 1,872,736
Investments in nonconsolidated affiliates 46,412 49,221
Property and equipment, net 2,474,693 2,156,292
Right-of-use lease assets 470,253 280,579
Amortizable intangible assets, net 182,006 198,274
Indefinite-lived intangible assets 63,801 63,801
Goodwill 500,181 502,195
Other assets 150,326 166,781
Total assets $ 5,523,074 $ 5,289,879
See accompanying notes to unaudited consolidated financial statements.


	December 31, 2022		June 30, 2022

ASSETS
Current Assets:
Cash, cash equivalents and restricted cash	$	553,736	$	846,010


Accounts receivable, net	208,452		216,652



Prepaid expenses and other current assets	153,968		155,994

Total current assets	916,156		1,218,656


Non-Current Assets:
Property and equipment, net	3,509,473		2,939,052
Right-of-use lease assets	499,279		446,499
Goodwill	500,181		500,181
Intangible assets, net	217,181		227,885

Other non-current assets	207,392		189,887
Total assets	$	5,849,662	$	5,522,160

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable, accrued and other current liabilities	$	584,313	$	589,246

Current portion of long-term debt	102,500		78,512

Operating lease liabilities, current	67,775		65,310


Deferred revenue	209,882		228,032

Total current liabilities	964,470		961,100

Non-Current Liabilities:
Long-term debt, net of deferred financing costs	1,885,251		1,664,576
Operating lease liabilities, non-current	479,991		427,971



Deferred tax liabilities, net	165,467		163,441
Other non-current liabilities	145,341		145,496
Total liabilities	3,640,520		3,362,584
Commitments and contingencies (see Note 9)
Redeemable noncontrolling interests	190,222		184,192
Equity:
Class A Common Stock(a)	277		273
Class B Common Stock(b)	69		69

Additional paid-in capital	2,322,007		2,301,970

Accumulated deficit	(267,909)		(290,736)

Accumulated other comprehensive loss	(48,563)		(48,355)
Total Madison Square Garden Entertainment Corp. stockholders’ equity	2,005,881		1,963,221
Nonredeemable noncontrolling interests	13,039		12,163
Total equity	2,018,920		1,975,384
Total liabilities, redeemable noncontrolling interests and equity	$	5,849,662	$	5,522,160

1_________________

(a)Class A Common Stock, $0.01 par value per share, 120,000 shares authorized;27,687 and 27,368 shares outstanding as of December 31, 2022 and June 30, 2022, respectively.

~~Table~~(b)Class B Common Stock, $0.01 par value per share, 30,000 shares authorized;6,867 shares outstanding as of ~~Contents~~December 31, 2022 and June 30, 2022.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
(in thousands, except per share data)
December 31,
2021 June 30,
2021
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable $ 43,815 $ 26,644
Net related party payables, current 56,597 23,173
Current portion of long-term debt, net of deferred financing costs 56,483 53,973
Income taxes payable 406 2,527
Accrued liabilities:
Employee related costs 73,078 91,853
Other accrued liabilities 268,135 210,749
Operating lease liabilities, current 65,663 73,423
Collections due to promoters 49,513 37,877
Deferred revenue 256,154 209,651
Total current liabilities 869,844 729,870
Long-term debt, net of deferred financing costs 1,606,759 1,650,628
Operating lease liabilities, noncurrent 450,019 233,556
Defined benefit and other postretirement obligations 52,653 54,179
Other employee related costs 17,814 21,193
Collections due to promoters, noncurrent — 6,625
Deferred tax liabilities, net 181,214 200,325
Other liabilities 74,952 75,263
Total liabilities 3,253,255 2,971,639
Commitments and contingencies (see Note 11) 0 0
Redeemable noncontrolling interests 142,004 137,834
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,327 and 27,093 shares outstanding as of December 31, 2021 and June 30, 2021, respectively 273 271
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of December 31, 2021 and June 30, 2021 69 69
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2021 and June 30, 2021 — —
Additional paid-in capital 2,317,415 2,294,775
Accumulated deficit (173,302) (96,341)
Accumulated other comprehensive loss (32,632) (30,272)
Total Madison Square Garden Entertainment Corp. stockholders’ equity 2,111,823 2,168,502
Nonredeemable noncontrolling interests 15,992 11,904
Total equity 2,127,815 2,180,406
Total liabilities, redeemable noncontrolling interests and equity $ 5,523,074 $ 5,289,879

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		December 31,				December 31,					December 31,				December 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenues (a)	Revenues (a)	$	516,439	$	168,752	$	810,949	$	339,298	Revenues(a)	$	642,198	$	516,439	$	1,043,416	$	810,949
Operating expenses:

Direct operating expenses ~~(b)~~(a)	Direct operating expenses ~~(b)~~(a)	296,258		92,497		462,019		191,728		Direct operating expenses ~~(b)~~(a)	(348,959)		(296,258)		(602,860)		(462,019)
Selling, general and administrative expenses ~~(c)~~(a)	Selling, general and administrative expenses ~~(c)~~(a)	162,277		96,018		337,116		177,675		Selling, general and administrative expenses ~~(c)~~(a)	(182,433)		(162,277)		(346,843)		(337,116)
Depreciation and amortization	Depreciation and amortization	30,533		25,677		59,963		54,087		Depreciation and amortization	(29,059)		(30,533)		(58,814)		(59,963)
Impairment and other (gains) loss, net		(7,979)		—		(161)		—
Impairment and other gains, net										Impairment and other gains, net	5,885		7,979		7,885		161
Restructuring charges	Restructuring charges	—		1,372		—		21,299		Restructuring charges	(13,682)		—		(13,682)		—
Operating income (loss)	Operating income (loss)	35,350		(46,812)		(47,988)		(105,491)		Operating income (loss)	73,950		35,350		29,102		(47,988)
Other income (expense):
Loss in equity method investments		(1,774)		(1,568)		(2,981)		(3,264)

Interest income	Interest income	773		837		1,548		1,609		Interest income	3,603		773		7,557		1,548
Interest expense	Interest expense	(8,167)		(5,262)		(17,415)		(10,535)		Interest expense	(894)		(8,167)		(3,061)		(17,415)
Miscellaneous income (expense), net		(17,100)		(7,568)		(19,647)		26,449
Other expense, net										Other expense, net	(3,853)		(18,874)		(2,328)		(22,628)
		(26,268)		(13,561)		(38,495)		14,259
Income (loss) from operations before income taxes	Income (loss) from operations before income taxes	9,082		(60,373)		(86,483)		(91,232)		Income (loss) from operations before income taxes	72,806		9,082		31,270		(86,483)
Income tax benefit (expense)		(4,063)		298		14,847		(9,159)
Income tax (expense) benefit										Income tax (expense) benefit	(2,249)		(4,063)		(4,756)		14,847
Net income (loss)	Net income (loss)	5,019		(60,075)		(71,636)		(100,391)		Net income (loss)	70,557		5,019		26,514		(71,636)
Less: Net income (loss) attributable to redeemable noncontrolling interests		2,642		(3,342)		4,854		(7,231)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests		106		(902)		471		(1,532)
Less: Net income attributable to redeemable noncontrolling interests										Less: Net income attributable to redeemable noncontrolling interests	3,029		2,642		4,153		4,854
Less: Net (loss) income attributable to nonredeemable noncontrolling interests										Less: Net (loss) income attributable to nonredeemable noncontrolling interests	(56)		106		(466)		471
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	2,271	$	(55,831)	$	(76,961)	$	(91,628)	Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	67,584	$	2,271	$	22,827	$	(76,961)

Basic earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders		$	0.07	$	(1.64)	$	(2.25)	$	(2.70)
Diluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders		$	0.07	$	(1.64)	$	(2.25)	$	(2.70)

Basic and diluted earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders										Basic and diluted earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	1.95	$	0.07	$	0.66	$	(2.25)

Weighted-average number of common shares outstanding:	Weighted-average number of common shares outstanding:									Weighted-average number of common shares outstanding:
Basic	Basic	34,278		34,021		34,186		33,961		Basic	34,684		34,278		34,544		34,186
Diluted	Diluted	34,436		34,021		34,186		33,961		Diluted	34,710		34,436		34,609		34,186

_________________

(a)~~Includes~~See Note 14, Related Party Transactions, for further information on related party revenues ~~from related parties of $30,702~~ and ~~$4,638 for the three months ended December 31, 2021 and 2020, respectively, and $34,889 and $7,461 for the six months ended December 31, 2021 and 2020, respectively.~~

~~(b)Includes net charges from related parties of$37,027~~ ~~and~~ ~~$35,270for the three months ended December 31, 2021 and 2020, respectively, and $79,360 and $75,186 for the six months ended December 31, 2021 and 2020, respectively.~~

~~(c)Includes net charges to related parties of $(9,526) and $(10,491)for the three months ended December 31, 2021 and 2020, respectively, and $(16,786) and $(20,538) for the six months ended December 31, 2021 and 2020, respectively.~~expenses

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(Unaudited)~~

~~(in thousands)~~

Three Months Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Net income (loss) $ 5,019 $ (60,075) $ (71,636) $ (100,391)
Other comprehensive income (loss), before income taxes:
Amortization of prior service credit included in net periodic benefit cost 510 416 1,020 894
Cumulative translation adjustments 2,486 11,883 (3,932) 25,834
Other comprehensive income (loss), before income taxes 2,996 12,299 (2,912) 26,728
Income tax benefit (expense) related to items of other comprehensive income (loss) (568) (3,733) 552 (6,465)
Other comprehensive income (loss), net of income taxes 2,428 8,566 (2,360) 20,263
Comprehensive income (loss) 7,447 (51,509) (73,996) (80,128)
Less: Net income (loss) attributable to redeemable noncontrolling interests 2,642 (3,342) 4,854 (7,231)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 106 (902) 471 (1,532)
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 4,699 $ (47,265) $ (79,321) $ (71,365)

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

~~(in thousands)~~

Six Months Ended
December 31,
2021 2020
Cash flows from operating activities:
Net loss $ (71,636) $ (100,391)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 59,963 54,087
Amortization of deferred financing costs 4,367 1,898
Benefit from deferred income taxes (17,173) (29,505)
Share-based compensation expense 43,699 45,984
Loss in equity method investments 2,981 3,264
Net unrealized loss (gains) on equity investments with readily determinable fair value 19,615 (26,431)
Provision for credit losses 1,236 495
Other non-cash adjustments 2,202 263
Change in assets and liabilities:
Accounts receivable (20,857) (9,821)
Receivables from related parties, net of payables 16,411 (2,049)
Prepaid expenses and other assets (11,504) (9,173)
Accounts payable 17,796 (12,614)
Prepaid/payable for income taxes 8,044 2,033
Accrued and other liabilities 5,133 (32,420)
Collections due to promoters, including noncurrent portion 5,011 (6,824)
Deferred revenue 47,016 14,077
Operating lease right-of-use assets and lease liabilities 20,482 4,660
Net cash provided by (used in) operating activities $ 132,786 $ (102,467)
Cash flows from investing activities:
Capital expenditures $ (313,076) $ (221,829)
Capitalized interest (19,926) (7,911)
Proceeds from maturity of short-term investments — 339,110
Proceeds from sale of equity securities — 20,583
Cash received for notes receivable — 6,328
Other investing activities 470 (43)
Net cash (used in) provided by investing activities $ (332,532) $ 136,238
See accompanying notes to unaudited consolidated financial statements.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)~~

~~(Unaudited)~~

~~(in thousands)~~

Six Months Ended
December 31,
2021 2020
Cash flows from financing activities:
Proceeds from issuance of term loan, net of issuance discount $ — $ 630,500
Proceeds from revolving credit facility — 6,500
Taxes paid in lieu of shares issued for equity-based compensation (15,240) (8,123)
Noncontrolling interest holders’ capital contribution 4,677 500
Distributions to noncontrolling interest holders (1,060) —
Distribution to related parties associated with the settlement of certain share-based awards (516) —
Repayments of revolving credit facility (15,000) —
Principal repayments on long-term debt (30,500) (16,250)
Payments for financing costs — (14,615)
Net cash (used in) provided by financing activities $ (57,639) $ 598,512
Effect of exchange rates on cash, cash equivalents and restricted cash (572) 7,795
Net (decrease) increase in cash, cash equivalents and restricted cash (257,957) 640,078
Cash, cash equivalents and restricted cash at beginning of period 1,539,976 1,121,141
Cash, cash equivalents and restricted cash at end of period $ 1,282,019 $ 1,761,219
Non-cash investing and financing activities:
Investments and loans to nonconsolidated affiliates $ 675 $ —
Capital expenditures incurred but not yet paid $ 154,131 $ 79,478
Share-based compensation capitalized in property and equipment $ 1,763 $ 2,784

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2022		2021		2022		2021
Net income (loss)	$	70,557	$	5,019	$	26,514	$	(71,636)
Other comprehensive income (loss), before income taxes:




Amortization of net actuarial loss included in net periodic benefit cost	510		510		1,020		1,020
Cumulative translation adjustments	14,803		2,486		(1,277)		(3,932)
Other comprehensive income (loss), before income taxes	15,313		2,996		(257)		(2,912)
Income tax (expense) benefit related to items of other comprehensive loss	(2,895)		(568)		49		552
Other comprehensive income (loss), net of income taxes	12,418		2,428		(208)		(2,360)
Comprehensive income (loss)	82,975		7,447		26,306		(73,996)
Less: Net income attributable to redeemable noncontrolling interests	3,029		2,642		4,153		4,854
Less: Net (loss) income attributable to nonredeemable noncontrolling interests	(56)		106		(466)		471
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	80,002	$	4,699	$	22,619	$	(79,321)

See accompanying notes to the unaudited condensed consolidated financial statements.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Six Months Ended
	December 31,
	2022		2021
OPERATING ACTIVITIES:
Net income (loss)	$	26,514	$	(71,636)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	58,814		59,963
Impairment and other gains, net	(7,885)		(161)
Amortization of deferred financing costs	2,634		4,367
Benefit (expense) from deferred income taxes	2,257		(17,173)
Share-based compensation expense	35,666		43,699


Amortization of right-of-use assets	15,421		12,451
Net unrealized loss on equity investments with and without readily determinable fair value	1,234		19,615


Other non-cash adjustments	2,798		6,580
Change in assets and liabilities:
Accounts receivable, net	9,421		(20,857)

Prepaid expenses and other current and non-current assets	(18,769)		4,907


Accounts payable, accrued and other current and non-current liabilities	(42,690)		35,984

Deferred revenue	(17,295)		47,016
Right-of-use lease assets and operating lease liabilities	(13,155)		8,031
Net cash provided by operating activities	$	54,965	$	132,786
INVESTING ACTIVITIES:
Capital expenditures, net	$	(558,808)	$	(313,076)
Capitalized interest	(50,335)		(19,926)


Proceeds from dispositions, net	27,904		—

Proceeds from sale of equity securities	3,819		—




Other investing activities	1,511		470
Net cash used in investing activities	$	(575,909)	$	(332,532)

FINANCING ACTIVITIES:


Proceeds from issuance of term loan	$	275,000	$	—

Taxes paid in lieu of shares issued for equity-based compensation	(14,980)		(15,240)
Noncontrolling interest holders’ capital contributions	2,000		4,677
Distributions to noncontrolling interest holders	(1,325)		(1,060)
Distributions to related parties associated with the settlement of certain share-based awards	(571)		(516)

Repayments of revolving credit facility	—		(15,000)
Principal repayments on long-term debt	(26,625)		(30,500)

Payments for financing costs	(5,112)		—
Other financing activities	788		—
Net cash provided by (used in) financing activities	$	229,175	$	(57,639)
Effect of exchange rates on cash, cash equivalents and restricted cash	(505)		(572)
Net decrease in cash, cash equivalents and restricted cash	(292,274)		(257,957)
Cash, cash equivalents and restricted cash at beginning of period	846,010		1,539,976
Cash, cash equivalents and restricted cash at end of period	$	553,736	$	1,282,019
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Investments and loans to nonconsolidated affiliates	$	—	$	675

Capital expenditures incurred but not yet paid	$	38,127	$	42,620
Share-based compensation capitalized in property and equipment	$	1,802	$	1,763

See accompanying notes to the unaudited condensed consolidated financial statements.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

(in thousands)

Three Months Ended December 31, 2021
Common
Stock
Issued Additional
Paid-In
Capital Accumulated Deficit Accumulated
Other
Comprehensive
Loss Total Madison Square Garden Entertainment Corp. Stockholders’ Equity Non -
redeemable
Noncontrolling
Interests Total Equity Redeemable
Noncontrolling
Interests
Balance as of September 30, 2021 $ 342 $ 2,293,157 $ (175,573) $ (35,060) $ 2,082,866 $ 13,141 $ 2,096,007 $ 140,410
Net income — — 2,271 — 2,271 106 2,377 2,642
Other comprehensive income — — — 2,428 2,428 — 2,428 —
Comprehensive income — — — — 4,699 106 4,805 2,642
Share-based compensation — 24,595 — — 24,595 — 24,595 —
Tax withholding associated with shares issued for equity-based compensation — (337) — — (337) — (337) —
Accretion of put options — — — — — — — 587
Contributions from noncontrolling interest holders — — — — — 3,805 3,805 —
Distributions to noncontrolling interest holders — — — — — (1,060) (1,060) (1,635)
Balance as of December 31, 2021 $ 342 $ 2,317,415 $ (173,302) $ (32,632) $ 2,111,823 $ 15,992 $ 2,127,815 $ 142,004
See accompanying notes to unaudited consolidated financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Three Months Ended December 31, 2020
Common Stock Issued Additional
Paid-In
Capital Retained Earnings (Accumulated Deficit) Accumulated
Other
Comprehensive Loss Total Madison Square Garden Entertainment Corp. Stockholders’ Equity Non -
redeemable
Noncontrolling
Interests Total Equity Redeemable
Noncontrolling
Interests
Balance as of September 30, 2020 $ 340 $ 2,294,072 $ 16,345 $ (37,295) $ 2,273,462 $ 11,773 $ 2,285,235 $ 17,298
Reversal of valuation allowance 1,415 — 1,415 — 1,415 —
Net loss — — (55,831) — (55,831) (902) (56,733) (3,342)
Other comprehensive income — — — 8,566 8,566 — 8,566 —
Comprehensive loss — — — — (47,265) (902) (48,167) (3,342)
Share-based compensation — 31,158 — — 31,158 — 31,158 —
Tax withholding associated with shares issued for equity-based compensation — (53) — — (53) — (53) —
Accretion of put options — — — — — — — 587
Contribution from noncontrolling interest holders — — — — — 300 300 —
Balance as of December 31, 2020 $ 340 $ 2,325,177 $ (38,071) $ (28,729) $ 2,258,717 $ 11,171 $ 2,269,888 $ 14,543
See accompanying notes to unaudited consolidated financial statements.




	Common Stock Issued		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of September 30, 2022	$	342	$	2,303,135	$	(335,493)	$	(60,981)	$	1,907,003	$	11,723	$	1,918,726	$	185,711

Net income (loss)	—		—		67,584		—		67,584		(56)		67,528		3,029
Other comprehensive income	—		—		—		12,418		12,418		—		12,418		—

Share-based compensation	—		20,784		—		—		20,784		—		20,784		—
Tax withholding associated with shares issued for equity-based compensation	4		(1,017)		—		—		(1,013)		—		(1,013)		—

BCE disposition	—		—		—		—		—		667		667		—

Accretion of put options and adjustments	—		(895)		—		—		(895)		—		(895)		1,482

Contributions	—		—		—		—		—		1,500		1,500		—


Distributions	—		—		—		—		—		(795)		(795)		—
Balance as of December 31, 2022	$	346	$	2,322,007	$	(267,909)	$	(48,563)	$	2,005,881	$	13,039	$	2,018,920	$	190,222

Balance as of September 30, 2021	$	342	$	2,293,157	$	(175,573)	$	(35,060)	$	2,082,866	$	13,141	$	2,096,007	$	140,410
Net income	—		—		2,271		—		2,271		106		2,377		2,642
Other comprehensive income	—		—		—		2,428		2,428		—		2,428		—
Share-based compensation	—		24,595		—		—		24,595		—		24,595		—
Tax withholding associated with shares issued for equity-based compensation	—		(337)		—		—		(337)		—		(337)		—
Accretion of put options	—		—		—		—		—		—		—		587

Contributions	—		—		—		—		—		3,805		3,805		—
Distributions	—		—		—		—		—		(1,060)		(1,060)		(1,635)
Balance as of December 31, 2021	$	342	$	2,317,415	$	(173,302)	$	(32,632)	$	2,111,823	$	15,992	$	2,127,815	$	142,004
See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

(in thousands)

Six Months Ended December 31, 2021
Common
Stock
Issued Additional
Paid-In
Capital Accumulated Deficit Accumulated
Other
Comprehensive
Loss Total Madison Square Garden Entertainment Corp. Stockholders’ Equity Non -
redeemable
Noncontrolling
Interests Total Equity Redeemable
Noncontrolling
Interests
Balance as of June 30, 2021 $ 340 $ 2,294,775 $ (96,341) $ (30,272) $ 2,168,502 $ 11,904 $ 2,180,406 $ 137,834
Net (loss) income — — (76,961) — (76,961) 471 (76,490) 4,854
Other comprehensive loss — — — (2,360) (2,360) — (2,360) —
Comprehensive (loss) income — — — — (79,321) 471 (78,850) 4,854
Share-based compensation — 44,287 — — 44,287 — 44,287 —
Tax withholding associated with shares issued for equity-based compensation 2 (15,242) — — (15,240) — (15,240) —
Adjustment of redeemable noncontrolling interest for change in ownership — — — — — — — (7,500)
Redeemable noncontrolling interest adjustment to redemption fair value — (6,178) — — (6,178) — (6,178) 7,566
Accretion of put options — — — — — — — 1,174
Contributions from noncontrolling interest holders — — — — — 4,677 4,677 —
Distributions to noncontrolling interest holders — — — — — (1,060) (1,060) (1,635)
Distribution to related parties associated with the settlement of certain share-based awards — (227) — — (227) — (227) (289)
Balance as of December 31, 2021 $ 342 $ 2,317,415 $ (173,302) $ (32,632) $ 2,111,823 $ 15,992 $ 2,127,815 $ 142,004
See accompanying notes to unaudited consolidated financial statements.




	Common Stock Issued		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of June 30, 2022	$	342	$	2,301,970	$	(290,736)	$	(48,355)	$	1,963,221	$	12,163	$	1,975,384	$	184,192

Net income (loss)	—		—		22,827		—		22,827		(466)		22,361		4,153
Other comprehensive loss	—		—		—		(208)		(208)		—		(208)		—

Share-based compensation	—		36,295		—		—		36,295		—		36,295		—
Tax withholding associated with shares issued for equity-based compensation	4		(14,984)		—		—		(14,980)		—		(14,980)		—

BCE disposition	—		—		—		—		—		667		667		—

Accretion of put options and adjustments	—		(895)		—		—		(895)		—		(895)		2,069

Contributions	—		—		—		—		—		2,000		2,000		—


Distributions	—		(379)		—		—		(379)		(1,325)		(1,704)		(192)
Balance as of December 31, 2022	$	346	$	2,322,007	$	(267,909)	$	(48,563)	$	2,005,881	$	13,039	$	2,018,920	$	190,222

Balance as of June 30, 2021	$	340	$	2,294,775	$	(96,341)	$	(30,272)	$	2,168,502	$	11,904	$	2,180,406	$	137,834
Net (loss) income	—		—		(76,961)		—		(76,961)		471		(76,490)		4,854
Other comprehensive loss	—		—		—		(2,360)		(2,360)		—		(2,360)		—
Share-based compensation	—		44,287		—		—		44,287		—		44,287		—
Tax withholding associated with shares issued for equity-based compensation	2		(15,242)		—		—		(15,240)		—		(15,240)		—
Accretion of put options	—		—		—		—		—		—		—		1,174
Adjustments of redeemable noncontrolling interest			(6,178)						(6,178)				(6,178)		66
Contributions	—		—		—		—		—		4,677		4,677		—
Distributions	—		(227)		—		—		(227)		(1,060)		(1,287)		(1,924)
Balance as of December 31, 2021	$	342	$	2,317,415	$	(173,302)	$	(32,632)	$	2,111,823	$	15,992	$	2,127,815	$	142,004
See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Six Months Ended December 31, 2020
Common Stock Issued Additional
Paid-In
Capital Retained Earnings (Accumulated Deficit) Accumulated
Other
Comprehensive Loss Total Madison Square Garden Entertainment Corp. Stockholders’ Equity Non -
redeemable
Noncontrolling
Interests Total Equity Redeemable
Noncontrolling
Interests
Balance as of June 30, 2020 $ 338 $ 2,285,709 $ 50,246 $ (48,992) $ 2,287,301 $ 12,203 $ 2,299,504 $ 20,600
Cumulative effect of adoption of ASU 2016-13, credit losses (480) — (480) (480)
Reversal of valuation allowance — — 3,791 — 3,791 — 3,791 —
Net loss — — (91,628) — (91,628) (1,532) (93,160) (7,231)
Other comprehensive income — — — 20,263 20,263 — 20,263 —
Comprehensive loss — (71,365) (1,532) (72,897) (7,231)
Share-based compensation — 47,593 — — 47,593 — 47,593 —
Tax withholding associated with shares issued for equity-based compensation 2 (8,125) — — (8,123) — (8,123) —
Accretion of put options — — — — — — — 1,174
Contributions from noncontrolling interest holders — — — — — 500 500 —
Balance as of December 31, 2020 $ 340 $ 2,325,177 $ (38,071) $ (28,729) $ 2,258,717 $ 11,171 $ 2,269,888 $ 14,543
See accompanying notes to unaudited consolidated financial statements.

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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

~~Entertainment Distribution and Merger with MSG Networks Inc.~~Description of Business

Madison Square Garden Entertainment Corp. (together with its subsidiaries, the “Company” or “MSG Entertainment”) ~~was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports”)~~, formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of MSG Entertainment to MSG Sports’ stockholders (the “Entertainment Distribution”), which occurred on April 17, 2020 (the “Entertainment Distribution Date”). See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, as amended by Form 10-K/A filed on February 9, 2022 (the “Form 10-K”) for more information regarding the Entertainment Distribution. As part of the Entertainment Distribution, the Company has entered into various agreements with MSG Sports as detailed in Note 18.

On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to the Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time ~~multiplied~~ by 0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time ~~multiplied~~ by 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.

The Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control. As a result, all prior period balances in these consolidated financial statements (including share activities) were retrospectively adjusted as if MSG Entertainment and MSG Networks Inc. had been operating as a single company.

~~Description of Business~~

~~The Company~~ is a leader in live ~~experiences~~entertainment comprised of iconic ~~venues;~~venues, marquee entertainment ~~brands;~~brands, regional sports and entertainment ~~networks;~~networks and popular dining and nightlife ~~offerings; and a premier music festival.~~offerings. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences.

The Company is comprised of 3three reportable segments: Entertainment, MSG Networks and Tao Group Hospitality.

•~~The Entertainment segment includes~~ As of December 31, 2022, there have been no changes to the ~~Company’s portfolio~~reportable segments of ~~venues: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall,~~ the ~~Beacon Theatre,~~Company. See Note 1, Description of Business and ~~The Chicago Theatre. In addition,~~Basis of Presentation, to the ~~Company has unveiled its vision~~consolidated and combined financial statements included in the Form 10-K for ~~state-of-the-art venues, called MSG Sphere,~~the fiscal years ended June 30, 2022, 2021 and ~~is currently building its first such venue in Las Vegas. The Entertainment segment also includes~~2020 as filed with the ~~original production,~~SEC on August 19, 2022 (the “2022 Form 10-K”) for more information regarding the ~~Christmas~~

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~Spectacular Starring the Radio City Rockettes~~ (“~~Christmas Spectacular~~”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival. This segment also includes our bookings business, which features a variety of live entertainment and sports experiences.

•~~The MSG Networks segment is comprised~~details of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. MSG Networks serves the New York Designated Market Area (“DMA”), as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders, New Jersey Devils and Buffalo Sabres of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants and Buffalo Bills of the National Football League.

•The Tao Group Hospitality segment features the Company’s controlling interest in TAO Group Holdings LLC, a hospitality group with globally-recognized entertainment dining and nightlife brands including: Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan and Omnia.

The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Garden and The Chicago Theatre. The Company leases Radio City Music Hall and the Beacon Theatre. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in Las Vegas, New York, Southern California, London, Singapore, Sydney and various other domestic and international locations.business.

Basis of Presentation

The Company reports on a fiscal year basis ending on June 30th (“Fiscal Year”). In these unaudited condensed consolidated interim financial statements ~~the year ending on June 30, 2022 is referred to as “Fiscal Year 2022,” and~~(“financial statements”), the years ended on June 30, ~~2021~~2023 and ~~2020~~2022 are referred to as “Fiscal Year ~~2021”~~2023” and “Fiscal Year ~~2020”,~~2022,” respectively. Certain Fiscal Year 2022 amounts have been reclassified to conform to the Fiscal Year 2023 presentation.

The accompanying ~~interim consolidated~~ financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the ~~instruction~~instructions of Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the Company’s audited consolidated ~~and combined~~ financial statements and notes thereto for ~~the year ended June 30, 2021~~Fiscal Year 2022 included in the ~~Company’s Annual Report on~~2022 Form ~~10-K and~~10-K.

In the ~~Company’s consolidated~~opinion of the Company, the accompanying financial statements ~~and notes thereto~~contain all adjustments, consisting of only normal recurring adjustments, necessary for the three months ended September 30, 2021 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2021, as amended by Form 10-Q/A filed on February 9, 2022. The consolidateda fair statement of its financial ~~statements~~position as of December 31, ~~2021~~2022, and its results of operations for the three and six months ended December 31, 2022, and 2021, and ~~2020 presented herein are unaudited; however, in~~cash flows for the ~~opinion of management, the~~six months ended December 31, 2022, and 2021. The condensed consolidated financial statements ~~reflect~~and the accompanying notes as of Fiscal Year 2023, were derived from audited annual financial statements but do not contain all ~~adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation~~ of the ~~results for~~footnote disclosures from the ~~interim periods presented.~~ 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 Starring the Radio City Rockettes~~and~~ (the “Christmas Spectacular”), arena license fees ~~from MSG Sports~~ in connection with the ~~Knicks and Rangers~~ use of Madison Square Garden (“The Garden”) by the ~~Garden,~~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”), and MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming, the Company generally earns a disproportionate share of its annual revenues in the second and third quarters of its fiscal year. ~~In addition, the Company’s operating results since the third quarter of Fiscal Year 2020 have been negatively impacted due to the COVID-19 pandemic.~~

As discussed above, the Merger has been accounted for as a transaction between entities under common control and resulted in a change in reporting entity for purposes of U.S. GAAP. The results of operations for the eight days ended July 8, 2021 from MSG Networks were immaterial and the Company has included these results in the period for the six months ended December 31, 2021. The following table provides the impact of the change in reporting entity on the results of operations for the three and six months ended December 31, 2020 in accordance with Accounting Standards Codification (“ASC”) Subtopic 250-10-50-6:

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Three Months Ended Six Months Ended
December 31, 2020
Decrease in net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 61,472 $ 115,165
Decrease in other comprehensive income $ (3,607) $ (6,213)
Decrease in net loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders (basic and diluted) $ 3.25 $ 5.88

Impact of the COVID-19 Pandemic

The Company’s operations and operating results ~~have been, and continue to be,~~were not materially impacted by the COVID-19 pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. ~~While operations have resumed, it is not clear when we will fully return to normal operations.~~

As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 with certain safety protocols and social distancing. Beginning in May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, including our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine (although specific performers may require enhanced protocols). Children under age 5 can attend events with a vaccinated adult, but ages 2 to 4 need to wear a mask while inside our venues. In addition, effective August 20, 2021 and continuing, masks are required for all individuals in indoor public spaces in Chicago, including our venues.

~~For Fiscal~~ ~~Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For~~during the six months ended December 31, ~~2021 and~~2022, as ~~of this date, live~~compared to the prior year period, which was impacted by (i) fewer ticketed events have been permitted to be held at all of our performance venues and we are continuing to host and book new events. As a result of an increase in cases of a COVID-19 variant, select bookings were postponed or cancelled at our performance venues indue to the ~~second quarter~~lead-time required to book touring acts and artists, (ii) the postponement or cancellation of ~~Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings~~select events at our performance ~~venues.~~

~~The impact of the COVID-19 pandemic on our operations also included (i)~~venues (including the partial cancellation of the 2021 production of the Christmas ~~Spectacular,~~ ~~(ii) the cancellation of the 2020 production of the~~ ~~Christmas Spectacular~~Spectacular), and a temporary impact to both demand and operations at Tao Group Hospitality as a result of an increase in COVID-19 cases during the fiscal second quarter, and (iii) certain regulatory requirements, including vaccination/mask requirements for our performance, entertainment dining and nightlife venues, which contributed to certain Tao Group Hospitality branded locations remaining closed during the ~~cancellation of both the 2020 and 2021 Boston Calling Music Festivals.~~

~~The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden.~~ ~~As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety~~period. See Note 1, Impact of the ~~Knicks~~COVID-19 Pandemic, to the consolidated and ~~Rangers 2020-21 regular seasons, which materially impacted~~combined financial statements included in the ~~payments we received under~~2022 Form 10-K for more information regarding the ~~Arena License Agreements for Fiscal Year 2021.~~ ~~On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements and~~ ~~full 82-game regular seasons for the 2021-22 NBA and NHL seasons are scheduled~~.

~~As a result~~impact of the COVID-19 pandemic ~~and league and~~on our business.

It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in new government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absenceor league-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedulesand/or demand for ~~its five professional teams across both the NBA and NHL, and, as a result,~~ our ~~advertising revenue and certain operating expenses, including rights fees expense, reflect the same.~~

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

~~virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in March 2020. Additionally, three venues were permanently closed.~~ Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021 and during the first two quarters of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. ~~Following updated regulations applicable to indoor dining facilities and~~performance, entertainment venues, effective January 3, 2022 for Chicago, and January 29, 2022 for New York, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, but Tao Group Hospitality is continuing to operate without capacity restrictions in domestic and key international markets.

It is unclear how long and to what extent COVID-19 concerns, including with respect to new variants, will continue to impact government and league-mandated capacity restrictions or vaccination/mask requirements, the use of and/or demand for our entertainment and dining and nightlife 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.

~~Impairment and other (gains) loss, net~~

For the three months ended December 31, 2021, the Company recorded other gains of $7,979 primarily from extinguishments and modification of lease liabilities associated with certain Hakkasan venues and a gain on disposal of one of the Hakkasan venues. For the three months ended September 30, 2021, Tao Group Hospitality recorded an impairment charge for long-lived assets of $7,818 due to decisions made by management to cease operations at certain Hakkasan venues subsequent to the Hakkasan acquisition date, resulting in the impairment of the respective right-of-use asset and a leasehold improvement. There were no other impairment charges recorded by the Company for the six months ended December 31, 2021. The duration and impact of the COVID-19 pandemic may result in future impairment charges that management will evaluate as facts and circumstances evolve over time. Refer to Note 8, Note 9 and Note 10 for further detail of the Company’s intangible assets, long-lived assets and goodwill.

Note 2. Accounting Policies

Principles of Consolidation

The ~~consolidated~~ financial statements of the Company include the accounts of Madison Square Garden Entertainment Corp. and its ~~subsidiaries.~~subsidiaries, which include Tao Group Holdings, LLC and its subsidiaries (“Tao Group Hospitality”) and Boston Calling Events, LLC (“BCE”), until its disposition on December 2, 2022. All significant intercompany transactions and balances have been eliminated in consolidation. ~~In addition, the consolidated~~

The financial statements of the Company include ~~the~~ accounts ~~from~~of Tao Group Hospitality, and BCE (up to December 2, 2022) in which the Company has controlling voting interests. The Company’s consolidation criteria are based on authoritative accounting guidance for ~~voting interest or variable interest entities.~~identifying a controlling financial interest. Tao Group Hospitality and BCE are consolidated with the equity owned by other stockholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying condensed consolidated balance sheets, and the other stockholders’ portion of net ~~income~~earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss), respectively.

The Company disposed of its controlling interest in BCE on December 2, 2022 and these condensed consolidated financial statements reflect the results of operations of BCE until its disposition. See Note 3, Dispositions, for details regarding the disposal. See Note 2, Summary of Significant Accounting Policies, to the ~~Company’s audited~~ consolidated and combined financial statements ~~and notes thereto for the year ended June 30, 2021~~ included in the ~~Company’s Annual Report on~~2022 Form 10-K regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality.

Use of Estimates

The preparation of the accompanying ~~consolidated~~ financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the ~~amount~~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, valuation of investments, goodwill, intangible assets, other long-lived assets, deferred tax assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, ~~tax accruals~~ and other liabilities. In addition, estimates are used in revenue recognition, rights fees, ~~income tax,~~ performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of ~~contingent consideration and~~ noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the financial statements to be reasonable.

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.

Summary of Significant Accounting Policies

The following is an update to the Company's Summary of Significant Accounting Policies, disclosed in ~~its~~the 2022 Form 10-K. The update primarily reflects ~~specific policies~~the addition of a policy related to production costs for the ~~MSG Networks segment in connection with~~Company’s Original Immersive Productions.

