Table of Contents


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 March 31, 20222023
OR
 ☐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
msge-20220331_g1.jpgSphere logo.gif
MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
(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 PlazaNew York,NY10121
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 465-6000(725) 258-0001
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockMSGESPHRNew 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 April 29, 2022:28, 2023:
Class A Common Stock par value $0.01 per share —27,346,26727,692,030 
Class B Common Stock par value $0.01 per share —6,866,754 


Table of Contents


MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
INDEX TO FORM 10-Q
 
 Page
Condensed Consolidated Balance Sheets as of March 31, 20223 and June 30, 20212022
1
Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 20222023 and 20212022
2
Condensed Consolidated Statements of ComprehensiveLoss for the three and nine months ended March 31, 2023 and 2022
3
Condensed Consolidated Statements of Comprehensive LossCash Flows for the three and nine months ended March 31, 20222023 and 20212022
4
Consolidated StatementCsondensed of Cash Flows for the nine months ended March 31, 2022 and 2021
5
Consolidated Statements of Stockholders' Equity and Redeemable Noncontrolling Interests for the three and nine months ended March 31, 20222023 and 20212022
75
Notes to Condensed Consolidated Financial Statements
117
5339
8058
8159
8260
82
8361
8462




Table of Contents


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

SPHERE ENTERTAINMENT CO.
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)thousands, except per share data)
March 31,
2022		June 30,
2021
ASSETS
Current Assets:
Cash and cash equivalents$999,063 $1,516,992 
Restricted cash21,690 22,984 
Accounts receivable, net250,853 184,613 
Net related party receivables58,835 31,916 
Prepaid income taxes3,705 12,772 
Prepaid expenses77,257 67,445 
Other current assets46,771 36,014 
Total current assets1,458,174 1,872,736 
Investments in nonconsolidated affiliates44,697 49,221 
Property and equipment, net2,707,193 2,156,292 
Right-of-use lease assets462,479 280,579 
Amortizable intangible assets, net177,069 198,274 
Indefinite-lived intangible assets63,801 63,801 
Goodwill500,181 502,195 
Other assets166,825 166,781 
Total assets$5,580,419 $5,289,879 
See accompanying notes to unaudited consolidated financial statements.
March 31,
2023		June 30,
2022
ASSETS
Current Assets:
Cash, cash equivalents and restricted cash$327,245 $822,885 
Accounts receivable, net214,443 188,012 
Prepaid expenses and other current assets145,838 135,671 
Current assets (Held for Sale) (c)
502,567 72,088 
Total current assets1,190,093 1,218,656 
Non-Current Assets:
Property and equipment, net3,690,234 2,853,656 
Right-of-use lease assets339,601 337,305 
Goodwill498,817 498,817 
Intangible assets, net82,490 86,464 
Other non-current assets248,246 173,298 
Non-current assets (Held for Sale) (c)
— 400,430 
Total assets$6,049,481 $5,568,626 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable, accrued and other current liabilities$699,769 $529,083 
Current portion of long-term debt98,750 74,762 
Operating lease liabilities, current46,086 45,559 
Deferred revenue265,611 208,895 
Current liabilities (Held for Sale) (c)
289,817 102,801 
Total current liabilities1,400,033 961,100 
Non-Current Liabilities:
Long-term debt, net of deferred financing costs1,781,748 1,584,446 
Operating lease liabilities, non-current342,629 338,534 
Deferred tax liabilities, net209,742 209,907 
Other non-current liabilities142,531 144,103 
Non-current liabilities (Held for Sale) (c)
— 170,960 
Total liabilities3,876,683 3,409,050 
Commitments and contingencies (see Note 9)
Redeemable noncontrolling interests (Held for Sale)138,812 184,192 
Equity:
Class A Common Stock (a)
277 273 
Class B Common Stock (b)
69 69 
Additional paid-in capital2,391,409 2,301,970 
Accumulated deficit(324,756)(290,736)
Accumulated other comprehensive loss(46,439)(48,355)
Total Sphere Entertainment Co. stockholders’ equity2,020,560 1,963,221 
Nonredeemable noncontrolling interests (Held for Sale)13,426 12,163 
Total equity2,033,986 1,975,384 
Total liabilities, redeemable noncontrolling interests and equity$6,049,481 $5,568,626 
1__________________

(a)Class A Common Stock, $0.01 par value per share, 120,000 shares authorized;27,692 and 27,368 shares outstanding as of March 31, 2023 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 ContentsMarch 31, 2023 and June 30, 2022.

(c)
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
(in thousands, except per share data)
March 31,
2022		June 30,
2021
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable$40,380 $26,644 
Net related party payables, current76,075 23,173 
Current portion of long-term debt, net of deferred financing costs65,989 53,973 
Income taxes payable— 2,527 
Accrued liabilities:
Employee related costs95,185 91,853 
Other accrued liabilities310,030 210,749 
Operating lease liabilities, current67,012 73,423 
Collections due to promoters46,744 37,877 
Deferred revenue263,494 209,651 
Total current liabilities964,909 729,870 
Long-term debt, net of deferred financing costs1,584,072 1,650,628 
Operating lease liabilities, noncurrent440,319 233,556 
Defined benefit and other postretirement obligations51,424 54,179 
Other employee related costs18,059 21,193 
Collections due to promoters, noncurrent— 6,625 
Deferred tax liabilities, net185,481 200,325 
Other liabilities76,755 75,263 
Total liabilities3,321,019 2,971,639 
Commitments and contingencies (see Note 12)00
Redeemable noncontrolling interests137,778 137,834 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,341 and 27,093 shares outstanding as of March 31, 2022 and June 30, 2021, respectively273 271 
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of March 31, 2022 and June 30, 202169 69 
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2022 and June 30, 2021— — 
Additional paid-in capital2,334,271 2,294,775 
Accumulated deficit(190,793)(96,341)
Accumulated other comprehensive loss(37,010)(30,272)
Total Madison Square Garden Entertainment Corp. stockholders’ equity2,106,810 2,168,502 
Nonredeemable noncontrolling interests14,812 11,904 
Total equity2,121,622 2,180,406 
Total liabilities, redeemable noncontrolling interests and equity$5,580,419 $5,289,879 

The assets and liabilities of the disposal group classified as held for sale are classified as current on the March 31,2023 balance sheet as the transaction was completed and net proceeds were received on May 3,2023.
See accompanying notes to the unaudited condensed consolidated financial statements.
1




SPHERE ENTERTAINMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
 Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Revenues (a)
$363,297 $352,534 $1,139,492 $928,442 
Direct operating expenses (a)
(210,141)(197,967)(658,935)(536,076)
Selling, general and administrative expenses (a)
(179,870)(118,788)(442,054)(384,280)
Depreciation and amortization(22,999)(20,463)(68,090)(63,050)
Impairment and other (losses) gains, net(51)245 7,361 245 
Restructuring charges(20,498)(14,690)(34,180)(14,690)
Operating (loss) income(70,262)871 (56,406)(69,409)
Interest income2,640 767 10,161 2,311 
Interest expense— (5,528)— (22,051)
Other income (expense), net4,994 (10,052)1,939 (32,304)
Loss from continuing operations before income taxes(62,628)(13,942)(44,306)(121,453)
Income tax benefit (expense)8,649 (6,349)4,717 10,112 
Loss from continuing operations(53,979)(20,291)(39,589)(111,341)
(Loss) income from discontinued operations, net of taxes(4,576)985 7,548 20,399 
Net loss(58,555)(19,306)(32,041)(90,942)
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations— (212)(554)(579)
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations(216)(1,161)(128)(323)
Less: Net (loss) income attributable to redeemable noncontrolling interests from discontinued operations(1,492)(442)2,661 4,412 
Net loss attributable to Sphere Entertainment Co.’s stockholders$(56,847)$(17,491)$(34,020)$(94,452)
Basic and diluted (loss) earnings per common share
Continuing operations$(1.55)$(0.59)$(1.13)$(3.24)
Discontinued operations$(0.09)$0.08 $0.15 $0.48 
Basic and diluted loss per common share attributable to Sphere Entertainment Co.’s stockholders$(1.64)$(0.51)$(0.98)$(2.76)
Weighted-average number of common shares outstanding:
Basic and diluted34,727 34,320 34,604 34,230 
_________________
(a)See Note 14, Related Party Transactions, for further information on related party revenues and expenses.
See accompanying notes to the unaudited condensed consolidated financial statements.
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SPHERE ENTERTAINMENT CO.
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except share and per share data)
 Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Revenues (a)
$460,127 $214,318 $1,271,076 $553,616 
Operating expenses:
Direct operating expenses (b)
262,476 110,022 724,495 301,750 
Selling, general and administrative expenses (c)
157,598 103,425 494,714 281,100 
Depreciation and amortization28,639 39,611 88,602 93,698 
Impairment and other (gains) losses, net(5,319)— (5,480)— 
Restructuring charges14,690 — 14,690 21,299 
Operating income (loss)2,043 (38,740)(45,945)(144,231)
Other income (expense):
Loss in equity method investments(1,528)(2,314)(4,509)(5,578)
Interest income774 792 2,322 2,401 
Interest expense(5,831)(6,503)(23,246)(17,038)
Miscellaneous income (expense), net(8,449)27,483 (28,096)53,932 
(15,034)19,458 (53,529)33,717 
Loss from operations before income taxes(12,991)(19,282)(99,474)(110,514)
Income tax benefit (expense)(6,315)(6,556)8,532 (15,715)
Net loss(19,306)(25,838)(90,942)(126,229)
Less: Net income (loss) attributable to redeemable noncontrolling interests(442)(6,860)4,412 (14,091)
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(902)(2,250)
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)$(94,452)$(109,888)
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(0.51)$(0.79)$(2.76)$(3.48)
Weighted-average number of common shares outstanding:
Basic and diluted34,320 34,060 34,230 34,083 
_________________
(a)Includes revenues from related parties of $35,259 and $16,291 for the three months ended March 31, 2022 and 2021, respectively, and $70,148 and $23,752 for the nine months ended March 31, 2022 and 2021, respectively.
(b)Includes net charges from related parties of$37,198 and $36,222for the three months ended March 31, 2022 and 2021, respectively, and $117,186 and $111,409 for the nine months ended March 31, 2022 and 2021, respectively.
(c)Includes net charges to related parties of $(9,635) and $(7,638)for the three months ended March 31, 2022 and 2021, respectively, and $(27,048) and $(28,626) for the nine months ended March 31, 2022 and 2021, respectively.

See accompanying notes to unaudited consolidated financial statements.
3

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
March 31,March 31,March 31,March 31,
20222021202220212023202220232022
Net lossNet loss$(19,306)$(25,838)$(90,942)$(126,229)Net loss$(53,979)$(20,291)$(39,589)$(111,341)
Other comprehensive income (loss), before income taxes:Other comprehensive income (loss), before income taxes:Other comprehensive income (loss), before income taxes:
Amortization of prior service credit included in net periodic benefit cost510 416 1,530 1,310 
Amortization of net actuarial loss included in net periodic benefit costAmortization of net actuarial loss included in net periodic benefit cost464 510 1,484 1,530 
Cumulative translation adjustmentsCumulative translation adjustments(5,912)1,499 (9,844)27,333 Cumulative translation adjustments1,972 (5,340)637 (9,226)
Other comprehensive income (loss), before income taxesOther comprehensive income (loss), before income taxes(5,402)1,915 (8,314)28,643 Other comprehensive income (loss), before income taxes2,436 (4,830)2,121 (7,696)
Income tax benefit (expense) related to items of other comprehensive income (loss)1,024 (350)1,576 (5,334)
Income tax (expense) benefitIncome tax (expense) benefit(421)919 (362)1,463 
Other comprehensive income (loss), net of income taxesOther comprehensive income (loss), net of income taxes(4,378)1,565 (6,738)23,309 Other comprehensive income (loss), net of income taxes2,015 (3,911)1,759 (6,233)
Comprehensive loss from continuing operationsComprehensive loss from continuing operations(51,964)(24,202)(37,830)(117,574)
Comprehensive (loss) income from discontinued operationsComprehensive (loss) income from discontinued operations(4,467)518 7,705 19,894 
Comprehensive lossComprehensive loss(23,684)(24,273)(97,680)(102,920)Comprehensive loss(56,431)(23,684)(30,125)(97,680)
Less: Net income (loss) attributable to redeemable noncontrolling interests(442)(6,860)4,412 (14,091)
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(902)(2,250)
Comprehensive loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(21,869)$(16,695)$(101,190)$(86,579)
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operationsLess: Net loss attributable to nonredeemable noncontrolling interests from continuing operations— (212)(554)(579)
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operationsLess: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations(216)(1,161)(128)(323)
Less: Net (loss) income attributable to redeemable noncontrolling interests from discontinued operationsLess: Net (loss) income attributable to redeemable noncontrolling interests from discontinued operations(1,492)(442)2,661 4,412 
Comprehensive loss attributable to Sphere Entertainment Co.’s stockholdersComprehensive loss attributable to Sphere Entertainment Co.’s stockholders$(54,723)$(21,869)$(32,104)$(101,190)

See accompanying notes to the unaudited condensed consolidated financial statements.

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Table of ContentsSPHERE ENTERTAINMENT CO.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Nine Months Ended
March 31,
20232022
OPERATING ACTIVITIES:
Net loss$(32,041)$(90,942)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization89,234 88,602 
Impairment and other gains, net(7,834)(5,480)
Amortization of deferred financing costs4,186 6,548 
Benefit from deferred income taxes(5,031)(11,872)
Share-based compensation expense56,092 62,321 
Amortization of right-of-use assets23,712 19,452 
Net unrealized (gains) loss on equity investments with and without readily determinable fair value(6,276)28,303 
Other non-cash adjustments6,432 5,588 
Change in assets and liabilities:
Accounts receivable, net(24,081)(64,496)
Prepaid expenses and other current and non-current assets(69,479)(22,790)
Accounts payable, accrued and other current and non-current liabilities68,650 31,928 
Deferred revenue53,688 54,195 
Right-of-use lease assets and operating lease liabilities(19,428)4,844 
Net cash provided by operating activities$137,824 $106,201 
INVESTING ACTIVITIES:
Capital expenditures, net$(764,513)$(516,494)
Capitalized interest(88,450)(32,202)
Investments in nonconsolidated affiliates(7,750)— 
Proceeds from dispositions, net29,104 — 
Proceeds from sale of equity securities4,369 — 
Distributions from equity method investments1,756 770 
Net cash used in investing activities$(825,484)$(547,926)
FINANCING ACTIVITIES:
Proceeds from issuance of debt$275,168 $— 
Taxes paid in lieu of shares issued for equity-based compensation(14,980)(15,652)
Noncontrolling interest holders’ capital contributions3,000 2,033 
Distributions to noncontrolling interest holders(1,722)— 
Distributions to related parties associated with the settlement of certain share-based awards(2,388)(2,256)
Put option payments to redeemable noncontrolling interest holders— (895)
Repayments of revolving credit facility(2,000)(15,000)
Principal repayments on long-term debt(52,250)(45,750)
Payments for financing costs(5,131)— 
Other financing activities788 — 
Net cash provided by (used in) financing activities$200,485 $(77,520)
Effect of exchange rates on cash, cash equivalents and restricted cash(729)22 
Net decrease in cash, cash equivalents and restricted cash(487,904)(519,223)
Cash, cash equivalents and restricted cash from continuing operations, beginning of period822,885 1,508,174 
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period23,125 31,802 
Cash, cash equivalents and restricted cash at beginning of period846,010 1,539,976 
Cash, cash equivalents and restricted cash from continuing operations, end of period327,245 987,922 
Cash, cash equivalents and restricted cash from discontinued operations, end of period30,861 32,831 
Cash, cash equivalents and restricted cash at end of period$358,106 $1,020,753 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Investments and loans to nonconsolidated affiliates$12,859 $731 
Capital expenditures incurred but not yet paid$104,004 $83,788 
Share-based compensation capitalized in property and equipment$2,887 $2,264 

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



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

See accompanying notes to the unaudited condensed consolidated financial statements.

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SPHERE ENTERTAINMENT CO.



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

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Three Months Ended March 31, 2021
Common Stock IssuedAdditional
Paid-In
Capital		Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of December 31, 2020$340 $2,325,177 $(38,071)$(28,729)$2,258,717 $11,171 $2,269,888 $14,543 
Reversal of valuation allowance(1,747)— (1,747)— (1,747)— 
Net loss——(18,260)— (18,260)(718)(18,978)(6,860)
Other comprehensive income——— 1,565 1,565 — 1,565 — 
Comprehensive loss— — — — (16,695)(718)(17,413)(6,860)
Share-based compensation— 12,608 — — 12,608 — 12,608 — 
Tax withholding associated with shares issued for equity-based compensation— (85)— — (85)— (85)— 
Accretion of put options— — — — — — — 587 
Contribution from noncontrolling interest holders— — — — — 200 200 — 
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— — (8,728)— (8,728)8,728 
Distribution to related parties associated with the settlement of certain share-based awards granted prior to the Entertainment Distribution— (1,273)— — (1,273)— (1,273)(498)
Balance as of March 31, 2021$340 $2,327,699 $(58,078)$(27,164)$2,242,797 $10,653 $2,253,450 $16,500 
See accompanying notes to unaudited consolidated financial statements.




Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Sphere Entertainment Co. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of December 31, 2022$346 $2,322,007 $(267,909)$(48,563)$2,005,881 $13,039 $2,018,920 $190,222 
Net loss— — (56,847)— (56,847)(216)(57,063)(1,492)
Other comprehensive income— — — 2,124 2,124 — 2,124 — 
Share-based compensation— 20,714 — — 20,714 — 20,714 — 
Redeemable noncontrolling interest adjustment to redemption fair value— 50,045 — — 50,045 — 50,045 (50,045)
Accretion of put options and adjustments— — — — — — — 587 
Contributions— — — — — 1,000 1,000 — 
Distributions— (1,357)— — (1,357)(397)(1,754)(460)
Balance as of March 31, 2023$346 $2,391,409 $(324,756)$(46,439)$2,020,560 $13,426 $2,033,986 $138,812 
Balance as of December 31, 2021$342 $2,317,415 $(173,302)$(32,632)$2,111,823 $15,992 $2,127,815 $142,004 
Net loss— — (17,491)— (17,491)(1,373)(18,864)(442)
Other comprehensive loss— — — (4,378)(4,378)— (4,378)— 
Share-based compensation— 18,537 — — 18,537 — 18,537 — 
Tax withholding associated with shares issued for equity-based compensation— (412)— — (412)— (412)— 
Accretion of put options— — — — — — — 587 
Put option payments to redeemable
noncontrolling interest holders
— — — (895)
Contributions— — — — — 723 723 — 
Distributions— (1,269)— — (1,269)(530)(1,799)(3,476)
Balance as of March 31, 2022$342 $2,334,271 $(190,793)$(37,010)$2,106,810 $14,812 $2,121,622 $137,778 
See accompanying notes to the unaudited condensed consolidated financial statements.





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SPHERE ENTERTAINMENT CO.







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

Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Sphere Entertainment Co. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
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 (loss) income— — (34,020)— (34,020)(682)(34,702)2,661 
Other comprehensive income— — — 1,916 1,916 — 1,916 — 
Share-based compensation— 57,009 — — 57,009 — 57,009 — 
Tax withholding associated with shares issued for equity-based compensation4 (14,984)— — (14,980)— (14,980)— 
BCE disposition— — — — — 667 667 — 
Redeemable noncontrolling interest adjustment to redemption fair value— 50,045 — — 50,045 — 50,045 (50,045)
Accretion of put options and adjustments— (895)— — (895)— (895)2,656 
Contributions— — — — — 3,000 3,000 — 
Distributions— (1,736)— — (1,736)(1,722)(3,458)(652)
Balance as of March 31, 2023$346 $2,391,409 $(324,756)$(46,439)$2,020,560 $13,426 $2,033,986 $138,812 
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— — (94,452)— (94,452)(902)(95,354)4,412 
Other comprehensive loss— — — (6,738)(6,738)— (6,738)— 
Share-based compensation— 62,824 — — 62,824 — 62,824 — 
Tax withholding associated with shares issued for equity-based compensation2 (15,654)— — (15,652)— (15,652)— 
Accretion of put options— — — — — — — 1,761 
Put option payments to redeemable
noncontrolling interest holders
— — — — — — — (895)
Adjustments of redeemable noncontrolling interest(6,178)(6,178)(6,178)66 
Contributions— — — — — 5,400 5,400 — 
Distributions— (1,496)— — (1,496)(1,590)(3,086)(5,400)
Balance as of March 31, 2022$342 $2,334,271 $(190,793)$(37,010)$2,106,810 $14,812 $2,121,622 $137,778 
See accompanying notes to the unaudited condensed 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)
Nine Months Ended March 31, 2021
Common Stock IssuedAdditional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of June 30, 2020$338 $2,285,709 $51,727 $(50,473)$2,287,301 $12,203 $2,299,504 $20,600 
Cumulative effect of adoption of ASU 2016-13, credit losses(480)— (480)(480)
Reversal of valuation allowance— — 563 — 563 — 563 — 
Net loss——(109,888)— (109,888)(2,250)(112,138)(14,091)
Other comprehensive income——— 23,309 23,309 — 23,309 — 
Comprehensive loss— (86,579)(2,250)(88,829)(14,091)
Share-based compensation— 60,201 — — 60,201 — 60,201 — 
Tax withholding associated with shares issued for equity-based compensation2 (8,210)— — (8,208)— (8,208)— 
Accretion of put options— — — — — — — 1,761 
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— — (8,728)— (8,728)8,728 
Contributions from noncontrolling interest holders— — — — — 700 700 — 
Distribution to related parties associated with the settlement of certain share-based awards granted prior to the Entertainment Distribution— (1,273)— — (1,273)— (1,273)(498)
Balance as of March 31, 2021$340 $2,327,699 $(58,078)$(27,164)$2,242,797 $10,653 $2,253,450 $16,500 
See accompanying notes to unaudited consolidated financial statements.

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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
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.