Production Costs for the ~~Merger.~~

~~Revenue Recognition — Media Affiliation Fee and Advertising Revenues~~Company’s Original Immersive Productions

The Company defers certain costs during the production phase of its original immersive productions for MSG ~~Networks segment generates revenues principally from affiliation~~Sphere that are directly related to production activities. Such costs include, but are not limited to, fees ~~charged~~paid to ~~cable, satellite, telephone~~writers, directors, and ~~other platforms (“Distributors”) for the right to carry its networks,~~producers as well as ~~from the sale of advertising, largely derived from the sale of inventory in its live professional sports programming. Due to the COVID-19 pandemic, the NBA~~video and NHL 2020-21 regular seasons were delayed and primarily occurred during the third and fourth quarters of Fiscal Year 2021 and will affect the comparability in the second, third and the fourth fiscal quarters of Fiscal Year 2022.

Affiliation fee revenue is earned from Distributors for the right to carry the segment’s networks under contracts, commonly referred to as “affiliation agreements.” The performance obligation under its affiliation agreements is satisfied as MSG Networks provides its programming over the term of the affiliation agreement.

Affiliation fee is the predominant revenue stream of the MSG Networks segment. Substantially all of the MSG Networks’ affiliation agreements are sales-based and usage-based royalty arrangements, the revenue for which is recognized as the sale or usage occurs. The transaction price is represented by affiliation fees that are generally based upon contractual rates applied to the number of the Distributor’s subscribers who receive or can receive the MSG Networks programming. Such subscriber information is generally not received until after the close of the reporting period, and in these cases, the Company estimates the number of subscribers. Historical adjustments to recorded estimates have not been material.

In addition to affiliation fee revenue, the MSG Networks segment also earns advertising revenue primarily through the sale of commercial time and other advertising inventory during its live professional sports programming. In general, these advertising arrangements either do not exceed one year or are primarily multi-year media banks, the elements of which are agreed upon each year. Advertising revenue is recognized as advertising is aired. In certain advertising arrangements, the Company guarantees specified viewer ratings for its programming. In such cases, the promise to deliver the guaranteed viewer ratings by airing the advertising represents MSG Networks’ performance obligation. A contract liability is recognized as deferred revenue to the extent any guaranteed viewer ratings are not met and the customer is expected to exercise a contractual right for additional advertising time. The related revenue is subsequently recognized as revenue either when MSG Networks provides the required additional advertising time, or additional performance requirements become remote, which may be at the time the guarantee obligation contractually expires.

~~Direct Operating Expenses~~

~~Direct operating expenses from the MSG Networks segment primarily represent media rights fees and other direct programming~~music production costs and production specific overhead. Deferred immersive production costs such as the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities. The professional team media rights acquired under media rights agreements to telecast various sporting events and other programming for exhibition on the segment’s networks are ~~typically expensed on a straight-line basis over the applicable annual contract or license period.~~

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(Continued)

~~Advertising Expenses~~

~~Advertising~~amortized in the same ratio that current period actual revenue bears to estimated remaining unrecognized ultimate revenue as of the beginning of the current fiscal year. Estimates of ultimate revenues are prepared on an individual production basis and reviewed regularly by management and revised where necessary to reflect the most current information. Ultimate revenues reflect management’s estimates of future revenue over a period not to exceed ten years following the premiere of the production. Deferred immersive production costs are typically charged to expense when incurred. The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors (see discussion below), that involve the exchange of advertising and promotional benefits, for the segment’s services. Total advertising costs, which includes the aforementioned nonmonetary transactions and are classified in selling, general and administrative expenses, were $11,102 and $16,229 for the three and six months ended December 31, 2021, respectively, and $3,667 and $8,469 for the three and six months ended December 31, 2020, respectively.

~~Noncash Consideration~~

The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors, that involve the exchange of products or services, such as advertising and promotional benefits, for the segment’s services. For arrangements that are subject to ~~sales based~~recoverability assessments whenever there is an indication of potential impairment.

Recently Issued and usage-based royalty guidance, MSG Networks measures noncash consideration that it receives at fair value as the sale or usage occurs. For other arrangements, the MSG Networks segment measures the estimated fair value of the noncash consideration that it receives at contract inception. If the MSG Networks segment cannot reasonably estimate the fair value of the noncash consideration, the segment measures the fair value of the consideration indirectly by reference to the standalone selling price of the services promised to the customer in exchange for the consideration as revenues.

~~Interest Capitalization~~

For significant long term construction projects, such as MSG Sphere, the Company begins to capitalize qualified interest costs once activities necessary to get the asset ready for its intended use have commenced. The Company calculates qualified interest capitalization using the average amount of accumulated expenditures during the period the asset is being prepared for its intended use and a capitalization rate which is derived from the Company’s weighted average borrowing rate during such time, in the absence of specific borrowings related to the significant long term construction projects. The Company ceases capitalization on any portions substantially completed and ready for their intended use. See Note 8 for further details on interest capitalization during the three and six months ended December 31, 2021 and 2020.

Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

No recently issued accounting guidance materially impacted or is expected to impact the Company's financial statements.

Recently Adopted Accounting Pronouncements

In ~~December 2019~~October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2019-12,~~2021-08, ~~Income Taxes (Topic 740): Simplifying the~~ Accounting for ~~Income Taxes~~Contract Assets and Contract Liabilities From Contracts With Customers. This ASU ~~eliminates certain exceptions to~~requires that the ~~general approach~~acquiring entity in a business combination recognize and measure contract assets and contract liabilities acquired in accordance with ASC Topic ~~740 and includes methods of simplification to the existing guidance.~~606. This standard was adopted by the Company in the first quarter of Fiscal Year ~~2022.~~2023. The adoption of ~~the~~this standard had no impact on the Company’s ~~consolidated financial statements.~~

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

Note 3. ~~Acquisition~~Dispositions

~~Acquisition~~Disposition of ~~Hakkasan~~

~~See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included~~Our Interest in the Company’s Annual Report on Form 10-K regarding the details of Tao Group Hospitality’s acquisition of the business (“Hakkasan”) of Hakkasan USA, Inc., a Delaware corporation (“Hakkasan Parent”) on April 27, 2021. During the three months ended September 30, 2021, the Company completed the finalization of a working capital adjustment and net debt against agreed upon targets. As a result, the initial determination of approximately 18% noncontrolling interest ownership

Boston Calling Events

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~of common equity interests in Tao Group Sub-Holdings LLC owned by the Hakkasan Parent was subsequently revised to approximately 15%.~~ The Company ~~continues~~entered into an agreement on December 1, 2022, to ~~own a 77.5%~~sell its controlling interest in ~~Tao Group Holdings LLC, which, after~~BCE (the “BCE Disposition”). The transaction closed on December 2, 2022, resulting in a total gain on sale of $8,744, net of transaction costs. BCE meets the ~~ownership adjustments, translates to an approximately 66% indirect controlling interest~~definition of a business under SEC Regulation S-X Rule 11-01(d)-1 and FASB ASC Topic 805 — Business Combinations. This disposition does not represent a strategic shift with a major effect on the Company’s operations, and as such, has not been reflected as a discontinued operation under FASB ASC Subtopic 205-20 — Discontinued Operations. The gain on the BCE Disposition was reported under the Entertainment segment and recorded in ~~Tao Group Sub-Holdings LLC. Tao Group Hospitality’s results will continue to be consolidated~~Impairment and other gains, net in the ~~financial results~~condensed consolidated statements of ~~the Company.~~operations.

~~The Company’s purchase price allocation and measurement period adjustment for the Hakkasan acquisition is presented below:~~Disposition of Corporate Aircraft

Fair Value Recognized as of Acquisition Date (as previously reported)
Measurement Period Adjustment (a)
Fair Value Recognized as of September 30, 2021 as adjusted (b)
Cash and cash equivalents $ 16,737 $ — $ 16,737
Property and equipment, net 33,393 — 33,393
Right-of-use lease assets 44,818 — 44,818
Amortizable intangible assets, net 47,170 (7,020) 40,150
Other assets 12,641 — 12,641
Accrued expenses and other current liabilities (15,957) 1,534 (14,423)
Operating lease liabilities (52,025) — (52,025)
Other liabilities (13,655) — (13,655)
Total identifiable net assets acquired 73,122 (5,486) 67,636
Goodwill 3,378 (2,014) 1,364
Redeemable noncontrolling interests $ (76,500) $ 7,500 $ (69,000)

~~_________________~~

~~(a)During the three months ended September~~On December 30, ~~2021,~~2022, the Company sold its owned aircraft for $20,375. In connection with the sale, the Company recognized a loss of $4,332, net of transaction costs. The loss on the aircraft disposition was reported under the Entertainment segment and recorded an adjustment to reflect a measurement period adjustment. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in ~~Tao Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease~~Impairment and other gains, net in the ~~Company’s redeemable noncontrolling interest~~condensed consolidated statements of $7,500, a decrease in Goodwill of $480, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534.

~~(b)No additional adjustments were recorded during the three months ended December 31, 2021.~~operations.

Note 4. Revenue Recognition

Contracts with Customers

See Note 2, Summary of Significant Accounting Policies and Note 4, Revenue Recognition, to the ~~Company’s audited~~ consolidated and combined financial statements ~~and notes thereto for the year ended June 30, 2021~~ included in the ~~Company’s Annual Report on~~2022 Form 10-K ~~and “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues”~~ for more information regarding the details of the Company’s revenue recognition policies. All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, except for revenues from ~~Arena~~the arena license agreements that require the Knicks and the Rangers to play their home games at The Garden (the “Arena License ~~Agreements,~~Agreements”), leases and subleases that are accounted for in accordance with ASC Topic ~~842 of $29,196 and $31,512 for the three and sixmonths ended December 31, 2021, respectively, and $2,334 and $3,082 for the three and sixmonths ended December 31, 2020, respectively.~~

~~The following table presents the activity in the allowance for credit losses for the six months ended December 31, 2021:~~842.

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(Continued)


~~Beginning balance, June 30, 2021~~	$	~~6,449~~
~~Provision for expected credit losses~~	~~1,236~~
~~Write-offs~~	~~(1,760)~~

~~Ending balance, December 31, 2021~~	$	~~5,925~~

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source and reportable segment based upon the timing of transfer of goods or services to the customer ~~in accordance with ASC Subtopic 606-10-50-5,~~ for the three and six months ended December 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended											Three Months Ended
		December 31, 2021											December 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)	Event-related and entertainment dining and nightlife offerings (a)	$	155,476	$	—	$	108,241	$	(657)	$	263,060	Event-related and entertainment dining and nightlife offerings (a)	$	238,888	$	—	$	117,365	$	(281)	$	355,972
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	50,979		1,787		490		(521)		52,735		Sponsorship, signage and suite licenses (b)	68,997		2,404		193		(330)		71,264
Media related, primarily from affiliation agreements ~~(c)~~(b)	Media related, primarily from affiliation agreements ~~(c)~~(b)	—		156,202		—		—		156,202		Media related, primarily from affiliation agreements ~~(c)~~(b)	—		154,401		—		—		154,401
Other ~~(d)~~(c)	Other ~~(d)~~(c)	11,959		1,992		8,355		(7,060)		15,246		Other ~~(d)~~(c)	15,353		2,093		18,436		(8,601)		27,281
Total revenues from contracts with customers	Total revenues from contracts with customers	$	218,414	$	159,981	$	117,086	$	(8,238)	$	487,243	Total revenues from contracts with customers	323,238		158,898		135,994		(9,212)		608,918
Revenues from Arena License Agreements, leases and subleases												Revenues from Arena License Agreements, leases and subleases	33,280		—		—		—		33,280
Total revenues												Total revenues	$	356,518	$	158,898	$	135,994	$	(9,212)	$	642,198



	Three Months Ended
	December 31, 2021
	Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)	$	155,476	$	—	$	108,241	$	(657)	$	263,060
Sponsorship, signage and suite licenses (b)	50,979		1,787		490		(521)		52,735
Media related, primarily from affiliation agreements (b)	—		156,202		—		—		156,202
Other (c)	11,959		1,992		8,355		(7,060)		15,246
Total revenues from contracts with customers	218,414		159,981		117,086		(8,238)		487,243
Revenues from Arena License Agreements, leases and subleases	29,196		—		—		—		29,196
Total revenues	$	247,610	$	159,981	$	117,086	$	(8,238)	$	516,439


		Three Months Ended											Six Months Ended
		December 31, 2020											December 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)	Event-related and entertainment dining and nightlife offerings (a)	$	1,001	$	—	$	9,179	$	(43)	$	10,137	Event-related and entertainment dining and nightlife offerings (a)	$	341,678	$	—	$	232,883	$	(329)	$	574,232
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	6,064		408		414		21		6,907		Sponsorship, signage and suite licenses (b)	107,389		2,648		996		(744)		110,289
Media related, primarily from affiliation agreements ~~(c)~~(b)	Media related, primarily from affiliation agreements ~~(c)~~(b)	—		145,364		—		—		145,364		Media related, primarily from affiliation agreements ~~(c)~~(b)	—		276,213		—		—		276,213
Other ~~(d)~~(c)	Other ~~(d)~~(c)	3,270		467		898		(625)		4,010		Other ~~(d)~~(c)	18,487		2,516		34,766		(9,153)		46,616
Total revenues from contracts with customers	Total revenues from contracts with customers	$	10,335	$	146,239	$	10,491	$	(647)	$	166,418	Total revenues from contracts with customers	467,554		281,377		268,645		(10,226)		1,007,350
Revenues from Arena License Agreements, leases and subleases												Revenues from Arena License Agreements, leases and subleases	36,066		—		—		—		36,066
Total revenues												Total revenues	$	503,620	$	281,377	$	268,645	$	(10,226)	$	1,043,416

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Six Months Ended
December 31, 2021
Entertainment MSG Networks Tao Group
Hospitality Eliminations Total
Event-related and entertainment dining and nightlife offerings (a)
$ 177,492 $ — $ 216,931 $ (838) $ 393,585
Sponsorship, signage and suite licenses (b)
57,956 2,423 625 (521) 60,483
Media related, primarily from affiliation agreements (c)
— 296,673 — — 296,673
Other (d)
14,889 2,358 18,994 (7,545) 28,696
Total revenues from contracts with customers $ 250,337 $ 301,454 $ 236,550 $ (8,904) $ 779,437


		Six Months Ended											Six Months Ended
		December 31, 2020											December 31, 2021
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)	Event-related and entertainment dining and nightlife offerings (a)	$	1,729	$	—	$	14,839	$	(43)	$	16,525	Event-related and entertainment dining and nightlife offerings (a)	$	177,492	$	—	$	216,931	$	(838)	$	393,585
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	8,524		692		486		(211)		9,491		Sponsorship, signage and suite licenses (b)	57,956		2,423		625		(521)		60,483
Media related, primarily from affiliation agreements ~~(c)~~(b)	Media related, primarily from affiliation agreements ~~(c)~~(b)	—		302,015		—		—		302,015		Media related, primarily from affiliation agreements ~~(c)~~(b)	—		296,673		—		—		296,673
Other ~~(d)~~(c)	Other ~~(d)~~(c)	6,890		895		2,387		(1,986)		8,186		Other ~~(d)~~(c)	14,889		2,358		18,994		(7,545)		28,696
Total revenues from contracts with customers	Total revenues from contracts with customers	$	17,143	$	303,602	$	17,712	$	(2,240)	$	336,217	Total revenues from contracts with customers	250,337		301,454		236,550		(8,904)		779,437
Revenues from Arena License Agreements, leases and subleases												Revenues from Arena License Agreements, leases and subleases	31,512		—		—		—		31,512
Total revenues												Total revenues	$	281,849	$	301,454	$	236,550	$	(8,904)	$	810,949

_________________

(a)Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.

(b)See Note 2, Summary of Significant Accounting Policies, Revenue Recognition, and Note 4, Revenue Recognition, to the ~~Company’s audited~~ consolidated and combined financial statements ~~and notes thereto for the year ended June 30, 2021~~ included in the ~~Company’s Annual Report on~~2022 Form 10-K for further details on the pattern of recognition of sponsorship, signage and suite license ~~revenues.~~revenues and media related revenue.

(c)~~See “~~— ~~Note 2. Accounting Policies~~ — ~~Summary of Significant Accounting Policies~~ — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for further details on the pattern of recognition of Media affiliation fee and advertising revenues in the MSG Networks segment.

~~(d)~~Primarily consists of (i) revenues from sponsorship sales and representation agreements with Madison Square Garden Sports Corp. (“MSG ~~Sports,~~Sports”), (ii) Tao Group Hospitality’s managed venue revenues, and (iii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $8,426 and $8,802 for the three and six months ended December 31, 2022, respectively, and $6,985 and $7,395 for the three and six months ended December 31, 2021, respectively, ~~and $624 and $1,819 for the three and six months ended December 31, 2020, respectively,~~ that are eliminated in consolidation.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following tables disaggregate the Company’s consolidated revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three and six months ended December 31, ~~2021~~2022 and ~~2020:~~2021:



	Three Months Ended
	December 31, 2022
	Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Ticketing and venue license fee revenues (a)	$	173,725	$	—	$	—	$	—	$	173,725
Sponsorship and signage, suite, and advertising commission revenues (b)	92,174		—		—		(8,756)		83,418
Revenues from entertainment dining and nightlife offerings (c)	—		—		135,994		(456)		135,538
Food, beverage and merchandise revenues	55,387		—		—		—		55,387
Media networks revenues (d)	—		158,898		—		—		158,898
Other	1,952		—		—		—		1,952
Total revenues from contracts with customers	323,238		158,898		135,994		(9,212)		608,918
Revenues from Arena License Agreements, leases and subleases	33,280		—		—		—		33,280
Total revenues	$	356,518	$	158,898	$	135,994	$	(9,212)	$	642,198



	Three Months Ended
	December 31, 2021
	Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Ticketing and venue license fee revenues (a)	$	109,141	$	—	$	—	$	—	$	109,141
Sponsorship and signage, suite, and advertising commission revenues (b)	70,602		—		—		(7,506)		63,096
Revenues from entertainment dining and nightlife offerings (c)	—		—		117,086		(732)		116,354
Food, beverage and merchandise revenues	37,765		—		—		—		37,765
Media networks revenues (d)	—		159,981		—		—		159,981
Other	906		—		—		—		906
Total revenues from contracts with customers	218,414		159,981		117,086		(8,238)		487,243
Revenues from Arena License Agreements, leases and subleases	29,196		—		—		—		29,196
Total revenues	$	247,610	$	159,981	$	117,086	$	(8,238)	$	516,439

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)


		Three Months ended											Six Months Ended
		December 31, 2021											December 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Ticketing and venue license fee revenues (a)	Ticketing and venue license fee revenues (a)	$	109,141	$	—	$	—	$	—	$	109,141	Ticketing and venue license fee revenues (a)	$	245,857	$	—	$	—	$	—	$	245,857
Sponsorship and signage, suite, and advertising commission revenues (b)	Sponsorship and signage, suite, and advertising commission revenues (b)	70,602		—		—		(7,506)		63,096		Sponsorship and signage, suite, and advertising commission revenues (b)	137,308		—		—		(9,547)		127,761
Revenues from entertainment dining and nightlife offerings (c)	Revenues from entertainment dining and nightlife offerings (c)	—		—		117,086		(732)		116,354		Revenues from entertainment dining and nightlife offerings (c)	—		—		268,645		(679)		267,966
Food, beverage and merchandise revenues	Food, beverage and merchandise revenues	37,765		—		—		—		37,765		Food, beverage and merchandise revenues	81,690		—		—		—		81,690
Media networks revenues (d)	Media networks revenues (d)	—		159,981		—		—		159,981		Media networks revenues (d)	—		281,377		—		—		281,377
Other	Other	906		—		—		—		906		Other	2,699		—		—		—		2,699
Total revenues from contracts with customers	Total revenues from contracts with customers	$	218,414	$	159,981	$	117,086	$	(8,238)	$	487,243	Total revenues from contracts with customers	467,554		281,377		268,645		(10,226)		1,007,350
Revenues from Arena License Agreements, leases and subleases												Revenues from Arena License Agreements, leases and subleases	36,066		—		—		—		36,066
Total revenues												Total revenues	$	503,620	$	281,377	$	268,645	$	(10,226)	$	1,043,416

Three Months ended
December 31, 2020
Entertainment MSG Networks Tao Group
Hospitality Eliminations Total
Ticketing and venue license fee revenues (a)
$ 968 $ — $ — $ — $ 968
Sponsorship and signage, suite, and advertising commission revenues (b)
9,130 — — (604) 8,526
Revenues from entertainment dining and nightlife offerings (c)
— — 10,491 (43) 10,448
Food, beverage and merchandise revenues — — — — —
Media networks revenues (d)
— 146,239 — — 146,239
Other 237 — — — 237
Total revenues from contracts with customers $ 10,335 $ 146,239 $ 10,491 $ (647) $ 166,418

Six Months Ended
December 31, 2021
Entertainment MSG Networks Tao Group
Hospitality Eliminations Total
Ticketing and venue license fee revenues (a)
$ 125,977 $ — $ — $ — $ 125,977
Sponsorship and signage, suite, and advertising commission revenues (b)
81,415 — — (7,916) 73,499
Revenues from entertainment dining and nightlife offerings (c)
— — 236,550 (988) 235,562
Food, beverage and merchandise revenues 41,688 — — — 41,688
Media networks revenues (d)
— 301,454 — — 301,454
Other 1,257 — — — 1,257
Total revenues from contracts with customers $ 250,337 $ 301,454 $ 236,550 $ (8,904) $ 779,437

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~


		Six Months Ended											Six Months Ended
		December 31, 2020											December 31, 2021
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total
Ticketing and venue license fee revenues (a)	Ticketing and venue license fee revenues (a)	$	1,698	$	—	$	—	$	—	$	1,698	Ticketing and venue license fee revenues (a)	$	125,977	$	—	$	—	$	—	$	125,977
Sponsorship and signage, suite, and advertising commission revenues (b)	Sponsorship and signage, suite, and advertising commission revenues (b)	14,989		—		—		(2,031)		12,958		Sponsorship and signage, suite, and advertising commission revenues (b)	81,415		—		—		(7,916)		73,499
Revenues from entertainment dining and nightlife offerings (c)	Revenues from entertainment dining and nightlife offerings (c)	—		—		17,712		(209)		17,503		Revenues from entertainment dining and nightlife offerings (c)	—		—		236,550		(988)		235,562
Food, beverage and merchandise revenues	Food, beverage and merchandise revenues	—		—		—		—		—		Food, beverage and merchandise revenues	41,688		—		—		—		41,688
Media networks revenues (d)	Media networks revenues (d)	—		303,602		—		—		303,602		Media networks revenues (d)	—		301,454		—		—		301,454
Other	Other	456		—		—		—		456		Other	1,257		—		—		—		1,257
Total revenues from contracts with customers	Total revenues from contracts with customers	$	17,143	$	303,602	$	17,712	$	(2,240)	$	336,217	Total revenues from contracts with customers	250,337		301,454		236,550		(8,904)		779,437
Revenues from Arena License Agreements, leases and subleases												Revenues from Arena License Agreements, leases and subleases	31,512		—		—		—		31,512
Total revenues												Total revenues	$	281,849	$	301,454	$	236,550	$	(8,904)	$	810,949

_________________

(a)Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts (ii) the presentation of the Christmas Spectacular and (iii) other live entertainment and sporting events.

(b)Amounts include (i) revenues from sponsorship sales and representation agreements with MSG Sports and (ii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of ~~$6,985~~$8,426 and ~~$7,395~~$8,802 for the three and six months ended December 31, ~~2021, respectively,~~2022 and ~~$624~~$6,985 and ~~$1,819~~$7,395 for the three and six ~~months~~month ended December 31, ~~2020,~~2021, respectively, that are eliminated in consolidation.

(c)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.

(d)Primarily consist of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Contract Balances

~~The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets.~~ The following table provides information about contract balances from the Company’s contracts with customers as of December 31, ~~2021~~2022 and June 30, ~~2021:~~2022:


		December 31,		June 30,			December 31,		June 30,
		2021		2021			2022		2022
Receivables from contracts with customers, net (a)	Receivables from contracts with customers, net (a)	$	195,945	$	185,112	Receivables from contracts with customers, net (a)	$	211,296	$	215,261
Contract assets, current (b)	Contract assets, current (b)	10,204		7,052		Contract assets, current (b)	8,645		5,503
Contract assets, non-current (b)	Contract assets, non-current (b)	296		87		Contract assets, non-current (b)	765		756
Deferred revenue, including non-current portion (c)	Deferred revenue, including non-current portion (c)	257,054		210,187		Deferred revenue, including non-current portion (c)	210,210		228,703

_________________

(a)Receivables from contracts with customers, which are reported in Accounts receivable ~~net~~ and ~~Net related party receivables~~Prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, the Company’s receivables from contracts with customers above included ~~$11,239~~$11,105 and ~~$4,848,~~$4,618, respectively, related to various related parties. See Note 1814, Related Party Transactions for further details on related party arrangements.

(b)Contract assets, which are reported as ~~Other~~Prepaid expenses and other current assets or Other non-current assets ~~(non-current portion)~~ 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.

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

(c)Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to ~~those~~the customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the three and six months ended December 31, ~~2021~~2022 relating to the ~~contract liability~~deferred revenue balance ~~(primarily deferred revenue)~~ as of June 30, ~~2021~~2022 was ~~$86,108.~~$61,873 and $167,459, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

~~The following table depicts~~As of December 31, 2022, the ~~estimated revenue~~Company’s remaining performance obligations were approximately $634,000 of which 47% is expected to be recognized ~~based on current projections~~over the next two years and ~~expectations~~an additional 37% of ~~our business resuming,~~the balance to be recognized in the ~~future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2021.~~following two years. This primarily relates to performance obligations under sponsorship and suite license arrangements ~~and to a lesser extent, non-variable affiliation fee arrangements~~ that have original expected durations longer than one year and for which the consideration is not variable. ~~For arrangements with variable consideration, such variability is based on the Company’s ability to deliver the underlying benefits as dictated by the related contractual provisions.~~ In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Note 5. Restructuring Charges

During Fiscal Year 2023, the Company implemented a cost reduction program which resulted in the recording of termination benefits for a workforce reduction of certain executives and employees in the Entertainment and MSG Networks Segments. As a result, the Company recorded restructuring charges of $13,682 for the three and six months ended December 31, 2022, inclusive of $2,293 of share-based compensation expenses, none of which have been paid as of December 31, 2022 and are accrued in accounts payable, accrued and other current liabilities and additional paid-in-capital on the balance sheet.

Changes to the Company’s restructuring liability through December 31, 2022 were as follows:


~~Fiscal Year~~June 30, 2022 ~~(remainder)~~	$	~~114,338~~8,081
~~Fiscal Year 2023~~Restructuring charges (excluding share-based compensation expense)	~~170,402~~11,389
~~Fiscal Year 2024~~Payments	~~143,572~~ (3,079)
~~Fiscal Year 2025~~December 31, 2022	~~101,341~~
~~Fiscal Year 2026~~	~~72,543~~
~~Thereafter~~	~~88,109~~
	$	~~690,305~~16,391

~~Note 5. Computation of Earnings (Loss) per Common Share~~

The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss) per common share attributable to the Company’s stockholders (“EPS”).

Three Months Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Weighted-average shares (denominator):
Weighted-average shares for basic EPS (a)
34,278 34,021 34,186 33,961
Dilutive effect of shares issuable under share-based compensation plans (a)
158 — — —
Weighted-average shares for diluted EPS 34,436 34,021 34,186 33,961
Weighted-average anti-dilutive shares (b)
668 — — —

~~_________________~~

~~(a)For the three months ended December 31, 2020 and six months ended~~December 31, 2021 and 2020, all restricted stock units and stock options were excluded from the above table because the Company reported a net loss for the periods presented and, therefore, their impact on reported loss per share would have been antidilutive. See Note 15 for further detail.

~~(b)~~For the three months ended December 31, 2021, weighted-average anti-dilutive shares primarily consisted of approximately 630 units of stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. An anti-dilutive option exists when the average stock price for the period is less than the exercise price of the option.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

~~Note 6. Cash, Cash Equivalents and Restricted Cash~~

~~The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.~~

As of
December 31,
2021 June 30,
2021 December 31,
2020 June 30,
2020
Captions on the consolidated balance sheets:
Cash and cash equivalents $ 1,258,105 $ 1,516,992 $ 1,735,012 $ 1,103,392
Restricted cash (a)
23,914 22,984 26,207 17,749
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows $ 1,282,019 $ 1,539,976 $ 1,761,219 $ 1,121,141

~~_________________~~

~~(a)~~See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K for more information regarding the nature of restricted cash.

Note 7.6. Investments in Nonconsolidated Affiliates

The Company’s investments in nonconsolidated affiliates, which are accounted for under the equity method of accounting ~~and~~or as equity investments without readily determinable fair ~~values~~value, are included within Other non-current assets in ~~accordance with ASC Topic 323,~~ ~~Investments - Equity Method~~the accompanying condensed consolidated balance sheets and ~~Joint Ventures~~ ~~and ASC Topic 321,~~ ~~Investments - Equity Securities, respectively,~~ consisted of the following:

Ownership Percentage Investment
December 31, 2021
Equity method investments:
SACO Technologies Inc. (“SACO”) 30 % $ 33,731
Others 5,674
Equity securities without readily determinable fair values (a)
7,007
Total investments in nonconsolidated affiliates $ 46,412
June 30, 2021
Equity method investments:
SACO 30 % $ 36,265
Others 6,204
Equity securities without readily determinable fair values (a)
6,752
Total investments in nonconsolidated affiliates $ 49,221

~~_________________~~

~~(a)~~In accordance with the ASC Topic 321, Investments - Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values. Under the measurement alternative, equity securities without readily determinable fair values are accounted for at cost, adjusted for impairment and changes resulting from observable price fluctuations in orderly transactions for the identical or a similar investment of the same issuer. For the three and six months ended December 31, 2021 and 2020, the Company did not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values.


			Investment As of
	Ownership Percentage		December 31, 2022		June 30, 2022

Equity method investments:
SACO Technologies Inc. (“SACO”)	30	%	$	26,423	$	31,448
Others			4,941		5,248
Equity securities without readily determinable fair values			9,196		7,108
Total investments in nonconsolidated affiliates			$	40,560	$	43,804

Equity Investments with Readily Determinable Fair Value

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

In addition to the investments discussed above, the Company holds investments ofin (i) ~~3,208 shares of the common stock of~~ Townsquare Media, Inc. (“Townsquare”), and (ii) ~~869 shares of common stock of~~ DraftKings Inc. (“DraftKings”).

•Townsquare is a media, entertainment and digital marketing solutions company that is listed on the New York Stock Exchange (“NYSE”) under the symbol “TSQ.”

•DraftKings is a fantasy sports contest and sports gambling provider that is listed on the NASDAQ Stock Market (“NASDAQ”) under the symbol “DKNG” for its common stock.

The fair value of the Company’s investments in Class A common stock of Townsquare and Class A common stock of DraftKings are determined based on quoted market prices in active markets on the NYSE and NASDAQ, respectively, which are classified within Level I of the fair value hierarchy. As a holder of Class C common stock of Townsquare, the Company is entitled to convert at any time all or any part of the Company’s shares into an equal number of shares of Class A common stock of Townsquare, subject to restrictions set forth in Townsquare’s certificate of incorporation.

The ~~cost basis and the~~ carrying fair value of these investments, which are reported under Other non-current assets in the accompanying ~~consolidated~~condensed balance sheets as of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, are as follows:

December 31, 2021
Equity Investment with Readily Determinable Fair Values Shares / Units
Held Cost Basis Carrying value
/ Fair value
Townsquare Class A common stock 583 $ 4,221 $ 7,773
Townsquare Class C common stock 2,625 19,001 34,992
DraftKings common stock 869 6,036 23,884
Total $ 29,258 $ 66,649

June 30, 2021
Equity Investment with Readily Determinable Fair Values Shares / Units
Held Cost Basis Carrying value
/ Fair value
Townsquare Class A common stock 583 $ 4,221 $ 7,435
Townsquare Class C common stock 2,625 19,001 33,469
DraftKings common stock 869 6,036 45,360
Total $ 29,258 $ 86,264

~~The following table summarizes the realized and unrealized gain (loss) on equity investments with readily determinable fair value for the three and six months ended December 31, 2021 and 2020:~~

Three Months Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Unrealized gain — Townsquare $ 834 $ 6,416 $ 1,861 $ 7,026
Unrealized gain (loss) — DraftKings (17,989) (10,984) (21,476) 22,064
Realized loss — DraftKings — (2,659) — (2,659)
$ (17,155) $ (7,227) $ (19,615) $ 26,431


Equity Investments with Readily Determinable Fair Value	December 31, 2022		June 30, 2022
Townsquare Class A common stock	$	4,228	$	4,776
Townsquare Class C common stock	19,031		21,499
DraftKings common stock	7,630		10,146
Total Equity Investment with Readily Determinable Fair Values	$	30,889	$	36,421

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

The following table summarizes the realized and unrealized (loss) gain on equity investments with and without readily determinable fair value, which is reported in Other expense, net, for the three and six months ended December 31, 2022 and 2021:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Unrealized (loss) gain — Townsquare	$	(32)	$	834	$	(3,015)	$	1,861
Unrealized loss — DraftKings	(2,512)		(17,989)		(188)		(21,476)
Unrealized gain — Other	—		—		1,969		—
Gain from shares sold — DraftKings	—		—		1,489		—
Total realized and unrealized (loss) gain	$	(2,544)	$	(17,155)	$	255	$	(19,615)
Supplemental information on realized gain:
Shares of common stock sold — DraftKings	—		—		200		—
Cash proceeds from common stock sold — DraftKings	$	—	$	—	$	3,819	$	—

Note 8.7. Property and Equipment

As of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, property and equipment consisted of the following:


		December 31, 2021		June 30, 2021			December 31, 2022		June 30, 2022
Land	Land	$	148,919	$	150,750	Land	$	139,838	$	140,239
Buildings	Buildings	997,216		996,295		Buildings	1,065,039		997,345
Equipment		414,243		405,835
Equipment, furniture and fixtures						Equipment, furniture and fixtures	524,266		477,040
Aircraft(a)	Aircraft(a)	38,090		38,090		Aircraft(a)	—		38,090
Furniture and fixtures		38,806		40,660

Leasehold improvements	Leasehold improvements	227,349		214,678		Leasehold improvements	229,956		232,819
Construction in progress ~~(a)~~(b)	Construction in progress ~~(a)~~(b)	1,546,952		1,194,525		Construction in progress ~~(a)~~(b)	2,558,838		2,031,972
		3,411,575		3,040,833
Total Property and equipment						Total Property and equipment	4,517,937		3,917,505
Less accumulated depreciation and amortization(a)	Less accumulated depreciation and amortization(a)	(936,882)		(884,541)		Less accumulated depreciation and amortization(a)	(1,008,464)		(978,453)
		$	2,474,693	$	2,156,292
Property and equipment, net						Property and equipment, net	$	3,509,473	$	2,939,052

_________________

(a)~~Interest is~~On December 30, 2022, the Company completed the disposition of a corporate aircraft (see Note 3, Dispositions), which resulted in a reduction of gross assets of $38,090, and accumulated depreciation of $13,689.

(b)Construction in progress includes labor and interest that are capitalized during the construction period for significant long term construction projects. ~~The Company capitalizes interest within the Entertainment segment in connection with~~These costs primarily relate to the construction of MSG Sphere in Las Vegas. For the three and six months ended December 31, ~~2021,~~2022, the ~~company~~Company capitalized ~~$10,600~~interest of $29,869 and ~~$19,926~~$50,335 of interest, respectively. As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company forFor the three and six months ended December 31, ~~2020 have been revised to correct this immaterial accounting error by decreasing~~2021, the ~~Company’s previously reported~~Company capitalized $10,600 and $19,926 of interest, ~~expense by $7,566 and $7,911,~~ respectively.

The increase in Construction in progress is primarily associated with the development and construction of MSG Sphere in Las ~~Vegas.~~Vegas, which includes capitalized labor and interest. The property and equipment balances above include ~~$154,131~~$239,943 and ~~$106,990~~$206,462 of capital expenditure accruals (primarily related to MSG Sphere construction) as of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively, which are reflected in ~~Other~~Accounts payable, accrued and other current liabilities in the accompanying condensed consolidated balance sheets.

Depreciation and amortization expense on property and equipment was $25,029 and $50,326 for the three and six months ended December 31, 2022, respectively, and $26,100 and $51,221, for the three and six months ended December 31, 2021, ~~respectively, and $21,928 and $46,589 for the three and six months ended December 31, 2020,~~ respectively.

During the three months ended September 30, 2021, Tao Group Hospitality recorded an impairment charge for leasehold improvements of $3,269 due to decisions made by management to cease operations at certain venues subsequent to Hakkasan acquisition date.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

~~Note 9. Leases~~

The Company’s leases primarily consist of certain live-performance venues, entertainment dining and nightlife venues, corporate office space, storage and, to a lesser extent, office and other equipment. The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made available by the lessor for the Company’s use. The Company’s assessment of the lease term reflects the non-cancellable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the Company is reasonably certain to exercise. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations and consolidated statements of cash flows over the lease term.

For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of the fixed minimum payment obligations over the lease term. A corresponding right-of-use (“ROU”) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.

The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases are presented separate from ROU assets associated with operating leases and are included within Property and equipment, net on the Company’s consolidated balance sheet. For purposes of measuring the present value of the Company’s fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in the underlying leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment surrounding the associated lease.

For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments. For leases with a term of 12 months or less (“short-term leases”), any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the consolidated balance sheet. Variable lease costs for both operating and finance leases, if any, are recognized as incurred and such costs are excluded from lease balances recorded on the consolidated balance sheet. In addition, the Company excluded its ground lease with Las Vegas Sands Corp. (“Sands”) associated with MSG Sphere in Las Vegas from the ROU asset and lease liability balance recorded on the consolidated balance sheet as the ground lease will have no fixed rent. Under the ground lease agreement, Sands will receive priority access to purchase tickets to events at the venue for inclusion in hotel packages or other uses, as well as certain rent-free use of the venue to support its Expo Center business. If certain return objectives are achieved, Sands will receive 25% of the after-tax cash flow in excess of such objectives. The ground lease is for a term of 50 years, commencing upon substantial completion of MSG Sphere.

As of December 31, 2021, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 0.3 years to 20.1 years. In certain instances, leases include options to renew, with varying option terms in each case. The exercise of lease renewal options is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

~~The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheets as of December 31, 2021 and June 30, 2021:~~

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Line Item in the Company’s Consolidated Balance Sheet December 31,
2021 June 30,
2021
Right-of-use assets:
Operating leases Right-of-use lease assets $ 470,253 $ 280,579
Lease liabilities:
Operating leases, current Operating lease liabilities, current $ 65,663 $ 73,423
Operating leases, noncurrent Operating lease liabilities, noncurrent 450,019 233,556
Total lease liabilities $ 515,682 $ 306,979

~~The following table summarizes the activity recorded within the Company’s consolidated statements of operations for the three and six months ended December 31, 2021 and 2020:~~

Three Months Ended
Line Item in the Company’s Consolidated and Combined Statement of Operations December 31,
2021 2020
Operating lease cost Direct operating expenses $ 10,324 $ 6,545
Operating lease cost Selling, general and administrative expenses 7,723 6,410
Variable lease cost Direct operating expenses 1,006 315
Variable lease cost Selling, general and administrative expenses 15 15
Total lease cost $ 19,068 $ 13,285

Six Months Ended
Line Item in the Company’s Consolidated Statement of Operations December 31,
2021 2020
Lease cost, operating leases Direct operating expenses $ 21,960 $ 12,952
Lease cost, operating leases Selling, general and administrative expenses 14,144 12,903
Variable lease cost Direct operating expenses 2,092 591
Variable lease cost Selling, general and administrative expenses 29 38
Total lease cost $ 38,225 $ 26,484

~~Supplemental Information~~

~~For the six months ended December 31, 2021 and 2020, cash paid for amounts included in the measurement of operating lease liabilities was $30,282 and $28,261, respectively.~~For the six months ended December 31, 2021, the Company recorded new operating lease liabilities of $321,863 arising from obtaining right-of-use lease assets including (i) the renewal of the Radio City Music Hall and Beacon Theatre leases, and to a lesser extent, reflecting (ii) leases associated with MSG Sphere development, net of tenant incentives, (iii) a lease agreement with the existing landlord for the Company’s New York corporate office space, which extended the term for certain existing office space in use, and (iv) an aviation lease. For the six months ended December 31, 2021, the Company received approximately $12,800 of the aforementioned tenant incentives, through a cash receipt from the landlord and payments by the landlord for capital expenditures on behalf of the Company. For the six months ended December 31, 2020, the Company did not enter into new leases.

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

In November 2021, the Company executed an agreement with the existing landlord for its New York corporate office space pursuant to which it will be relocating from the space that the Company currently occupies to newly renovated office space within the same building. The Company will not be involved in the design or construction of the new space for purposes of the Company’s buildout prior to obtaining possession, which is expected to occur in Fiscal Year 2024. Upon obtaining possession of the space, the new lease is expected to result in an additional lease obligation and right of use asset. While lease payments under the new lease agreement will be recognized as a lease expense on a straight-line basis over the lease term, the Company will begin paying full rent in the second half of Fiscal Year 2026 due to certain tenant incentives included in the arrangement. Base rent payments will increase every five years beginning in Fiscal Year 2031 in accordance with the terms of the lease. The Company anticipates entering into a new sublease agreement with MSG Sports for a lease term equivalent to the November 2021 agreement that the Company entered into with the existing landlord. The future lease payments related to this new lease for the next five fiscal years and thereafter are expected to be as follows:



~~Fiscal Year 2022~~	$	—
~~Fiscal Year 2023~~	—
~~Fiscal Year 2024~~	—
~~Fiscal Year 2025~~	~~10,121~~
~~Fiscal Year 2026~~	~~19,023~~
~~Thereafter (Fiscal Year 2027 to Fiscal Year 2046)~~	~~1,026,207~~
~~Total lease payments~~	$	~~1,055,351~~

During the three months ended September 30, 2021, a non-cash impairment charge of $4,549 was recorded for the right-of-use lease assets associated with certain Hakkasan venues of Tao Group Hospitality due to decisions made by management to cease operations at certain venues subsequent to the Hakkasan acquisition date. For the three months ended December 31, 2021, the Company recorded a net gain of approximately $5,900 principally from extinguishments and modification of lease liabilities associated with certain Hakkasan venues of Tao Group Hospitality.

As of December 31, 2021, the weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet was 12.2 years. The weighted average discount rate was 6.41% as of December 31, 2021 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard, (ii) upon entering a new lease or (iii) the period in which the lease term expectation was modified.

~~Maturities of operating lease liabilities as of December 31, 2021 are as follows:~~

~~Fiscal Year 2022 (remainder)~~

~~28,220~~

~~Fiscal Year 2023~~

~~78,709~~

~~Fiscal Year 2024~~

~~80,196~~

~~Fiscal Year 2025~~

~~57,624~~

~~Fiscal Year 2026~~

~~34,293~~

~~Thereafter~~

~~479,386~~

~~Total lease payments~~

~~758,428~~

~~Less imputed interest~~

~~242,746~~

~~Total lease liabilities~~

~~515,682~~

~~Lessor Arrangements~~

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.

The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the COVID-19 pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021, and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 when it became available at 100% seating capacity. The Company recorded $27,854 and $29,182 of revenues under the Arena License Agreements for the three and six months ended December 31, 2021, respectively, and $1,585 for the three and six months ended December 31, 2020. In addition, the Company recorded revenues from third party and related party lease and sublease arrangements of $1,342 and $2,330 for the three and six months ended December 31, 2021, respectively, and $749 and $1,497 for the three and six months ended December 31, 2020, respectively.

Note ~~10.~~8. Goodwill and Intangible Assets

The carrying amount of goodwill as of December 31, ~~2021~~2022 and June 30, ~~2021~~2022 are as follows:

Entertainment MSG Networks Tao Group Hospitality Total
Balance as of June 30, 2021 $ 74,309 $ 424,508 $ 3,378 $ 502,195
Measurement period adjustment (a)
— — (2,014) (2,014)
Balance as of December 31, 2021 $ 74,309 $ 424,508 $ 1,364 $ 500,181

~~_________________~~

~~(a)~~During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment in connection with the acquisition of Hakkasan by Tao Group Hospitality. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in Tao Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480 as included above, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534, also included above. See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K regarding the details of the acquisition of Hakkasan. No additional adjustments were recorded during the three months ended December 31, 2021 .


	December 31, 2022		June 30, 2022
Entertainment	$	74,309	$	74,309
MSG Networks	424,508		424,508

Tao Group Hospitality	1,364		1,364
Total	$	500,181	$	500,181

During the first quarter of Fiscal Year ~~2022,~~2023, the Company performed its annual impairment test of goodwill and determined that there ~~were~~was no ~~impairments~~impairment of goodwill identified as of the impairment test date.

The carrying amount of indefinite-lived intangible assets, all of which are within the Entertainment segment, as of December 31, ~~2021~~2022 and June 30, ~~2021~~2022 were as follows:

~~Trademarks~~

~~61,881~~

~~Photographic related rights~~

~~1,920~~

~~Total~~

~~63,801~~


	December 31, 2022		June 30, 2022
Trademarks	$	61,881	$	61,881
Photographic related rights	1,920		1,920


Total	$	63,801	$	63,801

During the first quarter of Fiscal Year ~~2022,~~2023, the Company performed its annual impairment test of indefinite-lived intangible assets and determined that there ~~were~~was no ~~impairments~~impairment of indefinite-lived intangibles identified as of the impairment test date.

The Company’s intangible assets subject to amortization are as follows:


December 31, 2022	Gross		Accumulated Amortization		Net
Trade names (a)	$	108,956	$	(32,553)	$	76,403
Venue management contracts	83,963		(26,454)		57,509
Affiliate relationships	83,044		(63,576)		19,468

Non-compete agreements (b)	9,000		(9,000)		—
Other intangibles (b)	4,217		(4,217)		—
	$	289,180	$	(135,800)	$	153,380


June 30, 2022	Gross		Accumulated Amortization		Net
Trade names	$	112,094	$	(32,143)	$	79,951
Venue management contracts	84,855		(23,546)		61,309
Affiliate relationships	83,044		(62,019)		21,025

Non-compete agreements	9,000		(8,478)		522
Festival rights (a)	8,080		(6,926)		1,154
Other intangibles	4,217		(4,094)		123
	$	301,290	$	(137,206)	$	164,084

_________________

(a) On December 2, 2022, the Company completed the BCE Disposition (see Note 3, Dispositions), which resulted in a reduction of gross assets of $674 related to festival rights and $210 related to trade names, and accumulated amortization of $7,406 related to festival rights and $2,320 related to trade names associated with the BCE Disposition.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

(b) The ~~Company’s intangible assets subject to~~Non-compete agreements and Other intangibles gross and accumulated amortization ~~are as follows:~~balances were fully amortized.

December 31, 2021 Gross Accumulated
Amortization Net
Trade names $ 113,333 $ (28,292) $ 85,041
Venue management contracts 85,763 (20,572) 65,191
Affiliate relationships 83,044 (57,951) 25,093
Non-compete agreements 9,000 (7,696) 1,304
Festival rights 8,080 (2,966) 5,114
Other intangibles 4,217 (3,954) 263
$ 303,437 $ (121,431) $ 182,006

June 30, 2021 Gross Accumulated
Amortization Net
Trade names $ 121,000 $ (25,605) $ 95,395
Venue management contracts 85,700 (17,518) 68,182
Affiliate relationships 83,044 (56,221) 26,823
Non-compete agreements 9,000 (6,913) 2,087
Festival rights 8,080 (2,696) 5,384
Other intangibles 4,217 (3,814) 403
$ 311,041 $ (112,767) $ 198,274

Amortization expense for intangible assets was $4,030 and $8,488, for the three and six months ended December 31, 2022, respectively, and $4,433 and $8,742 for the three and six months ended December 31, 2021, ~~respectively, and $3,749 and $7,498 for three and six month ended December 31, 2020,~~ respectively.

Note ~~11.~~9. Commitments and Contingencies

Commitments

See Note 1214, Commitments and Contingencies, to the ~~Company’s audited~~ consolidated and combined financial statements ~~and notes thereto for the year ended June 30, 2021~~ included in the ~~Company’s Annual Report on~~2022 Form 10-K for details on the Company’s off-balance sheet commitments. The Company’s off-balance sheet commitments as of June 30, ~~2021~~2022 included a total of ~~$3,646,250~~$3,898,281 of contract obligations (primarily related to media rights ~~agreements)~~agreements from the MSG Networks ~~segment, as a result of the Merger, as follows:~~


~~Fiscal Year 2022~~	$	~~276,707~~
~~Fiscal Year 2023~~	~~273,370~~
~~Fiscal Year 2024~~	~~253,485~~
~~Fiscal Year 2025~~	~~246,013~~
~~Fiscal Year 2026~~	~~249,584~~
~~Thereafter~~	~~2,347,091~~
	$	~~3,646,250~~

segment).

During the three and six months ended December 31, ~~2021,~~2022, the Company did not have any material changes in its non-cancelable contractual obligations ~~other~~(other than activities in the ordinary course of ~~business.~~business), except for the execution of the MSG Sphere Term Loan Facility (as defined below) on December 22, 2022. See Note 1310, Credit Facilities for details of the principal repayments required under the Company’s various credit facilities, including the MSG ~~Networks Senior Secured Credit Facilities, and Note 9 for details on the commitments under the Company’s lease obligations.~~

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Sphere Term Loan Facility.

Legal Matters

Fifteen complaints were filed in connection with the ~~Merger~~Company’s acquisition of MSG Networks Inc. (the “Merger”) by purported stockholders of the Company and MSG Networks Inc.

Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.

~~On May 27, 2021, a complaint captioned~~ ~~Hollywood Firefighters’ Pension Fund et al.~~ v. ~~James Dolan, et al., 2021-0468-KSJM, was filed~~Six complaints involved allegations of fiduciary breaches in connection with the ~~Court of Chancery of the State of Delaware by purported stockholders of the Company against the Company, its Board of Directors (the “Board”), certain Dolan family stockholders~~negotiation and MSG Networks Inc. The complaint purported to allege derivative claims on behalf of the Company and claims on behalf of a putative class of Company stockholders concerning the Merger. Plaintiffs alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the Delaware General Corporation Law (the “DGCL”), that the Board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the Merger were misleading or incomplete. Plaintiffs sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummationapproval of the Merger and an award of damages in the event the transaction was consummated and plaintiffs’ attorneys’ fees. On June 15, 2021, plaintiffs filed a brief in support of their motion seeking a preliminary injunction enjoining the Company’s stockholder vote and consummation of the Merger, which the defendants opposed. The Court of Chancery denied the plaintiffs’ preliminary injunction motion on July 2, 2021.

~~On June 9, 2021, a complaint captioned~~ ~~Timothy Leisz~~ v. ~~MSG Networks Inc. et al.~~, 2021-0504-KSJM, was filed in the Court of Chancery of the State of Delaware by a purported stockholder of MSG Networks Inc. against MSG Networks Inc., the MSG Networks Inc. board of directors, certain Dolan family stockholders and the Company. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The MSG Networks Inc. plaintiff alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the DGCL, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the merger were misleading or incomplete. Plaintiff sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiff’s attorneys’ fees. On June 21, 2021, plaintiff filed a brief in support of his motion seeking a preliminary injunction enjoining the MSG Networks Inc. stockholder vote and consummation of the Merger, which defendants opposed. The Court of Chancery denied the plaintiff’s preliminary injunction motion on July 2, 2021.

~~On July 6, 2021, a complaint captioned~~ ~~Stevens et al.~~ v. ~~Dolan et al.~~, 2021-0575, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages in the event the transaction was consummated, and plaintiffs’ attorneys’ fees.

~~On July 6, 2021, a complaint captioned~~ ~~The City of Boca Raton Police and Firefighters’ Retirement System~~ v. ~~MSG Networks Inc.~~, 2021-0578, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against MSG Networks Inc. The complaint purported to seek to enforce plaintiff’s right to inspect certain of MSG Networks Inc.’s books and records under Section 220 of the DGCL. The complaint was voluntarily dismissed on August 10, 2021.

~~On August 11, 2021, a stockholder derivative complaint captioned~~ ~~City of Miramar Retirement Plan and Trust Fund for General Employees et al.~~ v. ~~Dolan et al.,~~ 2021-0692 was filed in the Court of Chancery of the State of Delaware by purported stockholders of the Company. The complaint purported to allege derivative claims on behalf of the Company and direct claims on behalf of a putative class of Company stockholders. Plaintiffs alleged that the Board and the Company’s majority stockholders violated their fiduciary duties by failing to protect the Company’s interest in connection with the Merger. Plaintiffs sought, among other relief, an award of damages to the purported class and Company including interest, and plaintiffs’ attorneys’ fees.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~On August 31, 2021, a complaint captioned~~ ~~Murray~~ v. ~~Dolan et al.~~, 2021-0748, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks stockholders concerning the Merger. Plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages, and plaintiffs’ attorneys’ fees.

~~All of the above complaints~~ have since ~~either~~ been ~~dismissed or~~ consolidated into ~~one of~~ two remaining litigations.

On September 10, 2021, the Court of Chancery entered an order consolidating ~~the~~two derivative complaints ~~in the~~ ~~Hollywood Firefighters~~ ~~and~~ ~~City of Miramar~~ ~~actions.~~filed by purported Company stockholders. The ~~new~~ consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative ~~allegations for breach~~claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties ~~that were present~~ in the ~~Hollywood Firefighters~~course of negotiating and ~~City of Miramar~~ ~~complaints and abandons~~approving the ~~direct claims in those prior complaints.~~Merger. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, ~~2021,~~2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and ~~are currently~~on November 16, 2022, fact discovery closed. The Company continues to be engaged in responding to ~~the consolidated~~ plaintiffs’ outstanding discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.

On September 27, 2021, the Court of Chancery entered an order consolidating ~~the~~four complaints ~~in the~~ ~~Leisz~~, ~~Stevens~~, ~~City~~filed by purported stockholders of ~~Boca Raton, and~~ ~~Murray~~ ~~complaints.~~MSG Networks Inc. The ~~new~~ consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. ~~2021-0575-KSJM.~~No. 2021-0575-KSJM (the “MSG Networks Action”). The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. and the controlling stockholders prior to the Merger. Plaintiffs allege that the MSG Networks Inc. board of directors and ~~majority~~controlling stockholders breached their fiduciary duties in negotiating and approving the Merger. The Company is not named as a ~~defendant.~~defendant but has been subpoenaed to produce documents and testimony related to the Merger. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants in the MSG Networks Action filed answers to the complaint on December 30, 2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and on November 16, 2022 fact discovery closed. The Company continues to be engaged in responding to plaintiffs’ outstanding discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action. ~~Plaintiffs seek, among other relief, monetary damages~~

On September 19, 2022, the Court of Chancery approved a case schedule, governing the two consolidated actions, which set trial dates for April 2023. On January 3, 2023, the ~~putative~~Court of Chancery granted the unopposed motion for class ~~and plaintiffs’ attorneys’ fees. Defendants to~~certification in the MSG Networks Action. A joint-mediation session is scheduled for February 11 and 12, 2023.

On January 12, 2023, the Court of Chancery granted a stipulation and order dismissing former MSG Networks Inc. ~~consolidated action filed answers to~~directors William Bell, Stephen Mills and Hank Ratner from the ~~complaint on December 30, 2021 and are currently engaged in responding to the plaintiffs’ discovery requests.~~MSG Networks Action.

We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been made in our ~~consolidated~~ financial statements.

The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.

~~Note 12. Fair Value Measurements~~

The following table presents the Company’s assets that are measured at fair value within Level I of the fair value hierarchy on a recurring basis using observable inputs that reflect quoted prices for identical assets in active markets. These assets include (i) cash equivalents in money market accounts and time deposits, and (ii) equity investments with readily determinable fair value:

Line Item on Consolidated Balance Sheet December 31,
2021 June 30,
2021
Assets:
Money market accounts and time deposits(a)
Cash and cash equivalents $ 1,107,768 $ 1,361,729
Equity investments with readily determinable fair value (b)
Other assets 66,649 86,264
Total assets measured at fair value $ 1,174,417 $ 1,447,993
~~_________________~~

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~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~(a)The carrying amount of the Company’s cash equivalents in money market accounts and time deposits approximate fair value due to their short-term maturities.~~

~~(b)See Note 7 for more information on the Company’s equity investments with readily determinable fair value in Townsquare and DraftKings.~~

~~In addition to the table above, the carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:~~

December 31, 2021 June 30, 2021
Carrying
Value Fair
Value Carrying
Value Fair
Value
Liabilities
Current and non-current portion of long-term debt under the MSG Networks Term Loan Facility (a)
$ 1,023,000 $ 1,012,770 $ 1,047,750 $ 1,042,510
Current and non-current portion of long-term debt under the National Properties Term Loan Facility (a)
$ 643,500 $ 658,783 $ 646,750 $ 669,386
Current and non-current portion of long-term debt under the Tao Credit Facilities (a)
$ 26,250 $ 26,315 $ 43,750 $ 43,851

~~_________________~~

~~(a)~~On October 11, 2019, MSGN Holdings, L.P., certain MSGN Holdings, L.P. subsidiaries and certain MSG Networks Inc. subsidiaries entered into an amended and restated credit facility consisting of a $1,100,000 five-year term loan facility and a $250,000 five-year revolving credit facility. On May 23, 2019, Tao Group Intermediate Holdings LLC and Tao Group Operating LLC entered into a $40,000 five-year term loan facility and a $25,000 five-year term revolving facility. In November 2020, MSG National Properties and certain subsidiaries of the Company entered into the National Properties Term Loan Facility, providing a five-year $650,000 term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 13 for more information and outstanding balances on this long-term debt.

Note ~~13.~~10. Credit Facilities

See Note 15, Credit Facilities, to the consolidated and combined financial statements included in the 2022 Form 10-K 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 December 31, 2022 and June 30, 2022:


	December 31, 2022		June 30, 2022
Current portion
MSG Networks Term Loan	$	82,500	$	66,000
National Properties Term Loan Facility	16,250		8,125
Tao Term Loan Facility	3,750		3,750

Other debt	—		637
Current portion of long-term debt	$	102,500	$	78,512



	December 31, 2022						June 30, 2022
	Principal		Unamortized Deferred Financing Costs		Net		Principal		Unamortized Deferred Financing Costs		Net
Non-current portion
MSG Networks Term Loan	$	891,000	$	(2,095)	$	888,905	$	932,250	$	(2,715)	$	929,535
National Properties Term Loan Facility	633,750		(14,452)		619,298		641,875		(16,064)		625,811
National Properties Revolving Credit Facility	29,100		—		29,100		29,100		—		29,100
MSG Sphere Term Loan Facility	275,000		(5,419)		269,581		—		—		—
Tao Term Loan Facility	69,375		(1,008)		68,367		71,250		(1,120)		70,130
Tao Revolving Credit Facility	10,000		—		10,000		10,000		—		10,000

Long-term debt, net of deferred financing costs	$	1,908,225	$	(22,974)	$	1,885,251	$	1,684,475	$	(19,899)	$	1,664,576

MSG Networks ~~Senior Secured~~ Credit Facilities

~~On September 28, 2015,~~General. MSGN Holdings, L.P. (”(“MSGN L.P.”), MSGN Eden, LLC, an indirect subsidiary of the Company ~~(through the Merger)~~ and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P. (collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. ~~entered into a credit agreement (the “MSGN Former Credit Agreement”) with a syndicate of lenders. The MSGN Former Credit Agreement provided MSGN L.P. with~~have senior secured credit facilities ~~that consisted of: (a) an initial $1,550,000 term loan facility~~pursuant to a credit agreement (as amended and ~~(b) a $250,000 revolving credit facility.~~

Onrestated on October 11, 2019, ~~MSGN L.P.,~~ the ~~MSGN Holdings Entities and certain subsidiaries of MSGN L.P. amended and restated the MSGN Former Credit Agreement in its entirety (the~~ “MSGN

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

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Credit Agreement”~~). The MSGN Credit Agreement provides MSGN L.P. with senior secured credit facilities (as amended, the “MSG Networks Senior Secured Credit Facilities”~~) consisting of: (i) an ~~initial~~initial $1,100,000 term ~~loan~~loan facility (the “MSGN Term Loan Facility”) and ~~(ii)~~(ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility” and, together with the MSGN Term Loan Facility, the “MSG Networks Credit Facilities”), each with a term of five years. ~~Proceeds from the MSGN Term Loan Facility were used by MSGN L.P. to repay outstanding indebtedness under the MSGN Former Credit Agreement.~~ Up to ~~$35,000~~$35,000 of the MSGN Revolving Credit Facility is available for the issuance of letters of credit. ~~Subject to the satisfaction~~As of ~~certain conditions~~December 31, 2022, there were no borrowings or letters of credit issued and ~~limitations,~~outstanding under the MSGN Revolving Credit ~~Agreement allows for the addition of incremental term and/or revolving loan commitments and incremental term and/or revolving loans.~~Facility.

Interest Rates. Borrowings under the MSGN Credit Agreement bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio) (the “MSGN Base Rate”), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined

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based on a total net leverage ratio) (the “MSGN Eurodollar Rate”). Upon a payment default in respect of principal, interest or other amounts due and payable under the MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00% per annum. The MSGN Credit Agreement requires that MSGN L.P. pay a commitment fee ranging from 0.225% to 0.30% (determined based on a total net leverage ratio) in respect of the average daily unused commitments under the MSGN Revolving Credit Facility. MSGN L.P. will also be required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit. The interest rate on the MSGN Term Loan Facility as of December 31, ~~2021~~2022 was ~~1.60%~~6.73%.

The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. All borrowings under the MSGN Credit Agreement are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties. As of December 31, 2021, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants. As of December 31, 2021, there were no letters of credit issued and outstanding under the MSGN Revolving Credit Facility. As of December 31, 2021, there was $1,023,000 outstanding under the MSGN Term Loan Facility, and no borrowings under the MSGN Revolving Credit Facility.

All obligations under the MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s existing and future direct and indirect domestic subsidiaries that are not designated as excluded subsidiaries or unrestricted subsidiaries (the “MSGN Subsidiary Guarantors,” and together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P.

Principal Repayments. Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily repay outstanding loans under the MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurodollar loans).The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024. MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

Covenants. The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. As of December 31, 2022, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants.

In addition to the financial covenants discussed above, the MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative covenants, and events of default. The MSGN Credit Agreement contains certain restrictions on the ability of MSGN L.P. and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the MSGN Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) changing their lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified material agreements; (viii) merging or consolidating; (ix) making certain dispositions; and (x) entering into agreements that restrict the granting of liens. The MSGN Holdings Entities are also subject to customary passive holding company covenants. ~~The Merger did not result in a change of control or acceleration of debt payments~~

Guarantors and Collateral. All obligations under the MSGN Credit ~~Agreement.~~Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s existing and future direct and indirect domestic subsidiaries that are not designated as excluded subsidiaries or unrestricted subsidiaries (the “MSGN Subsidiary Guarantors,” and together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P.

National Properties ~~Term Loan Facility~~Credit Facilities

General.On ~~November 12, 2020,~~June 30, 2022, MSG National Properties, LLC (“MSG National Properties”) an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a ~~5-year~~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~~senior secured term loan facility (the “National Properties Term Loan Facility”). The proceeds of the National Properties Term Loan Facility may be used to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group.

The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. Following

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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 ~~first anniversary~~National Properties Term Loan Facility, the “National Properties Credit Facilities”). As of December 31, 2022, outstanding letters of credit were $7,860 and the ~~closing~~remaining balance available under the National Properties Revolving Credit Facility was $63,040.

Interest Rates. Borrowings under the current National Properties Credit Facilities bear interest at a floating rate, which at the option of ~~the facility in November 2021, the minimum liquidity level was reduced~~MSG National Properties may be either (a) a base rate plus an applicable margin ranging from 1.50% to ~~$200,000. If at any time~~2.50%per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries ~~is less than 5.00~~(the “National Properties Base Rate”), or (b) Term SOFR plus an applicable margin ranging from 2.50% to ~~1.00 as~~3.50% per annum, determined based on the total leverage ratio of the end of any four consecutive fiscal quarter period or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000. As of December 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries (the “National Properties SOFR Rate”). The National Properties Credit Agreement requires MSG National Properties to pay a commitment fee ranging from 0.30% to 0.50% in respect of the daily unused commitments under the National Properties Revolving Credit Facility. MSG National Properties is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the National Properties Credit Agreement. The interest rate on the National Properties Credit Facilities as of December 31, 2022was ~~negative and therefore, the minimum liquidity level continues to be $200,000.~~8.18%.

Principal Repayments. Subject to customary notice and minimum amount conditions, ~~the Company~~MSG National Properties may voluntarily repay outstanding loans under the National Properties ~~Term Loan~~Credit Facilities and terminate commitments under the National Properties Revolving Credit Facility, at any time, in whole or in part, ~~(subject~~subject only to customary breakage costs ~~with respect to LIBOR loans) subject to a~~in the case of prepayment ~~premium equal to (i) for the initial 18 month period following the facility’s effective date, 2.0%~~ of ~~the principal amount prepaid~~ ~~plus~~ the amount of interest that would have been payable on such principal amount from the date of such prepayment through the end of such 18-month period, (ii) after the initial 18 month period but on or prior to the three year anniversary of the effective date, 2.0% of the principal amount prepaid, (iii) after the three year anniversary but on or prior to the four year anniversary of the effective date, 1.0% of the principal amount prepaid and (iv) after the 4th anniversary, —%.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 ~~1.00%~~2.50% per annum ~~(0.25%~~(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.~~facility on June 30, 2027. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of December 31, 2021 was 7.00%. As of December 31, 2021, there was $643,500 outstanding under the National Properties Term Loan Facility.

~~All~~principal obligations under the National Properties ~~Term Loan~~Revolving Credit Facility are ~~guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than~~due at the ~~subsidiaries that own The Garden, BCE and certain other excluded subsidiaries (the “Subsidiary Guarantors”).~~

~~All obligations under the National Properties Term Loan Facility, including the guarantees of those obligations, are secured by certain~~maturity 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.facility. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including ~~prepayments in an amount equal to a specified percentage of excess cash flow in any fiscal year and~~ prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair, or replacement rights), ~~in each case~~ subject to certain exceptions.

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 Credit 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. 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 December 31, 2022, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Credit Agreement.

In addition to the ~~minimum liquidity covenant,~~financial covenants discussed above, the National Properties ~~Term Loan Facility~~Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default.

The National Properties ~~Term Loan Facility~~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 ~~Term Loan Facility,~~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. As

Guarantors and Collateral. All obligations under the National Properties Credit Facilities are guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden and certain other excluded subsidiaries (the “Subsidiary Guarantors”).

All obligations under the National Properties Credit Facilities, including the guarantees of ~~December 31, 2021,~~those obligations, are secured by certain of the assets of MSG National Properties and ~~its restricted subsidiaries were in compliance with~~ the ~~covenants of the National Properties Term Loan Facility.~~

~~Tao Credit Facilities~~

~~On May 23, 2019, Tao Group Intermediate Holdings LLC (“TAOIH” or “Intermediate Holdings”~~Subsidiary Guarantors (collectively, “Collateral”) and Tao Group Operating LLC (“TAOG” or “Senior Borrower”), entered into a credit agreement (the “Tao Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a letter of credit issuer, and the lenders party thereto. Together the Tao Senior Credit Agreement and a $49,000 intercompany subordinated credit agreement that matures in August 2024 (the “Tao Subordinated Credit Agreement”) between a subsidiary of the Company and Tao Group Sub-Holdings LLC, a subsidiaryincluding, but not

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limited to, a pledge of ~~Tao Group Hospitality, replaced~~some or all of the ~~Senior Borrower’s prior credit agreement dated January 31, 2017~~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.

MSG Sphere Term Loan Facility

General. On December 22, 2022, MSG Las Vegas, LLC (“~~2017 Tao Credit Agreement”~~MSG LV”)~~. On June 15, 2020,~~, an indirect, wholly-owned subsidiary of the Company, entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the ~~second amendment~~lenders party thereto, providing for a five-year, $275,000 senior secured term loan facility (the “MSG Sphere Term Loan Facility”).

Interest Rates. Borrowings under the MSG Sphere Term Loan Facility bear interest at a floating rate, which at the option of MSG LV may be either (i) a base rate plus a margin of 3.375% per annum or (ii) adjusted Term SOFR (i.e., Term SOFR plus 0.10%) plus a margin of 4.375% per annum.

Principal Repayments. The MSG Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the MSG Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity. Under certain circumstances, MSG LV is required to make mandatory prepayments on the loan, including prepayments in an amount equal to the ~~Tao Subordinated Credit Agreement,~~net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.

Covenants. The MSG Sphere Term Loan Facility includes financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring MSG Entertainment Group to maintain a specified minimum liquidity level. The debt service coverage ratio covenant begins testing in the fiscal quarter ending December 31, 2023 on a historical basis and, beginning with the first fiscal quarter occurring after the date on which the first ticketed performance or event open to the general public occurs at the MSG Sphere in Las Vegas (the “Opening Date”), is also tested on a prospective basis. Both the historical and prospective debt service coverage ratios are set at 1.35:1. In addition, among other conditions, MSG LV is not permitted to make distributions to MSG Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for MSG Entertainment Group is set at $100,000, with $75,000 required to be held in cash or cash equivalents, which amounts, prior to the Liquidity Covenant Reduction Date (as defined below), must be held in an account pledged as collateral for the MSG Sphere Term Loan Facility until its release upon the Liquidity Covenant Reduction Date (the “Pledged Account”), before stepping down to $50,000, with $25,000 required to be held in cash or cash equivalents, once the MSG Sphere in Las Vegas has been substantially completed and certain of its systems are ready to be used in live, immersive events (the “Liquidity Covenant Reduction Date”). The minimum liquidity level was tested on the closing date and is tested as of the last day of each fiscal quarter thereafter based on MSG Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date. In the event the Company completes the spin-off of its traditional live entertainment business currently under consideration (the “MSGE Spin-off”) and retains an economic interest in the live entertainment company (the “Live Entertainment Company Retained Interest”), the Live Entertainment Company Retained Interest will be pledged to secure the MSG Sphere Term Loan Facility until the pledge is released upon the Liquidity Covenant Reduction Date, and a portion of the value of the Live Entertainment Company Retained Interest may also be counted toward the minimum liquidity level. See Note 17, Subsequent Events, for details regarding the MSGE Spin-off.

In addition to the covenants described above, the MSG Sphere Term Loan Facility and the related guaranty and security and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default. The MSG Sphere Term Loan Facility contains certain restrictions on the ability of MSG LV and MSG Entertainment Group to take certain actions as provided anin (and subject to various exceptions and baskets set forth in) the MSG Sphere Term Loan Facility and the related guaranty and security and pledge agreements, including the following: (i) incur additional ~~$22,000~~indebtedness; (ii) create liens on the MSG Sphere in Las Vegas, the Live Entertainment Company Retained Interest or the real property intended for development as the MSG Sphere in London; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions (which will restrict the ability of ~~intercompany loan borrowing availability~~MSG LV to make cash distributions to the Company); (v) change its lines of business; (vi) engage in certain transactions with affiliates; (vii) amend organizational documents; (viii) merge or consolidate; and (ix) make certain dispositions.

Guarantors and Collateral. All obligations under the ~~Tao Subordinated Credit Agreement. The net intercompany loan outstanding balance~~MSG Sphere Term Loan Facility are guaranteed by MSG Entertainment Group. All obligations under the ~~Tao Subordinated Credit Agreement, as amended, was $63,000 as~~MSG Sphere Term Loan Facility, including the guarantees of ~~December 31, 2021. The balances~~those obligations, are secured by all of the assets of MSG LV and ~~interest-related activities pertaining~~certain assets of MSG Entertainment Group including, but not limited to, ~~the Tao Subordinated Credit Agreement, as amended, have been eliminated~~MSG LV’s leasehold

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interest in the ~~consolidated financial statements~~land on which the MSG Sphere in ~~accordance~~Las Vegas is located, a pledge of all of the equity interests held directly by MSG Entertainment Group in MSG LV and, until the Liquidity Covenant Reduction Date, the Pledged Account and a pledge of the Live Entertainment Company Retained Interest following the consummation of the MSGE Spin-off.

Tao Credit Facilities

General. On June 9, 2022, TAO Group Intermediate Holdings LLC (“TAOIH”) and TAO Group Operating LLC (“TAOG”) entered into an amended and restated credit agreement (the “Restated Tao Senior Credit Agreement”) with ~~ASC Topic 810,~~ ~~Consolidation~~.

JPMorgan Chase Bank, N.A., as agent, and the lenders party thereto. The Restated Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “Tao ~~Senior Secured~~ Credit Facilities”) consisting of: (i) an initial ~~$40,000~~$75,000 term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a ~~$25,000~~$60,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit. ~~All borrowings~~As of December 31, 2022, outstanding letters of credit were $750 and the remaining borrowing available under the Tao Revolving Credit Facility ~~including, without limitation, amounts drawn~~was $49,250.

Interest Rates. Borrowings under the revolving line of credit are subject to the satisfaction of customary conditions. The Tao Senior Secured Credit Facilities were obtained without recourse to the Company or any of its affiliates (other than TAOG, TAOIH and its subsidiaries and in respect of a certain reserve account, each as discussed below).

The Tao Senior Credit Agreement requires TAOIH to comply with a maximum total leverage ratio of 4.00:1.00 and a maximum senior leverage ratio of 3.00:1.00 from the closing date until December 31, 2021 and a maximum total leverage ratio of 3.50:1.00 and a maximum senior leverage ratio of 2.50:1.00 from and after December 31, 2021. In addition, there is a minimum fixed charge coverage ratio of 1.25:1.00 for TAOIH. On August 6, 2020, TAOG and TAOIH entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct wholly owned subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. The balance held in the reserve account was approximately $1,600 as of December 31, 2021. As of December 31, 2021, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Tao Senior Credit Agreement.

All obligations under the Tao Senior Credit Agreement are guaranteed by MSG Entertainment Group, TAOIH and TAOIH’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG, (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or unrestricted subsidiaries) (the “Tao Subsidiary Guarantors,” and together with TAOIH, the “Tao Guarantors”). All obligations under the Tao Senior Credit Agreement, including the guarantees of those obligations, are secured by the reserve account noted above and substantially all of the assets of TAOG and each Tao Guarantor (collectively, “Tao Collateral”), including, but not limited to, a pledge of the equity interests in TAOG held directly by TAOIH and the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.