0
Note 1. Description of Business and Basis of Presentation
Spin-off Transaction
On April 20, 2023 (the “MSGE Spinco Distribution Date”), Sphere Entertainment Distribution and Merger with MSG Networks Inc.
Co., formerly Madison Square Garden Entertainment Corp. (together with its subsidiaries,(“Sphere Entertainment” or the “Company” or “MSG Entertainment”) was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary, distributed approximately 67% of the outstanding common stock of Madison Square Garden SportsEntertainment Corp. (“MSG Sports”)Entertainment”, formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ boardMSGE Spinco, Inc.) to its stockholders (the “MSGE Spinco Distribution”), with the Company retaining approximately 33% of directors approved the distribution of all the outstanding common stock of MSG Entertainment to(in the form of Class A common stock) immediately following the MSGE Spinco Distribution (the “MSGE Retained Interest”). MSG Sports’ stockholders (the “Entertainment Distribution”), which occurred on April 17, 2020 (the “Entertainment Distribution Date”). See Note 1 toEntertainment owns the Company’s audited consolidatedtraditional live entertainment business previously owned 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 amendedoperated 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 19.
On July 9, 2021,through its Entertainment business segment, excluding Sphere, which was retained by the Company completed its previously announced acquisition of MSG Networks Inc. pursuant toafter the Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), amongMSGE Spinco Distribution Date. In the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiaryMSGE Spinco Distribution, stockholders of the Company (“Merger Sub”), andreceived (a) one share of 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 ofEntertainment’s Class A common stock, par value $0.01 per share, for every 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 ofCompany’s 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 toas of the Effective Time multiplied by 0.172, with such product rounded up to the next wholeclose of business, New York City time, on April 14, 2023 (the “Record Date”), and (b) one share and (ii) each share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every 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 ofCompany’s 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 prioras of the close of business, New York City time, on the Record Date.
As of March 31, 2023, the Company maintained the historical operating structure and reported the consolidated financial results of its traditional live entertainment business in continuing operations within the Entertainment reporting segment until the MSGE Spinco Distribution Date. Subsequent to the Effective Time multiplied by 0.172, with such product rounded up toMSGE Spinco Distribution, the next whole share, in each case except for Excluded Shares (as definedhistorical financial results of the Company’s traditional live entertainment business, excluding Sphere, will be reflected 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 reflectedCompany’s consolidated financial statements as outstandingdiscontinued operations under U.S. generally accepted accounting principles (“GAAP”) for all periods presented.presented through the MSGE Spinco Distribution Date, effective as of the filing with the U.S. Securities and Exchange Commission (the “SEC”) of the Company’s Annual Report on Form 10-K for the fiscal year ending on June 30, 2023.
Tao Group Hospitality Disposition
On April 17, 2023, the Company announced it entered into an agreement to sell its 66.9% majority interest in TAO Group Sub-Holdings LLC (“Tao Group Hospitality”) to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors (the “Tao Group Hospitality Disposition”). On May 3, 2023, the Company announced that, through its indirect subsidiary, TAO Group Holdings, LLC (“TAO Holdings”), the Company completed the sale of its interests in Tao Group Hospitality.
The transaction values Tao Group Hospitality at $550,000, subject to certain customary purchase price adjustments. The Company, through certain of its subsidiaries, owns 79.1% of TAO Holdings, which represents an effective ownership of 66.9% of Tao Group Hospitality, and thus would be entitled to that percentage of the total cash consideration paid to the Sellers (net of, among other things, the payoff of outstanding debt and certain debt-like items and fees, costs and expenses incurred in connection with the transaction) pursuant to the transaction agreement dated as of April 17, 2023, by and among TAO Holdings, Hakkasan USA Inc., the other sellers party thereto and Disco Ball Intermediate, LLC (the “Transaction Agreement”). At closing, the Company received approximately $295,000 of net proceeds (taking into account the payment of accrued management fees) in connection with the transaction.
As of and for the three and nine months ended March 31, 2023, the Tao Group Hospitality segment met the criteria for discontinued operations and was classified as for held for sale, along with the related operations as a discontinued operation. See Note 3. Discontinued Operations and Dispositions, for details regarding the Tao Group Hospitality Disposition.
Description of Business
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment brands; regional sportsFollowing the MSGE Spinco Distribution and entertainment networks; popular dining and nightlife offerings; and a premier music festival. Utilizingthe Tao Group Hospitality Disposition, the Company’s powerful brands and livebusiness consists of Sphere, a next-generation entertainment expertise, the Company delivers uniquemedium powered by new technologies to create experiences that set the standard for excellencetransport audiences to places both real and innovation while forging deep connections with diverse and passionate audiences.
The Company is comprised of 3 reportable segments: Entertainment,imagined; MSG Networks, and Tao Group Hospitality.
•The Entertainment segment includes the Company’s portfolio of venues: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. In addition, the Company has unveiled its vision for state-of-the-art venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Entertainment segment also includes the original production, the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns andwhich operates the Boston Calling Music Festival. This segment also includes our bookings business, which features a variety of live entertainment and sports experiences.
•The MSG Networks segment is comprised of the Company’stwo 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”Sportsnet (formerly MSG+), as well as other portionsa companion streaming service, MSG GO, delivering a wide range of New York, New Jersey, Connecticut andlive
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Pennsylvania and features a wide range of sports content including exclusive live local games and other programmingprogramming; and an approximately 33% economic interest in MSG Entertainment.
The Company is comprised of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”)two reportable segments: Entertainment 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.
•TheMSG Networks. Historically, Tao Group Hospitality had been a reportable segment, featuresbut as of March 31, 2023, has been classified as a discontinued operation, as discussed above. See Note 1. Description of Business and Basis of Presentation, to the consolidated and combined financial statements included in the Form 10-K for the fiscal years ended June 30, 2022, 2021 and 2020 as filed with the SEC on August 19, 2022 (the “2022 Form 10-K”) for more information regarding the details of 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.business.
Advertising Sales Representation Agreement Termination
The advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) between two of the Company’s subsidiaries, MSGN Holdings, L.P. and Sphere Entertainment Group, LLC (formerly MSG Entertainment Group, LLC, “Sphere Entertainment Group”), pursuant to which Sphere Entertainment Group had the exclusive right and obligation to sell MSG Networks advertising availabilities for a commission, was terminated effective as of December 31, 2022. The termination of the Networks Advertising Sales Representation Agreement has impacted the operating results of the reportable segments of the Company conductsfor the three and nine months end March 31, 2023 and on a significant portiongo forward basis. As a result, the Entertainment segment will no longer recognize advertising sales commission revenue or the employee costs related to the advertising sales agency. Conversely, the MSG Networks segment will no longer incur advertising commission expense but will reflect the employee costs of its operations at venuesthe former Entertainment employees that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Gardensupported the advertising sales agency as such employees have been transferred to MSG Networks, which will result in higher direct operating expenses and The Chicago Theatre. The Company leases Radio City Music Hallselling, general 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.administrative expenses going forward.
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 (“financial statements”), the years ended on June 30, 2022, 20212023 and 20202022 are referred to as “Fiscal Year 2022,” “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”)GAAP for interim financial information and the instructioninstructions of Rule 10-01 of Regulation S-X of Securities and Exchange Commission (“SEC”),the SEC, and should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes thereto for Fiscal Year 20212022 included in the 2022 Form 10-K and10-K.
In the Company’s consolidatedopinion of the Company, the accompanying financial statements and notes theretocontain all adjustments, consisting of only normal recurring adjustments, necessary for the three and six months ended December 31, 2021 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2021. The consolidateda fair statement of its financial statementsposition as of March 31, 20222023 and its results of operations for the three and nine months ended March 31, 2023, and 2022, and 2021 presented herein are unaudited; however, incash flows for the opinion of management, thenine months ended March 31, 2023, and 2022. The condensed consolidated financial statements reflectand the accompanying notes as of Fiscal Year 2022 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 forfootnote 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 ofPrior to the production of the Christmas Spectacular and arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden,MSGE Spinco Distribution, the Company generally earnsearned a disproportionate share of its annual revenues in the second and third quarters of its fiscal year. In addition,year as a result of the production of the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”), arena license fees in connection with the use of Madison Square Garden (“The Garden”) by 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”), and MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming. Following the MSGE Spinco Distribution, our MSG Networks segment generally continues to expect to earn a higher share of its annual revenues in the second and third quarters of its fiscal year as a result of MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming.
Impact of the COVID-19 Pandemic
The Company’s operations and operating results since the third quarter of Fiscal Year 2020 have been negativelywere not materially impacted due toby the COVID-19 pandemic.
The Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control. As a result, all prior period balances in these consolidated financial statements (including share activities) were retrospectively adjusted as if MSG Entertainment and MSG Networks Inc. had been operating as a single company.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

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 nine months ended March 31, 2022. The following table provides the impact of the change in reporting entity on the results of operations forpandemic during the three and nine months ended March 31, 2021 in accordance with Accounting Standards Codification (“ASC”) Subtopic 250-10-50-6:
Three Months EndedNine Months Ended
March 31, 2021
Decrease in net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders48,038 163,203 
Increase (decrease) in other comprehensive income (loss)$1,257 $(4,956)
Decrease in net loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders (basic and diluted)$2.28 $8.16 
Impact of2023, as compared to the COVID-19 Pandemic
The Company’s operations and operating results have been materiallyprior year period, which was impacted by the COVID-19 pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all operations of the Entertainment business were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. Fiscal Year 2022 has also been impacted by the pandemic, with fewer ticketed events at our performance venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19) due to the lead-time required to book touring acts and artists and an increase in cases due to a COVID-19 variant, which resulted in a numberthe postponement or cancellation of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in 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 were required to provide proof that they had received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols).
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the nine months ended March 31, 2022 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 cancelledevents at our performance venues in the second and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact of the COVID-19 pandemic on our operations also included (i)(including the partial cancellation of the 2021 production of the Christmas Spectacular,Spectacular) (ii)during the cancellationsecond and third quarters of the 2020 production of the Christmas Spectacular, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festival.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers 2020-21 regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements. The Knicks and the Rangers each completed their 2021-2022 82-game regular seasons, with the Rangers advancing2022 as a result of an increase in COVID-19 cases. In addition, due to the playoffs.COVID-19 pandemic, the 2020-21 NHL season was shortened and resulted in
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Asreductions in media rights fees recognized in our MSG Networks segment, which had a resultresidual impact reflected in the nine months ended March 31, 2022. See Note 1, Impact of the COVID-19 Pandemic, to the consolidated and combined financial statements included in the 2022 Form 10-K for more information regarding the 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, its 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 government 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, 3 venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. During Fiscal Year 2022, Tao Group Hospitality’s operations have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and reduced demand from guests, including corporate and private event cancellations and postponements in the second and third quarters.As of the date of this filing, Tao Group Hospitality is operating without capacity restrictions in domestic and key international markets.our business.
It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in new government or league-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of and/or demand for our entertainment and dining and nightlife venues,Sphere in Las Vegas, impact demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venuesSphere in Las Vegas (which may lead to difficulties in staffing) or otherwise materially impact our operations.
Impairment and other (gains) losses, net
For the three months ended March 31, 2022, the Company recorded other gains of $5,319 primarily from extinguishment of lease liabilities associated with a Hakkasan venue. For the nine months ended March 31, 2022, the Company recorded other net gains of $5,480 primarily from the extinguishment and modifications of lease liabilities associated with a Hakkasan venues, offset by an impairment charge of long-lived assets and certain right-of-use assets and leasehold improvements. The duration and impact of the COVID-19 pandemic may result in future impairment charges that management will evaluate as facts and circumstances evolve over time. Refer to Note 9, Note 10 and Note 11 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 GardenSphere Entertainment Corp.Co. and its subsidiaries.subsidiaries, including Tao Group Hospitality, which is reported as a discontinued operation as of March 31, 2023 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 thehistorically included accounts fromof Tao Group Hospitality, which has been sold subsequent to March 31, 2023, and BCE (up to December 2, 2022) in which the Company hashad a controlling voting interests.interest. 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 arewere 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 incomeearnings (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.
See Note 3, Discontinued Operations and Dispositions, for details regarding the Tao Group Hospitality Disposition and the BCE disposition. 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 on2022 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 amountamounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, provision for credit losses, valuation of investments,
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 assets and liabilities. In addition, estimates are used in revenue recognition, rights fees, income tax, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions.matters. Management believes its use of estimates in the financial statements to be reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Summary of Significant Accounting Policies
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SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The following is an update to the Company's Summary of Significant Accounting Policies, disclosed in itsthe 2022 Form 10-K. The update primarily reflects specific policiesthe addition of a policy related to production costs for the MSG Networks segment in connection withCompany’s Original Immersive Productions.
Production Costs for the Merger.
Revenue Recognition — Media Affiliation Fee and Advertising RevenuesCompany’s Original Immersive Productions
The MSG Networks segment generates revenues principally from affiliationCompany defers certain costs during the production phase of its original immersive productions for Sphere that are directly related to production activities. Such costs include, but are not limited to, fees chargedpaid to cable, satellite, telephonewriters, directors, and other platforms (“Distributors”) for the right to carry its networks,producers as well as from the sale of advertising. The MSG Networks advertising revenue is largely derived from the sale of inventory in its live professional sports programming,video and as such, a significant share of this revenue has historically been earnedmusic production costs and production specific overhead. Deferred immersive production costs are amortized in the second and third fiscal quarters. Duesame ratio that current period actual revenue bears to the COVID-19 pandemic, the NBA and NHL 2020-21 regular seasons were delayed and primarily occurred during the third and fourth quarters of Fiscal Year 2021 and will affect the comparability in the second, third and the fourth fiscal quarters of Fiscal Year 2022.
Affiliation feeestimated remaining unrecognized ultimate 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 revenue is the predominant revenue streambeginning of the MSG Networks segment. Substantially allcurrent 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 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 andproduction. 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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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Nonmonetary Transactions
The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors, that involve the exchange of products or services, such as advertising and promotional benefits, for the segment’s services. For arrangements that are subject to sales based and usage-based royalty guidance, MSG Networks measures noncash consideration that it receives at fair value as the sale or usage occurs. For other arrangements, the MSG Networks segment measures the estimated fair valuerecoverability assessments whenever there is an indication of the noncash consideration that it receives at contract inception. If the MSG Networks segment cannot reasonably estimate the fair valuepotential impairment.
As of the noncash consideration, the segment measures the fair value of the consideration indirectly by reference to the standalone selling price of the services promised to the customer in exchange for the consideration as revenues. Total advertising costs for MSG Networks, which includes the aforementioned nonmonetary transactions and which are classified in selling, general and administrative expenses, were $14,521 and $35,193 for the three and nine months ended March 31, 2022, respectively, and $12,852 and $23,029 for the three and nine months ended March 31, 2021, respectively.
Interest Capitalization
For significant long term construction projects, such as MSG Sphere,2023, the Company begins to capitalize qualified interest costs once activities necessary to getrecorded approximately $46,500 in Other non-current assets in 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 borrowingsaccompanying condensed consolidated balance sheets related to the significant long term construction projects. The Company ceases capitalization on any portions substantially completedthese production costs.
Recently Issued and ready for their intended use. See Note 9 for further details on interest capitalization during the three and nine months ended March 31, 2022 and 2021.

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 2019October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASUASU”)”) No. 2019-12,2021-08, Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesContract Assets and Contract Liabilities From Contracts With Customers. This ASU eliminates certain exceptions torequires that the general approachacquiring entity in ASCa business combination recognize and measure contract assets and contract liabilities acquired in accordance with Accounting Standard Codification (“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 thethis standard had nodid not have an 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. AcquisitionDiscontinued Operations and Dispositions
AcquisitionDiscontinued Operations in Tao Group Hospitality
As described above, on April 17, 2023, the Company announced it entered into an agreement to sell its 66.9% majority interest in Tao Group Hospitality to a subsidiary of HakkasanMohari Hospitality Limited. On May 3, 2023, the Company announced it had completed the Tao Group Hospitality Disposition.
The Company analyzed the quantitative and qualitative factors relevant to the Tao Group Hospitality Disposition and determined that the criteria to classify the assets and liabilities of Tao Group Hospitality as held for sale, along with the related operations as a discontinued operation had been satisfied as of the third quarter of Fiscal Year 2023.
The historical financial results of the Tao Group Hospitality segment have been reflected in the accompanying condensed consolidated financial statements as held for sale as of March 31, 2023 and June 30, 2022 and as discontinued operations for the three and nine months ended March 31, 2023 and March 31, 2022. No impairment loss was recognized in connection with the reclassification to discontinued operations as of March 31, 2023, and the gain on the sale will be recorded in the fourth quarter of Fiscal Year 2023. Prior to the Tao Group Hospitality Disposition, the Company’s results from discontinued operations reflect a number of intercompany transactions.
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SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The tables below sets forth, for the periods presented, the balance sheet and the operating results of the disposal group. Amounts presented below differ from historically reported results for the Tao Group Hospitality business segment due to reclassifications and adjustments made for purposes of discontinued operations presentation.
March 31,
2023		June 30,
2022
ASSETS
Current Assets:
Cash, cash equivalents and restricted cash$30,861 $23,125 
Accounts receivable, net25,301 28,640 
Prepaid expenses and other current assets17,890 20,323 
Total current assets (a)
74,052 72,088 
Non-Current Assets:
Property and equipment, net87,529 85,396 
Right-of-use lease assets141,184 109,194 
Goodwill1,364 1,364 
Intangible assets, net131,413 141,421 
Deferred tax assets, net51,117 46,466 
Other non-current assets15,908 16,589 
Total non-current assets (a)
428,515 400,430 
Total assets of the disposal group classified as held for sale$502,567 $472,518 
LIABILITIES
Current Liabilities:
Accounts payable, accrued and other current liabilities$49,507 $60,163 
Current portion of long-term debt3,750 3,750 
Operating lease liabilities, current19,168 19,751 
Deferred revenue15,295 19,137 
Total current liabilities (a)
87,720 102,801 
Non-Current Liabilities:
Long-term debt, net of deferred financing costs77,486 80,130 
Operating lease liabilities, non-current123,191 89,437 
Other non-current liabilities1,420 1,393 
Total non-current liabilities (a)
202,097 170,960 
Total liabilities of the disposal group classified as held for sale289,817 273,761 
Net Assets of the disposal group classified as held for sale212,750 198,757 
Redeemable noncontrolling interests of disposal group classified as held for sale$138,812 $184,192 
Nonredeemable noncontrolling interests of disposal group classified as held for sale$13,426 $12,163 
_________________
(a) The assets and liabilities of the disposal group classified as held for sale are classified as current on the March 31,2023 balance sheet as the transaction was completed and net proceeds were received on May 3,2023.
11



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
 Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Revenues$130,857 $107,593 $398,078 $342,634 
Direct operating expenses(77,963)(64,509)(232,029)(188,419)
Selling, general and administrative expenses(46,541)(38,810)(131,200)(110,434)
Depreciation and amortization(7,421)(8,176)(21,144)(25,552)
Impairment and other gains, net— 5,074 473 5,235 
Operating (loss) income(1,068)1,172 14,178 23,464 
Interest income49 7 85 11 
Interest expense(160)(303)(3,221)(1,195)
Other (expense) income, net(8)75 719 (301)
(Loss) income from operations before income taxes(1,187)951 11,761 21,979 
Income tax (expense) benefit(3,389)34 (4,213)(1,580)
Net (loss) income(4,576)985 7,548 20,399 
Less: Net loss attributable to nonredeemable noncontrolling interests(216)(1,161)(128)(323)
Less: Net (loss) income attributable to redeemable noncontrolling interests(1,492)(442)2,661 4,412 
Net (loss) income from discontinued operations attributable to Sphere Entertainment Co.’s stockholders$(2,868)$2,588 $5,015 $16,310 
As permitted under ASC 205-20-50-5b(2), the Company has elected not to adjust the consolidated statements of cash flows for the nine months ended March 31, 2023 and 2022 to exclude cash flows attributable to discontinued operations. The table below sets forth, for the periods presented, significant selected financial information related to discontinued activities included in the accompanying condensed consolidated financial statements:
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Non-cash items included in net (loss) income:
Depreciation and amortization$7,421 $8,176 $21,144 $25,552 
Impairment and other gains, net— (5,074)(473)(5,235)
Share-based compensation expense2,144 1,876 6,570 5,745 
Cash flows from investing activities:
Capital expenditures, net$(4,962)$(5,295)$(16,417)$(16,566)
Non-cash investing activities:
Investments and loans to nonconsolidated affiliates$— $55 $— $731 
Disposition of Our Interest in Boston Calling Events
The Company entered into an agreement on December 1, 2022 to sell its controlling interest in 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 definition of a business under SEC Regulation S-X Rule 11-01(d)-1 and 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 ASC Subtopic 205-20 — Discontinued Operations. The gain on the BCE Disposition was reported under the Entertainment segment and recorded in Impairment and other (losses) gains, net in the condensed consolidated statements of operations.
12



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Disposition of Corporate Aircraft
On December 30, 2022, the Company sold its owned aircraft for $20,375. In connection with the sale, the Company recognized a loss of $4,383, net of transaction costs. The loss on the aircraft disposition was reported under the Entertainment segment and recorded in Impairment and other (losses) gains, net in the condensed consolidated statements of operations.
Note 4. Revenue Recognition
Contracts with Customers
See Note 32, 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 on2022 Form 10-K for more information regarding the details of Tao Group Hospitality’s acquisitionthe 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 the arena license agreements that require the Knicks and the Rangers to play their home games at The Garden (the “Arena License Agreements”), leases and subleases that are accounted for in accordance with ASC Topic 842.
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 for the three and nine months ended March 31, 2023 and 2022:
Three Months Ended
March 31, 2023
EntertainmentMSG NetworksEliminationsTotal
Event-related and entertainment offerings (a)
$102,314 $— $— $102,314 
Sponsorship, signage and suite licenses (b)
59,724 3,060 — 62,784 
Media related, primarily from affiliation agreements (b)
— 156,162 — 156,162 
Other (c)
7,173 2,214 — 9,387 
Total revenues from contracts with customers169,211 161,436 — 330,647 
Revenues from Arena License Agreements, leases and subleases32,650 — — 32,650 
Total revenues$201,861 $161,436 $— $363,297 
Three Months Ended
March 31, 2022
EntertainmentMSG NetworksEliminationsTotal
Event-related and entertainment offerings (a)
$90,899 $— $— $90,899 
Sponsorship, signage and suite licenses (b)
55,609 2,688 — 58,297 
Media related, primarily from affiliation agreements (b)
— 163,247 — 163,247 
Other (c)
17,025 1,634 (9,620)9,039 
Total revenues from contracts with customers163,533 167,569 (9,620)321,482 
Revenues from Arena License Agreements, leases and subleases31,052 — — 31,052 
Total revenues$194,585 $167,569 $(9,620)$352,534 
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SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Nine Months Ended
March 31, 2023
EntertainmentMSG NetworksEliminationsTotal
Event-related and entertainment offerings (a)
$443,992 $— $— $443,992 
Sponsorship, signage and suite licenses (b)
167,113 5,708 — 172,821 
Media related, primarily from affiliation agreements (b)
— 432,375 — 432,375 
Other (c)
25,660 4,730 (8,802)21,588 
Total revenues from contracts with customers636,765 442,813 (8,802)1,070,776 
Revenues from Arena License Agreements, leases and subleases68,716 — — 68,716 
Total revenues$705,481 $442,813 $(8,802)$1,139,492 
Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksEliminationsTotal
Event-related and entertainment offerings (a)
$268,391 $— $— $268,391 
Sponsorship, signage and suite licenses (b)
113,565 5,111 — 118,676 
Media related, primarily from affiliation agreements (b)
— 459,920 — 459,920 
Other (c)
31,914 3,992 (17,015)18,891 
Total revenues from contracts with customers413,870 469,023 (17,015)865,878 
Revenues from Arena License Agreements, leases and subleases62,564 — — 62,564 
Total revenues$476,434 $469,023 $(17,015)$928,442 
_________________
(a)Consists of (i) ticket sales and other ticket-related revenues, (ii) venue license fees from third-party promoters, and (iii) food, beverage and merchandise sales. Event-related revenues and entertainment 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 consolidated and combined financial statements included in the 2022 Form 10-K for further details on the pattern of recognition of sponsorship, signage and suite license revenues and media related revenue.
(c)Primarily consists of (i) revenues from sponsorship sales and representation agreements with Madison Square Garden Sports Corp. (“MSG Sports”) and (ii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $— and $8,802 for the three and nine months ended March 31, 2023, and $9,620 and $17,015 for the three and nine months ended March 31, 2022, respectively, that are eliminated in consolidation. The Networks Advertising Sales Representation Agreement was terminated as of December 31, 2022, as discussed in Note 1, Description of Business.
14