~~Borrowings under the~~Restated Tao Senior Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to ~~2.50%~~2.00% per annum (determined based on a total leverage ratio) (the “Tao Base Rate”), or (b) a ~~Eurocurrency~~SOFR rate plus an additional rate ranging from 2.50% to ~~3.50%~~3.00% per annum (determined based on a total leverage ratio) (the “Tao ~~Eurocurrency~~SOFR Rate”), provided that through December 31, 2021, the additional rate used in calculating the floating rate is (i) 1.50% per annum for borrowings bearing the Tao Base Rate, and (ii) 2.50% per annum for borrowings bearing the Eurocurrency Rate.. The Restated Tao Senior Credit Agreement requires TAOG to pay a commitment fee of ~~0.50%~~0.375% in respect of the daily unused commitments under the Tao Revolving Credit ~~Facility.~~Facility (previously 0.50% prior to the amendment on June 9, 2022). TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Restated Tao Senior Credit Agreement. The interest rate on the Restated Tao Senior Credit Agreement as of December 31, ~~2021~~2022 was ~~2.61%~~6.92%. ~~There was no borrowing~~

Principal Repayments. Subject to customary notice and minimum amount conditions, TAOG may voluntarily repay outstanding loans under the Restated Tao ~~Revolving~~Senior Credit Agreement at any time, in whole or in part, without premium or penalty. The Tao Term Loan Facility ~~as of December 31, 2021. Tao Group Hospitality utilized $750~~amortizes quarterly in accordance with its terms from June 9, 2022 through the maturity date on June 9, 2027. TAOG is required to make mandatory prepayments of the Tao ~~Revolving Credit~~Term Loan Facility ~~for issuance~~from the net cash proceeds of ~~letters~~certain sales of ~~credit~~assets or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the ~~remaining borrowing available as~~incurrence of ~~December 31, 2021 was $24,250.~~certain indebtedness, subject to certain exceptions.

Covenants.The Restated Tao Senior Credit Agreement requires TAOIH to comply with a maximum total leverage ratio of 3.50:1.00, a maximum senior leverage ratio of 2.50:1.00 and a minimum fixed charge coverage ratio of 1.25:1.00. The Restated Tao Senior Credit Agreement, among other things, (i) increased the minimum liquidity for TAOG to $20,000 and maximum capital expenditures to $30,000, with a one year carry forward of $20,000, (ii) increased the basket for the maximum amount of the incremental revolving credit facility to $50,000; and (iii) amended certain other financial covenants regarding leverage to allow up to $10,000 of cash netting. As of December 31, ~~2021, there was $26,250 outstanding under~~2022, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Restated Tao ~~Term Loan Facility.~~

Senior Credit Agreement.

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In addition to the financial covenants described above, the Restated Tao Senior Credit Agreement and the related security agreements contain certain customary representations and warranties, affirmative covenants and events of default. The Restated Tao Senior Credit Agreement contains certain restrictions on the ability of TAOIH, TAOG and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Restated Tao Senior Credit Agreement, including, without limitation, the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) engaging in certain transactions with affiliates; (vi) amending specified agreements; (vii) merging or consolidating; (viii) making certain dispositions; and (ix) entering into agreements that restrict the granting of liens. Intermediate Holdings is subject to a customary passive holding company covenant.

~~Subject to customary notice~~Guarantors and ~~minimum amount conditions, TAOG may voluntarily repay outstanding loans~~Collateral. All obligations under the Restated Tao Senior Credit Agreement ~~at any time, in whole~~are guaranteed by MSG Entertainment Group, TAOIH and TAOIH’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG, (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or ~~in part, without premium or penalty (except for customary breakage costs~~unrestricted subsidiaries) (the “Tao Subsidiary Guarantors,” and together with ~~respect to Eurocurrency loans)~~TAOIH, the “Tao Guarantors”). ~~The initial~~All obligations under the Restated Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 30, 2019 through March 31, 2024 with a final maturity date on May 23, 2024. TAOG is required to make mandatory prepaymentsSenior Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of TAOG and each Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

~~Principal Repayments~~

Long-term debt maturities over the next five years for the outstanding balance under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as of December 31, 2021 were:

MSG Networks Senior Secured Credit Facilities National Properties Term Loan Facility Tao Credit Facilities Total
Fiscal Year 2022 (remainder) $ 24,750 3,250 $ 3,750 $ 31,750
Fiscal Year 2023 66,000 6,500 10,000 82,500
Fiscal Year 2024 82,500 6,500 12,500 101,500
Fiscal Year 2025 849,750 6,500 — 856,250
Fiscal Year 2026 — 620,750 — 620,750
Thereafter — — — —
$ 1,023,000 $ 643,500 $ 26,250 $ 1,692,750

The following table summarizes the outstanding balances under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as well as the related deferred financing costs in the accompanying consolidated balance sheets as of December 31, 2021 and June 30, 2021:

December 31, 2021 June 30, 2021
Principal Unamortized Deferred Financing Costs
Net (a)
Principal Unamortized Deferred Financing Costs
Net (a)
Current portion
MSG Networks Senior Secured Credit Facilities $ 49,500 $ (1,244) $ 48,256 $ 49,500 $ (1,255) $ 48,245
National Properties Term Loan Facility 6,500 (6,783) (283) 6,500 (6,783) (283)
Tao Term Loan Facility 8,750 (240) 8,510 6,250 (239) 6,011
Current portion of long-term debt, net of deferred financing costs $ 64,750 $ (8,267) $ 56,483 $ 62,250 $ (8,277) $ 53,973
Guarantor (collectively, “Tao Collateral”),

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

December 31, 2021 June 30, 2021
Principal Unamortized Deferred Financing Costs
Net (a)
Principal Unamortized Deferred Financing Costs
Net (a)
Noncurrent portion
MSG Networks Senior Secured Credit Facilities $ 973,500 $ (2,095) $ 971,405 $ 998,250 $ (2,715) $ 995,535
National Properties Term Loan Facility 637,000 (19,427) 617,573 640,250 (22,819) 617,431
Tao Term Loan Facility 17,500 (356) 17,144 22,500 (475) 22,025
Tao Revolving Credit Facility — — — 15,000 — 15,000
Long-term debt, net of deferred financing costs $ 1,628,000 $ (21,878) $ 1,606,122 $ 1,676,000 $ (26,009) $ 1,649,991
~~_________________~~

~~(a)In addition~~including, but not limited to, a pledge of the ~~outstanding balance associated with the MSG Networks Senior Secured Credit Facilities, the Tao Term Loan Facility, the Tao Revolving Credit Facility~~equity interests in TAOG held directly by TAOIH and the ~~National Properties Term Loan Facility disclosed above, the Company’s long-term debt, net of deferred financing costs~~equity interests in the accompanying consolidated balance sheets of $1,606,759 and $1,650,628 as of December 31, 2021 and June 30, 2021, respectively, also includes $637 related to a note with respect to a loan receivedeach Tao Subsidiary Guarantor held directly or indirectly by ~~BCE from its noncontrolling interest holder that matures in April 2023.~~TAOIH.

Unamortized deferred financing costs associated with MSGN Revolving Credit Facility and Tao Revolving Credit Facility are presented under the captions Other current assets and Other assets in the accompanying consolidated balance sheets.

~~Supplemental cash flows information~~

~~During the six months ended December 31, 2021 and 2020, interest~~Interest payments and loan principal repayments made by the Company under the ~~MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility, and Tao Senior Credit Agreement for term loan and revolving~~ credit ~~facilities~~agreements were as follows:

Interest Payments (a)
Loan Principal Repayments
Six Months Ended Six Months Ended
December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020
MSG Networks Senior Secured Credit Facilities $ 8,886 $ 9,584 $ 24,750 $ 13,750
National Properties Term Loan Facility 23,141 — 3,250 —
Tao Credit Facilities 415 554 17,500 2,500
$ 32,442 $ 10,138 $ 45,500 $ 16,250


	Interest Payments				Loan Principal Repayments
	Six Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
MSG Networks Credit Facilities	$	24,468	$	8,886	$	24,750	$	24,750
National Properties Credit Facilities	22,410		23,141		—		3,250
Tao Credit Facilities	2,259		415		1,875		17,500

	$	49,137	$	32,442	$	26,625	$	45,500

The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:


	December 31, 2022				June 30, 2022
	Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value
Liabilities:
MSG Networks Credit Facilities	$	973,500	$	951,596	$	998,250	$	958,320
National Properties Credit Facilities	679,100		672,309		679,100		679,100

MSG Sphere Term Loan Facility	275,000		275,000		—		—
Tao Senior Credit Facilities	83,125		83,428		85,000		82,569
Total Long-term debt	$	2,010,725	$	1,982,333	$	1,762,350	$	1,719,989

_________________

(a)~~See Note 2 and Note 8 for further details on interest capitalization during~~The total carrying value of the ~~three and six months ended~~Company’s financial instruments as of December 31, ~~2021,~~2022andJune 30, 2022is equal to the current and ~~2020. Interest~~non-current principal payments ~~net of capitalized interest, were $12,516 and $2,227~~ for the ~~six months ended December 31, 2021~~Company’s credit agreements excluding unamortized deferred financing costs of $22,974 and ~~2020.~~$19,899, 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.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Note ~~14.~~11. Pension Plans and Other Postretirement Benefit Plan

~~See Note 14 to the Company’s audited consolidated~~The Company sponsors several pension, savings and ~~combined financial statements and notes thereto for the year ended June 30, 2021 included in the Form 10-K for more information regarding~~postretirement benefit plans including the Company’s defined benefit pension plans (“MSGE Pension Plans”), postretirement benefit plan (“MSGE Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “Savings Plans”), and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”).

Through the Merger, the Company also sponsors (i) a non-contributory, qualified defined benefit pension plan covering certain of its union employees, (ii) an unfunded non-contributory, non-qualified frozen excess cash balance plan covering certain employees who participated in an underlying qualified plan, and (iii) an unfunded noncontributory, non-qualified frozen defined benefit pension plan for the benefit of certain employees who participated in an underlying qualified plan (collectively the “MSGN Pension Plans”, and together with MSGE See Note 16, Pension Plans and Other Postretirement Benefit Plans, to the “Pension Plans”). MSG Networks also sponsors a contributory welfare plan which provides certain postretirement healthcare benefits to certain employees hired prior to January 1, 2001 (the “MSGN Postretirement Plan”,consolidated and ~~together with MSGE Postretirement Plan,~~combined financial statements included in the ~~“Postretirement Plans”).~~2022 Form 10-K for more information regarding these plans.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Defined Benefit Pension Plans and Postretirement Benefit ~~Plan~~Plans

The following tables present components of net periodic benefit cost for the Pension Plans and Postretirement Plans included in the accompanying condensed consolidated statements of operations for the three and six months ended December 31, ~~2021~~2022 and ~~2020.~~2021. Service cost is recognized in direct operating expenses and selling, general and administrative expenses. All other components of net periodic benefit cost are reported in ~~miscellaneous~~Other expense, net.
Pension Plans Postretirement Plan
Three Months Ended Three Months Ended
December 31, December 31,
2021 2020 2021 2020
Service cost $ 118 $ 123 $ 16 $ 22
Interest cost 1,190 1,101 20 19
Expected return on plan assets (1,719) (1,509) — —
Recognized actuarial loss 501 396 9 20
Net periodic benefit cost $ 90 $ 111 $ 45 $ 61


		Pension Plans				Postretirement Plans					Pension Plans				Postretirement Plans
		Six Months Ended				Six Months Ended					Three Months Ended				Three Months Ended
		December 31,				December 31,					December 31,				December 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Service cost	Service cost	$	236	$	244	$	32	$	44	Service cost	$	123	$	118	$	15	$	16
Interest cost	Interest cost	2,380		2,203		40		38		Interest cost	1,189		1,190		19		20
Expected return on plan assets	Expected return on plan assets	(3,438)		(3,018)		—		—		Expected return on plan assets	(1,719)		(1,719)		—		—
Recognized actuarial loss	Recognized actuarial loss	1,002		854		18		40		Recognized actuarial loss	501		501		9		9

Net periodic (benefit) cost		$	180	$	283	$	90	$	122
Net periodic benefit cost										Net periodic benefit cost	$	94	$	90	$	43	$	45



	Pension Plans				Postretirement Plans
	Six Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Service cost	$	246	$	236	$	30	$	32
Interest cost	2,378		2,380		38		40
Expected return on plan assets	(3,438)		(3,438)		—		—
Recognized actuarial loss	1,002		1,002		18		18


Net periodic benefit cost	$	188	$	180	$	86	$	90

Contributions for Qualified Defined Benefit Plans

~~Table~~The Company sponsors two non-contributory, qualified defined benefit pension plans covering certain of ~~Contents~~its union employees (the “UTT Plan” and the “Networks 1212 Plan,” collectively the “Union Plans”). During the three and six months ended December 31, 2022, the Company contributed $500 to the Networks 1212 Plan.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Contributions for Defined Contribution ~~Pension~~ Plans

For the three and six months ended December 31, ~~2021~~2022 and ~~2020,~~2021, expenses related to the Savings Plans and Union Savings Plan included in the accompanying condensed consolidated statements of operations are as follows:

Savings Plans Union Savings Plan
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2021 2020 2021 2020 2021 2020 2021 2020
$ 2,475 $ 1,672 $ 4,494 $ 3,077 $ 7 $ 10 $ 21 $ 19


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Savings Plans	$	2,742	$	2,475	$	5,307	$	4,494
Union Savings Plan	$	20	$	7	$	38	$	21

Note ~~15.~~12. Share-based Compensation

See Note 15 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Form 10-K for more information regarding MSG Sports equity award programs (the “MSG Sports Stock Plans”) and MSG Entertainment equity award programs. Prior to the Merger,The Company has three share-based compensation ~~awards were also granted under~~plans: the 2020 Employee Stock Plan, the 2020 Stock Plan for Non-Employee Directors and the MSG Networks Inc. 2010 Employee Stock ~~Plan, as amended,~~Plan. See Note 17, Share-based Compensation, to the consolidated and combined financial statement included in the ~~MSG Networks Inc. 2010 Stock Plan~~2022 Form 10-K for ~~Non-Employee Directors (collectively, “MSGN Equity Incentive Plans”). Upon exercise of stock options or vesting of time-based~~more detail on these plans.

Share-based compensation expense for the Company’s restricted stock units ~~and~~(“RSUs”), performance ~~condition based restricted~~ stock units ~~collectively referred to as “RSUs,” under MSGN Equity Incentive Plans, shares were either issued from MSG Networks Inc.’s unissued reserved stock~~ (“PSUs”) and/or ~~from treasury stock.~~

At the Effective Time, each RSU for MSG Networks Inc.’s common stock was converted into 0.172 RSUs for the Company’s Class A Common Stock and each outstanding stock option for MSG Networks Inc.’s common stock was converted into 0.172 options for Class A Common Stock. The exercise price of stock options was adjusted by dividing the exercise price of the MSG Networks Inc.’s stock options by 0.172 (rounded up to the nearest whole cent). All outstanding performance-based vesting RSU or stock option awards for which the performance period had not been completed were converted into time-based (nonperformance based) vesting RSUs or stock option awards, respectively, based on the 100% target number of shares includedarerecognized in the ~~terms~~condensed consolidated statements of ~~the original award (“Performance Award Conversion”).~~

~~Share-based compensation expense was $24,171~~operations as a component of direct operating expenses or selling, general and $43,699 for the three and six months ended December 31, 2021, respectively, and $29,828 and $45,984 for the three and six months ended December 31, 2020, respectively. In addition, capitalized share-based compensation expense was $1,763 and $2,784 for the six months ended December 31, 2021 and 2020, respectively.

~~RSUs and stock options information is presented herein as if the Company and MSG Networks Inc. had been combined for all periods presented, unless otherwise noted.~~administrative expenses.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

~~Restricted Stock Units Award Activity~~

The following table summarizes ~~activity related to holders (including (i) Company employees and (ii) MSG Sports employees that received share-based awards prior to the Entertainment Distribution) of~~ the Company’s ~~RSUs~~share-based compensation expense:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Share-based compensation(a)	$	18,185	$	24,171	$	33,373	$	43,699

Intrinsic value of awards vested(b)	$	2,995	$	492	$	35,127	$	32,734

_________________

(a)Share-based compensation excludes costs that have been capitalized of $1,802 and $1,763 for the six months ended December 31, ~~2021:~~

Number of Weighted-Average
Fair Value
Per Share at
Date of Grant
Nonperformance
Based Vesting
RSUs
(In Thousands) Performance
Based Vesting
RSUs
(In Thousands)
Unvested award balance, June 30, 2021 683 701 $ 76.15
Granted 445 422 $ 79.07
Performance Award Conversion 223 (223) $ 82.63
Vested (332) (77) $ 87.42
Forfeited (9) (12) $ 74.87
Unvested award balance, December 31, 2021 1,010 811 $ 75.02

~~The fair value of RSUs that vested during~~2022 and 2021, respectively. For the three and six months ended December 31, ~~2021 was $32,734. Upon delivery, RSUs granted under~~2022, share-based compensation also excludes costs of $2,293 that have been reclassified to Restructuring charges in the ~~Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations.~~ condensed consolidated statements of operations, as detailed in Note 5, Restructuring Charges.

(b)To fulfill ~~the employees’~~ required statutory tax withholding obligations for the applicable income and other employment taxes, ~~195 of these~~ RSUs and PSUs with an aggregate value of $14,741 and $15,652 were retained by the Company during the six months ended December 31, 2022, and 2021, ~~of which 6 of these RSUs, with an~~respectively. The aggregate value of the RSUs and PSUs retained included $305 and $477 related to MSG Sports ~~employees.~~

~~Stock Options Award Activity~~

Compensation expense for the Company’s existing stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. Stock options generally vest over a three year service period and expire 7.5 to 10 years from the date of grant.

~~The following table summarizes activity related to the Company’s stock options held by~~ employees, ~~for~~during the six months ended December 31, ~~2021:~~2022, and 2021, respectively.

Number of
Time Vesting Options
(In Thousands) Number of
Performance
Based Vesting Options
(In Thousands) Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value
(In Thousands)
Balance as of June 30, 2021 409 315 $ 103.88
Performance Award Conversion 315 (315) $ 109.76
Balance as of December 31, 2021 724 — $ 103.88 3.96 $ 561
Exercisable as of December 31, 2021 597 — $ 108.29 3.70 $ 561
As of December 31, 2022, there was $106,360 of unrecognized compensation cost related to unvested RSUs and PSUs held by the Company’s employees. The cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

For the three and six months ended December 31, 2022, weighted-average anti-dilutive shares primarily consisted of approximately 1,671 units and 1,433 units, respectively, of RSUs and stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the three months ended December 31, 2021, weighted-average anti-dilutive shares primarily consisted of approximately 668 units of RSUs and stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the six months ended December 31, 2021 all restricted stock units 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. An anti-dilutive option exists when the average stock price for the period is less than the exercise price of the option or share.

Award Activity

RSUs

During the six months ended December 31, 2022 and 2021, approximately 650 and 445 RSUs were granted and approximately 546 and 332 RSUs vested, respectively.

PSUs

During the six months ended December 31, 2022 and 2021, approximately 566 and 422 PSUs were granted and approximately 91 and 77 PSUs vested, respectively.

Note 13. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 15,000 shares of preferred stock, par value $0.01. As of December 31, 2022 and June 30, 2022, no shares of preferred stock were outstanding.

Stock Repurchase Program

On March 31, 2020, the Company’s Board of Directors authorized the repurchase of up to $350,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on April 20, 2020. Under the authorization, shares of Class A Common Stock may be purchased from time to time 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 has not engaged in any share repurchase activities under its share repurchase program to date.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

~~Note 16.~~ Accumulated Other Comprehensive Loss

The following table details the components of accumulated other comprehensive loss:


		Three Months Ended December 31, 2021							Three Months Ended
		Pension Plans and Postretirement Plan		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss			December 31, 2022
Balance as of September 30, 2021		$	(45,009)	$	9,949	$	(35,060)
Other comprehensive income before reclassifications		—		2,486		2,486
									Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of September 30, 2022								Balance as of September 30, 2022	$	(39,787)	$	(21,194)	$	(60,981)
Other comprehensive income								Other comprehensive income	—		14,803		14,803
Amounts reclassified from accumulated other comprehensive loss (a)	Amounts reclassified from accumulated other comprehensive loss (a)	510		—		510		Amounts reclassified from accumulated other comprehensive loss (a)	510		—		510
Income tax expense	Income tax expense	(97)		(471)		(568)		Income tax expense	(176)		(2,719)		(2,895)

Other comprehensive income	Other comprehensive income	413		2,015		2,428		Other comprehensive income	334		12,084		12,418
Balance as of December 31, 2021		$	(44,596)	$	11,964	$	(32,632)

Balance as of December 31, 2022								Balance as of December 31, 2022	$	(39,453)	$	(9,110)	$	(48,563)



	Three Months Ended
	December 31, 2021
	Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of September 30, 2021	$	(45,009)	$	9,949	$	(35,060)
Other comprehensive income	—		2,486		2,486
Amounts reclassified from accumulated other comprehensive loss (a)	510		—		510
Income tax expense	(97)		(471)		(568)
Other comprehensive income	413		2,015		2,428
Balance as of December 31, 2021	$	(44,596)	$	11,964	$	(32,632)

Three Months Ended December 31, 2020
Pension Plans and
Postretirement
Plan Cumulative Translation Adjustments Accumulated
Other
Comprehensive
Loss
Balance as of September 30, 2020 $ (38,452) $ 1,157 $ (37,295)
Other comprehensive income before reclassifications — 11,883 11,883
Amounts reclassified from accumulated other comprehensive loss (a)
416 — 416
Income tax expense (1,562) (2,171) (3,733)
Other comprehensive income (loss) (1,146) 9,712 8,566
Balance as of December 31, 2020 $ (39,598) $ 10,869 $ (28,729)

Six Months Ended December 31, 2021
Pension Plans and
Postretirement
Plan Cumulative Translation Adjustments Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2021 $ (45,425) $ 15,153 $ (30,272)
Other comprehensive loss before reclassifications — (3,932) (3,932)
Amounts reclassified from accumulated other comprehensive loss (a)
1,020 — 1,020
Income tax benefit (expense) (191) 743 552
Other comprehensive income (loss) 829 (3,189) (2,360)
Balance as of December 31, 2021 $ (44,596) $ 11,964 $ (32,632)



	Six Months Ended
	December 31, 2022
	Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of June 30, 2022	$	(40,287)	$	(8,068)	$	(48,355)
Other comprehensive loss	—		(1,277)		(1,277)
Amounts reclassified from accumulated other comprehensive loss (a)	1,020		—		1,020
Income tax (expense) benefit	(186)		235		49

Other comprehensive income (loss)	834		(1,042)		(208)

Balance as of December 31, 2022	$	(39,453)	$	(9,110)	$	(48,563)

4227

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Six Months Ended December 31, 2020
Pension Plans and
Postretirement
Plan Cumulative Translation Adjustments Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2020 $ (38,767) $ (10,225) $ (48,992)
Other comprehensive income before reclassifications — 25,834 25,834
Amounts reclassified from accumulated other comprehensive loss (a)
894 — 894
Income tax expense (1,725) (4,740) (6,465)
Other comprehensive income (loss) (831) 21,094 20,263
Balance as of December 31, 2020 $ (39,598) $ 10,869 $ (28,729)



	Six Months Ended
	December 31, 2021
	Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of June 30, 2021	$	(45,425)	$	15,153	$	(30,272)
Other comprehensive loss	—		(3,932)		(3,932)
Amounts reclassified from accumulated other comprehensive loss (a)	1,020		—		1,020
Income tax (expense) benefit	(191)		743		552

Other comprehensive income (loss)	829		(3,189)		(2,360)

Balance as of December 31, 2021	$	(44,596)	$	11,964	$	(32,632)

~~_____________~~_________________

(a)Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under ~~Miscellaneous~~Other income (expense), net in the accompanying condensed consolidated statements of ~~operations.~~operations (see Note 11, Pension Plans and Other Postretirement Benefit Plans).

~~Note 17. Income Taxes~~

For the periods prior to the Entertainment Distribution, the Company filed consolidated income tax returns with MSG Sports. The income tax provision included in these periods has been calculated using the separate return basis, as if the Company filed a separate tax return. In addition, although the Company and MSG Networks did not file consolidated returns for periods prior to the Merger, income tax expense or benefit and deferred tax assets and liabilities have been presented on a combined basis for all historical periods, as described in Note 1.

Income tax expense for the three months ended December 31, 2021 of $4,063 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) tax expense of $2,910 related to nondeductible officers’ compensation and, (ii) state income tax expense of $3,107 primarily offset by (x) tax benefit of $1,378 resulting from a decrease in the valuation allowance, (y) tax benefit of $1,015 resulting from federal tax credits and (z) tax benefit of $577 related to noncontrolling interests.

Income tax benefit for the six months ended December 31, 2021 of $14,847 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $9,048 to write off the deferred tax for certain transaction costs associated with the Merger, (ii) tax expense of $5,769 related to nondeductible officers’ compensation, partially offset by (w) state income tax benefit of $5,067, (x) tax benefit of $2,460 resulting from a decrease in the valuation allowance, (y) tax benefit of $1,987 resulting from a change in the estimated applicable tax rate used to measure deferred taxes and (z) tax benefit of $1,118 related to noncontrolling interests.

Income tax benefit for the three months ended December 31, 2020 of $298 differs from income tax benefits derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $11,021 resulting from an increase in the valuation allowance, (ii) tax expense of $4,056 related to nondeductible officers’ compensation and (iii) tax expense of $891 relating to noncontrolling interests, partially offset by state income tax benefit of $3,531.

Income tax expense for the six months ended December 31, 2020 of $9,159 differs from income tax benefits derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $18,561 resulting from an increase in the valuation allowance, (ii) tax expense of $6,921 resulting from a change in the estimated applicable tax rate used to measure deferred taxes, (iii) tax expense of $5,512 related to nondeductible officers’ compensation, and (iv) tax expense of $1,840 related to noncontrolling interests, partially offset by state income tax benefit of $5,267.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax asset will not be realized. As of December 31, 2021, based on current facts and circumstances, management believes that it is more likely than not that the Company will not realize the benefit for a portion of its deferred tax asset.~~Accordingly, a partial valuation allowance has been recorded as of December 31, 2021.The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis.~~

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

During the six months ended December 31, 2021 the Company received income tax refunds, net of payments, of $7,063. During the six months ended December 31, 2020, the Company made income tax payments (net) of $52,147.

Note ~~18.~~14. Related Party Transactions

As of December 31, ~~2021, members~~2022, members of the Dolan ~~family~~Family, including trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially owned 100% of the Company’s outstanding Class B Common Stock and approximately ~~5.0%~~5.5% of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of ~~the date hereof)~~December 31, 2022). Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately ~~72.6%~~72.4% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Sports and AMC Networks Inc. ~~(“AMC Networks”).~~

~~Current~~See Note 21, Related Party ~~Arrangements~~

~~The Company is party~~Transactions, to the ~~following agreements and/or arrangements with MSG Sports:~~

•~~Media rights agreements with MSG Sports pursuant to which~~consolidated and combined financial statements included in the ~~Company has the exclusive media rights to Knicks and Rangers games in their local markets.~~

•~~Sponsorship sales and service representation agreements pursuant to which the Company has the exclusive right and obligation to sell MSG Sports’ sponsorships for an initial stated term of ten years~~2022 Form 10-K for a ~~commission;~~

•A team sponsorship allocation agreement, pursuant to which MSG Sports continues receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the Entertainment Distribution Date;

•~~Arena License Agreements pursuant to which the Company (i) provides MSG Sports the right to use The Garden for games~~description of the ~~Knicks and Rangers for a 35-year term~~Company’s current related party arrangements. There have been no material changes in exchange for venue license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sale of food and beverage sales and catering services during the Knicks and Rangers games for a portion of net profits (as defined under the Arena License Agreements), (v) provides day of game services that were historically provided prior to the Entertainment Distribution, and (vi) provides other general services within The Garden;

•~~Transition Services Agreement (the “TSA”) pursuant to which the Company provides certain corporate and other transition services to MSG Sports,~~ such related party arrangements except as information technology, accounting, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions, in exchange for service fees. MSG Sports also provides certain transition services to the Company, in exchange for service fees;

•~~Sublease agreement, pursuant to which the Company subleases office space to MSG Sports;~~

•Group ticket sales representation agreement, pursuant to which the Company appointed MSG Sports as its sales and service representative to sell group ticket packages related to Company events in exchange for a commission;

•Single night rental commission agreement, pursuant to which MSG Sports may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual Company events in exchange for a commission;

•~~Aircraft time sharing agreements (discussed below); and~~

•Other agreements with MSG Sports entered into in connection with the Entertainment Distribution such as a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

Further, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman and Chief Executive Officer and the Company’s President with MSG Sports and (ii) the Company’s Vice Chairman with MSG Sports and AMC Networks.

The Company is a party to various aircraft arrangements. Pursuant to certain Aircraft Support Services Agreements (the “Support Agreements”), the Company provides certain aircraft support services to entities controlled by (i) James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, (ii) Charles F. Dolan, a director, and certain of his children, who are siblings of James L. Dolan, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M. Dolan, and (iii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan. The Aircraft Support Services Agreement with the entity controlled by James L. Dolan is no longer effective as of December 21, 2021.

The Company entered into reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and Kristin A. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling2k LLC (collectively, “CFD”), an entity owned and controlled by Deborah Dolan-Sweeney, the daughter of Charles F. Dolan and the sister of James L. Dolan, pursuant to which the Company has agreed from time to time to make its aircraft available to each of Q2C and CFD, and Q2C, and CFD have agreed from time to time to make their aircraft available to the Company. Pursuant to the terms of the agreements, Q2C and/or CFD may lease on a non-exclusive, “time sharing” basis, the certain Company aircraft. The reciprocal dry lease agreement between the Company and Q2C is no longer effective as of December 21, 2021.

The Company is also party to a dry lease agreement and a time sharing agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F. Dolan, the son of Charles F. Dolan and the brother of James L. Dolan, pursuant to which Brighid Air has agreed from time to time to make its Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”) available to the Company on a non-exclusive basis. In connection with the dry lease agreement, the Company also entered into a Flight Crew Services Agreement (the “Flight Crew Agreement”) with Dolan Family Office, LLC (“DFO”), an entity owned and controlled by Charles F. Dolan, pursuant to which the Company may utilize pilots employed by DFO for purposes of flying the Challenger when the Company is leasing that aircraft under the Company’s dry lease agreement with Brighid Air.

The Company and each of MSG Sports and AMC Networks are party to certain aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make aircraft available to MSG Sports and/or AMC Networks for lease on a “time sharing” basis. Additionally, the Company, MSG Sports and AMC Networks have agreed on an allocation of the costs of certain aircraft and helicopter use by their shared executives.

~~In addition to the aircraft arrangements~~ described above, certain executives of the Company are party to aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).below.

From time to time the Company enters into arrangements with 605, ~~LLC.~~LLC (“605”). James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and his spouse, Kristin A. Dolan (a director of the Company), own 50% of ~~605, LLC.~~605. Kristin A. Dolan is also the founder and Chief Executive Officer of 605. 605 ~~LLC. 605, LLC~~ provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.

As The Company’s Audit Committee approved the entry into one or more agreements with 605 to provide certain data analytics services to the Company for an aggregate amount of up to $1,000. In August 2022, a subsidiary of the Company entered into a three-year agreement with 605, valued at approximately $750, covering several customer analysis projects per year in connection with events held at our venues. The Company expects to engage 605 to provide additional data analytics services in the future. Pursuant to this arrangement, the Company recognized approximately $65 and $135 of expense for the three and six months ended December 31, 2022 and as of December 31, ~~2021~~2022 approximately $135 has been recognized in Prepaid expenses and other current assets.

As of June 30, ~~2021, BCE~~2022, the Company had $637 of notes payable with respect to a loan received by BCE from its noncontrolling interest holder. ~~See Note 13 for further information.~~As of December 31, 2022 there were no notes payable with respect to this loan as a result of the BCE Disposition.

The Company has also entered into certain commercial agreements with its equity method investment nonconsolidated affiliates in connection with MSG Sphere. ~~For~~The company recorded $22,416 and $28,064 for the three months ended December 31, 2022 and 2021, and $73,086 and $36,741 for the six months ended December 31, ~~2021~~2022 and ~~2020, the Company recorded $36,741 and $20,742,~~2021, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, accrued capital expenditures associated with related parties were ~~$20,606~~$27,401 and ~~$6,921,~~$25,028, respectively, and are reported under Accounts payable, accrued and other ~~accrued~~current liabilities in the accompanying condensed consolidated balance sheets.

4528

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Revenues and Operating Expenses ~~(Credits)~~

The following table summarizes the composition and amounts of the transactions with the Company’s affiliates. These amounts are reflected in revenues and operating expenses in the accompanying condensed consolidated statements of operations for the ~~three and~~ six months ended December 31, 2022 and 2021:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Revenues	$	41,087	$	35,099	$	46,284	$	39,467
Operating expenses (credits):
Media rights fees	$	43,433	$	40,813	$	86,200	$	81,258
Revenue sharing expenses	7,099		5,633		8,286		6,396

Reimbursement under Arena License Agreements	(9,357)		(8,673)		(9,850)		(9,050)
Cost reimbursement from MSG Sports - per Transition services agreement	(9,475)		(10,513)		(18,992)		(19,729)


Origination, master control and technical services	1,232		1,208		2,464		2,416


Other operating expenses, net	1,454		792		2,292		2,914
Total operating expenses, net (a)	$	34,386	$	29,260	$	70,400	$	64,205

_________________

(a)Of the total operating expenses, net, $43,808, and $38,992 for three months ended December 31, 2022 and 2021, and ~~2020:~~

Three Months Ended December 31, Six Months Ended December 31,
2021 2020 2021 2020
Revenues $ 30,702 $ 4,638 $ 34,889 $ 7,461
Operating expenses (credits):
Direct operating — media rights fees $ 40,813 $ 34,422 $ 81,258 $ 73,963
Direct operating — revenue sharing expenses $ 1,131 $ 15 1,985 96
Direct operating — reimbursement under Arena License Arrangement (6,125) (351) (6,465) (1,241)
General and administrative with MSG Sports — net of TSA credits (10,513) (10,273) (19,729) (20,453)
Direct operating — origination, master control and technical services 1,208 1,184 2,416 2,368
Other operating expenses, net 987 (218) 3,109 (85)
$88,807, and $81,197, for the six months ended December 31, 2022 and, 2021, respectively, are included in direct operating expenses in the accompanying condensed consolidated statements of operations, and $(9,422) and $(9,732) for three months ended December 31, 2022 and 2021, and $(18,407) and $(16,992) for the six months ended December 31, 2022 and 2021, respectively, are included as net credits in selling, general and administrative expenses.

Revenues

In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed annual license fees scheduled to be paid monthly over the term of the agreements. The Company ~~accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of~~recorded $31,825 and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games, as further detailed in Note 9, operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.

In addition to the Arena License Agreements, ~~discussed above,~~ the Company’s revenues from related parties primarily reflected sponsorship sales and service representation agreements of $6,031 and $8,564 and merchandise sharing revenues of $2,176 and $2,291 with MSG Sports ~~of $4,831 and $7,179~~ during the three and six months ended December 31, ~~2021, respectively~~2022, respectively. The Company also earned sublease revenue from related parties of $611 and ~~$2,441 and $4,646 during~~$1,222 during the three and six months ended December 31, ~~2020,~~2022, respectively.

The company recorded $27,853 and $29,181 of revenues under the Arena License Agreements for the three and six months ended December 31, 2021, respectively. In addition, the Company recorded revenues under sponsorship sales and service representation agreements of $4,831 and $7,179 and merchandise sharing revenues of $1,395 and $1,452 with MSG Sports during the three and six months ended December 31, 2021, respectively.The Company also earned sublease revenue from related parties of $611 and $1,222 during the three and six months ended December 31, 2021, respectively and $611 and $1,223 during the three and six months ended December 31, 2020, respectively. These related party revenues were partially offset by approximately $3,002 and $3,126 of merchandise revenue sharing with MSG Sports during the three and six months ended December 31, 2021, respectively.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~Media Rights Fees~~

MSG Networks’ media rights agreements with MSG Sports, effective as of July 1, 2015, provide the MSG Networks segment with the exclusive media rights to Knicks and Rangers games in their local markets.

~~Revenue Sharing Expenses~~

In connection with the Entertainment Distribution, revenue sharing expenses include MSG Sports’ share of the Company’s suite license arrangements and certain venue signage agreements entered into by the Company, as well as profit sharing expenses related to in-venue food and beverage sales in connection with the Arena License Agreements.

~~General and Administrative with MSG Sports — Net of TSA Credits~~

The Company’s corporate overhead expenses that are charged to MSG Sports are primarily related to centralized functions, including information technology, accounting, accounts payable, payroll, tax, legal, human resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and reporting, and internal audit.

General and administrative operating expenses with MSG Sports, net of TSA credits included in the table above primarily reflect charges from the Company to MSG Sports pursuant to the TSA of $10,513 and $19,729 for the three and six months ended December 31, 2021, respectively, and $10,273 and $20,452 for the three and six months ended December 31, 2020, respectively.