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
In addition to the disaggregation of the business (“Hakkasan”)Company’s revenue by major source based upon the timing of Hakkasan USA, Inc., a Delaware corporation (“Hakkasan Parent”) on April 27, 2021. Duringtransfer 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 nine months ended SeptemberMarch 31, 2023 and 2022:
Three Months Ended
March 31, 2023
EntertainmentMSG NetworksEliminationsTotal
Ticketing and venue license fee revenues (a)
$45,547 $— $— $45,547 
Sponsorship and signage, suite, and advertising commission revenues (b)
78,504 — — 78,504 
Food, beverage and merchandise revenues43,021 — — 43,021 
Media networks revenues (c)
— 161,436 — 161,436 
Other2,139 — — 2,139 
Total revenues from contracts with customers169,211 161,436 — 330,647 
Revenues from Arena License Agreements, leases and subleases32,650 — — 32,650 
Total revenues$201,861 $161,436 $— $363,297 
Three Months Ended
March 31, 2022
EntertainmentMSG NetworksEliminationsTotal
Ticketing and venue license fee revenues (a)
$46,867 $— $— $46,867 
Sponsorship and signage, suite, and advertising commission revenues (b)
79,631 — (9,620)70,011 
Food, beverage and merchandise revenues36,344 — — 36,344 
Media networks revenues (c)
— 167,569 — 167,569 
Other691 — — 691 
Total revenues from contracts with customers163,533 167,569 (9,620)321,482 
Revenues from Arena License Agreements, leases and subleases31,052 — — 31,052 
Total revenues$194,585 $167,569 $(9,620)$352,534 
Nine Months Ended
March 31, 2023
EntertainmentMSG NetworksEliminationsTotal
Ticketing and venue license fee revenues (a)
$291,404 $— $— $291,404 
Sponsorship and signage, suite, and advertising commission revenues (b)
215,812 — (8,802)207,010 
Food, beverage and merchandise revenues124,711 — — 124,711 
Media networks revenues (c)
— 442,813 — 442,813 
Other4,838 — — 4,838 
Total revenues from contracts with customers636,765 442,813 (8,802)1,070,776 
Revenues from Arena License Agreements, leases and subleases68,716 — — 68,716 
Total revenues$705,481 $442,813 $(8,802)$1,139,492 
15



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksEliminationsTotal
Ticketing and venue license fee revenues (a)
$172,844 $— $— $172,844 
Sponsorship and signage, suite, and advertising commission revenues (b)
161,046 — (17,015)144,031 
Food, beverage and merchandise revenues78,032 — — 78,032 
Media networks revenues (c)
— 469,023 — 469,023 
Other1,948 — — 1,948 
Total revenues from contracts with customers413,870 469,023 (17,015)865,878 
Revenues from Arena License Agreements, leases and subleases62,564 — — 62,564 
Total revenues$476,434 $469,023 $(17,015)$928,442 
_________________
(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 $8,802 for the nine months ended March 31, 2023, and $9,620 and $17,015 for the three and nine month ended March 31, 2022, respectively, that are eliminated in consolidation.
(c)Primarily consists of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.
Contract Balances
The following table provides information about contract balances from the Company’s contracts with customers as of March 31, 2023 and June 30, 2021,2022:
March 31,June 30,
20232022
Receivables from contracts with customers, net (a)
$225,644 $192,630 
Contract assets, current (b)
8,324 5,688 
Contract assets, non-current (b)
— 756 
Deferred revenue, including non-current portion (c)
265,894 209,473 
_________________
(a)Receivables from contracts with customers, which are reported in Accounts receivable and 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 March 31, 2023 and June 30, 2022, the Company’s receivables from contracts with customers above included $11,201 and $4,618, respectively, related to various related parties. See Note 14, Related Party Transactions for further details on related party arrangements.
(b)Contract assets, which are reported as Prepaid expenses and other current assets or Other non-current assets in the Company’s condensed consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company completeddoes not have an unconditional right to bill as of the finalizationreporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
(c)Deferred revenue primarily relates to the Company’s receipt of a working capital adjustmentconsideration from customers in advance of the Company’s transfer of goods or services to the customers. Deferred revenue is reduced and net debt against agreed upon targets. As a result, the initial determination of approximately 18% noncontrolling interest ownership of common equity interests in TAO Group Sub-Holdings LLC owned byrelated revenue is recognized once the Hakkasan Parent was subsequently revised to approximately 15%. The Company continued to own a 77.5% controlling interest in TAO Group Holdings LLC, which, after the ownership adjustments, translated to an approximately 66% indirect controlling interest in TAO Group Sub-Holdings LLC.
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
underlying goods or services are transferred to a customer. Revenue recognized for the three and nine months ended March 31, 2023 relating to the deferred revenue balance as of June 30, 2022 was $21,196 and $175,363, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
As of March 31, 2022,2023, the Company’s ownership interestremaining performance obligations were approximately $577,000 of which 40% is expected to be recognized over the next two years and an additional 42% of the balance to be recognized in TAO Group Holdings LLC had increasedthe following two years. This primarily relates to 77.8% in connection with investor put transactions at TAO Group Holdings LLC. The Company’s ownership interest in TAO Group Holdings LLC increased further to 79.1% as of April 1, 2022, whenperformance obligations under sponsorship and suite license arrangements that have original expected durations longer than one year and for which the consideration is not variable. In developing the estimated revenue, the Company completed investor call transactions at TAO Group Holdings LLC. Tao Group Hospitality’s results will continue to be consolidated inapplies the financial resultsallowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of the Company.
The Company’s purchase price allocation and measurement period adjustment for the Hakkasan acquisition is presented below:
Fair Value Recognized as of Acquisition Date (as previously reported)
Measurement Period Adjustment (a)
Fair Value Recognized as of September 30, 2021 as adjusted (b)
Cash and cash equivalents$16,737 $— $16,737 
Property and equipment, net33,393 — 33,393 
Right-of-use lease assets44,818 — 44,818 
Amortizable intangible assets, net47,170 (7,020)40,150 
Other assets12,641 — 12,641 
Accrued expenses and other current liabilities(15,957)1,534 (14,423)
Operating lease liabilities(52,025)— (52,025)
Other liabilities(13,655)— (13,655)
Total identifiable net assets acquired73,122 (5,486)67,636 
Goodwill3,378 (2,014)1,364 
Redeemable noncontrolling interests$(76,500)$7,500 $(69,000)
_________________
(a)During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in TAO Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534.
(b)No additional adjustments were recorded during the three months ended March 31, 2022.one year or less.
Note 4. Restructuring Charges
During the three months ended March 31, 2022, the Company underwent organizational changes. These measures included termination of certain employees and executives. For the three months ended March 31, 2022, the Company recorded $14,690 for restructuring charges related to the termination benefits provided to employees, inclusive of $4,589 of share-based compensation expenses, none of which have been paid as of March 31, 2022 and are shown in accrued severance and additional paid-in-capital on the balance sheet, respectively. The Company recorded $21,299 of restructuring charges during the nine months ended March 31, 2021, all of which has been paid as of March 31, 2022. Such costs are reflected in restructuring charges in the accompanying consolidated and combined statements of operations.


0
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 5. Revenue Recognition
Contracts with CustomersRestructuring Charges
See Note 4 to
During Fiscal Year 2023, the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 includedCompany implemented a cost reduction program which resulted in the Company’s Annual Report on Form 10-K,recognition of termination benefits for a workforce reduction of certain executives 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 recognizedemployees in the consolidated statementsEntertainment and MSG Networks segments. As a result, the Company recognized restructuring charges of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, except for revenues from Arena License Agreements, leases$20,498 and subleases that are accounted for in accordance with ASC Topic 842 of $31,052 and $62,564$34,180 for the three and nine months ended March 31, 2023, respectively, inclusive of $7,384 and $9,677, respectively, of share-based compensation expenses, which are accrued in accounts payable, accrued and other current liabilities and additional paid-in-capital on the condensed consolidated balance sheet. The Company recognized restructuring charges of $14,690 for the three and nine months ended March 31, 2022, respectively,inclusive of $4,589 of share-based compensation expenses, which are accrued in accounts payable, accrued and $12,186other current liabilities and $15,267 foradditional paid-in-capital on the three and ninecondensed consolidated balance sheet.

months ended
Changes to the Company’s restructuring liability through March 31, 2021, respectively.
The following table presents the activity in the allowance for credit losses for the nine months ended March 31, 2022:2023 were as follows:
Beginning balance, June 30, 2021$6,449 
Provision for expected credit losses1,170 
Write-offs(2,322)
Ending balance, March 31, 2022$5,2978,081 
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 nine months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$90,899 $— $100,150 $— $191,049 
Sponsorship, signage and suite licenses (b)
55,609 2,688 1,372 (633)59,036 
Media related, primarily from affiliation agreements (c)
— 163,247 — — 163,247 
Other (d)
17,025 1,634 7,050 (9,966)15,743 
Total revenues from contracts with customers$163,533 $167,569 $108,572 $(10,599)$429,075 

Three Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$3,710 $— $11,378 $(570)$14,518 
Sponsorship, signage and suite licenses (b)
4,217 1,555 648 — 6,420 
Media related, primarily from affiliation agreements (c)
— 174,657 — — 174,657 
Other (d)
10,844 1,641 764 (6,712)6,537 
Total revenues from contracts with customers$18,771 $177,853 $12,790 $(7,282)$202,132 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$268,391 $— $317,081 $(838)$584,634 
Sponsorship, signage and suite licenses (b)
113,565 5,111 1,997 (1,154)119,519 
Media related, primarily from affiliation agreements (c)
— 459,920 — — 459,920 
Other (d)
31,914 3,992 26,044 (17,511)44,439 
Total revenues from contracts with customers$413,870 $469,023 $345,122 $(19,503)$1,208,512 
Nine Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$5,439 $— $26,217 $(613)$31,043 
Sponsorship, signage and suite licenses (b)
12,740 2,247 1,134 (211)15,910 
Media related, primarily from affiliation agreements (c)
— 476,672 — — 476,672 
Other (d)
17,735 2,536 3,151 (8,698)14,724 
Total revenues from contracts with customers$35,914 $481,455 $30,502 $(9,522)$538,349 
_________________
(a)Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.
(b)See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(c)See “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for further details on the pattern of recognition of Media affiliation fee and advertising revenues in the MSG Networks segment.
(d)Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) Tao Group Hospitality’s managed venue revenues, and (iii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $9,621 and $17,016 for the three and nine months ended March 31, 2022, respectively, and $6,637 and $8,456 for the three and nine months ended March 31, 2021, respectively, that are eliminated in consolidation.
In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following 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 nine months ended March 31, 2022 and 2021:
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$46,867 $— $— $— $46,867 
Sponsorship and signage, suite, and advertising commission revenues (b)
79,631 — — (10,253)69,378 
Revenues from entertainment dining and nightlife offerings (c)
— — 108,572 (346)108,226 
Food, beverage and merchandise revenues36,344 — — — 36,344 
Media networks revenues (d)
— 167,569 — — 167,569 
Other691 — — — 691 
Total revenues from contracts with customers$163,533 $167,569 $108,572 $(10,599)$429,075 

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

Nine Months Ended
March 31, 2022
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$172,844 $— $— $— $172,844 
Sponsorship and signage, suite, and advertising commission revenues (b)
161,046 — — (18,169)142,877 
Revenues from entertainment dining and nightlife offerings (c)
— — 345,122 (1,334)343,788 
Food, beverage and merchandise revenues78,032 — — — 78,032 
Media networks revenues (d)
— 469,023 — — 469,023 
Other1,948 — — — 1,948 
Total revenues from contracts with customers$413,870 $469,023 $345,122 $(19,503)$1,208,512 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended
March 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$4,445 $— $— $— $4,445 
Sponsorship and signage, suite, and advertising commission revenues (b)
29,943 — — (8,667)21,276 
Revenues from entertainment dining and nightlife offerings (c)
— — 30,502 (855)29,647 
Food, beverage and merchandise revenues139 — — — 139 
Media networks revenues (d)
— 481,455 — — 481,455 
Other1,387 — — — 1,387 
Total revenues from contracts with customers$35,914 $481,455 $30,502 $(9,522)$538,349 
_________________
(a)Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events.
(b)Amounts include (i) revenues from sponsorship sales and representation agreements with MSG Sports and (ii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $9,621 and $17,016 for the three and nine months ended March 31, 2022, respectively, and $6,637 and $8,456 for the three and nine months ended March 31, 2021, respectively, that are eliminated in consolidation.
(c)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
(d)Primarily consist of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. The following table provides information about contract balances from the Company’s contracts with customers as of March 31, 2022 and June 30, 2021:
March 31,June 30,
20222021
Receivables from contracts with customers, net (a)
$253,584 $185,112 
Contract assets, current (b)
$17,722 $7,052 
Contract assets, non-current (b)
$585 $87 
Deferred revenue, including non-current portion (c)
$264,233 $210,187 
_________________
(a)Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of March 31, 2022 and June 30, 2021, the Company’s receivables from contracts with customers above included $10,041 and $4,848, respectively, related to various related parties. See Note 19 for further details on related party arrangements.
(b)Contract assets, which are reported as Other current assets or Other assets (non-current portion) in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
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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 customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the nine months ended March 31, 2022 relating to the contract liability balance (primarily deferred revenue) as of June 30, 2021 was $126,473.
Transaction Price Allocated to the Remaining Performance Obligations
The following table depicts the estimated revenue expected to be recognized, based on current projections, in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2022. This primarily relates to performance obligations under sponsorship and suite license arrangements and to a lesser extent, non-variable affiliation fee arrangements that have original expected durations longer than one year and the consideration is not variable. For arrangements with variable consideration, such variability is based on the Company’s ability to deliver the underlying benefits as dictated by the related contractual provisions. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Fiscal Year 2022 (remainder)Restructuring charges (excluding share-based compensation expense)24,503 
Payments(16,647)
March 31, 2023$74,248 
Fiscal Year 2023183,766 
Fiscal Year 2024151,275 
Fiscal Year 2025101,176 
Fiscal Year 202670,259 
Thereafter87,174 
$667,89815,937 
Note 6. Computation of Loss per Common Share
The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted loss per common share attributable to the Company’s stockholders (“EPS”).
Three Months EndedNine Months Ended
 March 31,March 31,
 2022202120222021
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders (numerator):
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)(94,452)$(109,888)
Adjustment of redeemable noncontrolling interest to redemption value— (8,728)— (8,728)
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders for EPS:$(17,491)$(26,988)$(94,452)$(118,616)
Weighted-average shares (denominator):
Weighted-average shares for basic and diluted EPS (a)
34,320 34,060 34,230 34,083 
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(0.51)$(0.79)$(2.76)$(3.48)
_________________
(a)All restricted stock units and stock options were excluded from the above table because the Company reported a net loss for the periods presented and, therefore, their impact on reported loss per share would have been antidilutive. See Note 16 for further detail.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 7. Cash, Cash Equivalents and Restricted Cash
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
As of
March 31,
2022		June 30,
2021		March 31,
2021		June 30,
2020
Captions on the consolidated balance sheets:
Cash and cash equivalents$999,063 $1,516,992 $1,601,765 $1,103,392 
Restricted cash (a)
21,690 22,984 24,610 17,749 
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows$1,020,753 $1,539,976 $1,626,375 $1,121,141 
_________________
(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 8.6. Investments in Nonconsolidated Affiliates
The Company’s investments in nonconsolidated affiliates, which are accounted for under the equity method of accounting andor as equity investments without readily determinable fair valuesvalue, are included within Other non-current assets in accordance with ASC Topic 323, Investments - Equity Methodthe accompanying condensed consolidated balance sheets and Joint Ventures and ASC Topic 321, Investments - Equity Securities, respectively, consisted of the following:
Ownership PercentageInvestment
March 31, 2022
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %$32,387 
Others5,313 
Equity securities without readily determinable fair values (a)
6,997 
Total investments in nonconsolidated affiliates$44,697 
June 30, 2021
Equity method investments:
SACO30 %$36,265 
Others6,204 
Equity securities without readily determinable fair values (a)
6,752 
Total investments in nonconsolidated affiliates$49,221 
Investment As of
Ownership PercentageMarch 31,
2023		June 30,
2022
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %$23,733 $31,448 
Holoplot Loan (a)
20,584 — 
Holoplot25 %1,809 2,096 
Equity securities without readily determinable fair values9,195 7,102 
Total investments in nonconsolidated affiliates$55,321 $40,646 
_________________
(a)In accordance with the ASC Topic 321, Investments - Equity Securities,January 2023, the Company, appliesthrough an indirect subsidiary, extended financing to Holoplot GmbH (“Holoplot”) in the measurement alternativeform of a three-year convertible loan (the “Holoplot Loan”) of €18,804, equivalent to its equity investments without readily determinable fair values. Under$20,484 using the measurement alternative, equity securities without readily determinable fair values are accounted forapplicable exchange rate at cost, adjusted for impairment and changes resulting from observable price fluctuations in orderly transactions for the identical or a similar investmenttime of the same issuer. For the threetransaction. The Holoplot Loan is comprised of $7,625 cash and nine months ended March 31, 2022 and 2021,$12,859 of outstanding deposits paid by the Company didto Holoplot in prior periods. Absent conversion, which is currently not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values.available under the terms of the Holoplot Loan, the Holoplot Loan and interest accrued thereon are due and payable at the conclusion of the three
year term.
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Equity Investments with Readily Determinable Fair Value
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 consolidatedcondensed balance sheets as of March 31, 20222023 and June 30, 2021,2022, are as follows:
March 31, 2022
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare Class A common stock583 $4,221 $7,458 
Townsquare Class C common stock2,625 19,001 33,574 
DraftKings common stock869 6,036 16,929 
Total$29,258 $57,961 

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

Equity Investments with Readily Determinable Fair ValueMarch 31,
2023		June 30,
2022
Townsquare Class A common stock$4,665 $4,776 
Townsquare Class C common stock21,000 21,499 
DraftKings common stock12,397 10,146 
Total Equity Investments with Readily Determinable Fair Values$38,062 $36,421 
The following table summarizes the realized and unrealized gain (loss) on equity investments with and without readily determinable fair value, which is reported in Other expense, net, for the three and nine months ended March 31, 20222023 and 2021:2022:

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

Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Unrealized gain (loss) — Townsquare$2,406 $(1,732)$(609)$129 
Unrealized gain (loss) — DraftKings5,104 (6,956)4,916 (28,432)
Unrealized gain — Other— — 1,969 — 
Gain from shares sold — DraftKings214 — 1,703 — 
Total realized and unrealized gain (loss)$7,724 $(8,688)$7,979 $(28,303)
Supplemental information on realized gain:
Shares of common stock sold — DraftKings29 — 229— 
Cash proceeds from common stock sold — DraftKings$550 $— $4,369 $— 
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Note 9.7. Property and Equipment
As of March 31, 20222023 and June 30, 2021,2022, property and equipment consisted of the following: 
March 31,
2022		June 30,
2021		March 31,
2023		June 30,
2022
LandLand$146,344 $150,750 Land$141,257 $140,239 
BuildingsBuildings997,340 996,295 Buildings1,066,722 997,345 
Equipment426,857 405,835 
Equipment, furniture and fixturesEquipment, furniture and fixtures516,266 455,463 
Aircraft(a)Aircraft(a)38,093 38,090 Aircraft(a)— 38,090 
Furniture and fixtures39,592 40,660 
Leasehold improvementsLeasehold improvements232,931 214,678 Leasehold improvements124,369 124,369 
Construction in progress (a)(b)
Construction in progress (a)(b)
1,786,817 1,194,525 
Construction in progress (a)(b)
2,818,995 2,024,117 
3,667,974 3,040,833 
Total Property and equipmentTotal Property and equipment4,667,609 3,779,623 
Less accumulated depreciation and amortization(a)Less accumulated depreciation and amortization(a)(960,781)(884,541)Less accumulated depreciation and amortization(a)(977,375)(925,967)
$2,707,193 $2,156,292 
Property and equipment, netProperty and equipment, net$3,690,234 $2,853,656 
_________________
(a)Interest isOn 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 withThese costs primarily relate to the construction of MSG Sphere in Las Vegas. For the three and nine months ended March 31, 2023, the Company capitalized interest of $38,115 and $88,450 of interest, respectively. For the three and nine months ended March 31, 2022, the Company capitalized $12,272 and $32,202 of interest, respectively. As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and nine months ended March 31, 2021 have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $13,312 and $21,223, respectively.
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 $192,360$307,368 and $106,990$206,462 of capital expenditure accruals (primarily related to MSG Sphere construction) as of March 31, 20222023 and June 30, 2021,2022, respectively, which are reflected in OtherAccounts payable, accrued and other current liabilities in the accompanying condensed consolidated balance sheets.
Depreciation and amortization expense on property and equipment was $24,273$22,220 and $75,494$65,000 for the three and nine months ended March 31, 2023, respectively, and $19,351 and $59,712, for the three and nine months ended March 31, 2022, respectively, and $21,695 and $68,284 for the three and nine months ended March 31, 2021, respectively.
During the nine months ended March 31, 2022, Tao Group Hospitality recorded an impairment charge for leasehold improvements of $3,269 due to decisions made by management to cease operations at certain venues subsequent to the Hakkasan acquisition date. Refer to Note 10 for further detail of the Company’s impairment related to leases.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 10. Leases
The Company’s leases primarily consist of certain live-performance venues, entertainment dining and nightlife venues, corporate office space, storage and, to a lesser extent, office and other equipment. The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made available by the lessor for the Company’s use. The Company’s assessment of the lease term reflects the non-cancellable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the Company is reasonably certain to exercise. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations and consolidated statements of cash flows over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of the fixed minimum payment obligations over the lease term. A corresponding 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 March 31, 2022, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 0.3 years to 35.0 years. In certain instances, leases include options to renew, with varying option terms in each case. The exercise of lease renewal options is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.
The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheets as of March 31, 2022 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 SheetMarch 31,
2022		June 30,
2021
Right-of-use assets:
Operating leasesRight-of-use lease assets$462,479 $280,579 
Lease liabilities:
Operating leases, currentOperating lease liabilities, current$67,012 $73,423 
Operating leases, noncurrentOperating lease liabilities, noncurrent440,319 233,556 
Total lease liabilities$507,331 $306,979 
The following table summarizes the activity recorded within the Company’s consolidated statements of operations for the three and nine months ended March 31, 2022 and 2021:
Three Months Ended
Line Item in the Company’s Consolidated and Combined Statement of OperationsMarch 31,
20222021
Operating lease costDirect operating expenses$10,181 $6,959 
Operating lease costSelling, general and administrative expenses8,043 6,428 
Variable lease costDirect operating expenses1,712 978 
Variable lease costSelling, general and administrative expenses16 14 
Total lease cost$19,952 $14,379 
Nine Months Ended
Line Item in the Company’s Consolidated Statement of OperationsMarch 31,
20222021
Lease cost, operating leasesDirect operating expenses$32,140 $19,911 
Lease cost, operating leasesSelling, general and administrative expenses22,187 19,331 
Variable lease costDirect operating expenses3,804 1,569 
Variable lease costSelling, general and administrative expenses45 52 
Total lease cost$58,176 $40,863 
Supplemental Information
For the nine months ended March 31, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities was $47,009 and $40,787, respectively.For the nine months ended March 31, 2022, the Company recorded new operating lease liabilities of $337,590 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 nine months ended March 31, 2022, the Company received approximately $15,580 of the aforementioned tenant incentives, through a cash receipt from the landlord and payments by the landlord for capital expenditures on behalf of the Company. For the nine months ended March 31, 2021, the Company did not enter into new leases.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In November 2021, the Company executed an agreement with the existing landlord for its New York corporate office space pursuant to which it will be relocating from the space that the Company currently occupies to newly renovated office space within the same building. The Company will not be involved in the design or construction of the new space for purposes of the Company’s buildout prior to obtaining possession, which is expected to occur in Fiscal Year 2024. Upon obtaining possession of the space, the new lease is expected to result in an additional lease obligation and right of use asset. While lease payments under the new lease agreement will be recognized as a lease expense on a straight-line basis over the lease term, the Company will begin paying full rent in the second half of Fiscal Year 2026 due to certain tenant incentives included in the arrangement. Base rent payments will increase every five years beginning in Fiscal Year 2031 in accordance with the terms of the lease. The Company anticipates entering into a new sublease agreement with MSG Sports for a lease term equivalent to the November 2021 agreement that the Company entered into with the existing landlord. The future lease payments related to this new lease for the next five fiscal years and thereafter are expected to be as follows:
Fiscal Year 2022$— 
Fiscal Year 2023— 
Fiscal Year 2024— 
Fiscal Year 202510,121 
Fiscal Year 202619,023 
Thereafter (Fiscal Year 2027 to Fiscal Year 2046)1,026,207 
Total lease payments$1,055,351 
For the three months ended March 31, 2022, the Company recorded a net gain of $5,074 resulting from the extinguishment of lease liabilities associated with a Hakkasan venue of Tao Group Hospitality. For the nine months ended March 31, 2022 the Company recorded other net gains of $2,151 primarily from the extinguishment of lease liabilities and right-of-use lease assets associated with certain Hakkasan venues of Tao Group Hospitality due to decisions made by management to cease operations.
As of March 31, 2022, the weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet was 12.6 years. The weighted average discount rate was 6.41% as of March 31, 2022 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard, (ii) upon entering a new lease or (iii) the period in which the lease term expectation was modified.
Maturities of operating lease liabilities as of March 31, 2022 are as follows:
Fiscal Year 2022 (remainder)$10,571 
Fiscal Year 202377,668 
Fiscal Year 202478,861 
Fiscal Year 202556,572 
Fiscal Year 202633,254 
Thereafter500,083 
Total lease payments757,009 
Less imputed interest249,678 
Total lease liabilities$507,331 
Lessor Arrangements
In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed annual license fees scheduled to be paid monthly over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games. Operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the COVID-19 pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021, and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 when it became available at 100% seating capacity. The Company recorded $29,616 and $58,798 of revenues under the Arena License Agreements for the three and nine months ended March 31, 2022, respectively, and $11,443 and $13,028 for the three and nine months ended March 31, 2021. In addition, the Company recorded revenues from third party and related party lease and sublease arrangements of $1,436 and $3,766 for the three and nine months ended March 31, 2022, respectively, and $743 and $2,239 for the three and nine months ended March 31, 2021, respectively.
Note 11.8. Goodwill and Intangible Assets
The carrying amount of goodwill as of March 31, 20222023 and June 30, 20212022 are as follows:
EntertainmentMSG NetworksTao Group HospitalityTotal
Balance as of June 30, 2021$74,309 $424,508 $3,378 $502,195 
Measurement period adjustment (a)
— — (2,014)(2,014)
Balance as of March 31, 2022$74,309 $424,508 $1,364 $500,181 
_________________
(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 March 31, 2022.
March 31,
2023		June 30,
2022
Entertainment$74,309 $74,309 
MSG Networks424,508 424,508 
Total Goodwill$498,817 $498,817 
During the first quarter of Fiscal Year 2022,2023, the Company performed its annual impairment test of goodwill and determined that there werewas no impairmentsimpairment of goodwill identified as of the impairment test date.
19



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The carrying amount of indefinite-lived intangible assets, all of which are within the Entertainment segment, as of March 31, 20222023 and June 30, 20212022 were as follows:
Trademarks$61,881 
Photographic related rights1,920 
Total$63,801 
March 31,
2023		June 30,
2022
Trademarks$61,881 $61,881 
Photographic related rights1,920 1,920 
Total indefinite-lived intangible assets$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 werewas no impairmentsimpairment of indefinite-lived intangibles identified as of the impairment test date.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company’s intangible assets subject to amortization are as follows:
March 31, 2023GrossAccumulated
Amortization		Net
Affiliate relationships83,044 (64,355)18,689 
Other intangibles (b)
4,217 (4,217)— 
Total amortizable intangible assets$87,261 $(68,572)$18,689 
June 30, 2022GrossAccumulated
Amortization		Net
Trade names (a)
$2,530 $(2,169)$361 
Affiliate relationships83,044 (62,019)21,025 
Festival rights (a)
8,080 (6,926)1,154 
Other intangibles4,217 (4,094)123 
Total amortizable intangible assets$97,871 $(75,208)$22,663 
_________________
(a)    On December 2, 2022, the Company completed the BCE Disposition (see Note 3, Dispositions), which resulted in a reduction of gross assets and accumulated amortization related to festival rights and trade names, associated with the BCE Disposition.
March 31, 2022GrossAccumulated
Amortization		Net
Trade names$112,990 $(29,661)$83,329 
Venue management contracts85,512 (22,085)63,427 
Affiliate relationships83,044 (58,816)24,228 
Non-compete agreements9,000 (8,087)913 
Festival rights8,080 (3,100)4,980 
Other intangibles4,217 (4,025)192 
$302,843 $(125,774)$177,069 
June 30, 2021GrossAccumulated
Amortization		Net
Trade names$121,000 $(25,605)$95,395 
Venue management contracts85,700 (17,518)68,182 
Affiliate relationships83,044 (56,221)26,823 
Non-compete agreements9,000 (6,913)2,087 
Festival rights8,080 (2,696)5,384 
Other intangibles4,217 (3,814)403 
$311,041 $(112,767)$198,274 
(b)     Other intangibles gross and accumulated amortization balances were fully amortized.
Amortization expense for intangible assets was $4,366$779 and $13,108$3,090 for the three and nine months ended March 31, 2023, respectively, and $1,112 and $3,338 for the three and nine months ended March 31, 2022, respectively, and $17,916 and $25,414 for three and nine month ended March 31, 2021, respectively.
Note 12.9. 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 on2022 Form 10-K for details on the Company’s off-balance sheet commitments. The Company’s off-balance sheet commitments as of June 30, 20212022 included a total of $3,646,250$3,893,665 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 2023273,370 
Fiscal Year 2024253,485 
Fiscal Year 2025246,013 
Fiscal Year 2026249,584 
Thereafter2,347,091 
$3,646,250 
segment).
During the three and nine months ended March 31, 2022,2023, 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 LV Sphere Term Loan Facility (as defined below) on December 22, 2022. See Note 1410, Credit Facilities for details of the principal repayments required under the Company’s various credit facilities, including the MSG Networks Senior Secured Credit Facilities (as defined below), and Note 10 for details on the commitments under the Company’s lease obligations.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
LV Sphere Term Loan Facility.
Legal Matters
NaNFifteen complaints were filed in connection with the MergerCompany’s acquisition of MSG Networks Inc. (the “Merger”) by purported stockholders of the Company and MSG Networks Inc.
NaN
20



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
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.
NaNSix complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Merger and have since been consolidated into two remaining litigations.
On September 10, 2021, the Court of Chancery of the State of Delaware (the “Court”) entered an order consolidating 2two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM.2021-0468-KSJM (the “MSG Entertainment Litigation”). The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Merger. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021,2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and are currently engaged in responding to the consolidated plaintiffs’on November 16, 2022, fact discovery requests.closed. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancinghas advanced the costs incurred by defendants in this action, and defendants may asserthave asserted indemnification rights in respect of any adverse judgment or settlement of the action.

On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment Litigation on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (“MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023. The MSGE Settlement Agreement provides for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of $85,000, subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement amount will be fully funded by defendants’ insurers. The settlement of the MSG Entertainment Litigation is subject to the final approval of the Court. No gain amount relating to the proposed settlement has been recorded as of March 31, 2023.

On September 27, 2021, the Court of Chancery entered an order consolidating four complaints filed by purported stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. No. 2021-0575-KSJM.2021-0575-KSJM (the “MSG Networks Litigation”). 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 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 toin the MSG Networks Inc. consolidated actionLitigation filed answers to the complaint on December 30, 20212021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and are currently engaged in responding to the plaintiffs’on November 16, 2022 fact discovery requests.closed. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancinghas advanced the costs incurred by defendants in this action, and defendants may asserthave asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On March 3, 2022April 6, 2023, the Courtparties to the MSG Networks Litigation reached an agreement in principle to settle the MSG Networks Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet (“MSG Networks Term Sheet”), which will be incorporated into a long-form settlement agreement. The MSG Networks Term Sheet provides for, among other things, the final dismissal of Chancery approvedthe MSG Networks Litigation in exchange for a case schedule, governingsettlement payment to the two consolidated actions,plaintiffs and the class of $48,500 which set tentative trial dates for April 2023.
We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been maderecorded in our consolidated financial statements.Accounts payable, accrued and other current liabilities as of March 31, 2023.MSG Networks has a dispute with its insurers over whether and to what extent there is insurance coverage for the settlement. Unless those parties settle that insurance dispute, it is expected to be resolved in a pending Delaware insurance coverage action.In the interim, and subject to final resolution of the parties’ insurance coverage dispute, certain of MSG Networks’ insurers have agreed to advance $20,500 to fund the settlement and related class notice costs. The settlement of the MSG Networks Litigation is subject to the final approval of the Court.

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.
21
Note 13. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value within Level I of the fair value hierarchy on a recurring basis using observable inputs that reflect quoted prices for identical assets in active markets. These assets include (i) cash equivalents in money market accounts, time deposits and U.S. treasury bills, and (ii) equity investments with readily determinable fair value:
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Line Item on Consolidated Balance SheetMarch 31,
2022		June 30,
2021
Assets:
Money market accounts, time deposits and U.S. treasury bills (a)
Cash and cash equivalents$938,703 $1,361,729 
Equity investments with readily determinable fair value (b)
Other assets57,961 86,264 
Total assets measured at fair value$996,664 $1,447,993 
_________________
(a)The carrying amount of the Company’s cash equivalents in money market accounts, time deposits, and U.S. treasury bills approximate fair value due to their short-term maturities.
(b)See Note 8 for more information on the Company’s equity investments with readily determinable fair value in Townsquare and DraftKings.
In addition to the table above, the carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
March 31, 2022June 30, 2021
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Liabilities
Current and non-current portion of long-term debt under the MSG Networks Term Loan Facility (a)
$1,010,625 $1,000,519 $1,047,750 $1,042,510 
Current and non-current portion of long-term debt under the National Properties Term Loan Facility (a)
$641,875 $645,084 $646,750 $669,386 
Current and non-current portion of long-term debt under the Tao Credit Facilities (a)
$25,000 $24,862 $43,750 $43,851 
_________________
(a)On October 11, 2019, MSGN Holdings, L.P., certain MSGN Holdings, L.P. subsidiaries and certain MSG Networks Inc. subsidiaries entered into an amended and restated credit facility consisting of a $1,100,000 five-year term loan facility and a $250,000 five-year revolving credit facility. On May 23, 2019, TAO Group Intermediate Holdings LLC and TAO Group Operating LLC entered into a $40,000 five-year term loan facility and a $25,000 five-year term revolving facility. In November 2020, MSG National Properties and certain subsidiaries of the Company entered into a five-year $650,000 term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 14 for more information and outstanding balances on this long-term debt.
Note 14.10. 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 March 31, 2023 and June 30, 2022:
March 31,
2023		June 30,
2022
Current portion
MSG Networks Term Loan$82,500 $66,000 
National Properties Term Loan Facility16,250 8,125 
Other current portion of long-term debt— 637 
Total Current portion of long-term debt$98,750 $74,762 
March 31, 2023June 30, 2022
PrincipalUnamortized Deferred Financing Costs
Net
PrincipalUnamortized Deferred Financing Costs
Net
Non-current portion
MSG Networks Term Loan$870,375 $(1,788)$868,587 $932,250 $(2,715)$929,535 
National Properties Term Loan Facility629,687 (13,645)616,042 641,875 (16,064)625,811 
National Properties Revolving Credit Facility27,100 — 27,100 29,100 — 29,100 
LV Sphere Term Loan Facility275,000 (5,149)269,851 — — — 
Other long-term debt168 — 168 — — — 
Total Long-term debt, net of deferred financing costs$1,802,330 $(20,582)$1,781,748 $1,603,225 $(18,779)$1,584,446 
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. withhave senior secured credit facilities that consisted of: (a) an initial $1,550,000 term loan facilitypursuant 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 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
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of: (i) an initialinitial $1,100,000 term loanloan 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 satisfactionAs of certain conditionsMarch 31, 2023, 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 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 March 31, 20222023 was 1.96%6.86%.
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 March 31, 2022, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants. As of March 31, 2022, there were no letters of credit issued and outstanding under the MSGN Revolving Credit Facility. As of March 31, 2022, there was $1,010,625 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
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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 March 31, 2023, 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.
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TableAgreement 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 Contentsthose 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.

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
National Properties Term Loan FacilityCredit Facilities
General.On November 12, 2020,June 30, 2022, MSG National Properties, LLC (“MSG National Properties”) an indirect, wholly-owned subsidiary of the Company, Sphere Entertainment Group, LLC (formerly known as MSG Entertainment Group, LLC, (“MSG“Sphere Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a 5-yearcredit 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 seniorsenior secured term loan facility (the “National Properties Term Loan Facility”). The proceeds of and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, may be used to fund working capital needs, for general corporate purposesthe “National Properties Credit Facilities”). As of March 31, 2023, outstanding letters of credit were $7,992 and the remaining balance available under the National Properties Revolving Credit Facility was $72,900.
Interest Rates. Borrowings under the current National Properties Credit Facilities bear interest at a floating rate, which at the option of MSG National Properties and its subsidiaries, andmay be either (a) a base rate plus an applicable margin ranging from 1.50% to make distributions to MSG Entertainment Group.
The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which2.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties Base Rate”), or (b) Term SOFR plus an applicable margin ranging from 2.50% to 3.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties SOFR Rate”). The National Properties Credit Agreement requires MSG National Properties to pay a commitment fee ranging from 0.30% to 0.50% in respect of the daily unused commitments under the National Properties Revolving Credit Facility. MSG National Properties is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the National Properties Credit Agreement. The interest rate on the National Properties Credit Facilities as of March 31, 2023 was 7.41%.
Principal Repayments. Subject to customary notice and minimum amount conditions, MSG National Properties may voluntarily repay outstanding loans under the National Properties Credit Facilities and terminate commitments under the National
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Properties Revolving Credit Facility, at any time, in whole or in part, subject only to customary breakage costs in the case of prepayment of Term SOFR loans. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments beginning with the fiscal quarter ending March 31, 2023, in an aggregate amount equal to 2.50% per annum (0.625% per quarter), stepping up to 5.0% per annum (1.25% per quarter) in the fiscal quarter ending September 30, 2025, with the balance due at the maturity of the facility on 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.
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. Followingquarter over the first anniversarylife of the closingNational 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 facilityfiscal 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 timefiscal 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 5.00subsidiaries’ consolidated total indebtedness to 1.00 asadjusted 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 period 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 March 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for2023, MSG National Properties and its restricted subsidiaries was negative and therefore,were in compliance with the minimum liquidity level continues to be $200,000.
Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans undercovenants of the National Properties Term Loan Facility at any time,Credit Agreement.
In addition to the financial covenants discussed above, the National Properties Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The National Properties Credit Agreement contains certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in whole or in part (subject to customary breakage costs with respect to LIBOR loans)(and subject to a prepayment premium equalvarious exceptions and baskets set forth in) the National Properties Credit Agreement, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to (i) forother persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the initial 18-month period following the facility’s effective date, 2.0%ability 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 priorMSG National Properties to make cash distributions to the three year anniversaryCompany); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of the effective date, 2.0%business; (vii) engage in certain transactions with affiliates; (viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions.
Guarantors and Collateral. As of the principal amount prepaid, (iii) after the three year anniversary but on or prior to the four year anniversary of the effective date, 1.0% of the principal amount prepaid and (iv) after the 4th anniversary, 0%. The principalMarch 31, 2023, obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments in an aggregate amount equal to 1.00% per annum (0.25% per quarter), with the balance due at the maturity of the facility. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of March 31, 2022 was 7.00%. As of March 31, 2022, there was $641,875 outstanding under the National Properties Term Loan Facility.
All obligations under the National Properties Term Loan Facility areCredit Facilities were guaranteed by MSGSphere Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden BCE and certain other excluded subsidiaries (the “Subsidiary Guarantors”).
All obligations under the National Properties Term Loan Facility,Credit Facilities, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Garden or the leasehold interests in Radio City Music Hall and the Beacon Theatre.
The National Properties Credit Facilities were transferred to MSG Entertainment on the MSGE Spinco Distribution Date.
LV Sphere Term Loan Facility
General. 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 “LV Sphere Term Loan Facility”).
Interest Rates. Borrowings under the LV 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. The interest rate on the LV Sphere Term Loan Facility as of March 31, 2023 was 9.23%.
Principal Repayments. The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity.
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Under certain circumstances, MSG National PropertiesLV is required to make mandatory prepayments on loans outstanding,the loan, 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 LV Sphere Term Loan Facility and related guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring Sphere 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 Sphere in Las Vegas, 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 Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for Sphere 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 LV 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 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 Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date. Following the completion of the MSGE Spinco Distribution, the MSGE Retained Interest was pledged to secure the LV Sphere Term Loan Facility and will remain pledged until the Liquidity Covenant Reduction Date, and a portion of the value of the MSGE Retained Interest may also be counted toward the minimum liquidity level.
In addition to the minimum liquidity covenant,covenants described above, the National PropertiesLV Sphere Term Loan Facility and the related guaranty and security agreementand pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default.
The National PropertiesLV Sphere Term Loan Facility contains certain restrictions on the ability of MSG National PropertiesLV and its restricted subsidiariesSphere Entertainment Group to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the National PropertiesLV Sphere Term Loan Facility and the related guaranty and security and pledge agreements, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets;Sphere in Las Vegas, the MSGE Retained Interest or the real property intended for development as Sphere in London; (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 PropertiesLV to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii)(vi) engage in certain transactions with affiliates;
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(viii) (vii) amend their respective organizational documents; (ix)(viii) merge or consolidate; and (x)(ix) make certain dispositions. As of March 31, 2022, MSG National Properties
Guarantors 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”) 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 subsidiary of TAO Group Holdings, LLC, replaced the Senior Borrower���s prior credit agreement dated January 31, 2017 (“2017 Tao Credit Agreement”). On June 15, 2020, the Company entered into the second amendment to the Tao Subordinated Credit Agreement, which provided an additional $22,000 of intercompany loan borrowing availability under the Tao Subordinated Credit Agreement. The net intercompany loan outstanding balance under the Tao Subordinated Credit Agreement, as amended, was $63,000 as of March 31, 2022. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement, as amended, have been eliminated in the consolidated financial statements in accordance with ASC Topic 810,Collateral Consolidation.
The Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “Tao Senior Secured Credit Facilities”) consisting of: (i) an initial $40,000 term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a $25,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit. All borrowings under the Tao Revolving Credit Facility, including, without limitation, amounts drawn under the revolving line of credit are subject to the satisfaction of customary conditions. The Tao Senior Secured Credit Facilities were obtained without recourse to the Company or any of its affiliates (other than TAOG, TAOIH and its subsidiaries and in respect of a certain reserve account, each as discussed below).
The Tao Senior Credit Agreement requires TAOIH to comply with a maximum total leverage ratio of 4.00:1.00 and a maximum senior leverage ratio of 3.00:1.00 from the closing date until December 31, 2021 and a maximum total leverage ratio of 3.50:1.00 and a maximum senior leverage ratio of 2.50:1.00 from and after December 31, 2021. In addition, there is a minimum fixed charge coverage ratio of 1.25:1.00 for TAOIH. On August 6, 2020, TAOG and TAOIH entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct wholly owned subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. There was no balance in the reserve account as of March 31, 2022. As of March 31, 2022, 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,LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group. All obligations under the LV Sphere Term Loan Facility, including the guarantees of those obligations, are secured by the reserve account noted above and substantially all of the assets of TAOGMSG LV and each Tao Guarantor (collectively, “Tao Collateral”),certain assets of Sphere Entertainment Group including, but not limited to, MSG LV’s leasehold interest in the land on which Sphere in Las Vegas is located, a pledge of all of the equity interests held directly by Sphere Entertainment Group in MSG LV and, until the Liquidity Covenant Reduction Date, the Pledged Account and a pledge of the equity interestsMSGE Retained Interest.
Delayed Draw Term Loan Facility
On April 20, 2023, the Company entered into a delayed draw term loan facility (the “DDTL Facility”) with MSG Entertainment Holdings, LLC (“MSG Entertainment Holdings”). Pursuant to the DDTL Facility, MSG Entertainment Holdings has committed to lend up to $65,000 in TAOG held directly by TAOIHdelayed draw term loans to the Company on an unsecured basis for a period of 18 months following the consummation of the MSGE Spinco Distribution. The Company has not yet drawn upon the DDTL Facility.
The DDTL Facility will mature and any unused commitments thereunder will expire on October 20, 2024. Borrowings under the equity interestsDDTL Facility will bear interest at a variable rate equal to either, at the option of the Company, (a) a base rate plus an applicable margin, or (b) Term SOFR plus 0.10%, plus an applicable margin. The applicable margin is equal to the applicable margin under the National Properties Credit Facilities, plus 1.00% per annum.