~~Direct Operating — Origination, Master Control and Technical Services~~

~~AMC Networks provides certain origination, master control, and technical services to the MSG Networks segment.~~

~~Other Operating Expenses, net~~

The Company and its related parties enter into transactions with each other in the ordinary course of business. Amounts charged to the Company for other transactions with its related parties are net of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L. Dolan, the Executive Chairman, Chief Executive Officer and a director of the Company, for office space and the cost of certain technology services. In addition, other operating expenses include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and CFD, (ii) time sharing and/or dry lease agreements with MSG Sports, AMC Networks and Brighid Air and (iii) commission under the group ticket sales representation agreement with MSG Sports. The reciprocal aircraft arrangement between the Company and Q2C and the related aircraft support services arrangement between them was no longer effective as of December 21, 2021.

Note ~~19.~~15. Segment Information

~~The~~As of December 31, 2022, the Company iswas comprised of 3three reportable segments: Entertainment, MSG Networks and Tao Group Hospitality. ~~In determining its reportable segments, the Company assessed the guidance of~~ ~~ASC~~ ~~280-10-50-1, which provides the definition of a reportable segment. In accordance with the FASB’s guidance, the~~The Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its Chief Operating Decision ~~Maker (“CODM”).~~ Maker.

The ~~Company has evaluated this guidance and determined that there are 3 reportable segments. In addition, the~~ Company incurs non-capitalizable content development and technology costs associated with the Company’s MSG Sphere initiative, which are reported in ~~“Entertainment.”~~Entertainment. In addition to event-related operating expenses, Entertainment also includes other expenses such as (a) corporate and supporting department operating costs that are attributable to MSG Sphere development and (b) non-event related operating expenses for the Company’s venues, such as (i) rent for the Company’s leased venues, (ii) real estate taxes, (iii) insurance, (iv) utilities, (v) repairs and maintenance, (vi) labor related to the overall management of the venues, and (vii) depreciation and amortization expense related to the Company’s performance venues and

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

certain corporate property, equipment and leasehold improvements. Additionally, the Company does not allocate any purchase accounting adjustments related to business acquisitions to the reporting segments.

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

The Company evaluates segment performance based on several factors, of which the key financial measure is adjusted operating income (loss), a non-GAAP financial measure. We define adjusted operating income (loss) ~~before~~ as operating income (loss) excluding:

(i) ~~adjustments to remove~~ the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with MSG Sports,

(ii) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets,

(iii) amortization for capitalized cloud computing arrangement costs,

(iv) share-based compensation expense, ~~or benefit,~~

(v) restructuring charges or credits,

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

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

(viii) the impact of purchase accounting adjustments related to business acquisitions, ~~which~~and

(ix) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan (which was established in November 2021).

The Company believes that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. Management believes that this adjustment is ~~referred~~beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Sports. In addition, this adjustment is included under the Company’s debt covenant compliance calculations and is a component of the performance measures used to as adjusted operating income (loss), a non-GAAP measure. Because it is based upon operating income (loss), adjusted operating income (loss) also excludes interest expense (including cash interest expense)evaluate, and ~~other non-operating income and expense items. Management~~compensate, senior management of the Company. The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. ~~In addition, the~~The Company believes that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. We eliminateeliminates merger and acquisition-related costs, when applicable, because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan, which were included for the first time in Fiscal Year 2022, 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 Company’s Executive Deferred Compensation Plan are recognized in Operating income (loss) whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Other income (expense), net, which is not reflected in Operating income (loss).

The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance. The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance, and evaluates management’s effectiveness with specific reference to these indicators.

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Information as to the operations of the Company’s reportable segments is set forth below.



	Three Months Ended
	December 31, 2022
	Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total
Revenues	$	356,518	$	158,898	$	135,994	$	—	$	(9,212)	$	642,198
Direct operating expenses	(181,042)		(90,400)		(76,483)		(1,668)		634		(348,959)
Selling, general and administrative expenses	(109,561)		(38,083)		(43,166)		—		8,377		(182,433)
Depreciation and amortization	(21,921)		(1,637)		(5,616)		115		—		(29,059)
Impairment and other gains, net	5,412		—		473		—		—		5,885
Restructuring charges	(9,694)		(3,988)		—		—		—		(13,682)
Operating income (loss)	$	39,712	$	24,790	$	11,202	$	(1,553)	$	(201)	$	73,950


Interest income, net											2,709
Other expense, net											(3,853)
Income from operations before income taxes											$	72,806
Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating income (loss)	$	39,712	$	24,790	$	11,202	$	(1,553)	$	(201)	$	73,950
Add back:
Non-cash portion of arena license fees from MSG Sports (a)	(12,410)		—		—		—		—		(12,410)
Share-based compensation	12,513		3,298		2,374		—		—		18,185
Depreciation and amortization	21,921		1,637		5,616		(115)		—		29,059
Impairment and other gains, net	(5,412)		—		(473)		—		—		(5,885)
Restructuring charges	9,694		3,988		—		—		—		13,682

Merger and acquisition related costs, net of insurance recovery	(56)		5,544		—		—		—		5,488

Amortization for capitalized cloud computing costs	191		44		—		—		—		235
Other purchase accounting adjustments	—		—		—		1,668		—		1,668
Remeasurement of deferred compensation plan liabilities	160		—		—		—		—		160
Adjusted operating income (loss)	$	66,313	$	39,301	$	18,719	$	—	$	(201)	$	124,132
Other information:
Capital expenditures	$	281,369	$	2,665	$	5,686	$	—	$	—	$	289,720

~~Table of Contents~~

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)


					Three Months Ended
			Three Months Ended December 31, 2021														December 31, 2021
			Entertainment			MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total			Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total
Revenues	Revenues		$	247,610		$	159,981	$	117,086	$	—	$	(8,238)	$	516,439	Revenues	$	247,610	$	159,981	$	117,086	$	—	$	(8,238)	$	516,439
Direct operating expenses	Direct operating expenses		147,343			85,924		60,880		3,038		(927)		296,258		Direct operating expenses	(147,343)		(85,924)		(60,880)		(3,038)		927		(296,258)
Selling, general and administrative expenses	Selling, general and administrative expenses		91,516			37,192		40,685		—		(7,116)		162,277		Selling, general and administrative expenses	(91,516)		(37,192)		(40,685)		—		7,116		(162,277)
Depreciation and amortization	Depreciation and amortization		19,024			1,756		6,243		3,510		—		30,533		Depreciation and amortization	(19,024)		(1,756)		(6,243)		(3,510)		—		(30,533)
Impairment and other (gains) loss, net			—			—		(7,443)		(536)		—		(7,979)
Impairment and other gains, net																Impairment and other gains, net	—		—		7,443		536		—		7,979

Operating income (loss)			$	(10,273)		$	35,109	$	16,721	$	(6,012)	$	(195)	$	35,350
Loss in equity method investments														(1,774)
Interest income														773
Interest expense														(8,167)
Miscellaneous expense, net		(a)												(17,100)
Operating (loss) income																Operating (loss) income	$	(10,273)	$	35,109	$	16,721	$	(6,012)	$	(195)	$	35,350

Interest expense, net																Interest expense, net											(7,394)
Other expense, net																Other expense, net											(18,874)
Income from operations before income taxes	Income from operations before income taxes													$	9,082	Income from operations before income taxes											$	9,082
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)			$	(10,273)		$	35,109	$	16,721	$	(6,012)	$	(195)	$	35,350
Reconciliation of operating (loss) income to adjusted operating income (loss):																Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income																Operating (loss) income	$	(10,273)	$	35,109	$	16,721	$	(6,012)	$	(195)	$	35,350
Add back:	Add back:															Add back:
Non-cash portion of arena license fees from MSG Sports			(11,346)			—		—		—		—		(11,346)
Non-cash portion of arena license fees from MSG Sports (a)																Non-cash portion of arena license fees from MSG Sports (a)	(11,346)		—		—		—		—		(11,346)
Share-based compensation	Share-based compensation		16,155			6,058		1,958		—		—		24,171		Share-based compensation	16,155		6,058		1,958		—		—		24,171
Depreciation and amortization	Depreciation and amortization		19,024			1,756		6,243		3,510		—		30,533		Depreciation and amortization	19,024		1,756		6,243		3,510		—		30,533

Impairment and other gains, net																Impairment and other gains, net	—		—		(7,443)		(536)		—		(7,979)
Merger and acquisition related costs, net of insurance recovery																Merger and acquisition related costs, net of insurance recovery	1,456		875		—		—		—		2,331
Amortization for capitalized cloud computing costs	Amortization for capitalized cloud computing costs		(34)			44		—		—		—		10		Amortization for capitalized cloud computing costs	(34)		44		—		—		—		10
Merger and acquisition related costs			1,456			875		—		—		—		2,331
Impairment and other (gains) loss, net			—			—		(7,443)		(536)		—		(7,979)

Other purchase accounting adjustments	Other purchase accounting adjustments		—			—		—		3,038		—		3,038		Other purchase accounting adjustments	—		—		—		3,038		—		3,038
Adjusted operating income (loss)	Adjusted operating income (loss)		$	14,982		$	43,842	$	17,479	$	—	$	(195)	$	76,108	Adjusted operating income (loss)	$	14,982	$	43,842	$	17,479	$	—	$	(195)	$	76,108
Other information:	Other information:															Other information:
Capital expenditures	Capital expenditures		$	166,218		$	600	$	8,987	$	—	$	—	$	175,805	Capital expenditures	$	166,218	$	600	$	8,987	$	—	$	—	$	175,805

4932

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Three Months Ended December 31, 2020
Entertainment MSG Networks Tao Group Hospitality Purchase
accounting adjustments Inter-segment eliminations Total
Revenues $ 12,669 $ 146,239 $ 10,491 $ — $ (647) $ 168,752
Direct operating expenses 23,409 57,033 10,980 924 151 92,497
Selling, general and administrative expenses 65,730 21,692 9,131 — (535) 96,018
Depreciation and amortization 19,246 1,802 1,563 3,066 — 25,677
Restructuring charges 1,372 — — — — 1,372
Operating income (loss) $ (97,088) $ 65,712 $ (11,183) $ (3,990) $ (263) $ (46,812)
Loss in equity method investments (1,568)
Interest income 837
Interest expense (5,262)
Miscellaneous expense, net (a) (7,568)
Loss from operations before income taxes $ (60,373)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss) $ (97,088) $ 65,712 $ (11,183) $ (3,990) $ (263) $ (46,812)
Add back:
Non-cash portion of arena license fees from MSG Sports (1,176) — — — — (1,176)
Share-based compensation 22,374 6,266 1,188 — — 29,828
Depreciation and amortization 19,246 1,802 1,563 3,066 — 25,677
Restructuring charges 1,372 — — — — 1,372
Other purchase accounting adjustments — — — 924 — 924
Adjusted operating income (loss) $ (55,272) $ 73,780 $ (8,432) $ — $ (263) $ 9,813
Other information:
Capital expenditures $ 106,945 $ 792 $ 293 $ — $ — $ 108,030



	Six Months Ended
	December 31, 2022
	Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total
Revenues	$	503,620	$	281,377	$	268,645	$	—	$	(10,226)	$	1,043,416
Direct operating expenses	(282,807)		(165,820)		(153,060)		(2,254)		1,081		(602,860)
Selling, general and administrative expenses	(212,923)		(55,899)		(86,712)		—		8,691		(346,843)
Depreciation and amortization	(41,204)		(3,255)		(12,246)		(2,109)		—		(58,814)
Impairment and other gains, net	7,412		—		473		—		—		7,885
Restructuring charges	(9,694)		(3,988)		—		—		—		(13,682)
Operating (loss) income	$	(35,596)	$	52,415	$	17,100	$	(4,363)	$	(454)	$	29,102


Interest expense, net											4,496
Other expense, net											(2,328)
Income from operations before income taxes											$	31,270
Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income	$	(35,596)	$	52,415	$	17,100	$	(4,363)	$	(454)	$	29,102
Add back:
Non-cash portion of arena license fees from MSG Sports (a)	(12,929)		—		—		—		—		(12,929)
Share-based compensation	23,945		5,002		4,426		—		—		33,373
Depreciation and amortization	41,204		3,255		12,246		2,109		—		58,814
Impairment and other gains, net	(7,412)		—		(473)		—		—		(7,885)
Restructuring charges	9,694		3,988		—		—		—		13,682

Merger and acquisition related costs, net of insurance recovery	2,693		7,445		—		—		—		10,138
Amortization for capitalized cloud computing costs	268		88		—		—		—		356
Other purchase accounting adjustments	—		—		—		2,254		—		2,254
Remeasurement of deferred compensation plan liabilities	6		—		—		—		—		6
Adjusted operating income (loss)	$	21,873	$	72,193	$	33,299	$	—	$	(454)	$	126,911
Other information:
Capital expenditures	$	546,461	$	3,892	$	11,455	$	—	$	—	$	561,808

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Six Months Ended December 31, 2021
Entertainment MSG Networks Tao Group Hospitality Purchase
accounting adjustments Inter-segment eliminations Total
Revenues $ 281,849 $ 301,454 $ 236,550 $ — $ (8,904) $ 810,949
Direct operating expenses 183,645 154,347 121,973 3,123 (1,069) 462,019
Selling, general and administrative expenses 184,478 85,167 74,779 — (7,308) 337,116
Depreciation and amortization 38,680 3,553 12,621 5,109

— 59,963
Impairment and other (gains) loss, net — — 375 (536) — (161)
Operating income (loss) $ (124,954) $ 58,387 $ 26,802 $ (7,696) $ (527) $ (47,988)
Loss in equity method investments (2,981)
Interest income 1,548
Interest expense (17,415)
Miscellaneous expense, net (a) (19,647)
Loss from operations before income taxes $ (86,483)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss) $ (124,954) $ 58,387 $ 26,802 $ (7,696) $ (527) $ (47,988)
Add back:
Non-cash portion of arena license fees from MSG Sports (11,889) — — — — (11,889)
Share-based compensation 26,298 13,532 3,869 — — 43,699
Depreciation and amortization 38,680 3,553 12,621 5,109 — 59,963
Amortization for capitalized cloud computing costs 7 88 — — — 95
Merger and acquisition related costs 15,448 24,075 — — — 39,523
Impairment and other (gains) loss, net — — 375 (536) — (161)
Restructuring charges — — — — — —
Other purchase accounting adjustments — — — 3,123 — 3,123
Adjusted operating income (loss) $ (56,410) $ 99,635 $ 43,667 $ — $ (527) $ 86,365
Other information:
Capital expenditures $ 299,756 $ 2,049 $ 11,271 $ — $ — $ 313,076



	Six Months Ended
	December 31, 2021
	Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total
Revenues	$	281,849	$	301,454	$	236,550	$	—	$	(8,904)	$	810,949
Direct operating expenses	(183,645)		(154,347)		(121,973)		(3,123)		1,069		(462,019)
Selling, general and administrative expenses	(184,478)		(85,167)		(74,779)		—		7,308		(337,116)
Depreciation and amortization	(38,680)		(3,553)		(12,621)		(5,109)		—		(59,963)
Impairment and other (losses) gains, net	—		—		(375)		536		—		161

Operating (loss) income	$	(124,954)	$	58,387	$	26,802	$	(7,696)	$	(527)	$	(47,988)


Interest expense, net											(15,867)
Other expense, net											(22,628)
Loss from operations before income taxes											$	(86,483)
Reconciliation of operating (loss) income to adjusted operating (loss) income:
Operating (loss) income	$	(124,954)	$	58,387	$	26,802	$	(7,696)	$	(527)	$	(47,988)
Add back:
Non-cash portion of arena license fees from MSG Sports (a)	(11,889)		—		—		—		—		(11,889)
Share-based compensation	26,298		13,532		3,869		—		—		43,699
Depreciation and amortization	38,680		3,553		12,621		5,109		—		59,963


Impairment and other (losses) gains, net	—		—		375		(536)		—		(161)
Merger and acquisition related costs, net of insurance recovery	15,448		24,075		—		—		—		39,523
Amortization for capitalized cloud computing costs	7		88		—		—		—		95
Other purchase accounting adjustments	—		—		—		3,123		—		3,123
Adjusted operating (loss) income	$	(56,410)	$	99,635	$	43,667	$	—	$	(527)	$	86,365
Other information:
Capital expenditures	$	299,756	$	2,049	$	11,271	$	—	$	—	$	313,076

_________________

(a) This adjustment represents the non-cash portion of operating lease revenue related to the Company’s Arena License Agreements with MSG Sports. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Operating income on a GAAP basis includes lease income of (i) $19,415 and $20,220 of revenue collected in cash for the three and six months ended December 31, 2022, respectively, and $16,507 and $17,293 of revenue collected in cash for the three and six months ended December 31, 2021, respectively, and (ii) a non-cash portion of $12,410 and $12,929 for the three and six months ended December 31, 2022, respectively, and $11,346 and $11,889 for the three and six months ended December 31, 2021, respectively.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Six Months Ended December 31, 2020
Entertainment MSG Networks Tao Group Hospitality Purchase
accounting adjustments Inter-segment eliminations Total
Revenues $ 20,224 $ 303,602 $ 17,712 $ — $ (2,240) $ 339,298
Direct operating expenses 47,024 122,105 20,808 1,848 (57) 191,728
Selling, general and administrative expenses 118,380 44,219 16,734 — (1,658) 177,675
Depreciation and amortization 41,260 3,630 2,609 6,588 — 54,087
Restructuring charges 21,299 — — — — 21,299
Operating income (loss) $ (207,739) $ 133,648 $ (22,439) $ (8,436) $ (525) $ (105,491)
Loss in equity method investments (3,264)
Interest income 1,609
Interest expense (10,535)
Miscellaneous income, net (a) 26,449
Loss from operations before income taxes $ (91,232)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss) $ (207,739) $ 133,648 $ (22,439) $ (8,436) $ (525) $ (105,491)
Add back:
Non-cash portion of arena license fees from MSG Sports (1,176) — — — — (1,176)
Share-based compensation 32,807 10,893 2,284 — — 45,984
Depreciation and amortization 41,260 3,630 2,609 6,588 — 54,087
Impairment and other (gains) loss, net — — — — — —
Restructuring charges 21,299 — — — — 21,299
Other purchase accounting adjustments — — — 1,848 — 1,848
Adjusted operating income (loss) $ (113,549) $ 148,171 $ (17,546) $ — $ (525) $ 16,551
Other information:
Capital expenditures $ 218,344 $ 2,533 $ 952 $ — $ — $ 221,829

~~Table of Contents~~

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(Continued)~~

~~_________________~~

~~(a)Miscellaneous income (expense), net includes the following:~~

Three Months Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Unrealized gain (loss) on equity investments with readily determinable fair value, see Note 7 for further details. $ (17,155) $ (7,227) $ (19,615) $ 26,431
Non-service cost components of net periodic pension and postretirement benefit costs (8) (28) (16) (119)
Others, net 63 (313) (16) 137
Total $ (17,100) $ (7,568) $ (19,647) $ 26,449

Concentration of Risk

Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenue and assets are concentrated in the New York City metropolitan area.

Accounts receivable, net onin the accompanying condensed consolidated balance sheets as of December 31, ~~2021~~2022 and June 30, ~~2021~~2022 include amounts due from the following individual customers, ~~all~~substantially derived from the MSG Networks segment, which accounted for the noted percentages of the gross balance:

December 31, 2021 June 30, 2021
Customer A (a)
15 % 1 %
Customer B 14 % 15 %
Customer C 13 % 17 %
Customer D 10 % 16 %


	December 31, 2022		June 30, 2022

Customer A	12	%	12	%
Customer B	10	%	10	%

~~_________________~~

~~(a)~~ ~~A receivable from Customer A as of December 31,2021 is primarily due to timing of cash receipts.~~

~~Revenues in the accompanying consolidated statements of operations for~~For the three and six months ended December 31, 2022, the Company had no customers that accounted for 10% or more of the Company’s revenues. The Company had no customers that accounted for 10% or more of the Company’s revenues for three months ended December 31, 2021. Revenues in the accompanying condensed consolidated statements of operations for the six months ended December 31, 2021 ~~and 2020~~ include amounts from the following individual customers, primarily derived from the MSG Networks segment, which accounted for the noted percentages of the total:


											Six Months Ended
		Three Months Ended				Six Months Ended					December 31,
		December 31, 2021		December 31, 2020		December 31, 2021		December 31, 2020				2022	2021
Customer 1	Customer 1	9	%	24	%	11	%	25	%	Customer 1		N/A	11	%
Customer 2	Customer 2	8	%	24	%	10	%	24	%	Customer 2		N/A	10	%

Note 16. Additional Financial Information

The ~~accompanying consolidated balance sheets~~following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.


	December 31, 2022		June 30, 2022
Cash and cash equivalents	$	432,173	$	828,540
Restricted cash	121,563		17,470
Total cash, cash equivalents and restricted cash	$	553,736	$	846,010

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 its workers compensation and general liability insurance obligations.

Prepaid expenses and other current assets consisted of the following:



	December 31, 2022		June 30, 2022
Prepaid expenses	$	79,432	$	86,022


Related party receivables	35,523		32,541
Inventory (a)	14,263		13,511
Notes and other receivables	1,822		2,726
Other	22,928		21,194
Total prepaid expenses and other current assets	$	153,968	$	155,994

_________________

(a)Inventory is mostly comprised of food and liquor for performance venues and Tao Group Hospitality.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Accounts payable, accrued and other current liabilities consisted of the following:


	December 31, 2022		June 30, 2022

Accounts payable	$	46,234	$	31,980
Related party payables	46,783		38,576
Accrued payroll and employee related liabilities	107,524		154,134
Cash due to promoters	34,912		78,428


Capital expenditure accruals	239,943		206,462
Accrued expenses	108,917		79,666

Total accounts payable, accrued and other current liabilities	$	584,313	$	589,246

Other expense, net includes the following:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021

Loss on equity method investments	$	(1,105)	$	(1,774)	$	(3,233)	$	(2,981)
Gains from shares sold — DraftKings	—		—		1,489		—
Net unrealized loss on equity investments with readily determinable fair value	(2,544)		(17,155)		(3,203)		(19,615)
Unrealized gain on equity investments without readily determinable fair value	—		—		1,969		—
Other	(204)		55		650		(32)
Total Other expense, net	$	(3,853)	$	(18,874)	$	(2,328)	$	(22,628)

Income Taxes

During the six months ended December 31, 2022 the Company made income tax payments, net of refunds, of $2,004. During the six months ended December 31, 2021 ~~and June 30, 2021 include~~ the ~~following approximate amounts~~Company received income tax refunds, net of payments, of $7,063.

Note 17. Subsequent Events

On January 13, 2023, the Company announced that ~~are recorded in connection~~it is moving forward with the ~~Company’s license agreement~~spin-off of its traditional live entertainment business from its MSG Sphere, MSG Networks and Tao Group Hospitality businesses. The Company has confidentially submitted an Amended Form 10 Registration Statement with the ~~New Jersey Devils:~~SEC for the proposed transaction and anticipates filing a publicly available Amended Form 10 Registration Statement with the SEC in February.

December 31, 2021 June 30, 2021
Prepaid expenses $ 3,200 $ 1,400
Other current assets 3,000 3,700
Other assets 30,100 31,100
$ 36,300 $ 36,200
On January 19, 2023, the Company, through an indirect subsidiary, entered into a three-year convertible loan agreement, for approximately €18,800, with Holoplot GmbH, a related party, and will bear interest of 5% per-annum.

On February 6, 2023, the Company announced that it is exploring a potential sale of its majority interest in Tao Group Hospitality. There is no assurance this exploration process will result in a transaction.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Entertainment Corp. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Entertainment,” or the ~~“Company��~~“Company”), including ~~the impact of the COVID-19 pandemic and COVID-19 variants on our future operations, our ability to realize the benefits of the Merger with MSG Networks,~~ the timing and costs of new venue construction and the development of related content, our ~~expansion plan for~~possible disposition of the Company’s interest in Tao Group Hospitality and the ~~status~~related proceeds, the impact of run-rate savings expected to be generated by the Company’s cost reduction program, the ability to reduce or defer certain discretionary capital projects, the disposition of the ~~non-carriage~~Company’s retained interest in the live entertainment business upon completion of ~~MSG Networks by Comcast Corporation (“Comcast”).~~the proposed spin-off, possible additional debt financing and our plans to refinance our existing debt. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:

•the substantial amount of debt we have incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities, and our ability to ~~effectively manage~~obtain additional financing, to the impacts of the COVID-19 pandemic (including COVID-19 variants) as well as the actions taken in response by governmental authorities and certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues as they are permitted to continue to operate;extent required;

•~~the effect of any show postponements~~our ability to successfully implement cost reductions and reduce 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;~~

•risks related to the Merger, as defined herein, with MSG Networks Inc., including, but not limited to: failure to realize the expected benefits of the Merger, business disruption following the Merger and the risk of the litigation relating to the Merger;

•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements at Knicks and Rangers games;defer certain discretionary capital projects, if necessary;

•the level of our expenses and our operational cash burn rate, including our corporate expenses;

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

•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 Starring the Radio City Rockettes (the “Christmas Spectacular”));

•the extent to which attendance at our venues may be impacted by government actions, continuing health concerns by potential attendees and reduced tourism;

•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements, if any, at games of 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”);

•the level of our revenues, which depends in part on the popularity of the Christmas Spectacular, the sports teams whose games are played at The Garden and broadcast on our networks, the appeal of our Tao Group Hospitality ~~venues,~~branded locations, and other events which are presented in our venues or broadcast on our networks;

•the demand for MSG Networks programming among cable, satellite, ~~telephone~~fiber-optic and other platforms that distribute its networks (“Distributors”) and the subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors;

•our ability to develop and successfully execute MSG Networks’ strategy for a direct-to-consumer offering;

•the ability of our Distributors to maintain, or minimize declines in, subscriber levels;

•the impact of subscribers selecting Distributors’ packages that do not include our networks or ~~Distributors~~distributors that do not carry our networks at all;

•the security of our MSG Networks program signal and electronic data;

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

•the level of our capital expenditures and other investments;

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

•the demand for sponsorship arrangements and advertising and viewer ratings for our networks;

~~Table of Contents~~

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

•the relocation or insolvency of professional sports teams with which we have a media rights agreement;

•our ability to maintain, obtain or produce content, together with the cost of such content;

•~~our~~MSG Networks’ ability to renew or replace our media rights agreements with professional sports ~~teams through MSG Networks Inc.;~~teams;

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

•any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations, including the unions representing players and officials of the ~~National Basketball Association (“NBA”)~~NBA and ~~National Hockey League (“NHL”),~~NHL, or other work stoppage due to COVID-19 or otherwise;

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

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

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

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

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

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

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

•our ability to successfully integrate acquisitions, new venues or new businesses into our ~~operations, including the Merger with MSG Networks Inc. and our acquisition of Hakkasan through Tao Group Hospitality;~~operations;

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

•our internal control environment ~~remediation of the material weakness,~~ and our ability to identify any future material weaknesses;

•the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or ~~acquire;~~acquire, including those related to the Company’s acquisition of MSG Networks Inc. (the “Merger”);

•the impact of governmental regulations or laws, changes in how those regulations and laws are interpreted, ~~including with respect to the legalization of sports gaming,~~ as well as the continued benefit of certain tax exemptions and the ability to maintain necessary permits or licenses;

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

•the impact of sports league rules, regulations and/or agreements and changes thereto;

•~~the substantial amount of debt incurred, and any default, by our subsidiaries under their respective credit facilities;~~

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

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

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

•our ability to achieve the intended benefits of the Entertainment ~~Distribution and the Merger with MSG Networks;~~Distribution;

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•the performance by MSG Sports of its obligations under various agreements with the Company related to the Entertainment Distribution and ongoing commercial arrangements, including the Arena License Agreements;

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

•the additional factors described under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2021, as amended by the Company’s Annual Report on Form 10-K/A~~2022 filed on ~~February 9,~~August 19, 2022 (the ~~“Form~~“2022 Form 10-K”).

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

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

Introduction

This MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q, as well as the Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations.

The Company has three reportable segments (Entertainment, MSG Networks, and Tao Group Hospitality).

~~Unless~~The Entertainment segment includes the ~~context otherwise requires, all references to “we,” “us,” “our,” “MSG Entertainment,”or the “Company” refer collectively to~~Company’s portfolio of venues: Madison Square Garden ~~Entertainment Corp.~~(“The Garden”), ~~a holding company,~~Hulu Theater at Madison Square Garden (“Hulu Theater”), Radio City Music Hall, the Beacon Theatre, and its direct and indirect subsidiaries through which substantially all of our operations are conducted. Through the period ended April 17, 2020, the Company operated and reported financial information as one reportable segment. Following the Entertainment Distribution on April 17, 2020 and the Merger on July 9, 2021,The Chicago Theatre. In addition, the Company has ~~three segments~~unveiled its vision for state-of-the-art venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Entertainment segment also includes the original production, the Christmas Spectacular Starring the Radio City Rockettes (the ~~Entertainment~~“Christmas Spectacular”). This segment also includes our bookings business, which features a variety of live entertainment and sports experiences. The Company also previously owned a controlling interest in Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival. The Company disposed of its controlling interest in BCE on December 2, 2022.

The MSG Networks segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. MSG Networks serves the New York Designated Market Area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders (the “Islanders”), New Jersey Devils (the “Devils”) and Buffalo Sabres (the “Sabres”) of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants (the “Giants”) and Buffalo Bills (the “Bills”) of the National Football League (the “NFL”).

The Tao Group Hospitality ~~business,~~segment features the Company’s controlling interest in TAO Group Holdings LLC (“Tao Group Hospitality”), a hospitality group with globally-recognized entertainment dining and nightlife brands including: Tao, Hakkasan, Omnia, Marquee, Lavo, Beauty & Essex, and Cathédrale. Tao Group Hospitality operates over 70 entertainment dining and nightlife branded locations in over 20 markets across four continents.

The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater and The Chicago Theatre, and leases Radio City Music Hall and the ~~MSG Networks business). See Note 19 to the consolidated financial statements included~~Beacon Theatre. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in ~~“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussion of the Company’s segment reporting.~~Las Vegas, New York, Southern California, London, Singapore, and various other domestic and international locations.

~~This~~Our MD&A is organized as follows:

~~Business Overview.~~ This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

Results of Operations. This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, ~~2021~~2022 and ~~2020~~2021 on both a (i) consolidated basis and a(ii) segment basis.

Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the six months ended December 31, ~~2021~~2022 and ~~2020,~~2021, as well as certain contractual obligations and off-balance sheet arrangements.

Seasonality of Our Business. This section discusses the seasonal performance of our Entertainment ~~segment.~~and MSG Networks segments.

Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company’s annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of Fiscal Year ~~2022.~~2023. This section should be read together with our critical accounting policies, which are discussed in our Form 10-K under “Item. 7. 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 consolidated financial statements (“financial statements”) of the Company included therein.

~~Business Overview~~

The Company is a leader in live experiences comprised of iconic venues; marquee entertainment brands; regional sports and entertainment networks; popular dining and nightlife offerings; and a premier music festival that, together, entertain millions of guests each year. The Company’s portfolio of venues includes: The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. In addition, the Company unveiled its vision for state-of-the-art venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Company also includes the original production, the ~~Christmas Spectacular~~, as well as BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. MSG Networks produces, develops and acquires content for multiple distribution platforms, including content originating from the Company’s venues, and is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. Tao Group Hospitality is a hospitality group with globally-recognized entertainment dining and nightlife brands.

~~Table of Contents~~

~~Merger with MSG Networks Inc.~~

On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to that certain Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time ~~multiplied by~~ 0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time ~~multiplied by~~ 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.

Beginning this fiscal year, the Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control.

Factors Affecting Results of Operations

Impact of the COVID-19 Pandemic on Our Business

~~Table of Contents~~

~~The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games~~operations at The Garden. Under the Arena License Agreements, the Knicks and the Rangers pay an annual license fee in connection with their respective use of The Garden. The teams are not required to pay the license fee during a period in which The Garden is unavailable for home games due to a force majeure event (including when events at The Garden were suspended by government mandateTao Group Hospitality as a result of an increase in COVID-19 cases during the fiscal second quarter, and (iii) certain regulatory requirements, including vaccination/mask requirements for our performance, entertainment dining and nightlife venues, which contributed to certain Tao Group Hospitality branded locations remaining closed during the period. See Note 1, Impact of the COVID-19 ~~pandemic). As a result, we did not receive any license fee payments under the Arena License Agreements from the period following the Entertainment Distribution through November 2020.On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements and~~ ~~full 82-game regular seasons for the 2021-22 NBA and NHL seasons are scheduled~~. See “Item. 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Revenue Sources — Entertainment — Venue License Fees” on the Company’s Form 10-K and Note 9Pandemic, to the consolidated and combined financial statements included in ~~“— Item 1. Financial Statements” of this Quarterly Report on~~the 2022 Form ~~10-Q~~10-K for ~~further~~more information ~~on revenue recognition under~~regarding the ~~Arena License Agreements.~~

~~As a result~~impact of the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result,on our ~~advertising revenue and certain operating expenses, including rights fees expense, reflect the same.~~

~~Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to governm~~ent actions taken in response to the COVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021 and during the first two quarters of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Following updated regulations applicable to indoor dining facilities and entertainment venues, effective January 3, 2022 for Chicago, and January 29, 2022 for New York, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, but Tao Group Hospitality is continuing to operate without capacity restrictions in domestic and key international markets.business.

It is unclear ~~how long and~~ to what extent COVID-19 concerns, including with respect to new variants, ~~will continue to impact~~could result in new government ~~and~~or league-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of and/or demand for our performance, entertainment ~~and~~ dining and nightlife 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.

~~As a result~~In addition to the above, the operating results of ~~the material impact COVID-19 had~~our segments are largely dependent on our ability to attract concerts and other events to our venues, as well as customers to our entertainment and nightlife offerings, revenues during Fiscal Year 2021, we took several actions to improve our financial flexibility, reduce operating costs and preserve liquidity, including (i) revising our construction schedule for MSG Sphere (which has an anticipated opening date in the second half of calendar year 2023), (ii) making significant cuts in both Entertainment and Tao Group Hospitality venue and corporate headcounts, and (iii) having our wholly-owned subsidiary, MSG National Properties, LLC (“MSG National Properties”) enter into a five-year $650,000 senior secured term loan facility (“National Properties Term Loan Facility”). See Note 13 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details on the National Properties Term Loan Facility.

~~In August 2020, Tao Group Hospitality~~under various agreements entered into ~~an amendment to~~with MSG Sports, the Tao Senior Credit Agreement, which suspended certain financial covenants through December 31, 2021 and increased the minimum liquidity requirement. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. In addition, in connection with the amendment, our wholly-owned subsidiary MSG Entertainment Group, LLC (“MSG Entertainment Group”) entered into a guarantee agreement, which also included a minimum liquidity requirement for MSG Entertainment Group. See Note 13 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information regarding the amendment to the Tao Senior Credit Agreement. Tao Group Hospitality may need to seek covenant waivers in the future. Tao Group Hospitality’s failure to obtain debt covenant waivers could trigger a violation of

~~Table of Contents~~

these covenants and lead to default, acceleration of all of its outstanding debt and a demand for payment under the guarantee of MSG Entertainment Group, which would negatively impact the liquidity of Tao Group Hospitality and the Company.

The Company is building its first MSG Sphere in Las Vegas. This is a complex construction project with cutting-edge technology, which relies on subcontractors obtaining components from a variety of sources around the world. In April 2020, the Company announced that it was suspending construction of MSG Sphere due to COVID-19 related factors that were outside of its control, including supply chain issues. As the ongoing effectscontinuing popularity of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it had resumed full construction with a lengthened timetable to better preserve cash through the COVID-19 pandemic. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in the second half of calendar year 2023.

In December 2020, the Company terminated its construction agreement with AECOM and assumed the role of construction manager to gain greater transparency and control over the construction process, including direct engagement and supervision of subcontractors. AECOM continues to support MSG Sphere at The Venetian through a services agreement that facilitates their ongoing involvement through MSG Sphere’s completion. As the construction manager of the project, we aim to aggressively manage the cost of the project in this volatile environment to minimize any potential cost increases.

~~For more information about the risks to the Company as a result of the COVID-19 pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors~~ Christmas Spectacular—~~General Risk Factors~~— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Actions Taken in Response by Governmental Authorities and Certain Professional Sports Leagues~~.” of the Form 10-K.~~

~~Factors Related to the MSG Networks Business~~

As further discussed under Note 2 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q, the financial performance of MSG Networks business is affected by, the affiliation agreements ~~the Company~~MSG Networks negotiates with Distributors, ~~(including rates, terms, and conditions as well as the ability to renew such agreements),~~ the number of Distributor subscribers ~~of our Distributors~~ that receive ~~MSG Networks,~~our networks, and ~~also by~~ the advertising rates we charge advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams ~~carried~~whose games we broadcast on ~~the~~our networks and host in our venues.

Our Company’s ~~networks as well as the cost~~future performance is dependent in part on general economic conditions and the ~~attractiveness~~effect of these conditions on our customers. Weak economic conditions may lead to lower demand for our entertainment and nightlife offerings and programming content, suite licenses and tickets to our live productions, concerts, family shows and other events, which would also negatively affect concession and merchandise sales, lower levels of sponsorship and venue signage and decrease advertising revenues. These conditions may also affect the ~~Company’s programming content.~~number of concerts, family shows and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.