Subject to customary borrowing conditions, the DDTL Facility may be drawn in each Tao Subsidiary Guarantor held directlyup to six separate borrowings of $5 million or indirectly by TAOIH.more. The DDTL Facility is prepayable at any time without penalty and amounts repaid on the DDTL Facility may not be
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Borrowingsreborrowed. If drawn, the Company will have the option to make any payments of principal, interest or fees under the Tao Senior Credit Agreement bear interest at a floating rate,DDTL Facility either in cash or by delivering to MSG Entertainment Holdings shares of MSG Entertainment Class A common stock. If the Company elected to make any payment in the form of MSG Entertainment Class A common stock, the amount of such payment would be calculated based on the dollar volume-weighted average trading price for MSG Entertainment Class A common stock for the twenty trading days ending on the day on which at the optionCompany made such election. The Company shall only be permitted to use the proceeds of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to 2.50% per annum (determined based on a total leverage ratio) (the “Tao Base Rate”), or (b) a Eurocurrency rate plus an additional rate ranging from 2.50% to 3.50% per annum (determined based on a total leverage ratio) (the “Tao Eurocurrency Rate”), provided that through March 31, 2022,DDTL Facility (i) for funding costs associated with the additional rate used in calculating the floating rate was (i) 1.50% per annum for borrowings bearing the Tao Base Rate,Sphere initiative and (ii) 2.50% per annum for borrowings bearing the Eurocurrency Rate. The Tao Senior Credit Agreement requires TAOG to pay a commitment fee of 0.50% in respectconnection with refinancing of the daily unused commitmentsindebtedness under the Tao RevolvingMSG Networks Credit Facility. TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Tao Senior Credit Agreement. Facilities.

The interest rate on the Tao Senior Credit Agreement as of March 31, 2022 was 2.96%. There was no borrowing outstanding under the Tao Revolving CreditDDTL Facility as of March 31, 2022. Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available as of March 31, 2022 was $24,250. As of March 31, 2022, there was $25,000 outstanding under the Tao Term Loan Facility.
In addition to the financial covenants described above, the Tao Senior Credit Agreement and the related security agreements containcontains certain customary representations and warranties and affirmative and negative covenants, including, among others, financial reporting, notices of material events, and events of default. The Tao Senior Credit Agreement contains certain restrictionslimitations on the ability of TAOIH, TAOGasset dispositions restricted payments, and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Tao Senior Credit Agreement, including, without limitation, the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) engaging in certain transactions with affiliates; (vi) amending specified agreements; (vii) merging or consolidating; (viii) making certain dispositions; and (ix) entering into agreements that restrict the granting of liens. Intermediate Holdings is subject to a customary passive holding company covenant.affiliate transactions.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily repay outstanding loans under the Tao Senior Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). The initial Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 30, 2019 through March 31, 2024 with a final maturity date on May 23, 2024. TAOG is required to make mandatory prepayments of the Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
Principal Repayments
Long-term debt maturities over the next five years for the outstanding balance under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as of March 31, 2022 were:
MSG Networks Senior Secured Credit FacilitiesNational Properties Term Loan FacilityTao Credit FacilitiesTotal
Fiscal Year 2022 (remainder)$12,375 1,625 $2,500 $16,500 
Fiscal Year 202366,000 6,500 10,000 82,500 
Fiscal Year 202482,500 6,500 12,500 101,500 
Fiscal Year 2025849,750 6,500 — 856,250 
Fiscal Year 2026— 620,750 — 620,750 
Thereafter— — — — 
$1,010,625 $641,875 $25,000 $1,677,500 
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 March 31, 2022 and June 30, 2021:
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
March 31, 2022June 30, 2021
PrincipalUnamortized Deferred Financing Costs
Net
PrincipalUnamortized Deferred Financing Costs
Net
Current portion
MSG Networks Senior Secured Credit Facilities$57,750 $(1,239)$56,511 $49,500 $(1,255)$48,245 
National Properties Term Loan Facility6,500 (6,783)(283)6,500 (6,783)(283)
Tao Term Loan Facility10,000 (239)9,761 6,250 (239)6,011 
Current portion of long-term debt, net of deferred financing costs$74,250 $(8,261)$65,989 $62,250 $(8,277)$53,973 

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

Interest PaymentsLoan Principal Repayments
Nine Months EndedNine Months Ended
March 31,March 31,
2023202220232022
MSG Networks Credit Facilities$41,034 $13,238 $45,375 $37,125 
National Properties Credit Facilities35,283 34,917 6,063 4,875 
LV Sphere Term Loan Facility6,211 — — — 
Total Payments$82,528 $48,155 $51,438 $42,000 
TableThe carrying value and fair value of Contentsthe Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Interest Payments (a)
Loan Principal Repayments
Nine Months EndedNine Months Ended
March 31, 2022March 31, 2021March 31, 2022March 31, 2021
MSG Networks Senior Secured Credit Facilities$13,238 $14,102 $37,125 $26,125 
National Properties Term Loan Facility34,917 11,643 4,875 1,625 
Tao Credit Facilities589 826 18,750 3,750 
$48,744 $26,571 $60,750 $31,500 
March 31, 2023June 30, 2022
Carrying
Value (a)
Fair
Value
Carrying
Value (a)
Fair
Value
Liabilities:
MSG Networks Credit Facilities$952,875 $938,582 $998,250 $958,320 
National Properties Credit Facilities673,037 666,307 679,100 679,100 
LV Sphere Term Loan Facility275,000 269,500 — — 
Other debt168 168 637 637 
Total Long-term debt$1,901,080 $1,874,557 $1,677,987 $1,638,057 
_________________
(a)See Note 2 and Note 9 for further details on interest capitalization duringThe total carrying value of the three and nine months endedCompany’s financial instruments as of March 31, 2023andJune 30, 2022is equal to the current and 2021. Interestnon-current principal payments net of capitalized interest, were $16,542 and $5,348 for the nine months ended March 31, 2022Company’s credit agreements excluding unamortized deferred financing costs of $20,582 and 2021.$18,779, respectively.
The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar instruments for which the inputs are readily observable.
Note 15.11. Pension Plans and Other Postretirement Benefit Plan
See Note 15 to the Company’s audited consolidatedThe 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 regardingpostretirement 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.
26



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Defined Benefit Pension Plans and Postretirement Benefit 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 nine months ended March 31, 20222023 and 2021.2022. 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 miscellaneousOther expense, net.
Pension PlansPostretirement Plans
Three Months EndedThree Months Ended
March 31,March 31,
2022202120222021
Service cost$118 $121 $16 $22 
Interest cost1,190 1,101 20 19 
Expected return on plan assets(1,719)(1,509)— — 
Recognized actuarial loss501 396 9 20 
Net periodic benefit cost$90 $109 $45 $61 
38

Pension PlansPostretirement Plans
Three Months EndedThree Months Ended
March 31,March 31,
2023202220232022
Service cost$123 $118 $15 $16 
Interest cost1,189 1,190 19 20 
Expected return on plan assets(1,719)(1,719)— — 
Recognized actuarial loss (gain)476 501 (12)9 
Net periodic benefit cost$69 $90 $22 $45 
Table
Pension PlansPostretirement Plans
Nine Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Service cost$369 $354 $45 $48 
Interest cost3,567 3,570 57 60 
Expected return on plan assets(5,157)(5,157)— — 
Recognized actuarial loss1,478 1,503 6 27 
Net periodic benefit cost$257 $270 $108 $135 
Contributions for Qualified Defined Benefit Plans
The Company sponsors two non-contributory, qualified defined benefit pension plans covering certain of Contentsits union employees (the “UTT Plan” and the “Networks 1212 Plan,” collectively the “Union Plans”). During the three and nine months ended March 31, 2023, the Company contributed $500 to the Networks 1212 Plan.

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

Contributions for Defined Contribution Pension Plans
For the three and nine months ended March 31, 20222023 and 2021,2022, expenses related to the Savings Plans and Union Savings Plan included in the accompanying condensed consolidated statements of operations are as follows:
Savings PlansUnion Savings Plan
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
March 31,March 31,March 31,March 31,
20222021202220212022202120222021
$2,095 $241 $6,589 $3,318 $24 $17 $45 $36 
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Savings Plans$3,304 $2,095 $8,611 $6,589 
Union Savings Plan$371 $24 $409 $45 
Note 16.12. Share-based Compensation
See Note 16 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 underplans: 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 Plan2022 Form 10-K for Non-Employee Directors (collectively, “MSGN Equity Incentive Plans”). Upon exercise of stock options or vesting of time-basedmore 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(“PSUs”) and/or stock options arerecognized in the condensed consolidated statements of operations as “RSUs,” under MSGN Equity Incentive Plans, shares were either issued from MSG Networks Inc.’s unissued reserved stocka component of direct operating expenses or from treasury stock.selling, general and administrative expenses.
At
27



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
The following table summarizes the Effective Time, each RSU for MSG Networks Inc.’s common stock was converted into 0.172 RSUsCompany’s share-based compensation expense:
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Share-based compensation (a)
$10,899 $12,157 $39,846 $51,987 
Intrinsic value of awards vested (b)    
$344 $1,198 $34,028 $35,048 
_________________
(a)Share-based compensation excludes costs that have been capitalized of $2,887 and $2,264 for the Company’s Class A Common Stocknine months ended March 31, 2023 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 price2022, respectively. For the three and nine months ended March 31, 2023, share-based compensation also excludes costs 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,$7,384 and $9,677, respectively, based on the 100% target number of shares included in the terms of the original award (“Performance Award Conversion”).
Share-based compensation expense was $18,622 and $62,321 for the three and nine months ended March 31, 2022, respectively, and $11,437 and $57,421 for the three and nine months ended March 31, 2021, respectively. The total share-based compensation expense as shown for the three and nine month periods ended March 31, 2022 includesalso excludes costs of $4,589, which wasthat have been reclassified to restructuring cost onRestructuring charges in the facecondensed consolidated statements of the Consolidated Statements of Operations,operations, as detailed in Note 4. In addition, capitalized share-based compensation expense was $2,264 and $4,541 for the nine months ended March 31, 2022 and 2021, respectively.
RSUs and stock options information is presented herein as if the Company and MSG Networks Inc. had been combined for all periods presented, unless otherwise noted.
39

5, Restructuring Charges.
Table of Contents(b)

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including (i) Company employees and (ii) MSG Sports employees that received share-based awards prior to the Entertainment Distribution) of the Company’s RSUs for the nine months ended March 31, 2022:
 Number ofWeighted-Average
Fair Value 
Per Share at
Date of Grant
 Nonperformance
Based Vesting
RSUs
(In Thousands)		Performance
Based Vesting
RSUs
(In Thousands)
Unvested award balance, June 30, 2021683 701 $76.15 
Granted445 422 $79.07 
Performance Award Conversion223 (223)$82.63 
Vested(391)(77)$85.22 
Forfeited(29)(27)$76.39 
Unvested award balance, March 31, 2022931 796 $75.15 
The fair value of RSUs that vested during the nine months ended March 31, 2022 was $36,940. Upon delivery, RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 205 of these RSUs and PSUs with an aggregate value of $16,336,$14,188 and $15,548 were retained by the Company during the nine months ended March 31, 2023, and 2022, of which 6 of these RSUs, with anrespectively. 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, forduring the nine months ended March 31, 2022:2023, and 2022, respectively.
Number of
Time Vesting Options
(In Thousands)		Number of
Performance
Based Vesting Options
(In Thousands)		Weighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Term (In Years)Aggregate Intrinsic Value
(In Thousands)
Balance as of June 30, 2021409 315 $103.88 
Performance Award Conversion315 (315)$109.76 
Balance as of March 31, 2022724 — $103.88 3.71$1,781 
Exercisable as of March 31, 2022597 — $108.29 3.45$1,781 
As of March 31, 2023, there was $69,512 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 1.7 years.
For the three and nine months ended March 31, 2023 and 2022 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.
Award Activity
RSUs
During the nine months ended March 31, 2023 and 2022, approximately 620 and 413 RSUs were granted and approximately 526 and 367 RSUs vested, respectively.
PSUs
During the nine months ended March 31, 2023 and 2022, approximately 529 and 390 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 March 31, 2023 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. The program was re-authorized by the Company’s Board of Directors on March 29, 2023. 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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Table of Contents

MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Note 17. Accumulated Other Comprehensive Loss
The following table detailstables detail the components of accumulated other comprehensive loss:
Three Months Ended March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of December 31, 2021$(44,596)$11,964 $(32,632)
Other comprehensive loss— (5,912)(5,912)
Amounts reclassified from accumulated other comprehensive loss (a)
510 — 510 
Income tax benefit (expense)2,675 (1,651)1,024 
Other comprehensive income (loss)3,185 (7,563)(4,378)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)
Three Months Ended
March 31, 2023
Pension Plans and
Postretirement
Plans		Cumulative
Translation
Adjustments		Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2022$(39,453)$(9,110)$(48,563)
Other comprehensive income— 2,105 2,105 
Amounts reclassified from accumulated other comprehensive loss (a)
464 — 464 
Income tax expense(58)(387)(445)
Other comprehensive income406 1,718 2,124 
Balance as of March 31, 2023$(39,047)$(7,392)$(46,439)

Three Months Ended
March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative
Translation
Adjustments		Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2021$(44,596)$11,964 $(32,632)
Other comprehensive loss— (5,912)(5,912)
Amounts reclassified from accumulated other comprehensive loss (a)
510 — 510 
Income tax (expense) benefit2,675 (1,651)1,024 
Other comprehensive income (loss)3,185 (7,563)(4,378)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)

Nine Months Ended
March 31, 2023
Pension Plans and
Postretirement
Plans		Cumulative
Translation
Adjustments		Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2022$(40,287)$(8,068)$(48,355)
Other comprehensive income— 828 828 
Amounts reclassified from accumulated other comprehensive loss (a)
1,484 — 1,484 
Income tax expense(244)(152)(396)
Other comprehensive income1,240 676 1,916 
Balance as of March 31, 2023$(39,047)$(7,392)$(46,439)
Three Months Ended March 31, 2021
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of December 31, 2020$(39,598)$10,869 $(28,729)
Other comprehensive income— 1,499 1,499 
Amounts reclassified from accumulated other comprehensive loss (a)
416 — 416 
Income tax expense(76)(274)(350)
Other comprehensive income340 1,225 1,565 
Balance as of March 31, 2021$(39,258)$12,094 $(27,164)
Nine Months Ended March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2021
$(45,425)$15,153 $(30,272)
Other comprehensive loss— (9,844)(9,844)
Amounts reclassified from accumulated other comprehensive loss (a)
1,530 — 1,530 
Income tax benefit (expense)2,484 (908)1,576 
Other comprehensive income (loss)4,014 (10,752)(6,738)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)
41
Nine Months Ended
March 31, 2022
Pension Plans and
Postretirement
Plans		Cumulative
Translation
Adjustments		Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2021$(45,425)$15,153 $(30,272)
Other comprehensive loss— (9,844)(9,844)
Amounts reclassified from accumulated other comprehensive loss (a)
1,530 — 1,530 
Income tax benefit (expense)2,484 (908)1,576 
Other comprehensive income (loss)4,014 (10,752)(6,738)
Balance as of March 31, 2022$(41,411)$4,401 $(37,010)

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nine Months Ended March 31, 2021
Pension Plans and
Postretirement
Plans		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2020$(40,248)$(10,225)$(50,473)
Other comprehensive income— 27,333 27,333 
Amounts reclassified from accumulated other comprehensive loss (a)
1,310 — 1,310 
Income tax expense(320)(5,014)(5,334)
Other comprehensive income990 22,319 23,309 
Balance as of March 31, 2021$(39,258)$12,094 $(27,164)
______________________________
(a)Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net
29



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
unrecognized prior service credit included in net periodic benefit cost, which is reflected under MiscellaneousOther income (expense), net in the accompanying condensed consolidated statements of operations.operations (see Note 11, Pension Plans and Other Postretirement Benefit Plans).
Note 18. Income Taxes
For the periods prior to the Entertainment Distribution, the Company filed consolidated income tax returns with MSG Sports. The income tax provision included in these periods has been calculated using the separate return basis, as if the Company filed a separate tax return. In addition, although the Company and MSG Networks did not file consolidated returns for periods prior to the Merger, income tax expense or benefit and deferred tax assets and liabilities have been presented on a combined basis for all historical periods, as described in Note 1.
In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or tax expense recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis.
Income tax expense for the three months ended March 31, 2022 of $6,315 differs from the income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $4,444 related to nondeductible officers’ compensation, (ii) state income tax expense of $3,243 and (iii) tax expense of $381 related to noncontrolling interests, partially offset by (iv) a tax benefit of $1,312 resulting from a decrease in the valuation allowance.
Income tax benefit for the nine months ended March 31, 2022 of $8,532 differs from the income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax expense of $10,213 related to nondeductible officers’ compensation, (ii) tax expense of $9,742 to write off the deferred tax for certain transaction costs associated with the Merger, partially offset by (iii) a tax benefit of $3,772 resulting from a decrease in the valuation allowance, (iv) a tax benefit of $1,998 resulting from a change in the estimated applicable tax rate used to measure deferred taxes, (v) state income tax benefit of $1,824 and (vi) tax benefit of $737 related to noncontrolling interests.

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

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

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax asset will not be realized. As of March 31, 2022, based on current facts and circumstances, management believes that it is more likely than not that the Company will not realize the benefit for a portion of its deferred tax asset.Accordingly, a partial valuation allowance has been recorded as of March 31, 2022.The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis.
During the nine months ended March 31, 2022 the Company received income tax refunds, net of payments, of $3,887. During the nine months ended March 31, 2021, the Company made income tax payments, net of refunds, of $77,393.
Note 19.14. Related Party Transactions
The descriptions of the transactions below, unless otherwise indicated, are as of March 31, 2023, and do not reflect the MSGE Spinco Distribution, which did not occur until after March 31, 2023.

As of March 31, 2022, members2023, members of the Dolan familyFamily, 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 of the date hereof)March 31, 2023). 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”)., as well as MSG Entertainment following the MSGE Spinco Distribution.
CurrentSee Note 21, Related Party Arrangements
TheTransactions, to the consolidated and combined financial statements included in the 2022 Form 10-K for a description of the Company’s related party arrangements. Following the MSGE Spinco Distribution, the Company is no longer party to the followingarrangements described thereunder, except for the media rights agreements and/or arrangements with MSG Sports:
•Media rightsand 2020 distribution-related agreements with MSG Sports, pursuant to whichand 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 termsharing of ten years for a commission;
•A team sponsorship allocation agreement, pursuant to which MSG Sports continues receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the Entertainment Distribution Date;
•Arena License Agreements pursuant to which the Company (i) provides MSG Sports the right to use The Garden for games of the Knicks and Rangers for a 35-year term in exchange for venue license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sale of food and beverage sales and catering services during the Knicks and Rangers games for a portion of net profits (as defined under the Arena License Agreements), (v) provides day of game services that were historically provided prior to the Entertainment Distribution, and (vi) provides other general services within The Garden;
•Transition Services Agreement (the “TSA”) pursuant to which the Company provides certain corporate and other transition services to MSG Sports, such as information technology, accounting, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions, in exchange for service fees. MSG Sports also provides certain transition services to the Company, in exchange for service fees;
•Sublease agreement, pursuant to which the Company subleases office space to MSG Sports;
•Group ticket sales representation agreement, pursuant to which the Company appointed MSG Sports as its sales and service representative to sell group ticket packages related to Company events in exchange for a commission;
•Single night rental commission agreement, pursuant to which MSG Sports may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual Company events in exchange for a commission;
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
•Aircraft time sharing agreements (discussed below); and
•Other agreements with MSG Sports entered into in connection with the Entertainment Distribution such as a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements.
Further, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman and Chief Executive Officer with MSG Entertainment and MSG Sports and (ii) the Company’s Vice Chairman with MSG Sports and AMC Networks. Prior to April 1, 2022, the Company also shared such costs for the Company’s former President with MSG Sports.
The Company is a party to various aircraft arrangements. Pursuant to certain Aircraft Support Services Agreements (the “Support Agreements”), the Company provides certain aircraft support services to entities controlled by (i) Charles F. Dolan, a director, and certain of his children, who are siblings of James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M. Dolan, and (ii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan.
The Company is party to reciprocal time sharing/dry lease agreements with 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 CFD and CFD has agreed from time to time to make their aircraft available to the Company. Pursuant to the terms of the agreement, CFD may lease on a non-exclusive, “time sharing” basis, certain Company aircraft.
The Company is also party to a dry lease agreement and a time sharing agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F. Dolan, the son of Charles F. Dolan and the brother of James L. Dolan, pursuant to which 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 was also party to (i) a reciprocal time sharing/dry lease agreement with Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and Kristin A. Dolan, his spouse and a director of the Company, pursuant to which the Company from time to time made its aircraft available to Q2C, and Q2C, from time to time made its aircraft available to the Company, and (ii) an aircraft support services agreement with an entity controlled by James L. Dolan, pursuant to which the Company provided certain aircraft support services. These agreements were no longer effective as of December 21, 2021.
The Company and each ofEntertainment, 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.Networks.
In addition to the aircraft arrangements described above, certain executives of the Company are party to aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).
From time to time the Company enters into arrangements with 605, LLC.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 OfficerNon-Executive Chairman 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. 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 $70 and $205 of expense for the three and nine months ended March 31, 2023, respectively, and as of March 31, 2023 approximately $70 has been recognized in Prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.
MSG Sports has made market rate interest-bearing advances to the Company (and such advances will be with MSG Entertainment following the MSGE Spinco Distribution) in connection with the construction of new premium hospitality suites at The Garden. The advances will be repaid (including interest) through cash receipts from the licenses for each new suite. As of March 31, 2023, MSG Sports had advanced approximately $170 to the Company in connection with the arrangement. This advance has been recognized in Long-term debt, net of deferred financing costs in the accompanying condensed consolidated balance sheets.
As of March 31, 2022 and June 30, 2021,2022, the Company had $853 and $792, respectively,$637 of notes payable with respect to a loan received by BCE from its noncontrolling interest holder. See Note 14As of for further information.
44

TableMarch 31, 2023 there were no notes payable with respect to this BCE loan as a result of Contentsthe BCE Disposition (as defined below).