Due largely to our media rights agreements with the NBA and NHL teams appearing on our networks and the generally recurring nature of our affiliation fee revenue, the MSG Networks segment has consistently produced operating profits for a number of years. Advertising revenues are less predictable and can vary based upon a number of factors, including general economic conditions and team performance.

The Company continues to 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. Our results will also be affected by investments in, and the success of, new productions.

Consolidated Results of Operations

Comparison of the Three and Six Months Ended December 31, ~~2021~~2022 versus the Three and Six Months Ended December 31, ~~2020~~

2021

The ~~table~~tables below ~~sets~~set forth, for the periods presented, certain historical financial information.
Three Months Ended
December 31,
Change (a)
2021 2020 Amount Percentage
Revenues $ 516,439 $ 168,752 $ 347,687 NM
Direct operating expenses 296,258 92,497 203,761 NM
Selling, general and administrative expenses 162,277 96,018 66,259 69 %
Depreciation and amortization 30,533 25,677 4,856 19 %
Impairment and other (gains) loss, net (7,979) — (7,979) NM
Restructuring charges — 1,372 (1,372) NM
Operating income (loss) 35,350 (46,812) 82,162 NM
Other expense:
Loss in equity method investments (1,774) (1,568) (206) 13 %
Interest expense, net (a)
(7,394) (4,425) (2,969) (67) %
Miscellaneous expense, net (17,100) (7,568) (9,532) (126) %
Income (loss) from operations before income taxes 9,082 (60,373) 69,455 NM
Income tax benefit (expense) (4,063) 298 (4,361) NM
Net income (loss) 5,019 (60,075) 65,094 NM
Less: Net income (loss) attributable to redeemable noncontrolling interests 2,642 (3,342) 5,984 NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 106 (902) 1,008 NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 2,271 $ (55,831) $ 58,102 NM
Six Months Ended
December 31, Change
2021 2020 Amount Percentage
Revenues $ 810,949 $ 339,298 $ 471,651 139 %
Direct operating expenses 462,019 191,728 270,291 141 %
Selling, general and administrative expenses 337,116 177,675 159,441 90 %
Depreciation and amortization 59,963 54,087 5,876 11 %
Impairment and other (gains) loss, net (161) — (161) NM
Restructuring charges — 21,299 (21,299) NM
Operating loss (47,988) (105,491) 57,503 55 %
Other income (expense):
Loss in equity method investments (2,981) (3,264) 283 9 %
Interest expense, net (a)
(15,867) (8,926) (6,941) (78) %
Miscellaneous income (expense), net (19,647) 26,449 (46,096) NM
Loss from operations before income taxes (86,483) (91,232) 4,749 5 %
Income tax benefit (expense) 14,847 (9,159) 24,006 NM
Net loss (71,636) (100,391) 28,755 29 %
Less: Net income (loss) attributable to redeemable noncontrolling interests 4,854 (7,231) 12,085 NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 471 (1,532) 2,003 NM
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders $ (76,961) $ (91,628) $ 14,667 16 %

~~_________________~~



	Three Months Ended
	December 31,				Change
	2022		2021		Amount		Percentage
Revenues	$	642,198	$	516,439	$	125,759	24	%
Direct operating expenses	(348,959)		(296,258)		(52,701)		18	%
Selling, general and administrative expenses	(182,433)		(162,277)		(20,156)		12	%
Depreciation and amortization	(29,059)		(30,533)		1,474		(5)	%
Impairment and other gains, net	5,885		7,979		(2,094)		(26)	%
Restructuring charges	(13,682)		—		(13,682)		NM
Operating income	73,950		35,350		38,600		109	%
Interest income	3,603		773		2,830		NM
Interest expense	(894)		(8,167)		7,273		(89)	%
Other expense, net	(3,853)		(18,874)		15,021		(80)	%
Income from operations before income taxes	72,806		9,082		63,724		NM
Income tax expense	(2,249)		(4,063)		1,814		(45)	%
Net income	70,557		5,019		65,538		NM
Less: Net income attributable to redeemable noncontrolling interests	3,029		2,642		387		15	%
Less: Net (loss) income attributable to nonredeemable noncontrolling interests	(56)		106		(162)		NM
Net income attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	67,584	$	2,271	$	65,313	NM



	Six Months Ended
	December 31,				Change
	2022		2021		Amount		Percentage
Revenues	$	1,043,416	$	810,949	$	232,467	29	%
Direct operating expenses	(602,860)		(462,019)		(140,841)		30	%
Selling, general and administrative expenses	(346,843)		(337,116)		(9,727)		3	%
Depreciation and amortization	(58,814)		(59,963)		1,149		(2)	%
Impairment and other gains, net	7,885		161		7,724		NM
Restructuring charges	(13,682)		—		(13,682)		NM
Operating income (loss)	29,102		(47,988)		77,090		NM
Interest income	7,557		1,548		6,009		NM
Interest expense	(3,061)		(17,415)		14,354		(82)	%
Other expense, net	(2,328)		(22,628)		20,300		(90)	%
Income (loss) from operations before income taxes	31,270		(86,483)		117,753		NM
Income tax (expense) benefit	(4,756)		14,847		(19,603)		NM
Net income (loss)	26,514		(71,636)		98,150		NM
Less: Net income attributable to redeemable noncontrolling interests	4,153		4,854		(701)		(14)	%
Less: Net (loss) income attributable to nonredeemable noncontrolling interests	(466)		471		(937)		NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	22,827	$	(76,961)	$	99,788	NM

~~(a)~~As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and six months ended December 31, 2020 have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $7,566 and $7,911, respectively._________________

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

considered not meaningful.

Factors Affecting Results of Operations

~~For~~The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during the three and six months ended December 31, ~~2021 and 2020,~~2022, as compared to the ~~Company’s operations and operating results were materially~~prior year period, which was impacted by (i) fewer ticketed events at our performance venues due to the lead-time required to book touring acts and artists, (ii) the postponement or cancellation of select events at our performance venues (including the partial cancellation of the 2021 production of the Christmas Spectacular), and a temporary impact to both demand and operations at Tao Group Hospitality as a result of an increase in COVID-19 ~~pandemic~~cases during the fiscal second quarter, and ~~actions taken in response by governmental authorities.~~(iii) certain regulatory requirements, including vaccination/mask requirements for our performance, entertainment dining and nightlife venues, which contributed to certain Tao Group Hospitality branded locations remaining closed during the period. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information. Also, see “ — Factors Affecting Results of Operations” under Business Segment Results for more information surrounding the factors affecting comparability of each business segment’s results.

~~Depreciation and amortization~~

Depreciation and amortization for the three months ended December 31, 2021 was $30,533 as compared to $25,677 in the prior year period, an increase of $4,856, or 19% primarily due to the acquisition of Hakkasan in April 2021. For the six months ended December 31, 2021, depreciation and amortization was $59,963 as compared to $54,087 in the prior year period, an increase of $5,876, or 11% primarily due to the acquisition of Hakkasan in April 2021, partially offset by lower depreciation expense due to certain assets in The Garden being fully depreciated and amortized and disposal of certain assets in the prior year period.

~~Table of Contents~~

~~Impairment and other (gains) loss, net~~

For the three months ended December 31, 2021, impairment and other (gains) loss of $7,979 principally reflects gains from extinguishments and modification of lease liabilities in the Tao Group Hospitality segment associated with certain Hakkasan venues and a gain on disposal of one of the Hakkasan venues.

The following is a summary of changes in our segments’ operating results for the three and six months ended December 31, 2022 as compared to the prior year period, which are discussed below under “Business Segment Results.”



	Three Months Ended
	December 31, 2022
Changes attributable to	Revenues		Direct operating expenses		Selling, general and administrative expenses		Depreciation and amortization		Impairment and other gains, net		Restructuring charges		Operating income (loss)
Entertainment segment	$	108,908	$	(33,699)	$	(18,045)	$	(2,897)	$	5,412	$	(9,694)	$	49,985
MSG Networks segment	(1,083)		(4,476)		(891)		119		—		(3,988)		(10,319)
Tao Group Hospitality segment (a)	18,908		(15,603)		(2,481)		627		(6,970)		—		(5,519)
Purchase accounting adjustments	—		1,370		—		3,625		(536)		—		4,459
Inter-segment eliminations	(974)		(293)		1,261		—		—		—		(6)
	$	125,759	$	(52,701)	$	(20,156)	$	1,474	$	(2,094)	$	(13,682)	$	38,600



	Six Months Ended
	December 31, 2022
Changes attributable to	Revenues		Direct operating expenses		Selling, general and administrative expenses		Depreciation and amortization		Impairment and other gains, net		Restructuring Charges		Operating income (loss)
Entertainment segment	$	221,771	$	(99,162)	$	(28,445)	$	(2,524)	$	7,412	$	(9,694)	$	89,358
MSG Networks segment	(20,077)		(11,473)		29,268		298		—		(3,988)		(5,972)
Tao Group Hospitality segment (a)	32,095		(31,087)		(11,933)		375		848		—		(9,702)
Purchase accounting adjustments	—		869		—		3,000		(536)		—		3,333
Inter-segment eliminations	(1,322)		12		1,383		—		—		—		73
	$	232,467	$	(140,841)	$	(9,727)	$	1,149	$	7,724	$	(13,682)	$	77,090

Impairment and other gains, net

Impairment and other gains, net for the three months ended December 31, 2022 decreased $2,094, to $5,885 as compared to the prior year period primarily due to the absence of prior year net gains from the write-off and modification of lease liabilities associated with certain Tao Group Hospitality venues and a net loss on disposal of a corporate aircraft partially offset by the gain on sale of the company’s controlling interest in BCE and receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA.

Impairment and other gains, netfor the six months ended December 31, 2022 increased $7,724, to $7,885 as compared to the prior year period primarily due to the gain on sale of the company’s controlling interest in BCE, and receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA partially offset by the net loss on disposal of a corporate aircraft.

Restructuring Charges

For the three and six months ended December 31, 2022, the Company recorded total restructuring charges of $13,682 related to termination benefits provided for a workforce reduction of certain executives and employees within the Entertainment and MSG Networks Segment as part of the Company’s cost reduction program implemented in Fiscal Year 2023. No amounts were recorded as restructuring charges during the comparative prior period.

Interest income

Interest incomefor the three and six months ended December 31, 2022 increased $2,830 and $6,009, respectively, as compared to the prior year periods primarily due to higher rates and average investment balances.

Interest expense

Interest expensefor the three and six months ended December 31, 2022 decreased $7,273 and $14,354, respectively, as compared to the prior year periods primarily due to a higher amount of interest cost capitalization of $19,285 and $30,405 related to MSG Sphere construction partially offset by higher rates related to the MSG Networks Term Loan.

Other expense, net

Other expense, netfor the three and six months ended December 31, 2022, decreased $15,021 and $20,300, respectively, as compared to the prior year periods, primarily due to lower unrealized losses of approximately $15,500 and $21,300, respectively, associated with the Company’s investments in DraftKings Inc.

Income tax (expense) benefit

Income tax expense for the three months ended December 31, 2022 of $2,249 reflected an effective income tax rate of 3% and differs from the income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to tax benefit of $7,044 resulting from a decrease in the valuation allowance, partially offset by (i) tax expense related to state and local taxes of $8,737 and (ii) tax expense of $1,507 related to nondeductible officers’ compensation.

Income tax expense for the three months ended December 31, 2021 of $4,063 reflected an effective income tax rate of 45% and differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) tax expense of $2,910 related to nondeductible officers’ compensation and (ii) state income tax expense of $3,107, primarily offset by (i) tax benefit of $1,378 resulting from a decrease in the valuation allowance, (ii) tax benefit of $1,015 resulting from federal tax credits and (iii) tax benefit of $577 related to noncontrolling interests.

Income tax expense for the six months ended December 31, 2022 of $4,756 reflected an effective income tax rate of 15% and differs from the income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) tax benefit of $8,949 resulting from a decrease in the valuation allowance and (ii) a tax benefit of $2,071 related to a federal income tax refund, partially offset by (i) tax expense related to state and local taxes of $9,075, (ii) tax expense of $5,328 related to share-based payment awards, (iii) tax expense of $2,572 related to nondeductible officers’ compensation, and (iv) tax expense of $1,961 resulting from a change in the estimated applicable tax rate used to measure deferred taxes.

Income tax benefit for the six months ended December 31, 2021 of $14,847 reflected an effective income tax rate of 17% and differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $9,048 to write off the deferred tax for certain transaction costs associated with the Merger, (ii) tax expense of $5,769 related to nondeductible officers’ compensation, partially offset by (iii) state income tax benefit of $5,067, (iv) tax benefit of $2,460 resulting from a decrease in the valuation allowance, (v) tax benefit of $1,987 resulting from a change in the estimated applicable tax rate used to measure deferred taxes and (vi) tax benefit of $1,118 related to noncontrolling interests.

Adjusted operating income (loss) ~~by segment~~(“AOI”)

The following is a reconciliation of operating income (loss) to adjusted operating income (as defined in Note 15. Segment Information in the notes to the financial statements) for the three and six months ended December 31, 2022 as compared to the prior year period:


	Three Months Ended
	December 31,				Change
	2022		2021		Amount		Percentage
Operating income (loss)	$	73,950	$	35,350	$	38,600	109	%
Non-cash portion of arena license fees from MSG Sports (a)	(12,410)		(11,346)		(1,064)		(9)	%
Share-based compensation	18,185		24,171		(5,986)		(25)	%
Depreciation and amortization (b)	29,059		30,533		(1,474)		(5)	%
Impairment and other gains, net	(5,885)		(7,979)		2,094		26	%
Restructuring charges	13,682		—		13,682		NM
Merger and acquisition related costs, net of insurance recovery	5,488		2,331		3,157		135	%
Amortization for capitalized cloud computing costs	235		10		225		NM

Other purchase accounting adjustments	1,668		3,038		(1,370)		(45)	%
Remeasurement of deferred compensation plan liabilities	160		—		160		NM
Adjusted operating income	$	124,132	$	76,108	$	48,024	63	%


	Six Months Ended
	December 31,				Change
	2022		2021		Amount		Percentage
Operating income (loss)	$	29,102	$	(47,988)	$	77,090	161	%
Non-cash portion of arena license fees from MSG Sports (a)	(12,929)		(11,889)		(1,040)		(9)	%
Share-based compensation	33,373		43,699		(10,326)		(24)	%
Depreciation and amortization (b)	58,814		59,963		(1,149)		(2)	%
Impairment and other gains, net	(7,885)		(161)		(7,724)		NM
Restructuring charges	13,682		—		13,682		NM
Merger and acquisition related costs, net of insurance recovery	10,138		39,523		(29,385)		(74)	%
Amortization for capitalized cloud computing costs	356		95		261		NM
Other purchase accounting adjustments	2,254		3,123		(869)		(28)	%
Remeasurement of deferred compensation plan liabilities	6		—		6		NM
Adjusted operating income	$	126,911	$	86,365	$	40,546	47	%

_________________

~~For the Three Months Ended December 31, 2021~~

~~Changes attributable to~~

~~Operating income (loss)~~

~~Entertainment segment~~ ~~(a)~~

~~86,815~~

~~MSG Networks segment~~ ~~(a)~~

~~(30,603)~~

~~Tao Group Hospitality segment~~ ~~(a)~~

~~27,904~~

~~Purchase accounting adjustments~~

~~(2,022)~~

~~Inter-segment eliminations~~

~~MSG Entertainment Corp. total~~

~~82,162~~

~~For the Six Months Ended December 31, 2021~~

~~Changes attributable to~~

~~Operating income (loss)~~

~~Entertainment segment~~ ~~(a)~~

~~82,785~~

~~MSG Networks segment~~ ~~(a)~~

~~(75,261)~~

~~Tao Group Hospitality segment~~ ~~(a)~~

~~49,241~~

~~Purchase accounting adjustments~~

~~740~~

~~Inter-segment eliminations~~

~~(2)~~

~~MSG Entertainment Corp. total~~

~~57,503~~

~~_________________~~

~~(a)See “Business Segment Results” for~~respectively, and (ii) a ~~more detailed discussion~~non-cash portion of ~~the operating results of our segments.~~

~~Interest expense, net~~

~~Net interest expense was $7,394~~$12,410 and $12,929 for the three months ended December 31, 2021, as compared to $4,425 in the prior year period, a net increase of $2,969, or 67%. The increase was primarily due to the entry into the National Properties Term Loan Facility on November 12, 2020, which resulted in an increase of interest expense of approximately $5,990. The increase was partially offset by higher interest capitalization related to construction of approximately $3,000. The Company capitalized $10,600 of interest for the three months ended December 31, 2021 as compared to $7,566 in the prior year period.

~~For the~~and six months ended December 31, 2021, net interest expense was $15,867 as compared to $8,926 in the prior year period, a net increase of net interest expense of $6,941 or 78%. The increase was primarily due to the entry into the National Properties Term Loan Facility on November 12, 2020, which resulted in an increase of interest expense by approximately $19,260. The increase was partially offset by higher interest capitalization related to construction of approximately $12,030. The Company capitalized $19,926 of interest for the six months ended December 31, 2021 as compared to $7,911 in the prior year period.

~~Miscellaneous income (expense), net~~

Net miscellaneous expense for the three months ended December 31, 2021 was $17,100, as compared to $7,568 in the prior year period, an increase of $9,532, or 126%, primarily due to an increase in unrealized loss of $7,005 associated with the Company’s investment in DraftKings Inc. (“DraftKings”), for, which the Company recorded an unrealized loss of $17,989 for the three months ended December 31, 2021 as compared to an unrealized loss of $10,984 in the prior year period.

For the six months ended December 31, 2021, net miscellaneous expense was $19,647 as compared to net miscellaneous income of 26,449, a decrease of $46,096, primarily due to the unrealized loss associated with the investment in DraftKings of $21,476 for the six months ended December 31, 2021 as compared to an unrealized gain of $22,064 in the prior year period.

~~Table of Contents~~

~~Income taxes~~

~~See Note 17 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s income taxes.~~

~~Adjusted operating income~~

~~The following are the reconciliations of operating income (loss) to adjusted operating income~~2022, respectively, and $11,346 and $11,889 for the three and six months ended December 31, 2021, ~~as compared to the prior year period:~~

Three Months Ended
December 31, Change
2021 2020 Amount Percentage
Operating income (loss) $ 35,350 $ (46,812) $ 82,162 NM
Non-cash portion of arena license fees from MSG Sports (11,346) (1,176)
Share-based compensation 24,171 29,828
Depreciation and amortization (a)
30,533 25,677
Amortization for capitalized cloud computing costs 10 —
Merger and acquisition related costs 2,331 —
Impairment and other (gains) loss, net (7,979) —
Restructuring charges — 1,372
Other purchase accounting adjustments 3,038 924
Adjusted operating income $ 76,108 $ 9,813 $ 66,295 NM

Six Months Ended
December 31, Change
2021 2020 Amount Percentage
Operating loss $ (47,988) $ (105,491) $ 57,503 55 %
Non-cash portion of arena license fees from MSG Sports (11,889) (1,176)
Share-based compensation 43,699 45,984
Depreciation and amortization (a)
59,963 54,087
Amortization for capitalized cloud computing costs 95 —
Merger and acquisition related costs 39,523 —
Impairment and other (gains) loss, net (161) —
Restructuring charges — 21,299
Other purchase accounting adjustments 3,123 1,848
Adjusted operating income $ 86,365 $ 16,551 $ 69,814 NM

~~_________________~~respectively.

~~(a)~~(b) Depreciation and amortization includes purchase accounting adjustments of ~~$3,510~~$115 and ~~$3,066~~$3,510 for the three months ended December 31, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$5,109~~$2,109 and ~~$6,588~~$5,109 for the six months ended December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

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

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~~Table of Contents~~

Adjusted operating income for the three months ended December 31, ~~2021 improved $66,295,~~2022 increased $48,024, to ~~$76,108. For~~$124,132. Adjusted operating income for the six months ended December 31, ~~2021, adjusted operating income~~2022 increased ~~$69,814,~~$40,546 to ~~$86,365. These~~$126,911. The increases in adjusted operating income were attributable to the following:

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Increase in adjusted operating income of the Entertainment segment (a)
$ 70,254 $ 57,139
Decrease in adjusted operating income of the MSG Networks segments (a)
(29,938) (48,536)
Increase in adjusted operating income of the Tao Group Hospitality segment (a)
25,911 61,213
Inter-segment eliminations 68 (2)
$ 66,295 $ 69,814

~~_________________~~

~~(a)See “ — Business Segment Results” for a more detailed discussion of the operating results of our segments.~~


	Three Months Ended		Six Months Ended
Changes attributable to	December 31, 2022		December 31, 2022
Entertainment segment	$	51,331	$	78,283
MSG Networks segments	(4,541)		(27,442)
Tao Group Hospitality segment	1,240		(10,368)
Inter-segment eliminations	(6)		73
	$	48,024	$	40,546

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

For the three months ended December 31, ~~2021,~~2022, the Company recorded $3,029 of net income attributable to redeemable noncontrolling interests and $56 of net loss attributable to nonredeemable noncontrolling interests as compared to $2,642 of net income attributable to redeemable noncontrolling interests and $106 of net income attributable to nonredeemable noncontrolling interests ~~as compared to $3,342~~for the three months ended December 31, 2021. For the six months endedDecember 31, 2022, the Company recorded $4,153 of net ~~loss~~income attributable to redeemable noncontrolling interests and ~~$902~~$466 of net loss attributable to nonredeemable noncontrolling interests ~~for the three months ended December 31, 2020. For the six months ended December 31, 2021, the Company recorded~~as compared to $4,854 of net income attributable to redeemable noncontrolling interests and $471 of net income attributable to nonredeemable noncontrolling interests ~~as compared to $7,231 of net loss attributable to redeemable noncontrolling interests and $1,532 of net loss attributable to nonredeemable noncontrolling interests~~ for the six months ended December 31, ~~2020.~~2021. These amounts represent the share of net income (loss) from the Company’s investments in Tao Group Hospitality and BCE that are not attributable to the Company.

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Business Segment Results

Entertainment

The ~~table~~tables below ~~sets~~set forth, for the periods presented, certain historical financial information and a reconciliation of operating ~~loss~~income (loss) to adjusted operating income (loss) for the Company’s Entertainment segment.


		Three Months Ended									Three Months Ended
		December 31,				Change					December 31,				Change
		2021		2020		Amount		Percentage			2022		2021		Amount		Percentage
Revenues	Revenues	$	247,610	$	12,669	$	234,941	NM		Revenues	$	356,518	$	247,610	$	108,908	44	%
Direct operating expenses	Direct operating expenses	147,343		23,409		123,934		NM		Direct operating expenses	(181,042)		(147,343)		(33,699)		23	%
Selling, general and administrative expenses	Selling, general and administrative expenses	91,516		65,730		25,786		39	%	Selling, general and administrative expenses	(109,561)		(91,516)		(18,045)		20	%
Depreciation and amortization	Depreciation and amortization	19,024		19,246		(222)		(1)	%	Depreciation and amortization	(21,921)		(19,024)		(2,897)		15	%
Impairment and other gains, net										Impairment and other gains, net	5,412		—		5,412		NM
Restructuring charges										Restructuring charges	(9,694)		—		(9,694)		NM

Operating income (loss)										Operating income (loss)	$	39,712	$	(10,273)	$	49,985	NM
Reconciliation to adjusted operating income:										Reconciliation to adjusted operating income:
Non-cash portion of arena license fees from MSG Sports (a)										Non-cash portion of arena license fees from MSG Sports (a)	(12,410)		(11,346)		(1,064)		9	%
Share-based compensation										Share-based compensation	12,513		16,155		(3,642)		(23)	%
Depreciation and amortization										Depreciation and amortization	21,921		19,024		2,897		15	%
Impairment and other gains, net										Impairment and other gains, net	(5,412)		—		(5,412)		NM
Restructuring charges	Restructuring charges	—		1,372		(1,372)		NM		Restructuring charges	9,694		—		9,694		NM
Operating loss		$	(10,273)	$	(97,088)	$	86,815	89	%
Reconciliation to adjusted operating income (loss):
Non-cash portion of arena license fees from MSG Sports		(11,346)		(1,176)
Share-based compensation		16,155		22,374
Merger and acquisition related costs, net of insurance recovery										Merger and acquisition related costs, net of insurance recovery	(56)		1,456		(1,512)		NM
Amortization for capitalized cloud computing arrangement costs	Amortization for capitalized cloud computing arrangement costs	(34)		—						Amortization for capitalized cloud computing arrangement costs	191		(34)		225		NM
Merger and acquisition related costs		1,456		—
Depreciation and amortization		19,024		19,246

Restructuring charges		—		1,372
Adjusted operating income (loss)		$	14,982	$	(55,272)	$	70,254	NM

Remeasurement of deferred compensation plan liabilities										Remeasurement of deferred compensation plan liabilities	160		—		160		NM
Adjusted operating income										Adjusted operating income	$	66,313	$	14,982	$	51,331	NM

Six Months Ended
December 31, Change
2021 2020 Amount Percentage
Revenues $ 281,849 $ 20,224 $ 261,625 NM
Direct operating expenses 183,645 47,024 136,621 NM
Selling, general and administrative expenses 184,478 118,380 66,098 56 %
Depreciation and amortization 38,680 41,260 (2,580) (6) %
Restructuring charges — 21,299 (21,299) NM
Operating loss $ (124,954) $ (207,739) $ 82,785 40 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports (11,889) (1,176)
Share-based compensation 26,298 32,807
Depreciation and amortization 38,680 41,260
Amortization for capitalized cloud computing costs 7 —
Merger and acquisition related costs 15,448 —
Restructuring charges — 21,299
Adjusted operating loss $ (56,410) $ (113,549) $ 57,139 50 %



	Six Months Ended
	December 31,				Change
	2022		2021		Amount		Percentage
Revenues	$	503,620	$	281,849	$	221,771	79	%
Direct operating expenses	(282,807)		(183,645)		(99,162)		54	%
Selling, general and administrative expenses	(212,923)		(184,478)		(28,445)		15	%
Depreciation and amortization	(41,204)		(38,680)		(2,524)		7	%
Impairment and other gains, net	7,412		—		7,412		NM
Restructuring charges	(9,694)		—		(9,694)		NM
Operating loss	$	(35,596)	$	(124,954)	$	89,358	72	%
Reconciliation to adjusted operating income (loss):
Non-cash portion of arena license fees from MSG Sports (a)	(12,929)		(11,889)		(1,040)		9	%
Share-based compensation	23,945		26,298		(2,353)		(9)	%
Depreciation and amortization	41,204		38,680		2,524		7	%
Impairment and other gains, net	(7,412)		—		(7,412)		NM
Restructuring charges	9,694		—		9,694		NM
Merger and acquisition related costs, net of insurance recovery	2,693		15,448		(12,755)		(83)	%
Amortization for capitalized cloud computing arrangement costs	268		7		261		NM
Remeasurement of deferred compensation plan liabilities	6		—		6		NM
Adjusted operating income (loss)	$	21,873	$	(56,410)	$	78,283	NM

_________________

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

~~Table of Contents~~

Factors Affecting Results of Operations

~~Impact of the COVID-19 Pandemic~~

For the three and six months ended December 31, 2021, ~~and 2020,~~ the Entertainment segment operations and operating results were materially impacted by the COVID-19 pandemic, including as a result of the lead-time required to book touring acts and artists, which is the majority of our Entertainment business, and the ~~actions taken~~postponement or cancellation of select events at our performance venues (including the partial cancellation of the 2021 production of the Christmas Spectacular) as a result of an increase in ~~response by governmental authorities. While~~COVID-19 cases during the ~~number~~fiscal second quarter. As of the date of this report, live events are permitted to be held at ~~the Company’s~~all of our performance venues ~~has started~~without capacity restrictions and we are continuing to ~~increase, it is not clear when the Company will fully return to normal business operations.~~host and book new events. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.

Revenues

Revenues for the three and six months ended December 31, ~~2021~~2022 increased ~~$234,941 to $247,610~~$108,908 and $221,771, respectively, as compared to the prior year ~~period.~~periods. The changes in revenues were attributable to the following:


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022
Increase in revenues from the presentation of the Christmas Spectacular	$	71,092	$	71,414
Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements	17,075		35,404
Increase in event-related revenues	7,576		88,214
Increase in venue-related sponsorship, signage and suite license fee revenues	4,479		16,643
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements	3,972		3,968

Other net increases	4,714		6,128
	$	108,908	$	221,771

The Company had 181 Christmas Spectacular performances during this year’s holiday season, of which 174 took place in the second 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 ~~the six months ended December 31, 2021, revenues increased $261,625 to $281,849~~this year’s holiday season, more than 930,000 tickets were sold, representing an over 25% increase in attendance on a per-show basis as compared to the prior ~~year period. The net increases were attributable to the following:~~

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Increase in event-related revenues, as discussed below $ 79,972 $ 100,632
Increase in revenues from the Christmas Spectacular given the cancellation of the 2020 production as a result of the COVID-19 pandemic
55,328 55,209
Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements 45,285 47,011
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below 26,268 27,596
Increase in suite license fee revenues, as a result of no live events held in the prior year periods due to the COVID-19 pandemic 13,080 13,459
Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic 4,634 7,297
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports 2,391 2,534
Increase in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidation 6,357 5,572
Other net increases 1,626 2,315
$ 234,941 $ 261,625
year.

For the three and six months ended December 31, ~~2021,~~2022, the increase in revenues from the presentation of the Christmas Spectacular production, as compared to the prior year periods, was primarily due to higher ticket-related revenues. This reflected an increase in the number of performances as compared to the prior year periods and, to a lesser extent, higher per-show paid attendance.

For the three months ended December 31, 2022, the increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflected higher suite license fee revenues and higher food, beverage and merchandise sales at Knicks and Rangers games. For the six months ended December 31, 2022, the increase in revenues primarily reflects higher suite license fee revenues, which was mainly 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).

For the three and six months ended December 31, 2022, the increase in event-related revenues primarily reflects ~~(i)~~ higher revenues from concerts of ~~$58,104~~$7,866 and ~~$74,605, respectively, and (ii) higher~~$88,072, respectively. The increase for the three months ended December 31, 2022 was due to an increase in the number of concerts at the Company’s venues as compared to the prior year period, partially offset by lower per-concert revenues ~~from other sporting and live entertainment events~~primarily due to the mix of ~~$21,868 and $26,027, respectively,~~events. The increase in revenues for the six months ended December 31, 2022 was primarily due to the return of live events toat the Company’s venues ~~during the current year period~~ as compared to nolimited live events held induring the ~~prior year period due~~first quarter of Fiscal Year 2022 (due to the COVID-19 ~~pandemic.~~pandemic). See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.

Direct operating expenses

Direct operating expenses for the three and six months ended December 31, 2022 increased $33,699 and $99,162, respectively, as compared to the prior year periods. The changes in direct operating expenses were attributable to the following:


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022



Increase in expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements	$	10,977	$	28,693
Increase in direct operating expenses associated with the Christmas Spectacular	10,560		9,854
Increase in event-related direct operating expenses	5,282		47,644
Increase in direct operating expenses associated with the Arena License Agreements	4,188		4,732
Increase in venue operating costs	2,131		6,627
Other net increases	561		1,612
	$	33,699	$	99,162

For the three and six months ended December 31, ~~2021,~~2022, the ~~Knicks and Rangers hosted a combined 35 and 37 pre-season and regular season games without any capacity restrictions. As a result,~~increase in direct operating expenses associated with the ~~Company recorded $27,854 and $29,182 in arena license fees under~~sharing of economics with MSG Sports pursuant to the Arena License Agreements ~~for~~primarily reflects the ~~three and six months ended December 31, 2021. In the prior year, the Knicks began their season~~increase in December 2020 and played four pre-season and regular season home games in the Fiscal Year 2021 second quarter without fans in attendance due to government-mandated assembly restrictions at that time. As capacity at The Garden was limited to 1,000 or fewer attendees, the amounts payable to the Company under the Arena License Agreement with the Knicks were reduced by 80%. As a result, the Company recorded $1,585 in arenasuite license fees ~~under~~and, to a lesser extent, the ~~Arena License Agreement with the Knicks for the three~~increase in Knicks’ and ~~six months ended December 31, 2020. In the prior year, the Rangers played no home games~~Rangers’ food and ~~the Company recorded no arena license fees under the Arena License Agreement with the Rangers. The Rangers’ 2020-21 season began subsequently in January 2021.~~

~~Table of Contents~~

beverage sales.

For the three and six months ended December 31, ~~2021,~~2022, the increase in ~~revenues from the presentation of~~direct operating expenses associated with the Christmas Spectacular production was primarily due to the ~~cancellation of the 2020 production~~increase in the ~~prior year periods. During the production’s 2021 holiday season run, the Company welcomed over 400,000 guests across 101~~number of performances ~~all of which took place in the Fiscal Year 2022 second quarter.~~

~~Direct operating expenses~~

~~Direct operating expenses for the three months ended December 31, 2021 increased $123,934 to $147,343~~ as compared to the prior year period. For the six months ended December 31, 2021, direct operating expenses increased $136,621 to $183,645 as compared to the prior year period. The net increases were attributable to the following:periods.

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Increase in event-related direct operating expenses, as discussed below $ 41,844 $ 51,570
Increase in direct operating expenses associated with the Christmas Spectacular given the cancellation of the 2020 production as a result of the COVID-19 pandemic
38,923 39,522
Increase in direct operating expenses associated with revenue or profit sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License Agreements 32,697 33,978
Increase in direct operating expenses associated with the Arena License Agreements 5,630 6,173
Increase in direct operating expenses associated with venue operating costs 2,622 5,348
Other net increases 2,218 30
$ 123,934 $ 136,621

For the three and six months ended December 31, ~~2021,~~2022, the increase in event-related direct operating expenses reflects ~~(i)~~ higher direct operating expenses from concerts of ~~$28,981~~$4,914, and ~~$36,246,~~$46,422, respectively, ~~and (ii) higher direct operating expenses from other sporting and live entertainment events of $12,863 and $15,324, respectively,~~which was primarily due to the ~~return~~increase in the number of events toheld at the Company’s venues ~~during the current year period~~ as compared to ~~no live events held in~~ the prior year ~~period due to~~periods.

For the ~~COVID-19 pandemic.~~three and six months ended December 31, 2022, 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.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended December 31, ~~2021~~2022 increased ~~$25,786,~~$18,045, or ~~39%~~20% to ~~$91,516~~$109,561 as compared to the prior year period. The increase primarily reflects ~~(i)~~ higher employee compensation and related benefits of ~~$14,105,~~$9,501, primarily due to the Company’s MSG Sphere initiative, and higher professional fees of $4,704, which ~~is net~~reflects an increase in costs related to the Company’s potential spin-off of its live entertainment business, partially offset by a decrease in ~~share-based compensation~~costs, primarily litigation-related and net of ~~$6,241,~~insurance recovery, associated with the acquisition of MSG Networks by MSG Entertainment and ~~(ii) an increase~~a decrease in ~~professional fees of $7,766, inclusive of~~ costs ~~for~~related to the Company’s MSG Sphere ~~development.~~ initiative.

For the six months ended December 31, ~~2021,~~2022, selling, general and administrative expenses increased ~~$66,098,~~$28,445, or ~~56%~~15%, to ~~$184,478~~$212,923 as compared to the prior year period. ~~This~~The increase primarily reflects ~~(i)~~ higher employee compensation and related benefits of ~~$32,867, which is net of a decrease in share-based compensation of $6,699, and (ii) an increase in professional fees of $22,567, inclusive of expenses in the current year period related~~$19,862, primarily due to the Company’s ~~acquisition of MSG Networks Inc. of $13,992 and, to a lesser extent, initiatives for~~ MSG Sphere ~~development.~~initiative, and higher other general administrative expenses of $9,713.

~~Depreciation~~

Impairment and ~~amortization~~other gains, net

~~Depreciation~~For the three and ~~amortization for~~six months ended December 31, 2022, the Company recorded net gains of $5,412 and $7,412, respectively, primarily due to the gain on sale of the company’s controlling interest in BCE and partially offset by the net loss on the disposal of a corporate aircraft. In addition, the six months ended December 31, ~~2021, decreased $2,580, or 6% to $38,680 as compared~~2022 also reflects receipt of insurance proceeds related to the ~~prior year period primarily due to lower depreciation expense as a result of certain assets~~Company’s creative studio in ~~The Garden being fully depreciated and amortized, and disposal of certain assets in the prior year period.~~Burbank, CA.

~~Operating loss~~

Operating ~~loss~~income (loss)

Operating income for the three months ended December 31, ~~2021~~2022 was ~~$10,273~~$39,712 as compared to ~~$97,088~~a loss of $10,273 in the prior year period, ~~a decrease in operating loss~~an improvement of ~~$86,815, or 89%.~~$49,985. For the six months ended December 31, ~~2021,~~2022, operating loss was ~~$124,954~~$35,596 as compared to ~~$207,739~~a loss of $124,954 in the prior year period, ~~a decrease~~an improvement of $89,358, or 72%. The improvements in operating ~~loss of $82,785 or 40%. The decreases in operating loss~~income (loss) were primarily due to ~~increases~~an increase in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses, ~~and, to a lesser extent, the impact of restructuring charges in the prior year periods,~~ as discussed above.