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company has also entered into certain commercial agreements with its equity method investment nonconsolidated affiliates in connection with MSG Sphere. ForThe Company recorded $14,271 and $46,577 for the three months ended March 31, 2023 and 2022, respectively, and $87,357 and $83,318 for the nine months ended March 31, 20222023 and 2021, the Compa2022ny recorded $83,318 and $32,654,, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of March 31, 20222023 and June 30, 2021,2022, accrued capital expenditures associated with related parties were $25,482$24,826 and $6,921,$25,028, respectively, and are reported under Accounts payable, accrued and other accruedcurrent liabilities in the accompanying condensed consolidated balance sheets.
30



SPHERE ENTERTAINMENT CO.
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 nine months ended March 31, 2023 and 2022:
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Revenues$42,795 $39,987 $88,431 $79,314 
Operating expenses (credits):
Media rights fees$43,433 $40,948 $129,633 $122,206 
Revenue sharing expenses7,353 5,791 15,639 12,187 
Reimbursement under Arena License Agreements(8,911)(10,047)(18,761)(19,097)
Cost reimbursement from MSG Sports - per Transition services agreement(9,789)(9,159)(28,781)(28,888)
Origination, master control and technical services1,257 1,232 3,721 3,648 
Other operating expenses, net851 279 3,143 3,193 
Total operating expenses, net (a)
$34,194 $29,044 $104,594 $93,249 
_________________
(a)Of the total operating expenses, net, $44,264 and $37,949 for three months ended March 31, 2023 and 2022, respectively, and 2021:
Three Months Ended March 31,Nine Months Ended March 31,
2022202120222021
Revenues$35,259 $16,291 $70,148 $23,752 
Operating expenses (credits):
Direct operating — media rights fees$40,948 $35,007 $122,206 $108,971 
Direct operating — revenue sharing expenses1,075 181 3,060 277 
Direct operating — reimbursement under Arena License Arrangement(6,812)(174)(13,276)(1,415)
General and administrative with MSG Sports — net of TSA credits(9,159)(8,476)(28,888)(29,379)
Direct operating — origination, master control and technical services1,232 1,208 3,648 3,576 
Other operating expenses, net279 838 3,388 753 
$133,071 and $119,146 for the nine months ended March 31, 2023 and, 2022, respectively, are included in direct operating expenses in the accompanying condensed consolidated statements of operations, and $(10,070) and $(8,905) for three months ended March 31, 2023 and 2022, respectively, and $(28,477) and $(25,897) for the nine months ended March 31, 2023 and 2022, 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 and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games. As further detailed in Note 10, operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event (including when events at The Garden were suspended as a result of government-mandated assembly limitations and closures due to the COVID-19 pandemic) and that the license fees be reduced when The Garden is available with certain capacity restrictions (including when The Garden was available at 10% seating capacity from February through May 2021 as a result of government-mandated assembly limitations due to the COVID-19 pandemic). As of July 1, 2021, the Knicks and Rangers began paying the full amounts provided for their respective Arena License Agreements. The Company recorded $29,616ed $31,163 and $58,798$64,312 of revenuesrevenues under the Arena License Agreements for the three and nine months ended March 31, 2022,2023, respectively.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In addition to the Arena License Agreements, discussed above, the Company’s revenues from related parties primarily reflected sponsorship sales and service representation agreements with MSG Sports of $7,027 and $14,207 during the three$7,079 and nine months ended March 31, 2022, respectively$15,643 and $4,442merchandise sharing revenues of $2,160 and $9,088 during the three and nine months ended March 31, 2021, respectively. The Company also earned sublease revenue from related parties of $611 and $1,834 during the three and nine months ended March 31, 2022, respectively and $611 and $1,840 during the three and nine months ended March 31, 2021, respectively. These related party revenues were partially offset by approximately $3,225 and $6,351 of merchandise revenue sharing$4,451 with MSG Sports during the three and nine months ended March 31, 2022,2023, respectively.
Media Rights Fees
MSG Networks’ media rights agreements with MSG Sports, effective as The Company also earned sublease revenue from related parties of July 1, 2015, provide the MSG Networks segment with the exclusive media rights to Knicks$716 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$2,100 d
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 $9,159 and $28,888 foruring the three and nine months ended March 31, 2022, respectively,2023, respectively.
The Company recorded $29,616 and $8,476 and $29,379$58,797 of revenues under the Arena License Agreements for the three and nine months ended March 31, 2021,2022, 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 In addition, the Company for other transactions with its related parties are netrecorded revenues under sponsorship sales and service representation agreements of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L. Dolan, the Executive Chairman, Chief Executive Officer$7,027 and a director$14,206 and merchandise sharing revenues of the Company, for office space$1,548 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$3,000 with MSG Sports AMC Networksduring the three and Brighid Airnine months ended March 31, 2022, respectively. The Company also earned sublease revenue from related parties of $736 and (iii) commission under$1,958 during the group ticket sales representation agreement with MSG Sports. The reciprocal aircraft arrangement between the Company three and Q2C and the related aircraft support services arrangement between them was no longer effective as of December 21, 2021.
46
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 20.15. Segment Information
TheAs of March 31, 2023, the Company iswas comprised of 3two reportable segments: Entertainment and 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, theNetworks. 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”). TheMaker. Following the MSGE Entertainment Distribution, the Company currently has evaluated this guidance and determined that there are 3two reportable segments. In addition, the
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 certain corporate
31



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
property, equipment and leasehold improvements. Additionally, the Company does not allocate any purchase accounting adjustments related to business acquisitions to the reporting segments.
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, whichand
(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 referredbeneficial 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. Managementcompensate, 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, theThe 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).
32



SPHERE ENTERTAINMENT CO.
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
March 31, 2023
EntertainmentMSG Networks
Other (b)
Total
Revenues$201,861 $161,436 $— $363,297 
Direct operating expenses(120,835)(89,251)(55)(210,141)
Selling, general and administrative expenses(120,307)(60,052)489 (179,870)
Depreciation and amortization(21,310)(1,689)— (22,999)
Impairment and other losses, net(51)— — (51)
Restructuring charges(20,498)— — (20,498)
Operating (loss) income$(81,140)$10,444 $434 $(70,262)
Interest income, net2,640 
Other income, net4,994 
Loss from operations before income taxes$(62,628)
Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating (loss) income$(81,140)$10,444 $434 $(70,262)
Add back:
Non-cash portion of arena license fees from MSG Sports (a)
(12,149)— — (12,149)
Share-based compensation10,259 640 — 10,899 
Depreciation and amortization21,310 1,689 — 22,999 
Restructuring charges20,498 — — 20,498 
Impairment and other losses, net51 — — 51 
Merger and acquisition related costs, net of insurance recovery1,528 45,513 — 47,041 
Amortization for capitalized cloud computing costs185 43 — 228 
Remeasurement of deferred compensation plan liabilities126 — — 126 
Adjusted operating (loss) income$(39,332)$58,329 $434 $19,431 
Other information:
Capital expenditures$198,924 $1,818 $— $200,742 
47
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Three Months Ended
Three Months Ended March 31, 2022March 31, 2022
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotalEntertainmentMSG Networks
Other (b)
Total
RevenuesRevenues$194,585 $167,569 $108,572 $— $(10,599)$460,127 Revenues$194,585 $167,569 $(9,620)$352,534 
Direct operating expensesDirect operating expenses110,688 87,174 63,783 1,622 (791)262,476 Direct operating expenses(110,688)(87,174)(105)(197,967)
Selling, general and administrative expensesSelling, general and administrative expenses

94,603 32,237 40,376 — (9,618)157,598 Selling, general and administrative expenses(96,198)(32,237)9,647 (118,788)
Depreciation and amortizationDepreciation and amortization18,522 1,764 6,490 1,863 — 28,639 Depreciation and amortization(18,522)(1,764)(177)(20,463)
Impairment and other (gains) losses, net(245)— (5,074)— — (5,319)
Impairment and other gains, netImpairment and other gains, net245 — — 245 
Restructuring chargesRestructuring charges14,238 452 — — — 14,690 Restructuring charges(14,238)(452)— (14,690)
Operating income (loss)$(43,221)$45,942 $2,997 $(3,485)$(190)$2,043 
Loss in equity method investments(1,528)
Interest income774 
Interest expense(5,831)
Miscellaneous expense, net(a)(8,449)
Operating (loss) incomeOperating (loss) income$(44,816)$45,942 $(255)$871 
Interest expense, netInterest expense, net(4,761)
Other expense, netOther expense, net(10,052)
Loss from operations before income taxesLoss from operations before income taxes$(12,991)Loss from operations before income taxes$(13,942)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(43,221)$45,942 $2,997 $(3,485)$(190)$2,043 
Reconciliation of operating (loss) income to adjusted operating income (loss):Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) incomeOperating (loss) income$(44,816)$45,942 $(255)$871 
Add back:Add back:Add back:
Non-cash portion of arena license fees from MSG Sports(12,073)— — — — (12,073)
Non-cash portion of arena license fees from MSG Sports (a)
Non-cash portion of arena license fees from MSG Sports (a)
(12,073)— — (12,073)
Share-based compensationShare-based compensation10,399 1,758 1,876 — — 14,033 Share-based compensation10,399 1,758 — 12,157 
Depreciation and amortizationDepreciation and amortization18,522 1,764 6,490 1,863 — 28,639 Depreciation and amortization18,522 1,764 177 20,463 
Restructuring chargesRestructuring charges14,238 452 — 14,690 
Impairment and other gains, netImpairment and other gains, net(245)— — (245)
Merger and acquisition related costs, net of insurance recoveryMerger and acquisition related costs, net of insurance recovery1,647 866 — 2,513 
Amortization for capitalized cloud computing costsAmortization for capitalized cloud computing costs38 43 — — — 81 Amortization for capitalized cloud computing costs38 43 — 81 
Merger and acquisition related costs1,647 866 247 — — 2,760 
Impairment and other (gains) losses, net(245)— (5,074)— — (5,319)
Restructuring charges14,238 452 — — — 14,690 
Other purchase accounting adjustments— — — 1,622 — 1,622 
Adjusted operating income (loss)$(10,695)$50,825 $6,536 $— $(190)$46,476 
Adjusted operating (loss) incomeAdjusted operating (loss) income$(12,290)$50,825 $(78)$38,457 
Other information:Other information:Other information:
Capital expendituresCapital expenditures$200,958 $320 $5,295 $— $— $206,573 Capital expenditures$200,958 $320 $— $201,278 
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Three Months Ended March 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$30,957 $177,853 $12,790 $— $(7,282)$214,318 
Direct operating expenses24,644 74,392 10,480 887 (381)110,022 
Selling, general and administrative expenses67,286 31,743 11,025 — (6,629)103,425 
Depreciation and amortization19,081 1,833 1,130 17,567 — 39,611 
Operating income (loss)$(80,054)$69,885 $(9,845)$(18,454)$(272)$(38,740)
Loss in equity method investments(2,314)
Interest income792 
Interest expense(6,503)
Miscellaneous income, net(a)27,483 
Loss from operations before income taxes$(19,282)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(80,054)$69,885 $(9,845)$(18,454)$(272)$(38,740)
Add back:
Non-cash portion of arena license fees from MSG Sports(7,564)— — — — (7,564)
Share-based compensation6,799 3,324 1,314 — — 11,437 
Depreciation and amortization19,081 1,833 1,130 17,567 — 39,611 
Merger and acquisition related costs11,267 1,238 2,764 — — 15,269 
Other purchase accounting adjustments— — — 887 — 887 
Adjusted operating income (loss)$(50,471)$76,280 $(4,637)$— $(272)$20,900 
Other information:
Capital expenditures$102,026 $447 $295 $— $— $102,768 

Nine Months Ended
March 31, 2023
EntertainmentMSG Networks
Other (b)
Total
Revenues$705,481 $442,813 $(8,802)$1,139,492 
Direct operating expenses(403,642)(255,071)(222)(658,935)
Selling, general and administrative expenses(336,421)(115,951)10,318 (442,054)
Depreciation and amortization(62,514)(4,944)(632)(68,090)
Impairment and other gains, net7,361 — — 7,361 
Restructuring charges(30,192)(3,988)— (34,180)
Operating (loss) income$(119,927)$62,859 $662 $(56,406)
Interest expense, net10,161 
Other income, net1,939 
Loss from operations before income taxes$(44,306)
Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income$(119,927)$62,859 $662 $(56,406)
Add back:
Non-cash portion of arena license fees from MSG Sports (a)
(25,078)— — (25,078)
Share-based compensation34,204 5,642 — 39,846 
Depreciation and amortization62,514 4,944 632 68,090 
Restructuring charges30,192 3,988 — 34,180 
Impairment and other gains, net(7,361)— — (7,361)
Merger and acquisition related costs, net of insurance recovery4,221 52,958 — 57,179 
Amortization for capitalized cloud computing costs453 131 — 584 
Remeasurement of deferred compensation plan liabilities132 — — 132 
Adjusted operating (loss) income$(20,650)$130,522 $1,294 $111,166 
Other information:
Capital expenditures$745,385 $5,710 $— $751,095 
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Nine Months Ended March 31, 2022
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$476,434 $469,023 $345,122 $— $(19,503)$1,271,076 
Direct operating expenses294,333 241,521 185,756 4,745 (1,860)724,495 
Selling, general and administrative expenses279,081 117,404 115,155 — (16,926)494,714 
Depreciation and amortization57,202 5,317 19,111 6,972 

— 88,602 
Impairment and other (gains) losses, net(245)— (4,699)(536)— (5,480)
Restructuring charges14,238 452 — — — 14,690 
Operating income (loss)$(168,175)$104,329 $29,799 $(11,181)$(717)$(45,945)
Loss in equity method investments(4,509)
Interest income2,322 
Interest expense(23,246)
Miscellaneous expense, net(a)(28,096)
Loss from operations before income taxes$(99,474)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(168,175)$104,329 $29,799 $(11,181)$(717)$(45,945)
Add back:
Non-cash portion of arena license fees from MSG Sports(23,962)— — — — (23,962)
Share-based compensation36,697 15,290 5,745 — — 57,732 
Depreciation and amortization57,202 5,317 19,111 6,972 — 88,602 
Amortization for capitalized cloud computing costs45 131 — — — 176 
Merger and acquisition related costs17,095 24,941 247 — — 42,283 
Impairment and other (gains) losses, net(245)— (4,699)(536)— (5,480)
Restructuring charges14,238 452 — — — 14,690 
Other purchase accounting adjustments— — — 4,745 — 4,745 
Adjusted operating income (loss)$(67,105)$150,460 $50,203 $— $(717)$132,841 
Other information:
Capital expenditures$500,714 $2,369 $16,566 $— $— $519,649 

Nine Months Ended
March 31, 2022
EntertainmentMSG Networks
Other (b)
Total
Revenues$476,434 $469,023 $(17,015)$928,442 
Direct operating expenses(294,333)(241,521)(222)(536,076)
Selling, general and administrative expenses(283,715)(117,404)16,839 (384,280)
Depreciation and amortization(57,202)(5,317)(531)(63,050)
Impairment and other gains, net245 — — 245 
Restructuring charges(14,238)(452)— (14,690)
Operating (loss) income$(172,809)$104,329 $(929)$(69,409)
Interest expense, net(19,740)
Other expense, net(32,304)
Loss from operations before income taxes$(121,453)
Reconciliation of operating (loss) income to adjusted operating (loss) income:
Operating (loss) income$(172,809)$104,329 $(929)$(69,409)
Add back:
Non-cash portion of arena license fees from MSG Sports (a)
(23,962)— — (23,962)
Share-based compensation36,697 15,290 — 51,987 
Depreciation and amortization57,202 5,317 531 63,050 
Restructuring charges14,238 452 — 14,690 
Impairment and other gains, net(245)— — (245)
Merger and acquisition related costs, net of insurance recovery17,095 24,941 — 42,036 
Amortization for capitalized cloud computing costs45 131 — 176 
Adjusted operating (loss) income$(71,739)$150,460 $(398)$78,323 
Other information:
Capital expenditures$500,714 $2,369 $— $503,083 
_________________
(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) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836 of revenue collected in cash for the three and nine months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962for the three and nine months ended March 31, 2022, respectively.
(b) Includes inter-segment eliminations and, for operating (loss) income, purchase accounting adjustments.
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MADISON SQUARE GARDENSPHERE ENTERTAINMENT CORP.CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)(continued)
Nine Months Ended March 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$51,181 $481,455 $30,502 $— $(9,522)$553,616 
Direct operating expenses71,668 196,497 31,288 2,735 (438)301,750 
Selling, general and administrative expenses185,666 75,962 27,759 — (8,287)281,100 
Depreciation and amortization60,341 5,463 3,739 24,155 — 93,698 
Restructuring charges21,299 — — — — 21,299 
Operating income (loss)$(287,793)$203,533 $(32,284)$(26,890)$(797)$(144,231)
Loss in equity method investments(5,578)
Interest income2,401 
Interest expense(17,038)
Miscellaneous income, net(a)53,932 
Loss from operations before income taxes$(110,514)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(287,793)$203,533 $(32,284)$(26,890)$(797)$(144,231)
Add back:
Non-cash portion of arena license fees from MSG Sports(8,740)— — — — (8,740)
Share-based compensation39,606 14,217 3,598 — — 57,421 
Depreciation and amortization60,341 5,463 3,739 24,155 — 93,698 
Merger and acquisition related costs11,479 1,238 2,764 — — 15,481 
Impairment and other (gains) losses, net— — — — — — 
Restructuring charges21,299 — — — — 21,299 
Other purchase accounting adjustments— — — 2,735 — 2,735 
Adjusted operating income (loss)$(163,808)$224,451 $(22,183)$— $(797)$37,663 
Other information:
Capital expenditures$320,370 $2,980 $1,247 $— $— $324,597 

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
_________________
(a)Miscellaneous income (expense), net includes the following:
Three Months EndedNine Months Ended
March 31,March 31,
2022202120222021
Unrealized gain (loss) on equity investments with readily determinable fair value, see Note 8 for further details.$(8,688)$26,231 $(28,303)$52,662 
Non-service cost components of net periodic pension and postretirement benefit costs(9)(27)(25)(147)
Others, net248 1,279 232 1,417 
Total$(8,449)$27,483 $(28,096)$53,932 
Concentration of Risk
Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenue and assets are concentrated in the New York City metropolitan area.
Accounts receivable, net onin the accompanying condensed consolidated balance sheets as of March 31, 20222023 and June 30, 20212022 include amounts due from the following individual customers, all derived from the MSG Networks segment, which accounted for the noted percentages of the gross balance:
March 31, 2022June 30, 2021March 31,
2023		June 30,
2022
Customer ACustomer A16 %17 %Customer A14 %16 %
Customer BCustomer B12 %16 %Customer B12 %14 %
Customer CCustomer C11 %15 %Customer C10 %12 %
Revenues in the accompanying condensed consolidated statements of operations for the three and nine months ended March 31, 20222023 and 2021March 31, 2022 include amounts from the following individual customers, which accounted for the noted percentagescustomers:
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Customer 111 %11 %10 %13 %
Customer 2N/A12 %10 %14 %
Note 16. Additional Financial Information
The following table provides a summary of the total:amounts recorded as cash, cash equivalents and restricted cash.
Three Months EndedNine Months Ended
March 31, 2022March 31, 2021March 31, 2022March 31, 2021
Customer 19 %20 %10 %23 %
Customer 29 %19 %9 %22 %
March 31,
2023		June 30,
2022
Cash and cash equivalents$217,576 $805,415 
Restricted cash109,669 17,470 
Total cash, cash equivalents and restricted cash$327,245 $822,885 
The accompanying consolidated balance sheetsCompany’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:
March 31,
2023		June 30,
2022
Prepaid expenses$81,083 $77,059 
Related party receivables24,729 32,541 
Notes and other receivables15,588 2,725 
Current contract assets8,324 5,688 
Current deferred production costs5,240 7,227 
Other10,874 10,431 
Total prepaid expenses and other current assets$145,838 $135,671 
37



SPHERE ENTERTAINMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)

Accounts payable, accrued and other current liabilities consisted of the following:
March 31,
2023		June 30,
2022
Accounts payable$32,617 $13,255 
Related party payables37,682 37,746 
Accrued payroll and employee related liabilities99,376 130,287 
Cash due to promoters84,975 78,428 
Capital expenditure accruals307,368 206,462 
Accrued expenses137,751 62,905 
Total accounts payable, accrued and other current liabilities$699,769 $529,083 
Other expense, net includes the following:
Three Months EndedNine Months Ended
March 31,March 31,
2023202220232022
Loss on equity method investments$(2,883)$(1,555)$(6,287)$(4,064)
Gains from shares sold — DraftKings214 — 1,703 — 
Net unrealized gain (loss) on equity investments with readily determinable fair value7,510 (8,688)4,307 (28,303)
Unrealized gain on equity investments without readily determinable fair value— — 1,969 — 
Other153 191 247 63 
Total other expense, net$4,994 $(10,052)$1,939 $(32,304)
Income Taxes
During the nine months ended March 31, 2023, the Company made income tax payments, net of refunds, of $3,341. During the nine months ended March 31, 2022, and June 30, 2021 include the following approximate amounts that are recorded in connection with the Company’s license agreement with the New Jersey Devils:
March 31, 2022June 30, 2021
Prepaid expenses$650 $1,400 
Other current assets2,700 3,700 
Other assets30,000 31,100 
$33,350 $36,200 
Company received income tax refunds, net of payments, of $3,959.
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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 GardenSphere Entertainment Corp.Co. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG“Sphere Entertainment,” or the “Company”), including the impact of the COVID-19 pandemic and COVID-19 variants on our future operations, our ability to realize the benefits of the Merger with MSG Networks Inc., the timing and costs of new venue construction and the development of related content, our expansion plan for Tao Group Hospitality, andplans to refinance our existing debt, the statusimpact 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 potential disposition of the non-carriage of our networks by Comcast Corporation (“Comcast”).Company’s retained interest in MSG Entertainment and possible additional debt financing. 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 (including refinancing the MSG Networks debt prior to its maturity in October 2024), and our ability to effectively manage the impacts of the COVID-19 pandemic (including COVID-19 variants) as well as the actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues as they are permittedobtain additional financing, to continue to operate;
•the effect of any show postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic due to operational challenges and other health and safety concerns (such as the partial cancellation of the 2021 production of the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”);
•the extent to which attendance at our venues may be impacted by government actions, continuing health concerns by potential attendees and reduced tourism;
•risks related to the Merger, as defined herein, with MSG Networks Inc., including, but not limited to: failure to realize the expected benefits of the Merger, business disruption following the Merger and the risk of the litigation relating to the Merger;
•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements at games of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”);
•the level of our expenses and our operational cash burn rate, including our corporate expenses;required;
•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 maintain, obtain or produce content, together with the cost of such content;
•the successful development of Sphere Experiences and the investments associated with such development, as well as investment in personnel, content and technology for Sphere;
•our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary;
•the level of our expenses and our operational cash burn rate, including our corporate expenses;
•the level of our revenues, which depends in part on the popularity of the Christmas Spectacular, the sports teams whose games are played at The Garden and broadcast on our networks, the appeal of our Tao Group Hospitality venues, and other events which are presented in our venues or broadcast on our networks;networks or which will be presented at Sphere in Las Vegas;
•the demand for MSG Networks programming among cable, satellite, telephonefiber-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 Distributorsdistributors that do not carry our networks at all;
•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;
•the extent to which attendance at Sphere in Las Vegas may be impacted by government actions, health concerns by potential attendees or reduced tourism;
•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;networks;
•the level of our capital expenditures and other investments;
•general economic conditions, especially in the Las Vegas and New York City Las Vegas, Chicago and London metropolitan areas where we have (or plan to have) significant business activities;
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•the demand for sponsorship and suite arrangements, exosphere advertising and advertising and viewer ratings for our networks;
•competition, for example, from other venues and other sports and entertainment and nightlife options(including the construction of new competing venues) and other regional sports and entertainment networks, including the construction of new competing venues;networks;
•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;
•ourMSG 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 NBA and NHL, or other work stoppage due to COVID-19 or otherwise;stoppage;
•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;venue;
•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;
•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 MSGE Spinco Distribution (as defined below) and the 2020 Entertainment Distribution (as defined below);
•our ability to achieve the intended benefits of the Entertainment Distribution and the Merger with MSG Networks Inc.;MSGE Spinco Distribution;
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•the performance by Madison Square Garden Entertainment Corp. (“MSG SportsEntertainment”, formerly MSGE Spinco, Inc.) of its obligations under various agreements with the Company and the performance by the Company of its obligations under various arrangements with MSG Entertainment, in each case related to the EntertainmentMSGE Spinco 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;arrangements; 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/A2022 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.
Spin-off Transaction
On April 20, 2023 (the “MSGE Spinco Distribution Date”), the Company distributed approximately 67% of the outstanding common stock of MSG Entertainment to its stockholders (the “MSGE Spinco Distribution”), with the Company retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of Class A common stock)
40




immediately following the MSGE Spinco Distribution. MSG Entertainment owns the traditional live entertainment business previously owned and operated by the Company through its Entertainment business segment, excluding Sphere, which was retained by the Company after the MSGE Spinco Distribution Date. In the MSGE Spinco Distribution, stockholders of the Company received (a) one share of MSG Entertainment’s Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on April 14, 2023 (the “Record Date”), and (b) one share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every share of the Company’s Class B common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on the Record Date.
The disclosures within this Management’s Discussion and Analysis of Financial Condition and Results of Operations that discuss the quarter ended March 31, 2023 are on a consolidated Company basis, which means that they include the results of MSG Entertainment and do not take the MSGE Spinco Distribution into account. In future filings, beginning with our Annual Report on Form 10-K for the fiscal year ending June 30, 2023, the historical results of the Company’s traditional live entertainment business, excluding Sphere, will be presented as discontinued operations. In addition, the unaudited pro forma consolidated balance sheet of the Company as of December 31, 2022 and the unaudited pro forma condensed consolidated statements of operations of the Company for the six months ended December 31, 2022 and the fiscal years ended June 30, 2022, 2021 and 2020, in each case giving effect to the MSGE Spinco Distribution, are set forth in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 24, 2023. As a result of the MSGE Spinco Distribution, the accompanying unaudited condensed consolidated interim financial statements of the Company are not indicative of the Company’s future financial position, results of operations or cash flows.
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. Unless
The Company has historically had three reportable segments (Entertainment, MSG Networks, and Tao Group Hospitality). However, as of March 31, 2023, Tao Group Hospitality is classified as held for sale and its results are recorded as discontinued operations as disclosed in Note 3. Discontinued Operations and Dispositions in the context otherwise requires, all references to “we,” “us,” “our,” “MSGForm 10-Q. As a result, Tao Group Hospitality is no longer a reportable segment, and the Company has two reportable segments (Entertainment and MSG Networks) for the period ended March 31, 2023.
The Entertainment”or segment included the “Company” refer collectively toCompany’s portfolio of venues as of March 31, 2023: Madison Square Garden Entertainment Corp.(“The Garden”), a holding company, and its direct and indirect subsidiaries through which substantially all of our operations are conducted. Through the period ended April 17, 2020, the Company operated and reported financial information as one reportable segment. Following the distribution of all the outstanding common stock of MSG Entertainment to stockholders ofThe Theater at Madison Square Garden, Sports Corp. (the “Entertainment Distribution”) on April 17, 2020Radio City Music Hall, the Beacon Theatre, and the Merger with MSG Networks Inc. on July 9, 2021,The Chicago Theatre. In addition, the Company has three segmentsunveiled its vision for state-of-the-art venues, called Sphere, and is completing construction of its first such venue in Las Vegas. As of March 31, 2023, the Entertainment segment also included the original production, the Christmas Spectacular Starring the Radio City Rockettes (the Entertainment“Christmas Spectacular”). As of March 31, 2023, this segment also included 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 Tao Group Hospitality business,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 business). See Note 20 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussionsegment is comprised of the Company’s segment reporting.regional sports and entertainment networks, MSG Network and MSG Sportsnet (formerly MSG+), as well as a companion streaming service, MSG GO. 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”).
ThisAs of March 31, 2023, the Company conducted a significant portion of its operations at venues that it owns or operates under long-term leases. As of March 31, 2023 the Company owned The Garden, The Theater at Madison Square Garden and The Chicago Theatre, and leased Radio City Music Hall and the Beacon Theatre.
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 nine months ended March 31, 20222023 and 20212022 on both a (i) consolidated basis and a(ii) segment basis.
41




Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the nine months ended March 31, 20222023 and 2021,2022, 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.“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: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. In addition, the Company 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
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Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. Tao Group Hospitality is a hospitality group with globally-recognized entertainment dining and nightlife brands.
Merger with MSG Networks Inc.
On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to that certain Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time multiplied by 0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time multiplied by 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.
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
The Company’s operations and operating results have beenwere not materially impacted by the COVID-19 pandemic (including COVID-19 variants)during the three and actions taken in response by governmental authorities and certain professional sports leagues. Fornine months ended March 31, 2023, as compared to the majority of Fiscal Year 2021, substantially all operations of the Entertainment business were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitalityprior year period, which was operating at significantly reduced capacity and demand. Fiscal Year 2022 has also been impacted by the pandemic, with fewer ticketed events at our performance venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19) due to the lead-time required to book touring acts and artists and an increase in cases due to a COVID-19 variant, which resulted in a numberthe postponement or cancellation of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in 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 were required to provide proof that they had received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols).
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For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the nine months ended March 31, 2022 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 cancelledevents at our performance venues in the second and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact of the COVID-19 pandemic on our operations also included (i)(including the partial cancellation of the 2021 production of the Christmas Spectacular,Spectacular) (ii)during the cancellationsecond and third quarters of Fiscal Year 2022 as a result of an increase in COVID-19 cases. In addition, due to the COVID-19 pandemic, the 2020-21 NHL season was shortened and resulted in reductions in media rights fees recognized in our MSG Networks segment, which had a residual impact reflected in the nine months ended March 31, 2022. See Note 1, Impact of the 2020 production of the Christmas Spectacular, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festival.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers 2020-21 regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements. The Knicks and the Rangers each completed their 2021-2022 82-game regular seasons, with the Rangers advancingCOVID-19 Pandemic, to the playoffs. See “Item. 7. Management's Discussionconsolidated and Analysis of Financial Condition and Results of Operations — Revenue Sources — Entertainment — Venue License Fees” on the Company’s Form 10-K and Note 10 to the consolidatedcombined financial statements included in “— Item 1. Financial Statements” of this Quarterly Report onthe 2022 Form 10-Q10-K for furthermore information on revenue recognition underregarding the Arena License Agreements.
As a resultimpact 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, its 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 government 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. During Fiscal Year 2022, Tao Group Hospitality’s operations have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and reduced demand from guests, including corporate and private event cancellations and postponements in the second and third quarters. As of the date of this filing, Tao Group Hospitality is operating without capacity restrictions in domestic and key international markets.our business.
It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in new government or league-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of and/or demand for our entertainment and dining and nightlife venues,Sphere in Las Vegas, impact demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venuesSphere in Las Vegas (which may lead to difficulties in staffing) or otherwise materially impact our operations.
AsIn addition to the a resultbove, the operating results of the material impact COVID-19 hadour segments will be largely dependent on our revenues during Fiscal Year 2021, we took several actionsability to improveattract audiences to our financial flexibility, reduce operating costsSphere Experiences, concerts 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 (we have since begun rehiring), and (iii) having our wholly-owned subsidiary, MSG National Properties, LLC (“MSG National Properties”) enter into a five-year $650,000 senior secured term loan facility (“National Properties Term Loan Facility”). See Note 14other events 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 entered into an amendment to the Tao Senior Credit Agreement, which suspended certain financial covenants through December 31, 2021 and increased the minimum liquidity requirement. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. In addition, in connection with the amendment, our wholly-owned subsidiary MSG Entertainment Group, LLC (“MSG Entertainment Group”) entered into a guarantee agreement, which also included a minimum liquidity requirement for MSG Entertainment Group. See Note 14 to the consolidated 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
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covenant waivers in the future. Tao Group Hospitality’s failure to obtain debt covenant waivers could trigger a violation of these covenants and lead to default, acceleration of all of its outstanding debt and a demand for payment under the guarantee of MSG Entertainment Group, which would negatively impact the liquidity of Tao Group Hospitality and the Company.
The Company is building its first MSG Sphere in Las Vegas. This is a complex construction project with cutting-edge technology, which relies on subcontractors obtaining components from a variety of sources around the world. In April 2020, the Company announced that it was suspending construction of MSG Sphere due to COVID-19 related factors that were outside of its control, including supply chain issues. As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it had resumed full construction with a lengthened timetable to better preserve cash through the COVID-19 pandemic. The Company remains committed to bringing MSG Sphere to Las Vegas, and expects to open the venue in the second half of calendar year 2023.
In December 2020, the Company terminated its construction agreement with AECOM and assumed the role of construction manager to gain greater transparency and control over the construction process, including direct engagement and supervision of subcontractors. AECOM continues to support MSG Sphere at The Venetian through a services agreement that facilitates their ongoing involvement through MSG Sphere’s completion. As the construction manager of the project, we aim to aggressively manage the cost of the project in this volatile environment to minimize any potential cost increases.
For more information about the risks to the Company as a result of the COVID-19 pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors —General Risk Factors— Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Actions Taken in Response by Governmental Authorities and Certain Professional Sports Leagues.” of the 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 Reportare dependent on Form 10-Q, the financial performance of MSG Networks business is affected by the affiliation agreements the CompanyMSG 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, and also byour networks, the advertising rates we charge advertisers.advertisers and sponsorship rates we can charge our partners. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams carriedwhose games we broadcast on theour networks.
Our Company’s networks as well as the costfuture performance is dependent in part on general economic conditions and the attractivenesseffect of these conditions on our customers. Weak economic conditions may lead to lower demand for our entertainment offerings and programming content, which would also decrease advertising revenues. These conditions may also affect the number of concerts, Sphere Experiences and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.
Due largely to 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.
Additionally, the advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) between two of the Company’s programming content.subsidiaries, MSGN Holdings, L.P. and Sphere Entertainment Group, LLC (formerly MSG Entertainment Group, LLC, “Sphere Entertainment Group”), pursuant to which Sphere Entertainment Group had the exclusive right and obligation to sell MSG Networks advertising availabilities for a commission, was terminated effective as of December 31, 2022. The termination of the Networks Advertising Sales Representation Agreement has impacted the operating results of the reportable segments of the Company for the three and nine months end March 31, 2023 and on a go forward basis. As a result, the Entertainment segment will no longer recognize advertising sales commission revenue or the employee costs related to the advertising sales agency. Conversely, the MSG Networks segment will no longer incur advertising commission expense but will reflect the employee costs of the former Entertainment employees that supported the advertising sales agency as such employees have been transferred to MSG Networks, which will result in higher direct operating expenses and selling, general and administrative expenses going forward.
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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 attractions, such as Sphere Experiences.
Consolidated Results of Operations
Comparison of the Three and Nine Months Ended March 31, 20222023 versus the Three and Nine Months Ended March 31, 20212022
The tables below set forth, for the periods presented, certain historical financial information. 
Three Months Ended
March 31,
Change (a)
20222021AmountPercentage
Revenues$460,127 $214,318 $245,809 115 %
Direct operating expenses262,476 110,022 152,454 139 %
Selling, general and administrative expenses157,598 103,425 54,173 52 %
Depreciation and amortization28,639 39,611 (10,972)(28)%
Impairment and other (gains) losses, net(5,319)— (5,319)NM
Restructuring charges14,690 — 14,690 NM
Operating income (loss)2,043 (38,740)40,783 NM
Other expense:
Loss in equity method investments(1,528)(2,314)786 (34)%
Interest expense, net (a)
(5,057)(5,711)654 11 %
Miscellaneous income (expense), net(8,449)27,483 (35,932)NM
Loss from operations before income taxes(12,991)(19,282)6,291 NM
Income tax expense(6,315)(6,556)241 4 %
Net loss(19,306)(25,838)6,532 NM
Less: Net loss attributable to redeemable noncontrolling interests(442)(6,860)6,418 NM
Less: Net loss attributable to nonredeemable noncontrolling interests(1,373)(718)(655)NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(17,491)$(18,260)$769 NM
Three Months Ended
March 31,Change
20232022AmountPercentage
Revenues$363,297 $352,534 $10,763 3 %
Direct operating expenses(210,141)(197,967)(12,174)6 %
Selling, general and administrative expenses(179,870)(118,788)(61,082)51 %
Depreciation and amortization(22,999)(20,463)(2,536)12 %
Impairment and other (losses) gains, net(51)245 (296)(121)%
Restructuring charges(20,498)(14,690)(5,808)40 %
Operating (loss) income(70,262)871 (71,133)NM
Interest income2,640 767 1,873 NM
Interest expense— (5,528)5,528 (100)%
Other income (expense), net4,994 (10,052)15,046 (150)%
Loss from operations before income taxes(62,628)(13,942)(48,686)NM
Income tax benefit (expense)8,649 (6,349)14,998 NM
Loss from continuing operations(53,979)(20,291)(33,688)166 %
Loss from discontinued operations, net of taxes(4,576)985 (5,561)NM
Net loss(58,555)(19,306)(39,249)NM
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations— (212)212 (100)%
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations(216)(1,161)945 (81)%
Less: Net loss attributable to redeemable noncontrolling interests from discontinued operations(1,492)(442)(1,050)NM
Net income attributable to Sphere Entertainment Co.’s stockholders$(56,847)$(17,491)$(39,356)NM
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Nine Months Ended
March 31,Change
20222021AmountPercentage
Revenues$1,271,076 $553,616 $717,460 130 %
Direct operating expenses724,495 301,750 422,745 140 %
Selling, general and administrative expenses494,714 281,100 213,614 76 %
Depreciation and amortization88,602 93,698 (5,096)(5)%
Impairment and other (gains) losses, net(5,480)— (5,480)NM
Restructuring charges14,690 21,299 (6,609)(31)%
Operating loss(45,945)(144,231)98,286 68 %
Other income (expense):
Loss in equity method investments(4,509)(5,578)1,069 19 %
Interest expense, net (a)
(20,924)(14,637)(6,287)(43)%
Miscellaneous income (expense), net(28,096)53,932 (82,028)NM
Loss from operations before income taxes(99,474)(110,514)11,040 10 %
Income tax benefit (expense)8,532 (15,715)24,247 NM
Net loss(90,942)(126,229)35,287 28 %
Less: Net income (loss) attributable to redeemable noncontrolling interests4,412 (14,091)18,503 NM
Less: Net loss attributable to nonredeemable noncontrolling interests(902)(2,250)1,348 NM
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(94,452)$(109,888)$15,436 14 %
Nine Months Ended
March 31,Change
20232022AmountPercentage
Revenues$1,139,492 $928,442 $211,050 23 %
Direct operating expenses(658,935)(536,076)(122,859)23 %
Selling, general and administrative expenses(442,054)(384,280)(57,774)15 %
Depreciation and amortization(68,090)(63,050)(5,040)8 %
Impairment and other gains, net7,361 245 7,116 NM
Restructuring charges(34,180)(14,690)(19,490)133 %
Operating loss(56,406)(69,409)13,003 19 %
Interest income10,161 2,311 7,850 NM
Interest expense— (22,051)22,051 (100)%
Other income (expense), net1,939 (32,304)34,243 (106)%
Loss from continuing operations before income taxes(44,306)(121,453)77,147 64 %
Income tax benefit4,717 10,112 (5,395)(53)%
Loss from continuing operations(39,589)(111,341)71,752 64 %
Income from discontinued operations, net of taxes7,548 20,399 (12,851)(63)%
Net loss(32,041)(90,942)58,901 65 %
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations(554)(579)25 (4)%
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations(128)$(323)195 (60)%
Less: Net income attributable to redeemable noncontrolling interests from discontinued operations2,661 4,412 (1,751)(40)%
Net loss attributable to Sphere Entertainment Co.’s stockholders$(34,020)$(94,452)$60,432 NM
_________________
_________________NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
(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 applicationThe following is a summary 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 beganchanges in 2017. As a result, the previously reported consolidated statements of operation of the Companyour segments’ operating results for the three and nine months ended March 31, 2021 have been revised2023 as compared to correct this immaterial accountingthe prior year period, which are discussed below under “Business Segment Results.”
Three Months Ended
March 31, 2023
Changes attributable toRevenuesDirect operating expensesSelling, general and administrative expensesDepreciation and amortizationImpairment and other losses, netRestructuring chargesOperating income (loss)
Entertainment segment$7,276 $(10,147)$(24,109)$(2,788)$(296)$(6,260)$(36,324)
MSG Networks segment(6,133)(2,077)(27,815)75 — 452 (35,498)
Other (a)
9,620 50 (9,158)177 — — 689 
$10,763 $(12,174)$(61,082)$(2,536)$(296)$(5,808)$(71,133)