~~Table of Contents~~

Adjusted operating income (loss)

Adjusted operating income for the three months ended December 31, ~~2021~~2022 was ~~$14,982~~$66,313 as compared to adjusted operating ~~loss~~income of ~~$55,272~~$14,982 in the prior year period, an increase ~~in adjusted operating income~~ of ~~$70,254.~~$51,331. The increase in adjusted operating income was ~~lower than the decrease in operating loss of $86,815~~ primarily due to ~~(i) the~~an increase in ~~adjustments for the non-cash portion of arena license fees from MSG Sports of $10,170,~~revenues, partially offset by an increase in direct operating expenses and ~~(ii) a decrease in share-based compensation of $6,219, both of which are excluded in the calculation of adjusted operating income (loss).~~ selling, general and administrative expenses.

For the six months ended December 31, ~~2021,~~2022, adjusted operating ~~loss~~income was ~~$56,410~~$21,873 as compared to ~~$113,549~~a loss of $56,410 in the prior year period, ~~a decrease~~an improvement of $78,283. The improvement in adjusted operating ~~loss of $57,139. The decrease in adjusted operating loss~~income was ~~lower than the decrease in operating loss of $82,785~~ primarily due to ~~(i) restructuring charges of $21,299 in the prior year period as compared to merger and acquisition related costs of $15,448 in the current year period, (ii) the~~an increase in ~~adjustments for the non-cash portion of arena license fees from MSG Sports of $10,713,~~revenues, partially offset by an increase in direct operating expenses and ~~(iii) a decrease in share-based compensation of $6,509, which are excluded in the calculation of adjusted operating loss.~~selling, general and administrative expenses.

MSG Networks

The ~~table~~tables below ~~sets~~set forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Networks segment.


		Three Months Ended									Three Months Ended
		December 31,				Change					December 31,				Change
		2021		2020		Amount		Percentage			2022		2021		Amount		Percentage
Revenues	Revenues	$	159,981	$	146,239	$	13,742	9	%	Revenues	$	158,898	$	159,981	$	(1,083)	(1)	%
Direct operating expenses	Direct operating expenses	85,924		57,033		28,891		51	%	Direct operating expenses	(90,400)		(85,924)		(4,476)		5	%
Selling, general and administrative expenses	Selling, general and administrative expenses	37,192		21,692		15,500		71	%	Selling, general and administrative expenses	(38,083)		(37,192)		(891)		2	%
Depreciation and amortization	Depreciation and amortization	1,756		1,802		(46)		(3)	%	Depreciation and amortization	(1,637)		(1,756)		119		(7)	%

Restructuring charges										Restructuring charges	(3,988)		—		(3,988)		NM
Operating income	Operating income	$	35,109	$	65,712	$	(30,603)	(47)	%	Operating income	$	24,790	$	35,109	$	(10,319)	(29)	%
Reconciliation to adjusted operating income:	Reconciliation to adjusted operating income:									Reconciliation to adjusted operating income:

Share-based compensation	Share-based compensation	6,058		6,266						Share-based compensation	3,298		6,058		(2,760)		(46)	%
Depreciation and amortization	Depreciation and amortization	1,756		1,802						Depreciation and amortization	1,637		1,756		(119)		(7)	%

Restructuring charges										Restructuring charges	3,988		—		3,988		NM
Merger and acquisition related costs										Merger and acquisition related costs	5,544		875		4,669		NM
Amortization for capitalized cloud computing arrangement costs	Amortization for capitalized cloud computing arrangement costs	44		—						Amortization for capitalized cloud computing arrangement costs	44		44		—		—	%
Merger and acquisition related costs		875		—

Adjusted operating income	Adjusted operating income	$	43,842	$	73,780	$	(29,938)	(41)	%	Adjusted operating income	$	39,301	$	43,842	$	(4,541)	(10)	%


		Six Months Ended									Six Months Ended
		December 31,				Change					December 31,				Change
		2021		2020		Amount		Percentage			2022		2021		Amount		Percentage
Revenues	Revenues	$	301,454	$	303,602	$	(2,148)	(1)	%	Revenues	$	281,377	$	301,454	$	(20,077)	(7)	%
Direct operating expenses	Direct operating expenses	154,347		122,105		32,242		26	%	Direct operating expenses	(165,820)		(154,347)		(11,473)		7	%
Selling, general and administrative expenses	Selling, general and administrative expenses	85,167		44,219		40,948		93	%	Selling, general and administrative expenses	(55,899)		(85,167)		29,268		(34)	%
Depreciation and amortization	Depreciation and amortization	3,553		3,630		(77)		(2)	%	Depreciation and amortization	(3,255)		(3,553)		298		(8)	%

Restructuring charges										Restructuring charges	(3,988)		—		(3,988)		NM
Operating income	Operating income	$	58,387	$	133,648	$	(75,261)	(56)	%	Operating income	$	52,415	$	58,387	$	(5,972)	(10)	%
Reconciliation to adjusted operating income:	Reconciliation to adjusted operating income:									Reconciliation to adjusted operating income:

Share-based compensation	Share-based compensation	13,532		10,893						Share-based compensation	5,002		13,532		(8,530)		(63)	%
Depreciation and amortization	Depreciation and amortization	3,553		3,630						Depreciation and amortization	3,255		3,553		(298)		(8)	%

Restructuring charges										Restructuring charges	3,988		—		3,988		NM
Merger and acquisition related costs										Merger and acquisition related costs	7,445		24,075		(16,630)		(69)	%
Amortization for capitalized cloud computing arrangement costs	Amortization for capitalized cloud computing arrangement costs	88		—						Amortization for capitalized cloud computing arrangement costs	88		88		—		—	%
Merger and acquisition related costs		24,075		—

Adjusted operating income	Adjusted operating income	$	99,635	$	148,171	$	(48,536)	(33)	%	Adjusted operating income	$	72,193	$	99,635	$	(27,442)	(28)	%

_________________

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

~~Table of Contents~~

Factors Affecting Results of Operations

Due to the COVID-19 pandemic, the 2020-21 NHL season was shortened and resulted in ~~March 2020, the 2019-20 NHL and NBA seasons were suspended. The leagues resumed play during the summer of 2020, with the Rangers and Islanders participating~~reductions in media rights fees which had a residual impact reflected in the ~~NHL’s return to play and the Islanders advancing to the 2019-20 playoffs. The NHL and NBA subsequently completed their shortened 2019-20 seasons in~~three months ended September and October 2020, respectively, which resulted in a delayed start to the shortened 2020-21 NBA and NHL seasons. For the 2021-22 seasons, MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL.30, 2021. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.

Revenues

~~Revenues for~~For the three months ended December 31, ~~2021 increased $13,742,~~2022, MSG Networks generated total revenues of $158,898, a decrease of $1,083, or ~~9% to $159,981~~1%, as compared to the prior year ~~period. Revenues for~~quarter. For the six months ended December 31, ~~2021 decreased $2,148,~~2022, MSG Networks generated total revenues of $281,377, a decrease of $20,077, or 1%7%, ~~to $301,454~~ as compared to the prior year period. The changes in revenues were attributable to the following:


							Three Months Ended		Six Months Ended
		Three Months Ended December 31, 2021		Six Months Ended December 31, 2021			December 31, 2022		December 31, 2022

Decrease in affiliation fee revenue	Decrease in affiliation fee revenue	$	(16,114)	$	(28,379)	Decrease in affiliation fee revenue	$	(7,549)	$	(26,510)
Increase in advertising revenue	Increase in advertising revenue	28,307		24,745		Increase in advertising revenue	6,315		6,226
Other net increases	Other net increases	1,549		1,486		Other net increases	151		207
		$	13,742	$	(2,148)		$	(1,083)	$	(20,077)

For the three months ended December 31, ~~2021, the decrease in~~2022, affiliation fee revenue ~~was~~decreased $7,549, primarily due to a decrease in subscribers of approximately 10.5%. These decreases were partially offset by net favorable affiliate adjustments of approximately $4,100 and the impact of higher affiliation rates.

For the six months ended December 31, 2022, affiliation fee revenue decreased $26,510, primarily due to the impact of ~~(i)~~ the non-renewal of MSG Networks’ carriage agreement with Comcast Corporation (“Comcast”) as of October 1, 2021 and ~~(ii)~~ a decrease in subscribers of approximately 7%10.0% (excluding the impact of the non-renewal with Comcast). These decreases were partially offset by ~~(i) the~~ net ~~impact of higher affiliation rates and (ii) a decrease in net unfavorable~~favorable affiliate adjustments of approximately $3,100. For the six months ended December 31, 2021, the decrease in affiliation fee revenue was primarily due to the impact of (i) the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2021, (ii) a decrease in subscribers of approximately 6.5% (excluding the impact of the non-renewal with Comcast),$10,400 and ~~(iii) an increase in net unfavorable affiliate adjustments of approximately $2,200. These decreases were partially offset by~~ the impact of higher affiliation rates.

Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date. The financial impact of Comcast’s non-carriage of MSG Networks will depend on many factors including if, when and on what terms Comcast and the Company reach a new carriage agreement and the extent to which Comcast subscribers switch to other Distributors that carry MSG Networks. Comcast’s non-carriage has reduced MSG Networks’ subscribers by approximately ~~10%~~10.0% and ~~subject to the foregoing factors,~~ has ~~and is expected to reduce~~reduced MSG Networks’ revenue by a comparable ~~percentage for so long as MSG Networks’ carriage agreement with Comcast is not renewed.~~percentage. In addition, ~~during any period of non-carriage,~~ MSG Networks’ segment operating income and AOI have been ~~and are expected to be~~ reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.

For the three and six months ended December 31, ~~2021,~~2022, the increase in advertising revenue primarily ~~reflects~~reflected the impact of a ~~greater~~higher number of live ~~NBA~~professional sports telecasts and ~~NHL telecasts~~an increase in per-game advertising sales as compared with the prior year ~~period. As a result of the delayed start~~periods and higher sales related to the 2020-21 NBA and NHL seasons due to the COVID-19 pandemic, MSG Networks telecast nine NBA games and no NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period. For the six months ended December 31, 2021, the increase inCompany’s non-ratings-based advertising revenue primarily reflects a greater number of live NBA and NHL telecasts in the current year period as compared with the prior year period. As a result of the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast nine NBA games and 14 NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period.

~~Table of Contents~~

initiatives.

Direct operating expenses

Direct operating expenses for the three months ended December 31, ~~2021~~2022 increased ~~$28,891, or 51%,~~$4,476 to ~~$85,924~~$90,400 as compared to the prior year period. For the six months ended December 31, ~~2021,~~2022, direct operating expenses increased ~~$32,242, or 26%,~~$11,473 to $154,347 as compared to the prior year period. For the three and six months ended December 31, 2021, the increase was primarily due to higher rights fees expenses of $20,358 and $22,901, respectively, and, to a lesser extent, an increase in other programming and production-related costs of $8,286 and $9,052, respectively. The increases in rights fees were primarily due to the impact of (i) lower media rights fees in the prior year periods as a result of the rights fees reductions related to the shortened 2020-21 NHL seasons, (ii) the impact in the prior year periods of the delayed start of the 2020-21 NBA and NHL regular seasons, and (iii) annual contractual rate increases. The increase in other programming and production-related costs was primarily due to the impact of a regular NBA and NHL telecast schedule in the current year period, as compared to the prior year period in which due to the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast nine NBA games and 14 NHL games.

~~Selling, general and administrative expenses~~

Selling, general and administrative expenses for the three months ended December 31, 2021 increased $15,500, or 71%, to $37,192 as compared to the prior year period. For the six months ended December 31, 2021, selling, general and administrative expenses increased $40,948, or 93%, to $85,167$165,820 as compared to the prior year period. The ~~increase in~~increases were attributable to the following:


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022

Increase due to higher rights fees expense primarily due to the impact of annual contractual rate increases in the current year period and the absence of reductions in media rights fees related to the shortened 2020-21 NHL season recorded in the prior year first quarter	$	3,072	$	9,005
Increase in other programming and production costs including the impact of a higher number of live professional sports telecasts in the current year period	1,404		2,468

	$	4,476	$	11,473

Selling, general and administrative expenses

For the three months ended December 31, 2022, selling, general and administrative expenses ~~was primarily due~~of $38,083 increased $891 as compared to ~~higher (i) advertising, and marketing expenses of approximately $7,000 for~~ the three and six months ended December 31, 2021, and (ii) advertising sales commissions of approximately $6,400 and $5,600 for the three and six months ended December 31, 2021, respectively. In addition, forprior year quarter. For the six months ended December 31, ~~2021,~~2022, selling, general and administrative expenses of $55,899 decreased $29,268 as compared to the prior year quarter.


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022

Impact of the acquisition of MSG Networks by MSG Entertainment in July 2021, including litigation costs in the current year period	$	4,669	$	(18,328)
Increase in advertising commissions and other expenses	1,717		1,228
Decrease due to lower employee compensation and related benefits	(2,834)		(6,057)
Decrease due to lower advertising and marketing expenses	(2,661)		(6,111)
	$	891	$	(29,268)

Operating income

For the three months ended December 31, 2022, operating income of $24,790 decreased $10,319, or 29%, as compared to the prior year quarter, primarily due to the increase in direct operating expenses, the impact of restructuring charges and, to a lesser extent, the decrease in revenues, and the increase in selling, general and administrative expenses ~~also reflected approximately $25,700 of merger and acquisition costs that occurred primarily during the first quarter of Fiscal Year 2022, inclusive of~~(including the impact of ~~executive separation agreements.~~higher acquisition-related costs).

~~Operating~~For the six months ended December 31, 2022, operating income of $52,415 decreased $5,972, or 10%, as compared to the prior year quarter, primarily due to the decrease in revenues, increase in direct operating expenses, and the impact of restructuring charges, partially offset by a decrease in selling, general and administrative expenses (including the impact of lower acquisition-related costs).

~~Operating~~Adjusted operating income ~~for~~

For the three months ended December 31, ~~2021~~2022, adjusted operating income of $39,301 decreased ~~$30,603,~~$4,541, or ~~47% to $35,109~~10%, as compared to the prior year ~~period. The decrease in operating income for three months ended December 31, 2021 was~~quarter, primarily due to the increase in direct operating expenses and, to a lesser extent, the ~~increase~~decrease in revenues, partially offset by lower selling, general and administrative expenses ~~partially offset by~~(excluding the ~~increase in revenues.~~ impact of higher acquisition-related costs).

For the six months ended December 31, ~~2021,~~2022, adjusted operating income of $72,193 decreased ~~$75,261,~~$27,442, or ~~56%~~28%, ~~to $58,387~~ as compared to the prior year ~~period. The decrease in operating income for the six months ended December 31, 2021 was~~quarter, primarily due to the decrease in revenues and increase in direct operating expenses, partially offset by a decrease in selling, general and administrative expenses ~~and direct operating expenses and, to a lesser extent~~(excluding the ~~decrease in revenues.~~

~~Adjusted operating income~~

Adjusted operating income for the three months ended December 31, 2021 decreased $29,938, or 41%, to $43,842 as compared to the prior year period, which is consistent with the decrease in operating incomeimpact of $30,603, as discussed above. For the six months ended December 31, 2021, adjusted operating income decreased $48,536, or 33%, to $99,635 as compared to the prior year period. The decrease in adjusted operating income for the six months ended December 31, 2021 was lower ~~than the decrease in operating income of $75,261 primarily due to the merger and~~ acquisition-related ~~costs of $24,075 recorded in the current year period, which are excluded in the calculation of adjusted operating income.~~costs).

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Tao Group Hospitality

The ~~table~~tables below ~~sets~~set forth, for the periods presented, certain historical financial information and a reconciliation of operating income ~~(loss)~~ to adjusted operating income ~~(loss)~~ for the Company’s Tao Group Hospitality segment.


		Three Months Ended								Three Months Ended
		December 31,				Change				December 31,				Change
		2021		2020		Amount		Percentage		2022		2021		Amount		Percentage
Revenues	Revenues	$	117,086	$	10,491	$	106,595	NM	Revenues	$	135,994	$	117,086	$	18,908	16	%
Direct operating expenses	Direct operating expenses	60,880		10,980		49,900		NM	Direct operating expenses	(76,483)		(60,880)		(15,603)		26	%
Selling, general and administrative expenses	Selling, general and administrative expenses	40,685		9,131		31,554		NM	Selling, general and administrative expenses	(43,166)		(40,685)		(2,481)		6	%
Depreciation and amortization	Depreciation and amortization	6,243		1,563		4,680		NM	Depreciation and amortization	(5,616)		(6,243)		627		(10)	%
Impairment and other (gains) loss, net		(7,443)		—		(7,443)		NM
Impairment and other gains, net									Impairment and other gains, net	473		7,443		(6,970)		(94)	%

Operating income (loss)		$	16,721	$	(11,183)	$	27,904	NM
Reconciliation to adjusted operating income (loss):
Operating income									Operating income	$	11,202	$	16,721	$	(5,519)	(33)	%
Reconciliation to adjusted operating income:									Reconciliation to adjusted operating income:

Share-based compensation	Share-based compensation	1,958		1,188					Share-based compensation	2,374		1,958		416		21	%
Depreciation and amortization	Depreciation and amortization	6,243		1,563					Depreciation and amortization	5,616		6,243		(627)		(10)	%
Impairment and other (gains) loss, net		(7,443)		—

Adjusted operating income (loss)		$	17,479	$	(8,432)	$	25,911	NM
Impairment and other gains, net									Impairment and other gains, net	(473)		(7,443)		6,970		(94)	%

Adjusted operating income									Adjusted operating income	$	18,719	$	17,479	$	1,240	7	%


		Six Months Ended								Six Months Ended
		December 31,				Change				December 31,				Change
		2021		2020		Amount		Percentage		2022		2021		Amount		Percentage
Revenues	Revenues	$	236,550	$	17,712	$	218,838	NM	Revenues	$	268,645	$	236,550	$	32,095	14	%
Direct operating expenses	Direct operating expenses	121,973		20,808		101,165		NM	Direct operating expenses	(153,060)		(121,973)		(31,087)		25	%
Selling, general and administrative expenses	Selling, general and administrative expenses	74,779		16,734		58,045		NM	Selling, general and administrative expenses	(86,712)		(74,779)		(11,933)		16	%
Depreciation and amortization	Depreciation and amortization	12,621		2,609		10,012		NM	Depreciation and amortization	(12,246)		(12,621)		375		(3)	%
Impairment and other (gains) loss, net		375		—		375		NM
Impairment and other gains, net									Impairment and other gains, net	473		(375)		848		NM

Operating income (loss)		$	26,802	$	(22,439)	$	49,241	NM
Reconciliation to adjusted operating income (loss):
Operating income									Operating income	$	17,100	$	26,802	$	(9,702)	(36)	%
Reconciliation to adjusted operating income:									Reconciliation to adjusted operating income:

Share-based compensation	Share-based compensation	3,869		2,284					Share-based compensation	4,426		3,869		557		14	%
Depreciation and amortization	Depreciation and amortization	12,621		2,609					Depreciation and amortization	12,246		12,621		(375)		(3)	%
Impairment and other (gains) loss, net		375		—

Adjusted operating income (loss)		$	43,667	$	(17,546)	$	61,213	NM
Impairment and other gains, net									Impairment and other gains, net	(473)		375		(848)		NM

Adjusted operating income									Adjusted operating income	$	33,299	$	43,667	$	(10,368)	(24)	%

_________________

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

Factors Affecting Results of Operations

~~Disruptions caused by~~For the ~~COVID-19 pandemic had a significant~~three and ~~negative impact on~~six months ended December 31, 2021, Tao Group Hospitality’s operations and ~~financial performance for Fiscal Year 2021.~~ ~~In the prior year period, due to government actions taken in response to~~operating results were impacted by the COVID-19 ~~pandemic~~pandemic. This included certain regulatory requirements such as vaccination/mask requirements, which contributed to certain branded locations remaining closed during the period, and a temporary impact to both demand and operations as a result of an increase in ~~2020, virtually all~~COVID-19 cases during the fiscal 2022 second quarter. As of December 31, 2022 and as of the date of this filing, Tao Group Hospitality’s domestic venues ~~closed for approximately three months starting~~no longer require guests to provide proof of COVID-19 vaccination before entering, and Tao Group Hospitality is operating without capacity restrictions in March. Certain venues then resumed limited operations, subject to significant regulatory requirements, which included limits on capacity, curfews and social distancing requirements for outdoor and indoor dining.all markets. See “— Introduction —Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.

As of December 31, 2021, 53 of Tao Group Hospitality’s venues (24 legacy Tao Group Hospitality venue and 29 Hakkasan venues acquired in connection with the April 27, 2021 transaction) were open for outdoor dining, limited or full capacity indoor dining (depending on the market), and delivery/takeout, inclusive of Tao Asian Bistro & Lounge at Mohegan Sun, a venue that first opened in March 2021, while six venues remained closed (four legacy Tao Group Hospitality venues and two Hakkasan

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~~venues). Our venues continue to be operating under various governmental safety protocols such as vaccine mandates, curfews, capacity limitations and social distancing depending on the location.~~

Revenues

Revenues for the three months ended December 31, ~~2021~~2022 increased ~~$106,595~~$18,908, or 16%, to ~~$117,086~~$135,994 as compared to the prior year period. For the six months ended December 31, ~~2021,~~2022, revenues increased ~~$218,838~~$32,095, or 14% to ~~$236,550 as compared to the prior year period.~~$268,645. The ~~net increases~~changes in revenue were attributable to the following:

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Increase in revenues due to Hakkasan, acquired in April 2021 $ 51,579 $ 110,931
Increase in revenues at venues subject to capacity restrictions in the prior year period (a)
36,455 62,728
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the COVID-19 pandemic 17,243 42,791
Other net increases 1,318 2,388
$ 106,595 $ 218,838
~~_________________~~


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022
Increase in revenues for comparable venues that opened more than 15 months ago	$	9,259	$	10,736
Increase in revenues associated with new venue openings	6,377		13,914
Increase in revenues associated with venues that were temporarily closed in the prior year as a result of the COVID-19 pandemic	2,685		5,798

Other net increases	587		1,647
	$	18,908	$	32,095

~~(a) Includes the increases in revenues from converting previously managed venues to self-operated venues of $9,291 and $20,222 for~~For the three and six months ended December 31, ~~2021 as compared~~2022, the increase in revenues associated with new venue openings was primarily due to the opening of Lavo Ristorante in Los Angeles, a venue that first opened in March 2022, Lavo San Diego, which first opened in June 2022 following the rebranding of a legacy Hakkasan venue, Fleur Room in Los Angeles, a venue that first opened in August 2022, and Tao Beach in Las Vegas which reopened in April 2022 following a multi-year renovation.

For the three and six months ended December 31, 2022, the increase in revenues associated with venues that were temporarily closed in the prior year ~~periods.~~as a result of the COVID-19 pandemic was due to Avenue and Marquee Singapore reopening in April and July 2022, respectively, and Herringbone Waikiki reopening in November 2021.

Direct operating expenses

Direct operating expenses for the three months ended December 31, ~~2021~~2022 increased ~~$49,900~~$15,603, or 26%, to ~~$60,880~~$76,483 as compared to the prior year period. For the six months ended December 31, ~~2021,~~2022, direct operating expenses increased ~~$101,165,~~$31,087, or 25%, to ~~$121,973 as compared to the prior year period.~~$153,060. The net increases were attributable to the following:

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Increase in direct operating expenses due to Hakkasan, acquired in April 2021 $ 24,614 $ 52,480
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the COVID-19 pandemic 11,578 21,688
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the COVID-19 pandemic 10,855 21,020
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the COVID-19 pandemic 2,603 5,282
Other net increases 250 695
$ 49,900 $ 101,165


	Three Months Ended		Six Months Ended
	December 31, 2022		December 31, 2022
Increase in employee compensation and related benefits at existing venues and reflecting the impact of new venues	$	7,171	$	15,105
Increase in the costs of food and beverage due to the impact of inflation, higher comparable venue revenues, and new venue openings	3,342		7,432
Increase in venue entertainment costs	2,636		3,782
Increase in rent expense	1,816		3,850
Other net increases	638		918
	$	15,603	$	31,087

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended December 31, ~~2021~~2022 increased ~~$31,554~~$2,481, or 6%, to ~~$40,685~~$43,166 as compared to the prior year period. For the six months ended December 31, ~~2021,~~2022, selling, general and administrative expenses increased ~~$58,045~~$11,933, or 16% to ~~$74,779 as compared to the prior year period.~~$86,712. For the three and six months ended December 31, ~~2021,~~2022, the net increases were primarily due to ~~higher~~ (i) ~~expenses from the Hakkasan operations acquired in April 2021 of $15,973 and $30,696, respectively, (ii)~~higher employee compensation and related benefits ~~inclusive~~ of an$3,076 and $9,705, respectively, reflecting the impact of increased staffing as the business returns to normal operations and (ii) a net increase ~~in share-based compensation,~~ of ~~$6,454~~$402 and ~~$10,640,~~$2,298, respectively, ~~(iii) professional fees and~~in restaurant expenses, as well as supplies, utilities, general liability insurance, pre-opening expenses, and repairs and maintenance, ~~of $4,521~~ and ~~$8,376, respectively,~~marketing expenses, partially offset by other net decreases.

Impairment and ~~(iv) marketing costs of $2,357 and $4,490, respectively. All increases were significantly driven by the acquisition of Hakkasan in April 2021.~~other gains (losses)

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~~Depreciation and amortization~~

~~Depreciation and amortization for~~For the three ~~months ended December 31, 2021 increased $4,680 to $6,243 as compared to the prior year period. For the~~and six months ended December 31, ~~2021, depreciation and amortization increased $10,012 to $12,621 as compared~~2022, the Company recorded a net gain of $473 related to the ~~prior year period. The increases were primarily due to acquisition~~sale of ~~Hakkasan~~certain leasehold improvements in ~~April 2021.~~

~~Impairment and other (gains) loss, net~~

connection with closing of a venue. For the three months ended December 31, 2021, the Company recorded net gains of $7,443 principally from ~~extinguishments~~the write-off and modification of lease liabilities associated with certain ~~Hakkasan~~ venues.

Operating income ~~(loss)~~

Operating income for the three months ended December 31, ~~2021~~2022 was ~~$16,721~~$11,202 as compared to ~~an operating loss of $11,183~~$16,721 in the prior year period, a decrease of $5,519, or 33%. This decrease was primarily due to an increase in direct operating expenses, a decrease in other net gains, and, to a lesser extent, an increase in selling, general and administrative expenses, partially offset by increased revenues.

Operating income ~~of $27,904. For~~for the six months ended December 31, ~~2021, operating income~~2022 was ~~$26,802~~$17,100 as compared to ~~an operating loss of $22,439~~$26,802 in the prior year period, ~~an increase in operating income~~a decrease of ~~$49,241. The increases in operating income for the three and six months ended December 31, 2021 were~~$9,702, or 36%. This decrease was primarily due to ~~the acquisition of Hakkasan in April 2021 and increased revenues, partially offset by~~ an increase in direct ~~operations,~~operating expenses and an increase in selling, general and administrative expenses, ~~depreciation and amortization and impairment of long-lived assets, as discussed above. All~~partially offset by increased ~~operations were significantly driven by the acquisition of Hakkasan in April 2021 and the prior year period disruptions caused by the COVID-19 pandemic.~~revenues.

Adjusted operating income ~~(loss)~~

Adjusted operating income for the three months ended December 31, ~~2021~~2022 was ~~$17,479~~$18,719 as compared to ~~adjusted operating loss $8,432~~$17,479 in the prior year period, an increase ~~in adjusted operating income~~ of $25,911. For the six months ended December 31, 2021, adjusted operating income was $43,667, as compared to adjusted operating loss of $17,546 in the prior year period, an increase in adjusted operating income of $61,213.$1,240, or 7%. The increase in adjusted operating income for the three months ended December 31, ~~2021~~2022 was ~~lower as compared~~due to ~~the~~an increase in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses.

Adjusted operating income ~~primarily due to the net recovery of impairment of long-lived assets, offset by the higher depreciation and amortization, as discussed above. For~~for the six months ended December 31, ~~2021,~~2022 was $33,299 as compared to $43,667 in the ~~increase~~prior year period, a decrease of $10,368, or 24%. The decrease in adjusted operating income for the six months ended December 31, 2022 was due to higher ~~than the~~direct operating expenses and selling, general and administrative expenses, partially offset by an increase in ~~operating income primarily due to increased depreciation and amortization, as discussed above.~~revenues.

Liquidity and Capital Resources

~~Overview~~

~~The Company’s operations~~Sources and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majorityUses of Fiscal Year 2021, substantially all of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. ~~While operations have resumed, it is not clear when we will fully return to normal operations.~~

~~For Fiscal~~ Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the six months ended December 31, 2021 and as of this date, live events have been permitted to be held at all of our performance venues and we are continuing to host and book new events. As a result of an increase in cases of a COVID-19 variant, select bookings were postponed or cancelled at our performance venues in the second quarter of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.

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~~The impact of the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the~~ ~~Christmas Spectacular,~~ ~~(ii) the cancellation of the 2020 production of the~~ ~~Christmas Spectacular, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals.~~

~~The Company has Arena License Agreements with MSG Sports that require the Knicks and Rangers to play their home games at The Garden.~~ As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers 2020-21 regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. ~~On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements and~~ ~~full 82-game regular seasons for the 2021-22 NBA and NHL seasons are scheduled~~.

As a result of the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, our advertising revenue and certain operating expenses, including rights fees expense, reflect the same.

Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under our credit facilities. ~~MSGN Credit Agreement.~~ Our principal uses of cash include working capital-related items (including funding our operations), capital spending (including our construction of MSG Sphere at The Venetian in Las Vegas and related original content, as described below), debt service, investments and related loans and advances that we may fund from time to time, and mandatory purchases from prior acquisitions. We may also use cash to repurchase our common stock. Our decisions as to the use of our available liquidity will be based upon the ongoing review of the funding needs of the business, the optimal allocation of cash resources, and the timing of cash flow generation. To the extent that we desire to access alternative sources of funding through the capital and credit markets, challenging U.S. and global economic and market conditions could adversely impact our ability to do so at that time.

We regularly monitor and assess our ability to meet our net funding and investing ~~requirements.~~requirements, including the construction of MSG Sphere at The Venetian. As of December 31, 2022, the Company’s unrestricted cash and cash equivalents balance, inclusive of approximately $218,000 in advance cash proceeds primarily related to tickets, suites and sponsorships, was $432,173 as compared to $441,350 as of September 30, 2022. As of December 31, 2022 the Company’s restricted cash and cash equivalents balance was $121,563, inclusive of $75,000 that is required to be held in an account pledged as collateral for the MSG Sphere Term Loan Facility until its release upon the Liquidity Covenant Reduction Date (as defined under Note 10). The principal balance of the Company’s total debt outstanding as of December 31, 2022 was $2,010,725, compared to $1,756,898 as of September 30, 2022. We believe we have sufficient liquidity ~~including $1,258,105 in~~from cash and cash equivalents, ~~as of December 31, 2021,~~available borrowing capacity under our credit facilities and cash flows from operations (including savings generated by the Company’s cost reduction program and expected cash from operations from MSG Sphere at the Venetian ) to fund our operations and service the ~~MSGN Credit Agreement, the National Properties Term Loan Facility, the Tao Credit Facilities, and pursue the development of the new venues discussed below~~credit facilities for the foreseeable ~~future.~~ future, as well as complete the construction of MSG Sphere at The Venetian. This also includes the Company’s expectation that it will pay down a portion of MSG Networks’ term loan upon the refinancing of the loan prior to its maturity in October 2024.

The Company is exploring a sale of its interest in Tao Group Hospitality in order to further advance the broader MSG Sphere initiative, including additional personnel, as well as the continued development of content and related technology. Should the Company choose not to sell its interest in Tao Group Hospitality, it may pursue additional cost cutting and would need to access additional capital, which may include the monetization of the Company’s retained interest in the live entertainment business upon completion of the planned spin-off. There is no assurance that the Company would be able to obtain such capital. Any additional cost reduction program would include further reductions in discretionary spend in normal course of business and reductions in investments in capital not essential for MSG Sphere.

See Note 1310, Credit Facilities to the condensed consolidated financial statements included in ~~“— Item 1. Financial Statements” of~~ this Quarterly Report on Form 10-Q for a discussion of the ~~MSGN~~MSG Networks Credit ~~Agreement,~~Facilities, the National Properties Credit Facilities, the MSG Sphere Term Loan Facility and the Tao ~~Revolving~~ Credit Facilities. ~~Our cash and cash equivalents include approximately $264,000 in advance cash proceeds primarily~~

For additional information regarding the Company’s capital expenditures, including those related to ~~tickets, suites,~~MSG Sphere, see Note 22, Segment Information to the Company’s audited consolidated and ~~to a lesser extent, sponsorships.~~

combined financial statements and notes thereto for the year ended June 30, 2022 included in the Company’s Annual Report on Form 10-K.

On March 31, 2020, the Company’s Board of Directors authorized, effective following the Entertainment Distribution, a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased under the share repurchase program to date.

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Tao Group Hospitality’s principal uses of cash include working capital related-items (including funding its operations), investments in new venues, tax-related cash distributions, interest expense payments and repayment of debt. Tao Group Hospitality plans to continue to grow its business through the opening of new venues and acquisitions.

MSG ~~Sphere~~Spheres

The Company has made significant progress on MSG Sphere at The Venetian, its state-of-the-art entertainment venue under construction in Las Vegas.

See “Part I — Item 1. Our Business — Our Performance Venues — MSG Sphere” in the Company’s Annual Report on Form 10-K. The Company expects the venue to have a number of significant revenue streams, including a wide variety of content such as attractions, concert residencies and corporate and select sporting events, as well as sponsorship and premium hospitality opportunities. As a result, we anticipate that MSG Sphere at The Venetian will generate substantial revenue and adjusted operating income on an annual basis.

MSG Sphere at The Venetian is a complex construction project that has become even more challenging due to the global impact of COVID-19. In April 2020, the Company announced that it was suspending construction due to COVID-19-related factors outside of its control, including supply chain issues. As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it resumed construction with a lengthened timetable. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in ~~the second half of calendar year~~September 2023. As with any major construction project, the construction of MSG Sphere is subject to potential delays, unexpected complications or cost fluctuations.

~~On August 23, 2021, we announced that~~As of December 31, 2022, our cost estimate, inclusive of core technology and soft costs, for MSG Sphere at The Venetian was approximately ~~$1,865,000.~~$2,175,000. This cost estimate was net of $75,000 that the ~~Sands~~Venetian has agreed to pay to defray certain construction costs and also excludes ~~the impacts of changes in inflation and~~ significant capitalized and non-capitalized costs for items such as content creation, internal labor, capitalized interest, and furniture and equipment. Relative to our cost estimate above, our actual construction costs for MSG Sphere at The Venetian incurred through December 31, ~~2021~~2022 were approximately ~~$1,131,000,~~$2,015,000, which is net of $65,000 received from ~~Sands. In addition,~~ the Venetian. The amount of construction costs incurred as of December 31, ~~2021~~2022 includes approximately ~~$146,000~~$236,000 of accrued expenses that were not yet paid as of that date.

With regard to MSG Sphere at The Venetian, the Company plans to finance the construction of the venue from cash-on-hand and cash flows from ~~operations. If~~operations (including savings generated by the Company’s ~~cash-on-hand~~cost reduction program and expected cash ~~flows~~ from operations ~~are not sufficient to finance the remaining construction costs of~~from MSG Sphere at the Venetian). The ~~Venetian, the~~ Company ~~would need~~also continues to ~~access additional capital, including potential incremental debt. There is no assurance that the Company will be able to obtain such capital.~~have revolver capacity available under its credit facilities, if needed.

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

For additional information regarding the Company’s capital expenditures, including those related to MSG Sphere, see Note 21 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K.

In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere. The Company submitted a planning ~~application~~applications to the local planning authority in March 2019 and that process, which ~~will require~~requires various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time.

We will continue to explore additional domestic and international markets where we believe next-generation venues such as MSG Sphere can be successful.

Financing Agreements

See Note 1310, Credit Facilities, to the ~~consolidated~~ financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s debt obligations and various financing agreements.

MSG Networks Credit Facilities

MSGN ~~Credit Facility~~Holdings, L.P. (“MSGN L.P.”), MSGN Eden, LLC, an indirect subsidiary of the Company and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P.

~~MSG~~

(collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. have senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, the “MSGN Credit Agreement”) consisting of: (i) an initial $1,100,000 term loan facility (the “MSGN Term Loan Facility”) and (ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility” and, together with the MSGN Term Loan Facility, the “MSG Networks ~~has made principal repayments aggregating to $77,000 through~~Credit Facilities”), each with a term of five years. As of December 31, ~~2021~~2022, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit ~~Agreement.~~ Facility.

The MSGN Term Loan Facility amortizes quarterly in accordance with its ~~terms. As~~terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of ~~December 31, 2021, there was $1,023,000 outstanding under~~October 11, 2024. MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

The MSGN Credit Agreement generally requires the MSGN ~~Term Loan Facility,~~Holdings Entities and ~~no borrowings under~~MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN ~~Revolving~~ Credit ~~Facility. As~~Agreement requires a minimum interest coverage ratio of ~~December 31, 2021,~~2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated ~~basis~~

~~Table~~basis. As of ~~Contents~~

December 31, 2022, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the ~~covenants of the MSGN Credit Agreement. The scheduled repayments for the remainder of Fiscal Year 2022 are $24,750.~~covenants.

National Properties Credit Facilities

On June 30, 2022, MSG National Properties, LLC (“MSG National Properties”) an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a 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 (the “National Properties Term Loan ~~Facility~~

~~The~~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 Credit Facilities”).

Up to $25,000 of the National Properties Revolving Credit Facility is available for the issuance of letters of credit. As of December 31, 2022, outstanding letters of credit were $7,860 and the remaining balance available under the National Properties Revolving Credit Facility was $63,040.

The principal obligations under the National Properties Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2023 through March 31, 2027, with the balance due at the maturity of the facility on June 30, 2027. The principal obligations under the National Properties Revolving Credit Facility are due at the maturity of the facility. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.

The National Properties Credit Agreement includes ~~a minimum liquidity covenant, pursuant to which~~financial covenants requiring MSG National Properties and its restricted subsidiaries ~~are required~~ 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. Following~~quarter over the ~~first anniversary~~life of the ~~closing~~National Properties Credit 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 ~~facility~~fiscal quarter ending September 30, 2024. The leverage ratio covenant begins testing in ~~November 2021,~~ the ~~minimum liquidity level was reduced to $200,000. If at any time~~fiscal quarter ending June 30, 2023. It is tested based on the ~~total leverage~~ ratio of MSG National Properties and its restricted ~~subsidiaries is less than 5.00~~subsidiaries’ consolidated total indebtedness to ~~1.00 as~~adjusted operating income, with an initial maximum ratio of 6:1, stepping down to 5.5:1 in the ~~end of any four consecutive~~ fiscal quarter ~~periods or MSG National Properties obtains an investment grade rating,~~ending June 30, 2024 and 4.5:1 in the ~~minimum liquidity level is permanently reduced to $50,000.~~fiscal quarter ending June 30, 2026. As of December 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.

MSG National Properties has made principal repayments aggregating to $6,500 through December 31, 2021 under the National Properties Term Loan Facility, which amortizes quarterly in accordance with its terms. As of December 31, 2021, there was $643,500 outstanding under the National Properties Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022, ~~are $3,250.~~

In addition to the minimum liquidity covenant, the National Properties Term Loan Facility and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. As of December 31, 2021, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties ~~Term Loan Facility.~~Credit Agreement.

~~Tao Senior Secured Credit Facilities~~

As of December 31, 2021, there was $26,250 outstanding drawn on the Tao Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022 are $3,750. As of December 31, 2021, Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available was $24,250.

Disruptions caused by the COVID-19 pandemic have had, and are likely to continue to have, a significant and negative impact on Tao Group Hospitality’s operations and financial performance. On August 6, 2020, TAOIH and TAOG entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder through December 31, 2021, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the TaoMSG Sphere Term Loan Facility

On December 22, 2022, MSG Las Vegas, LLC (“MSG LV”), an indirect, wholly-owned subsidiary of the Company, entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders party thereto, providing for a five-year, $275,000 senior secured term loan facility (the “MSG Sphere Term Loan Facility”). All obligations under the MSG Sphere Term Loan Facility are guaranteed by MSG Entertainment Group.

The MSG Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the MSG Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity.Under certain circumstances, MSG LV is required to make mandatory prepayments on the loan, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.

The MSG Sphere Term Loan Facility includes financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring MSG Entertainment Group to maintain a specified minimum liquidity level. The debt service coverage ratio covenant begins testing in the fiscal quarter ending December 31, 2023 on a historical basis and, beginning with the first fiscal quarter occurring after the date on which the first ticketed performance or event open to the general public occurs at the MSG Sphere in Las Vegas (the “Opening Date”), is also tested on a prospective basis. Both the historical and prospective debt service coverage ratios are set at 1.35:1. In addition, among other conditions, MSG LV is not permitted to make distributions to MSG Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for MSG Entertainment Group is set at $100,000, with $75,000 required to be held in cash or cash equivalents, which amounts, prior to the Liquidity Covenant Reduction Date (as defined below), must be held in an account pledged as collateral for the MSG Sphere Term Loan Facility until its release upon the Liquidity Covenant Reduction Date (the “Pledged Account”), before stepping down to $50,000, with $25,000 ~~availability under~~required to be held in cash or cash equivalents, once the ~~Tao Revolving Credit Facility. As~~MSG Sphere in Las Vegas has been substantially completed and certain of ~~January 1, 2022, such financial maintenance~~its systems are ready to be used in live, immersive events (the “Liquidity Covenant Reduction Date”). The minimum liquidity level was tested on the closing date and ~~restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated~~is tested as of the last day of each fiscal quarter thereafter based on MSG Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available ~~revolving commitments, at all times~~lines of ~~$10,000.~~credit, as of such date. In ~~addition, in connection with~~ the ~~amendment,~~event the Company ~~through~~completes the spin-off of its ~~direct subsidiary,~~traditional live entertainment business currently under consideration (the “MSGE Spin-off”) and retains an economic interest in the live entertainment company (the “Live Entertainment Company Retained Interest”), the Live Entertainment Company Retained Interest will be pledged to secure the MSG Sphere Term Loan Facility until the pledge is released upon the Liquidity Covenant Reduction Date, and a portion of the value of the Live Entertainment Company Retained Interest may also be counted toward the minimum liquidity level.

Tao Credit Facilities

On June 9, 2022, TAO Group Intermediate Holdings LLC (“TAOIH” or “Intermediate Holdings”) and TAO Group Operating LLC (“TAOG” or “Senior Borrower”) entered into ~~a guarantee~~an amended and ~~reserve account~~restated credit agreement ~~(i) to guarantee~~(the “Restated Tao Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as agent, and the ~~obligations of TAOG under the~~lenders party thereto. The Restated Tao Senior Credit Agreement ~~(ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii)~~provides TAOG with senior secured credit facilities (the “Tao Credit Facilities”) consisting of: (i) an initial $75,000 term loan facility with a ~~covenant~~term of five years (the “Tao Term Loan Facility”) and (ii) a $60,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to ~~maintain a minimum liquidity requirement~~$5,000 of ~~no less than $75,000 at all times. The balance held in~~ the ~~reserve account was approximately $1,600 as~~Tao Revolving Credit Facility is available for the issuance of ~~December 31, 2021.~~letters of credit. As of December 31, ~~2021,~~2022, outstanding letters of credit were $750 and the remaining borrowing available under the Tao Revolving Credit Facility was $49,250.

The Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 9, 2022 through the maturity date on June 9, 2027. TAOG is required to make mandatory prepayments of the Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

The Restated Tao Senior Credit Agreement requires TAOIH to comply with a maximum total leverage ratio of 3.50:1.00, a maximum senior leverage ratio of 2.50:1.00 and a minimum fixed charge coverage ratio of 1.25:1.00. The Restated Tao Senior Credit Agreement, among other things, (i) increased the minimum liquidity for TAOG to $20,000 and maximum capital expenditures to $30,000, with a one year carry forward of $20,000 , (ii) increased the basket for the maximum amount of the incremental revolving credit facility to $50,000; and (iii) amended certain other financial covenants regarding leverage to allow up to $10,000 of cash netting. As of December 31, 2022, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Restated Tao Senior Credit Agreement.

As of December 31, 2021, the outstanding balance under the Tao Subordinated Credit Agreement was $63,000. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810, ~~Consolidation~~. If recovery from the pandemic takes longer than currently estimated, Tao Group Hospitality may need to seek covenant waivers in the future. Tao Group Hospitality’s failure to obtain covenant waivers could trigger a violation of these covenants and lead to default and acceleration of all of its outstanding debt, which could have a material adverse effect on liquidity.

Letters of Credit

The Company uses letters of credit to support its business operations. As of December 31, ~~2021,~~2022, the Company had a total of ~~$8,447~~$9,478 of letters of credit outstanding, which included two letters of credit for an aggregate of $750 issued under the Tao Revolving Credit Facility and two outstanding letters of credit for an aggregate of $7,860 issued under the National Properties Revolving Credit Facility.

Contractual Obligations

~~The~~As of December 31, 2022, the Company did not have any material changes in its non-cancelable contractual obligations ~~since the end of Fiscal Year 2021 other~~(other than ~~(i) a total of approximately $3,646,250 in contract obligations (primarily related to media rights agreements) that are now included~~

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~~as a part of the Company’s contractual obligation in connection with the Merger with MSG Networks on July 9, 2021, and (ii)~~ activities in the ordinary course of ~~business.~~business), except for the execution of the MSG Sphere Term Loan Facility on December 22, 2022. See Note 119, Commitments and Contingencies, to the ~~consolidated~~ financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details on the timing and amount of payments under various media rights agreements.

Cash Flow Discussion

As of December 31, ~~2021,~~2022, cash, cash equivalents and restricted cash totaled ~~$1,282,019,~~$553,736, as compared to ~~$1,539,976~~$846,010 as of June 30, ~~2021.~~2022. The following table summarizes the Company’s cash flow activities for the six months ended December 31, ~~2021~~2022 and ~~2020:~~2021:

Six Months Ended December 31,
2021 2020
Net loss $ (71,636) $ (100,391)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities 116,890 50,055
Subtotal $ 45,254 $ (50,336)
Changes in working capital assets and liabilities 87,532 (52,131)
Net cash provided by (used in) operating activities $ 132,786 $ (102,467)
Net cash (used in) provided by investing activities (332,532) 136,238
Net cash (used in) provided by financing activities (57,639) 598,512
Effect of exchange rates on cash, cash equivalents and restricted cash (572) 7,795
Net (decrease) increase in cash, cash equivalents and restricted cash $ (257,957) $ 640,078


	Six Months Ended
	December 31,
	2022		2021




Net cash provided by operating activities	$	54,965	$	132,786
Net cash used in investing activities	(575,909)		(332,532)
Net cash provided by (used in) financing activities	229,175		(57,639)
Effect of exchange rates on cash, cash equivalents and restricted cash	(505)		(572)
Net decrease in cash, cash equivalents and restricted cash	$	(292,274)	$	(257,957)

Operating Activities

Net cash provided by operating activities for the six months ended December 31, ~~2021 increased~~2022 decreased by ~~$235,253~~$77,821 to ~~$132,786~~$54,965 as compared to ~~net cash used in operating activities of $102,467 in~~ the prior year period, primarily due to ~~lower net loss in the current year period and~~ changes in working capital assets and liabilities, which included (i) a decrease in deferred revenue associated with customers’ advanced payments, (ii) higher cash ~~collection associated with deferred revenue account including collections due~~payments to promoters, (iii) lower accrued and ~~(ii) higher increase in payables,~~other liabilities, including related party ~~payable. Our lower net loss~~payables, and (iv) higher prepaid expenses, partially offset by operating income in the current year period reflect significant non-cash items such as (i) net unrealized loss of $19,615 as compared to net unrealized gain of $29,090 in the prior year period and (ii) lower deferred income taxes benefits of $17,173 in the current year period as compared to $29,505 in the prior year period.

Investing Activities

Net cash used in investing activities for the six months ended December 31, ~~2021~~2022 increased by ~~$468,770~~$243,377 to ~~$332,532~~$575,909 as compared to the prior year period primarily due to an increase in capital expenditures mainly for the MSG Sphere in the current year period.

Financing Activities

Net cash provided by (used in) financing activities for the six months ended December 31, 2022 increased by $286,814 to $229,175 as compared to the prior year period primarily due to the ~~absence of~~ proceeds received from the ~~maturity of short-term investments in the prior year period and, to a lesser extent, an increase in capital expenditures in the current year period.~~

~~Financing Activities~~

Net cash used in financing activities for the six months ended December 31, 2021 increased by $656,151 to $57,639 as compared to cash provided by financing activities of $598,512 in prior year period. The increase in net cash used in financing activity was primarily due to proceeds from National PropertiesMSG Sphere Term Loan Facility ~~of $630,500 received during the prior~~in current year ~~period in November 2020.~~period.

Seasonality of Our Business

The revenues the Company earns from the Christmas Spectacular and arena license fees from MSG Sports in connection with the ~~Knicks~~Knicks’ and ~~Rangers~~Rangers’ use of ~~the~~The Garden generally means that the Entertainment segment earns a disproportionate share of its revenues and operating income in the second and third quarters of the Company’s fiscal year with the first fiscal quarter being disproportionally lower.

Similarly, MSG Networks’ advertising revenue is largely derived from the sale of inventory in its live professional sports programming, and as such, a disproportionate share of this revenue has historically been earned in the second and third fiscal quarters.

As a result of the foregoing, the Company’s revenue and operating income are disproportionally higher in the fiscal second and third quarter of the fiscal year and lower in the first quarter of the fiscal year.

Recently Issued Accounting Pronouncements and Critical Accounting ~~Policies~~Estimates

Recently Issued and Adopted Accounting Pronouncements

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See Note 2, Accounting Policies, to the ~~consolidated~~ financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of recently issued accounting pronouncements.

Critical Accounting ~~Policies~~Estimates

There have been no ~~other~~ material changes to the Company’s critical accounting policies, except for the addition of a policy related to production costs from the Company’s Original Immersive Productions mentioned in Note 2. Accounting Policies in “— Item 1. Financial Statements”, as compared with those set forth in Note 2. Summary of Significant Accounting Policies of the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, ~~2021~~2022 included in the Form 10-K. The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of Fiscal Year ~~2022.~~2023.

Impairment of ~~Long-Lived~~Goodwill and Indefinite-Lived Assets

Goodwill is tested annually for impairment as of August 31st 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 December 31, ~~2021,~~2022, the Company had three operating and reportable segments consistent with the process the Company’s management followed in making decisions and allocating resources to the business.

For purposes of evaluating goodwill for impairment, the Company has three reporting units: Entertainment, MSG Networks and Tao Group Hospitality.

The goodwill balance reported on the Company’s condensed consolidated balance sheet as of December 31, ~~2021~~2022 by reporting unit was as follows:


Entertainment	$	74,309
MSG Networks	424,508
Tao Group Hospitality	1,364
	$	500,181

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year ~~2022~~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; and

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

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During the first quarter of Fiscal Year ~~2022,~~2023, the Company performed its most recent annual impairment tests of goodwill and determined that there were no ~~impairment~~impairments of goodwill identified for any of its reporting units as of the impairment test date. Based on these impairment tests, the Company’s reporting units had sufficient safety margins, representing the excess of the estimated fair value of each reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill allocated to each respective reporting unit). The Company believes that if the fair value of the reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Identifiable Indefinite-Lived Intangible Assets

Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st 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 consolidated balance sheet as of December 31, ~~2021:~~2022:


Trademarks	$	61,881
Photographic related rights	1,920
	$	63,801

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform the qualitative assessment of impairment for the photographic related rights and the trademarks. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair values of the intangible assets. Examples of such events and circumstances include:

•cost factors;

•financial performance;

•legal, regulatory, contractual, business or other factors;

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

•industry and market considerations; and

•macroeconomic conditions.

During the first quarter of Fiscal Year ~~2022,~~2023, the Company performed its most recent annual impairment test of the identifiable indefinite-lived intangible assets and determined that there were no impairments identified. Based on these impairment tests, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value. The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K.

Potential Interest Rate Risk Exposure

The Company, through its subsidiaries, ~~MSGN L.P. and~~ MSG National Properties, MSG Networks and ~~as a result of~~MSG LV, and the consolidation of Tao Group Hospitality, ~~has~~is subject to potential interest rate risk exposure related to borrowings incurred under ~~the MSG Networks Senior Secured Credit Facilities~~, ~~National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities.~~their respective credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities.

Borrowings under the National Properties Term Loan Facility and Tao Senior Secured Credit Facilities incur interest, depending on election by MSG National Properties and TAOG, at a floating rate based upon LIBOR, the U.S. Federal Funds Rate or the U.S. Prime Rate, plus, in the case of TAOG, an additional spread which is dependent upon the total leverage ratio at the time for Tao Senior Secured Credit Facilities. In addition, borrowings under the MSG Networks Senior Secured Credit

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Facilities bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total net leverage ratio). Accordingly, the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities are subject to interest rate risk with respect to the tenor of any borrowings incurred. See Note 13 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information on the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities.

For the twelve months ended December 31, 2021, the interest rate on the MSG Networks Senior Secured Credit Facilities ranged from 1.58% to 1.65% and was approximately 1.60% as of December 31, 2021. The interest rate on the Tao Senior Secured Credit Facilities ranged from 2.59% to 2.65% and it was 2.61% as of December 31, 2021. In addition, the interest rate on National Properties Term Loan Facility was 7.00% as of December 31, 2021 and has been unchanged since inception. The effect of a hypothetical ~~100~~200 basis point increase in floating interest ~~rates~~rate prevailing as of December 31, ~~2021~~2022 and continuing for a full year would increase the Company’s interest expense ~~by $12,567,~~ on the outstanding ~~balances~~amounts under the ~~MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Senior Secured Credit Facilities.~~credit facilities by $40,215.

Foreign Currency Exchange Rate Exposure

We are exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through our net investment position initiated with our acquisition of land in London in the second quarter of fiscal year 2018 for future MSG Sphere development and through cash and invested funds which will be deployed in the construction of our London venue. We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations by entering into foreign currency forward exchange contracts with financial institutions. If we were to enter into such hedging transactions, the market risk resulting from foreign currency fluctuations is unlikely to be entirely eliminated. We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During the past twelve months ended December 31, ~~2021,~~2022, the GBP/USD exchange rate ranged from ~~1.3207~~1.0695 to ~~1.4218~~1.3967 as compared to GBP/

USD exchange rate of ~~1.3548 as of~~1.2120 on December 31, ~~2021,~~2022, a fluctuation range of approximately 5%15.24%. As of December 31, ~~2021,~~2022, a uniform hypothetical 4%14.28% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately ~~$6,800~~$23,200 in the Company’s net asset value.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ~~Act, as of December 31, 2021.~~Act. Based on that evaluation, and as a result of the material weakness in our internal control over financial reporting, previously disclosed under Part II, “Item 9A, Controls and Procedures” in the Form 10-K/A filed on February 9, 2022, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were ~~not~~ effective as of December 31, ~~2021.~~

Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).

~~Remediation Plan and Status~~

~~As of December 31, 2021, the material weakness previously disclosed has not yet been fully remediated.~~

In response to the material weakness in the Company’s internal control over financial reporting, management has designed and implemented control activities related to the identification, calculation, and disclosure of capitalized interest expense. We will continue to work towards full remediation of this material weakness to improve our internal control over financial reporting.

The material weakness cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described above.2022.

Changes in Internal Control over Financial Reporting

~~Other than the material weakness described above, there~~There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended December 31, ~~2021~~2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Fifteen complaints were filed in connection with the ~~Merger~~Company’s acquisition of MSG Networks Inc. (the “Merger”) by purported stockholders of the Company and MSG Networks Inc.

~~On August 31, 2021, a complaint captioned~~ ~~Murray~~ v. ~~Dolan et al., 2021-0748, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The~~

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complaint purported to allege claims on behalf of a putative class of MSG Networks stockholders concerning the Merger. Plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages, and plaintiffs’ attorneys’ fees.

~~All of the above complaints~~ have since ~~either~~ been ~~dismissed or~~ consolidated into ~~one of~~ two remaining litigations.

~~Item 1A.~~ ~~Risk Factors~~

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, ~~as amended by Form 10-K/A filed on February 8, 2022 (the “Form 10-K”),~~ which could materially affect the Company’s business, financial condition or future results. The risks described in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition or future results.

We Are Required to Assess Our Internal Control Over Financial Reporting on an Annual Basis and Our Management Has Identified a Material Weakness. If Our Remediation of the Material Weakness Is Not Effective, or We Identify Additional Material Weaknesses or Other Adverse Findings in the Future, Our Ability to Report Our Financial Condition or Results of Operations Accurately or Timely May Be Adversely Affected, Which May Result in a Loss of Investor Confidence in Our Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail

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to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.

Management of the Company evaluated an immaterial accounting error related to interest costs that should have been capitalized for MSG Sphere at the Venetian in the fiscal years ended June 30, 2021, 2020 and 2019 and in the fiscal quarter ended September 30, 2021, as prescribed by Accounting Standards Codification (“ASC”) Topic 835-20 (~~Capitalization of Interest~~). As a result of the accounting error, the Company has re-evaluated the effectiveness of the Company’s internal control over financial reporting and identified a material weakness in the Company’s internal control over financial reporting as of June 30, 2021, September 30, 2021 and December 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. For further discussion regarding the accounting error and the correction of such error to the Company’s previously issued consolidated and combined financial statements, see Note 23 – ~~Correction of Previously Issued Consolidated and Combined Financial Statements~~ ~~to the consolidated and combined financial statements of the Company included in the Form 10-K~~.

Our management may be unable to conclude in future periods that our disclosure controls and procedures are effective due to the effects of various factors, which may, in part, include unremediated material weaknesses in internal controls over financial reporting. For further discussion of the material weakness, see “Part I — Item 4. Controls and Procedures” of this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in those reports is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management is committed to maintaining a strong internal control environment and believes its remediation efforts will represent an improvement in existing controls. Management anticipates that the new controls, as implemented and when tested for a sufficient period of time, will remediate the material weakness. We may not be successful in promptly remediating the material weaknesses identified by management, or be able to identify and remediate additional control deficiencies, including material weaknesses, in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

As of December 31, ~~2021,~~2022, the Company has the ability to repurchase up to $350 million of the Company’s Class A Common Stock under the Class A Common Stock share repurchase program authorized by the Company’s Board of Directors on March 31, 2020. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased to date.

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Item 6. Exhibits

(a)Index to Exhibits


EXHIBIT NO.						DESCRIPTION
~~10.1~~10 .1						2020 Employee Stock Plan, as amended (incorporated by reference to Annex B to the Company’s Definitive Proxy Statement on Schedule 14A filed on October 26, 2022).
10 .2						2020 Stock Plan for Non- Employee Directors, as amended (incorporated by reference to Annex C to the Company’s Definitive Proxy Statement on Schedule 14A filed on October 26, 2022).
10.3						Amendment No. 12 to ~~Amended~~Dry Lease Agreement dated December 17, 2018 between Sterling2K LLC and ~~Restated~~ MSG Entertainment Group, LLC (formerly MSG Sports & Entertainment, LLC) (for the DFO G550), effective as of November 4, 2022 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on November 9, 2022).
10.4						Credit Agreement, dated as of ~~October 11, 2019, by~~December 22, 2022, among MSG Las Vegas, LLC, the lenders party thereto and ~~among MSGN Holdings, L.P., certain subsidiaries of MSGN Holdings, L.P. identified therein, MSGN Eden, LLC, Regional MSGN Holdings LLC and JP Morgan~~JPMorgan Chase Bank, N.A., as administrative agent ~~and the lenders party thereto, dated as of November 5, 2021.~~
~~10.2~~						~~Madison Square Garden Entertainment Corp. Executive Deferred Compensation Plan~~ (incorporated by reference to Exhibit 10.1 to the ~~Company’s Current Report on Form 8-K filed on November 19, 2021).~~†
~~10.3~~						~~Employment Agreement, dated as of December 27, 2021, between Madison Square Garden Entertainment Corp. and James L. Dolan (incorporated by reference to Exhibit 10.1 to the Company’s~~Company's Current Report on Form 8-K filed on December ~~30, 2021)~~22, 2022).†
~~10.4~~10.5						~~Employment~~Pledge and Security Agreement, dated as of December ~~16, 2021,~~22, 2022, by and between ~~Madison Square Garden Entertainment Corp.~~MSG Las Vegas, LLC and ~~Andrew Lustgarten~~JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit ~~10.1~~10.2 to the ~~Company’s~~Company's Current Report on Form 8-K filed on December ~~21, 2021).~~†
~~10.5~~						~~Employment Agreement, dated as of December 20, 2021, between Madison Square Garden Entertainment Corp. and David Byrnes.~~†
~~10.6~~						~~Employment Agreement, dated as of October 26, 2021, between Madison Square Garden Entertainment Corp. and Jamal Haughton.~~†
~~10.7~~						Employment Agreement, dated as of November 17, 2021, between Madison Square Garden Entertainment Corp. and Philip D’Ambrosio (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 19, 2021).†
~~10.8~~						~~Time Sharing Agreement, dated as of December 20, 2021, between Patrick F. Dolan and MSG Entertainment Group, LLC (for the Challenger)~~22, 2022).
~~10.9~~10.6						~~Time Sharing~~Guaranty Agreement, dated as of December ~~20, 2021, between~~22, 2022, by MSG Entertainment Group, LLC ~~and Charles F. Dolan (for~~in favor of JPMorgan Chase Bank, N.A. on behalf of the ~~New G550)~~lenders (incorporated by reference to Exhibit ~~10.1~~10.3 to the ~~Company’s~~Company's Current Report on Form 8-K filed on December ~~23, 2021)~~22, 2022).
~~10.10~~10.7						~~Time Sharing~~Pledge Agreement, dated as of December ~~20, 2021, between~~22, 2022, by MSG Entertainment Group, LLC ~~and Andrew Lustgarten (for~~in favor of JPMorgan Chase Bank, N.A. on behalf of the ~~New G550)~~lenders (incorporated by reference to Exhibit ~~10.3~~10.4 to the ~~Company’s~~Company's Current Report on Form 8-K filed on December ~~23, 2021).~~
~~10.11~~						Amendment No. 1 to Dry Lease Agreement, dated as of December 20, 2021, between Sterling2K LLC and MSG Entertainment Group, LLC (for the DFO G550) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 23, 2021)22, 2022).
31.1						Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from Madison Square Garden Entertainment Corp. Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2021,~~2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated ~~Statements~~statements of comprehensive loss, (iv) condensed consolidated statements of cash flows, (v) condensed consolidated statements of equity and redeemable noncontrolling interests, and (vi) notes to condensed consolidated financial statements.
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2021~~2022 formatted in Inline XBRL and contained in Exhibit 101.

_________________

† This exhibit is a management contract or a compensatory plan or arrangement.

8265

~~Table of Contents~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9th day of February ~~2022.~~2023.


Madison Square Garden Entertainment Corp.

By:	/S/ DAVID F. BYRNES
	Name:	David F. Byrnes
	Title:	Executive Vice President and Chief Financial Officer

8366


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
(in thousands, except per share data)
	December 31, 2021		June 30, 2021

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable	$	43,815	$	26,644
Net related party payables, current	56,597		23,173
Current portion of long-term debt, net of deferred financing costs	56,483		53,973
Income taxes payable	406		2,527
Accrued liabilities:
Employee related costs	73,078		91,853
Other accrued liabilities	268,135		210,749
Operating lease liabilities, current	65,663		73,423
Collections due to promoters	49,513		37,877

Deferred revenue	256,154		209,651

Total current liabilities	869,844		729,870

Long-term debt, net of deferred financing costs	1,606,759		1,650,628
Operating lease liabilities, noncurrent	450,019		233,556
Defined benefit and other postretirement obligations	52,653		54,179
Other employee related costs	17,814		21,193
Collections due to promoters, noncurrent	—		6,625
Deferred tax liabilities, net	181,214		200,325
Other liabilities	74,952		75,263
Total liabilities	3,253,255		2,971,639
Commitments and contingencies (see Note 11)	0		0
Redeemable noncontrolling interests	142,004		137,834
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,327 and 27,093 shares outstanding as of December 31, 2021 and June 30, 2021, respectively	273		271
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of December 31, 2021 and June 30, 2021	69		69
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2021 and June 30, 2021	—		—
Additional paid-in capital	2,317,415		2,294,775

Accumulated deficit	(173,302)		(96,341)

Accumulated other comprehensive loss	(32,632)		(30,272)
Total Madison Square Garden Entertainment Corp. stockholders’ equity	2,111,823		2,168,502
Nonredeemable noncontrolling interests	15,992		11,904
Total equity	2,127,815		2,180,406
Total liabilities, redeemable noncontrolling interests and equity	$	5,523,074	$	5,289,879



MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)

	Three Months Ended December 31, 2020
	Common Stock Issued		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of September 30, 2020	$	340	$	2,294,072	$	16,345	$	(37,295)	$	2,273,462	$	11,773	$	2,285,235	$	17,298

Reversal of valuation allowance					1,415		—		1,415		—		1,415		—
Net loss	—		—		(55,831)		—		(55,831)		(902)		(56,733)		(3,342)
Other comprehensive income	—		—		—		8,566		8,566		—		8,566		—
Comprehensive loss	—		—		—		—		(47,265)		(902)		(48,167)		(3,342)

Share-based compensation	—		31,158		—		—		31,158		—		31,158		—

Tax withholding associated with shares issued for equity-based compensation	—		(53)		—		—		(53)		—		(53)		—


Accretion of put options	—		—		—		—		—		—		—		587
Contribution from noncontrolling interest holders	—		—		—		—		—		300		300		—



Balance as of December 31, 2020	$	340	$	2,325,177	$	(38,071)	$	(28,729)	$	2,258,717	$	11,171	$	2,269,888	$	14,543

See accompanying notes to unaudited consolidated financial statements.


	Fair Value Recognized as of Acquisition Date (as previously reported)		Measurement Period Adjustment (a)		Fair Value Recognized as of September 30, 2021 as adjusted (b)
Cash and cash equivalents	$	16,737	$	—	$	16,737




Property and equipment, net	33,393		—		33,393
Right-of-use lease assets	44,818		—		44,818
Amortizable intangible assets, net	47,170		(7,020)		40,150


Other assets	12,641		—		12,641

Accrued expenses and other current liabilities	(15,957)		1,534		(14,423)
Operating lease liabilities	(52,025)		—		(52,025)



Other liabilities	(13,655)		—		(13,655)
Total identifiable net assets acquired	73,122		(5,486)		67,636
Goodwill	3,378		(2,014)		1,364
Redeemable noncontrolling interests	$	(76,500)	$	7,500	$	(69,000)


	As of
	December 31, 2021		June 30, 2021		December 31, 2020		June 30, 2020
Captions on the consolidated balance sheets:
Cash and cash equivalents	$	1,258,105	$	1,516,992	$	1,735,012	$	1,103,392
Restricted cash (a)	23,914		22,984		26,207		17,749
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows	$	1,282,019	$	1,539,976	$	1,761,219	$	1,121,141


	Ownership Percentage		Investment
December 31, 2021
Equity method investments:
SACO Technologies Inc. (“SACO”)	30	%	$	33,731
Others			5,674
Equity securities without readily determinable fair values (a)			7,007
Total investments in nonconsolidated affiliates			$	46,412

June 30, 2021
Equity method investments:
SACO	30	%	$	36,265

Others			6,204
Equity securities without readily determinable fair values (a)			6,752
Total investments in nonconsolidated affiliates			$	49,221


	December 31, 2021
Equity Investment with Readily Determinable Fair Values	Shares / Units Held	Cost Basis		Carrying value / Fair value
Townsquare Class A common stock	583	$	4,221	$	7,773
Townsquare Class C common stock	2,625	19,001		34,992
DraftKings common stock	869	6,036		23,884
Total		$	29,258	$	66,649


	Line Item on Consolidated Balance Sheet	December 31, 2021		June 30, 2021
Assets:

Money market accounts and time deposits(a)	Cash and cash equivalents	$	1,107,768	$	1,361,729





Equity investments with readily determinable fair value (b)	Other assets	66,649		86,264
Total assets measured at fair value		$	1,174,417	$	1,447,993


	December 31, 2021				June 30, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Current and non-current portion of long-term debt under the MSG Networks Term Loan Facility (a)	$	1,023,000	$	1,012,770	$	1,047,750	$	1,042,510
Current and non-current portion of long-term debt under the National Properties Term Loan Facility (a)	$	643,500	$	658,783	$	646,750	$	669,386
Current and non-current portion of long-term debt under the Tao Credit Facilities (a)	$	26,250	$	26,315	$	43,750	$	43,851


	Interest Payments (a)				Loan Principal Repayments
	Six Months Ended				Six Months Ended
	December 31, 2021		December 31, 2020		December 31, 2021		December 31, 2020
MSG Networks Senior Secured Credit Facilities	$	8,886	$	9,584	$	24,750	$	13,750
National Properties Term Loan Facility	23,141		—		3,250		—
Tao Credit Facilities	415		554		17,500		2,500
	$	32,442	$	10,138	$	45,500	$	16,250



	Pension Plans				Postretirement Plan
	Three Months Ended				Three Months Ended
	December 31,				December 31,
	2021		2020		2021		2020
Service cost	$	118	$	123	$	16	$	22
Interest cost	1,190		1,101		20		19
Expected return on plan assets	(1,719)		(1,509)		—		—
Recognized actuarial loss	501		396		9		20


Net periodic benefit cost	$	90	$	111	$	45	$	61


	Number of		Weighted-Average Fair Value Per Share at Date of Grant
	Nonperformance Based Vesting RSUs (In Thousands)	Performance Based Vesting RSUs (In Thousands)
Unvested award balance, June 30, 2021	683	701	$	76.15
Granted	445	422	$	79.07
Performance Award Conversion	223	(223)	$	82.63
Vested	(332)	(77)	$	87.42
Forfeited	(9)	(12)	$	74.87

Unvested award balance, December 31, 2021	1,010	811	$	75.02



	Number of Time Vesting Options (In Thousands)	Number of Performance Based Vesting Options (In Thousands)	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Balance as of June 30, 2021	409	315	$	103.88

Performance Award Conversion	315	(315)	$	109.76

Balance as of December 31, 2021	724	—	$	103.88	3.96	$	561
Exercisable as of December 31, 2021	597	—	$	108.29	3.70	$	561



	Six Months Ended December 31, 2020
	Pension Plans and Postretirement Plan		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of June 30, 2020	$	(38,767)	$	(10,225)	$	(48,992)
Other comprehensive income before reclassifications	—		25,834		25,834
Amounts reclassified from accumulated other comprehensive loss (a)	894		—		894
Income tax expense	(1,725)		(4,740)		(6,465)
Other comprehensive income (loss)	(831)		21,094		20,263
Balance as of December 31, 2020	$	(39,598)	$	10,869	$	(28,729)


	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Revenues	$	30,702	$	4,638	$	34,889	$	7,461
Operating expenses (credits):
Direct operating — media rights fees	$	40,813	$	34,422	$	81,258	$	73,963
Direct operating — revenue sharing expenses	$	1,131	$	15	1,985		96

Direct operating — reimbursement under Arena License Arrangement	(6,125)		(351)		(6,465)		(1,241)
General and administrative with MSG Sports — net of TSA credits	(10,513)		(10,273)		(19,729)		(20,453)


Direct operating — origination, master control and technical services	1,208		1,184		2,416		2,368


Other operating expenses, net	987		(218)		3,109		(85)


	December 31, 2021		June 30, 2021
Customer A (a)	15	%	1	%
Customer B	14	%	15	%
Customer C	13	%	17	%
Customer D	10	%	16	%



	Three Months Ended
	December 31,				Change (a)
	2021		2020		Amount		Percentage
Revenues	$	516,439	$	168,752	$	347,687	NM

Direct operating expenses	296,258		92,497		203,761		NM
Selling, general and administrative expenses	162,277		96,018		66,259		69	%
Depreciation and amortization	30,533		25,677		4,856		19	%
Impairment and other (gains) loss, net	(7,979)		—		(7,979)		NM
Restructuring charges	—		1,372		(1,372)		NM
Operating income (loss)	35,350		(46,812)		82,162		NM
Other expense:
Loss in equity method investments	(1,774)		(1,568)		(206)		13	%
Interest expense, net (a)	(7,394)		(4,425)		(2,969)		(67)	%
Miscellaneous expense, net	(17,100)		(7,568)		(9,532)		(126)	%
Income (loss) from operations before income taxes	9,082		(60,373)		69,455		NM
Income tax benefit (expense)	(4,063)		298		(4,361)		NM
Net income (loss)	5,019		(60,075)		65,094		NM
Less: Net income (loss) attributable to redeemable noncontrolling interests	2,642		(3,342)		5,984		NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests	106		(902)		1,008		NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders	$	2,271	$	(55,831)	$	58,102	NM


	Three Months Ended December 31, 2021		Six Months Ended December 31, 2021
Increase in adjusted operating income of the Entertainment segment (a)	$	70,254	$	57,139
Decrease in adjusted operating income of the MSG Networks segments (a)	(29,938)		(48,536)
Increase in adjusted operating income of the Tao Group Hospitality segment (a)	25,911		61,213
Inter-segment eliminations	68		(2)
	$	66,295	$	69,814


	Three Months Ended December 31, 2021		Six Months Ended December 31, 2021
Increase in event-related revenues, as discussed below	$	79,972	$	100,632

Increase in revenues from the Christmas Spectacular given the cancellation of the 2020 production as a result of the COVID-19 pandemic	55,328		55,209
Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements	45,285		47,011
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below	26,268		27,596
Increase in suite license fee revenues, as a result of no live events held in the prior year periods due to the COVID-19 pandemic	13,080		13,459
Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic	4,634		7,297
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports	2,391		2,534
Increase in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidation	6,357		5,572
Other net increases	1,626		2,315
	$	234,941	$	261,625


	Three Months Ended December 31, 2021		Six Months Ended December 31, 2021
Increase in revenues due to Hakkasan, acquired in April 2021	$	51,579	$	110,931
Increase in revenues at venues subject to capacity restrictions in the prior year period (a)	36,455		62,728
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the COVID-19 pandemic	17,243		42,791
Other net increases	1,318		2,388
	$	106,595	$	218,838


	Three Months Ended December 31, 2021		Six Months Ended December 31, 2021
Increase in direct operating expenses due to Hakkasan, acquired in April 2021	$	24,614	$	52,480
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the COVID-19 pandemic	11,578		21,688
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the COVID-19 pandemic	10,855		21,020
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the COVID-19 pandemic	2,603		5,282
Other net increases	250		695
	$	49,900	$	101,165