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Nine Months Ended
March 31, 2023
Changes attributable toRevenuesDirect operating expensesSelling, general and administrative expensesDepreciation and amortizationImpairment and other gains, netRestructuring chargesOperating income (loss)
Entertainment segment$229,047 $(109,309)$(52,706)$(5,312)$7,116 $(15,954)$52,882 
MSG Networks segment(26,210)(13,550)1,453 373 — (3,536)(41,470)
Other (a)
8,213 — (6,521)(101)— — 1,591 
$211,050 $(122,859)$(57,774)$(5,040)$7,116 $(19,490)$13,003 
    _________________
(a) Other relates to inter-segment eliminations.
Impairment and other (losses) gains, net
Impairment and other (losses) gains, net for the three months ended March 31, 2023 decreased $296, to $51 as compared to the prior year period. Impairment and other gains, net error by decreasingfor the nine months ended March 31, 2023 increased $7,116 to $7,361 as compared to the prior year period primarily due to the gain on sale of the Company’s previously reportedcontrolling 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 the disposal of a corporate aircraft.
Restructuring charges
Restructuring chargesfor the three months ended March 31, 2023 increased $5,808 to $20,498 as compared to the prior year period due to termination benefits provided for a workforce reduction of certain executives and employees within the Entertainment segment as part of the Company’s cost reduction program implemented in Fiscal Year 2023.
Restructuring chargesfor the nine months ended March 31, 2023 increased $19,490 to $34,180 as compared to the prior year period due to termination benefits provided for a workforce reduction of certain executives and employees within the Entertainment and MSG Networks segments as part of the Company’s cost reduction program implemented in Fiscal Year 2023.
Interest income
Interest incomefor the three and nine months ended March 31, 2023 increased $1,873 and $7,850, respectively, as compared to the prior year periods primarily due to higher interest rates.
Interest expense
Interest expensefor the three and nine months ended March 31, 2023 decreased $5,528 and $22,051, respectively, as compared to the prior year periods primarily due to a higher amount of interest cost capitalization of $23,347 and $52,383 related to Sphere construction.
Other income (expense), net
Other income (expense), netfor the three and nine months ended March 31, 2023, increased $15,046 and $34,243, respectively, as compared to the prior year periods, primarily due to unrealized gains of approximately $5,000 for the three and nine months ended March 31, 2023, as compared to unrealized losses in the prior year periods associated with the Company’s investments in DraftKings Inc.
Income tax benefit (expense)
In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or expense by $13,312recognized in an interim period. The estimated annual effective tax rate exceeds the statutory federal tax rate of 21% primarily due to state taxes, nondeductible officers’ compensation and $21,223,changes in the valuation allowance. The estimated annual effective tax rate is revised on a quarterly basis.
Income tax benefit for the three and nine months ended March 31, 2023 of $8,649 and $4,717, respectively, reflects an effective income tax of 14% and 11%, respectively.
Income tax expense for the three months ended March 31, 2022 of $6,349 reflects an effective income tax of (46)%. Income tax benefit for the nine months ended March 31, 2022 of $10,112 reflects an effective income tax rate of 8%.
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Adjusted operating income (“AOI”)
The following is a reconciliation of operating (loss) income to adjusted operating income (as defined in Note 15. Segment Information in the notes to the financial statements) for the three and nine months ended March 31, 2023 as compared to the prior year periods:
Three Months Ended
March 31,Change
20232022AmountPercentage
Operating (loss) income$(70,262)$871 $(71,133)NM
Non-cash portion of arena license fees from MSG Sports (a)
(12,149)(12,073)(76)(1)%
Share-based compensation10,899 12,157 (1,258)(10)%
Depreciation and amortization22,999 20,463 2,536 12 %
Restructuring charges20,498 14,690 5,808 40 %
Impairment and other losses (gains), net51 (245)296 121 %
Merger and acquisition related costs, net of insurance recovery47,041 2,513 44,528 NM
Amortization for capitalized cloud computing costs228 81 147 181 %
Remeasurement of deferred compensation plan liabilities126 — 126 NM
Adjusted operating income$19,431 $38,457 $(19,026)(49)%
Nine Months Ended
March 31,Change
20232022AmountPercentage
Operating loss$(56,406)$(69,409)$13,003 19 %
Non-cash portion of arena license fees from MSG Sports (a)
(25,078)(23,962)(1,116)(5)%
Share-based compensation39,846 51,987 (12,141)(23)%
Depreciation and amortization68,090 63,050 5,040 8 %
Restructuring charges34,180 14,690 19,490 133 %
Impairment and other gains, net(7,361)(245)(7,116)NM
Merger and acquisition related costs, net of insurance recovery57,179 42,036 15,143 36 %
Amortization for capitalized cloud computing costs584 176 408 NM
Remeasurement of deferred compensation plan liabilities132 — 132 NM
Adjusted operating income$111,166 $78,323 $32,843 42 %
_________________
(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 U.S. generally accepted accounting principles (“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) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836 of revenue collected in cash for the three and nine months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962 for the three and nine months ended March 31, 2022, respectively.
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
For the three and nine months ended March 31, 2022 and 2021, the Company’s operations and operating results were materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information. Also, see “ — Factors Affecting Results of Operations” under Business Segment Results for more information surrounding the factors affecting comparability of each business segment’s results.
Depreciation and amortization
Depreciation and amortization for the three months ended March 31, 2022 was $28,639 as compared to $39,611 in the prior year period, a decrease of $10,972, or 28%. For the nine months ended March 31, 2022, depreciation and amortization was $88,602 as compared to $93,698 in the prior year period, a decrease of $5,096, or 5%. The decreases are primarily attributable to the absence of $14,280 of accelerated amortization expense for certain venue management contracts as a result of Tao Group Hospitality converting certain venues to operational that were previously under management contracts during the prior three and nine month periods. Such decreases are offset by an increase in depreciation and amortization due to the acquisition of Hakkasan in April 2021.
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Impairment and other (gains) losses, net
For the three months ended March 31, 2022, the Company recorded other gains of $5,319 primarily from extinguishment of lease liabilities associated with a Hakkasan venue with the Tao Group Hospitality segment.
Restructuring charges
For the three months ended March 31, 2022, restructuring charges of $14,690 related to the termination of benefits provided to certain employees and executives as a result of organizational changes.
Operating income (loss)
The following is a summary of changes in operating income (loss) by segment for the three and nine months ended March 31, 2022 as compared to the prior year period.
For the Three Months Ended March 31, 2022
Changes attributable toOperating income (loss)
Entertainment segment (a)
$36,833 
MSG Networks segment (a)
(23,943)
Tao Group Hospitality segment (a)
12,842 
Purchase accounting adjustments14,969 
Inter-segment eliminations82 
Total$40,783 
For the Nine Months Ended March 31, 2022
Changes attributable toOperating income (loss)
Entertainment segment (a)
$119,618 
MSG Networks segment (a)
(99,204)
Tao Group Hospitality segment (a)
62,083 
Purchase accounting adjustments15,709 
Inter-segment eliminations80 
Total$98,286 
_________________
(a)See “Business Segment Results” for a more detailed discussion of the operating results of our segments.
Interest expense, net
Net interest expense was $5,057 for the three months ended March 31, 2022, as compared to $5,711 in the prior year period, a net decrease of $654, or 11%. The decrease was primarily due to a decrease in interest expense of approximately $1,700 due to lower debt balances in the current year period, partially offset by lower interest capitalization related to MSG Sphere construction of $1,040. The Company capitalized approximately $12,272 of interest for the three months ended March 31, 2022 as compared to $13,312 in the prior year period.
For the nine months ended March 31, 2022, net interest expense was $20,924 as compared to $14,637 in the prior year period, a net increase of $6,287 or 43%. The increase was primarily due to an increase in interest expense of approximately $17,200 due to the entry into the National Properties Term Loan Facility on November 12, 2020. The increase was partially offset by higher interest capitalization related to MSG Sphere construction of approximately $11,000. The Company capitalized $32,202 of interest for the nine months ended March 31, 2022 as compared to $21,223 in the prior year period.
Miscellaneous income (expense), net
Net miscellaneous expense for the three months ended March 31, 2022 was $8,449, as compared to net miscellaneous income of $27,483 in the prior year period, a decrease of $35,932, or 131%, primarily due to an increase in unrealized loss of $19,800 associated with the Company’s investment in DraftKings Inc. (“DraftKings”), which the Company recorded an unrealized loss of $6,956 for the three months ended March 31, 2022 as compared to an unrealized gain of $12,842 in the prior year period.
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For the nine months ended March 31, 2022, net miscellaneous expense was $28,096 as compared to net miscellaneous income of $53,932, a decrease of $82,028, primarily due to an increase in unrealized losses of $63,300 and $19,950, associated with the investments in DraftKings and Townsquare Media, Inc., respectively.
Income taxes
See Note 18 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 for the three and nine months ended March 31, 2022 as compared to the prior year period:
Three Months Ended
March 31,Change
20222021AmountPercentage
Operating income (loss)$2,043 $(38,740)$40,783 NM
Non-cash portion of arena license fees from MSG Sports(12,073)(7,564)
Share-based compensation14,033 11,437 
Depreciation and amortization (a)
28,639 39,611 
Amortization for capitalized cloud computing costs81 — 
Merger and acquisition related costs2,760 15,269 
Impairment and other (gains) losses, net(5,319)— 
Restructuring charges14,690 — 
Other purchase accounting adjustments1,622 887 
Adjusted operating income$46,476 $20,900 $25,576 122 %
Nine Months Ended
March 31,Change
20222021AmountPercentage
Operating loss$(45,945)$(144,231)$98,286 68 %
Non-cash portion of arena license fees from MSG Sports(23,962)(8,740)
Share-based compensation57,732 57,421 
Depreciation and amortization (a)
88,602 93,698 
Amortization for capitalized cloud computing costs176 — 
Merger and acquisition related costs42,283 15,481 
Impairment and other (gains) losses, net(5,480)— 
Restructuring charges14,690 21,299 
Other purchase accounting adjustments4,745 2,735 
Adjusted operating income$132,841 $37,663 $95,178 NM
_________________
(a)    Depreciation and amortization includes purchase accounting adjustments of $1,863 and $17,567 for the three months ended March 31, 2022 and 2021, respectively, and $6,972 and $24,155 for the nine months ended March 31, 2022 and 2021, respectively. The decrease in purchase accounting adjustments related depreciation and amortization for the three and nine months ended March 31, 2022 reflect the absence of $14,280 of accelerated amortization expense for the three and nine months ended March 31, 2021 for certain venue management contracts as a result of Tao Group Hospitality converting certain venues to operational that were previously under management contracts.
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Adjusted operating income for the three months ended March 31, 2022 improved $25,576,2023 decreased $19,026 to $46,476. For$19,431. Adjusted operating income for the nine months ended March 31, 2022, adjusted operating income2023 increased $95,178,$32,843 to $132,841. These increases$111,166. The changes in adjusted operating income were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in adjusted operating income of the Entertainment segment (a)
$39,776 $96,703 
Decrease in adjusted operating income of the MSG Networks segments (a)
(25,455)(73,991)
Increase in adjusted operating income of the Tao Group Hospitality segment (a)
11,173 72,386 
Inter-segment eliminations82 80 
$25,576 $95,178 
Three Months EndedNine Months Ended
Changes attributable toMarch 31, 2023March 31, 2023
Entertainment segment$(27,042)$51,089 
MSG Networks segments7,504 (19,938)
Other (a)
512 1,692 
$(19,026)$32,843 
_________________
(a)See “ — Business Segment Results” for a more detailed discussion of the operating results of our segments.Other relates to inter-segment eliminations.
Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests
For the three months ended March 31, 2022,2023, the Company recorded $442$0 of net loss attributable to redeemable noncontrolling interests and $1,373 of net lossincome attributable to nonredeemable noncontrolling interests as compared to $6,860 of net loss attributable to redeemable noncontrolling interests and $718$212 of net loss attributable to nonredeemable noncontrolling interests for the three months ended March 31, 2021.2022. For the nine months endedMarch 31, 2022,2023, the Company recorded $4,412 of net income attributable to redeemable noncontrolling interests and $902$554 of net loss attributable to nonredeemable noncontrolling interests as compared to $14,091 of net loss attributable to redeemable noncontrolling interests and $2,250$579 of net loss attributable to nonredeemable noncontrolling interests for the nine months ended March 31, 2021.2022. 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.Company up to the disposition date.
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Business Segment Results
Entertainment
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income (loss)loss for the Company’s Entertainment segment. 
Three Months Ended
March 31,Change
20222021AmountPercentage
Revenues$194,585 $30,957 $163,628 NM
Direct operating expenses110,688 24,644 86,044 NM
Selling, general and administrative expenses94,603 67,286 27,317 41 %
Depreciation and amortization18,522 19,081 (559)(3)%
Impairment and other (gains) losses, net(245)— (245)NM
Restructuring charges14,238 — 14,238 NM
Operating loss$(43,221)$(80,054)$36,833 46 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports(12,073)(7,564)
Share-based compensation10,399 6,799 
Amortization for capitalized cloud computing arrangement costs38 — 
Merger and acquisition related costs1,647 11,267 
Depreciation and amortization18,522 19,081 
Impairment and other (gains) losses, net(245)— 
Restructuring charges14,238 — 
Adjusted operating loss$(10,695)$(50,471)$39,776 79 %
Nine Months EndedThree Months Ended
March 31,ChangeMarch 31,Change
20222021AmountPercentage20232022AmountPercentage
RevenuesRevenues$476,434 $51,181 $425,253 NMRevenues$201,861 $194,585 $7,276 4 %
Direct operating expensesDirect operating expenses294,333 71,668 222,665 NMDirect operating expenses(120,835)(110,688)(10,147)9 %
Selling, general and administrative expensesSelling, general and administrative expenses279,081 185,666 93,415 50 %Selling, general and administrative expenses(120,307)(96,198)(24,109)25 %
Depreciation and amortizationDepreciation and amortization57,202 60,341 (3,139)(5)%Depreciation and amortization(21,310)(18,522)(2,788)15 %
Impairment and other (gains) losses, net(245)— (245)NM
Impairment and other (losses) gains, netImpairment and other (losses) gains, net(51)245 (296)121 %
Restructuring chargesRestructuring charges14,238 21,299 (7,061)(33)%Restructuring charges(20,498)(14,238)(6,260)44 %
Operating lossOperating loss$(168,175)$(287,793)$119,618 42 %Operating loss$(81,140)$(44,816)$(36,324)(81)%
Reconciliation to adjusted operating loss:Reconciliation to adjusted operating loss:Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports(23,962)(8,740)
Non-cash portion of arena license fees from MSG Sports (a)
Non-cash portion of arena license fees from MSG Sports (a)
(12,149)(12,073)(76)1 %
Share-based compensationShare-based compensation36,697 39,606 Share-based compensation10,259 10,399 (140)(1)%
Depreciation and amortizationDepreciation and amortization57,202 60,341 Depreciation and amortization21,310 18,522 2,788 15 %
Amortization for capitalized cloud computing costs45 — 
Merger and acquisition related costs17,095 11,479 
Impairment and other (gains) losses, net(245)— 
Restructuring chargesRestructuring charges14,238 21,299 Restructuring charges20,498 14,238 6,260 44 %
Impairment and other losses (gains), netImpairment and other losses (gains), net51 (245)296 121 %
Merger and acquisition related costs, net of insurance recoveryMerger and acquisition related costs, net of insurance recovery1,528 1,647 (119)(7)%
Amortization for capitalized cloud computing arrangement costsAmortization for capitalized cloud computing arrangement costs185 38 147 NM
Remeasurement of deferred compensation plan liabilitiesRemeasurement of deferred compensation plan liabilities126 — 126 NM
Adjusted operating lossAdjusted operating loss$(67,105)$(163,808)$96,703 59 %Adjusted operating loss$(39,332)$(12,290)$(27,042)NM
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Nine Months Ended
March 31,Change
20232022AmountPercentage
Revenues$705,481 $476,434 $229,047 48 %
Direct operating expenses(403,642)(294,333)(109,309)37 %
Selling, general and administrative expenses(336,421)(283,715)(52,706)19 %
Depreciation and amortization(62,514)(57,202)(5,312)9 %
Impairment and other gains, net7,361 245 7,116 NM
Restructuring charges(30,192)(14,238)(15,954)(112)%
Operating loss$(119,927)$(172,809)$52,882 31 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports (a)
(25,078)(23,962)(1,116)5 %
Share-based compensation34,204 36,697 (2,493)(7)%
Depreciation and amortization62,514 57,202 5,312 9 %
Restructuring charges30,192 14,238 15,954 112 %
Impairment and other gains, net(7,361)(245)(7,116)NM
Merger and acquisition related costs, net of insurance recovery4,221 17,095 (12,874)(75)%
Amortization for capitalized cloud computing arrangement costs453 45 408 NM
Remeasurement of deferred compensation plan liabilities132 — 132 NM
Adjusted operating loss$(20,650)$(71,739)$51,089 71 %
_________________
(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) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836 of revenue collected in cash for the three and nine months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962 for the three and nine months ended March 31, 2022, respectively.
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting ResultsRevenues
Revenues for the three and nine months ended March 31, 2023 increased $7,276 and $229,047, respectively, as compared to the prior year periods. The changes in revenues were attributable to the following:
Three Months EndedNine Months Ended
March 31, 2023March 31, 2023
Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements$10,111 $45,516 
Increase in revenues from the presentation of the Christmas Spectacular
3,533 74,947 
Increase in venue-related sponsorship, signage and
suite license fee revenues		1,872 18,958 
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements1,547 5,515 
(Decrease) increase in event-related revenues(527)87,244 
Decrease in commissions due to termination of the Networks Advertising Sales Representation Agreement(9,621)(8,213)
Other net increases361 5,080 
$7,276 $229,047 
For the three months ended March 31, 2023, the increase in revenues subject to the sharing of Operationseconomics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher food, beverage and merchandise sales and higher suite
Impact of the COVID-19 Pandemic
48




license fees revenues at Knicks and Rangers games. For the nine months ended March 31, 2023, the increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher suite license fees revenues, including the impact of the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 and 2021, the Entertainment segment operations and operating results were materially impacted by(due to the COVID-19 pandemicpandemic), as well as higher food, beverage and merchandise sales at Knicks and Rangers games.
The Company had 181 Christmas Spectacular performances during this year’s holiday season, of which 7 took place in the actions takenthird quarter of Fiscal Year 2023, as compared to 101 performances in response by governmental authorities. Asthe prior year’s holiday season (due to the partial cancellation of this date, live events are permitted to be held atthe 2021 production as a result of an increase in COVID-19 cases), all of our performance venues without capacity restrictions and we are continuingwhich took place in the second quarter of Fiscal Year 2022. For this year’s holiday season, approximately 930,000 tickets were sold, representing an over 25% increase in attendance on a per-show basis as compared to host and book new events. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.prior year.
Revenues
Revenues forFor the three months ended March 31, 2023, the increase in revenues from the presentation of the Christmas Spectacular production was due to the 7 performances that took place in the current year period as compared to no performances in the third quarter of Fiscal Year 2022. For the nine months ended March 31, 2023, the increase in revenues from the presentation of the Christmas Spectacular production was primarily due to higher ticket-related revenues. This reflected an increase in the number of performances as compared to the prior year period and, to a lesser extent, higher per-show paid attendance.

For the three months ended March 31, 2023, the increase in venue-related sponsorship, signage and suite license fee revenues was primarily due to higher suite sales. For the nine months ended March 31, 2023, the increase in venue-related sponsorship, signage and suite license fee revenues was primarily due to the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 increased $163,628and higher suite sales.
For the three months ended March 31, 2023, the decrease in event-related revenues primarily reflects lower revenues from concerts of $10,656 which was partially offset by an increase in revenues from other sporting and live entertainment events (excluding the Knicks and Rangers) of 10,129.The decrease in revenues from concerts was due to $194,585a decrease in the number of concerts at the Company’s venues as compared to the prior year period, partially offset by higher per-concert revenues. The increase in revenues from other sporting and live entertainment events (excluding the Knicks and Rangers) was due to higher per-event revenue and a higher number of events at the Company’s venues as compared to the prior year period. For the nine months ended March 31, 2023, the increase in event-related revenues primarily reflects higher revenues from concerts of $77,416 which was primarily due to the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 revenues(due to the COVID-19 pandemic). See “— Introduction — Factors Affecting Results of Operations” for more information.
Direct operating expenses
Direct operating expenses for the three and nine months ended March 31, 2023 increased $425,253 to $476,434$10,147 and $109,309, respectively, as compared to the prior year period.periods. The net increaseschanges in direct operating expenses were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in event-related revenues, as discussed below$63,411 $164,044 
Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements51,090 98,101 
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below18,173 45,770 
Increase in suite license fee revenues, due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)14,659 28,119 
Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic (except for Knicks and Rangers home games)7,831 15,129 
Increase in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidation2,984 8,556 
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports2,585 5,119 
Increase in revenues from the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in the prior year periods as a result of the COVID-19 pandemic
139 55,348 
Other net increases2,756 5,067 
$163,628 $425,253 
Three Months EndedNine Months Ended
March 31, 2023March 31, 2023
Increase in expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements$4,488 $33,181 
Impact of direct operating expenses related to the Company’s Sphere initiative in the current periods4,389 4,389 
Increase in direct operating expenses associated with the Arena License Agreements3,748 8,480 
Increase in direct operating expenses associated with the Christmas Spectacular
2,326 12,181 
(Decrease) increase in event-related direct operating expenses(4,515)43,129 
(Decrease) increase in venue operating costs(570)6,057 
Other net increases281 1,892 
$10,147 $109,309 
For the three and nine months ended March 31, 2023, the increase in direct operating expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects the increase in suite license fees and, to a lesser extent, the increase in Knicks’ and Rangers’ food and beverage sales.
For the three and nine months ended March 31, 2023, the increase in expenses associated with the Arena License Agreements primarily reflects an increase in food and beverage costs associated with the increase in Knicks’ and Rangers’ food and beverage sales.
49




For the three and nine months ended March 31, 2022,2023, the increase in direct operating expenses associated with the Christmas Spectacular production was primarily due to the increase in the number of performances as compared to the prior year periods.

For the three months ended March 31, 2023, the decrease in event-related revenuesdirect operating expenses reflects (i) higher revenueslower direct operating expenses from concerts of $49,960 and $124,566, respectively, and (ii)$6,785 which was primarily due to the decrease in the number of concerts held at the Company’s venues as compared to the prior year period, partially offset by higher revenuesdirect operating expenses from other sporting and live entertainment events (excluding the Knicks and Rangers) of $13,451 and $39,478, respectively,$2,269 which was primarily due to the returnincrease in the number of sporting 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 the COVID-19 pandemic (except for Knicks and Rangers home games). See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
For the three and nine months ended March 31, 2022, the Knicks and Rangers hosted a combined 38 and 75 pre-season and regular season games without any capacity restrictions. As a result, the Company recorded $29,616 and $58,978 in arena license fees under the Arena License Agreements for the three and nine months ended March 31, 2022. In the prior year, 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 during Fiscal Year 2021.
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Direct operating expenses
Direct operating expenses for the three months ended March 31, 2022 increased $86,044 to $110,688 as compared to the prior year period. For the nine months ended March 31, 2022, direct operating expenses increased $222,665 to $294,333 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in direct operating expenses associated with revenue or profit sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License Agreements$36,938 $70,916 
Increase in event-related direct operating expenses, as discussed below34,033 85,603 
Increase in direct operating expenses associated with the Arena License Agreements7,649 13,821 
Increase in direct operating expenses associated with venue operating costs7,633 12,981 
(Decrease) increase in direct operating expenses associated with the Christmas Spectacular due to the shortened 2021 holiday season run as compared to the cancellation of the 2020 production in Fiscal Year 2021 as a result of the COVID-19 pandemic
(116)39,406 
Other net (decreases) increases(93)(62)
$86,044 $222,665 
For the three and nine months ended March 31, 2022,2023, the increase in event-related direct operating expenses reflects (i) higher direct operating expenses from concerts of $26,403 and $62,650, respectively, and (ii) higher direct operating expenses from other sporting and live entertainment events of $7,629 and $22,953, respectively,$39,637 which was primarily due to the returnincrease 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 the COVID-19 pandemic (except for Knicks and Rangers home games).period.

Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended March 31, 20222023 increased $27,317,$24,109, or 41%25% to $94,603$120,307 as compared to the prior year period. The increase primarily reflects (i)higher professional fees of $11,438, which was driven by costs related to the MSGE Spinco Distribution, as well as higher employee compensation and related benefits of $30,632, which included the impact$7,967, and other general administrative expenses of severance-related costs attributable to separation agreements in the current year period, and (ii) higher professional fees of $2,129, inclusive of costs for MSG Sphere development, partially offset by lower expenses related$4,704, both primarily due to the Merger of $9,620.Company’s Sphere initiative.

For the nine months ended March 31, 2022,2023, selling, general and administrative expenses increased $93,415,$52,706, or 50%19%, to $279,081$336,421 as compared to the prior year period. ThisThe increase primarily reflects (i) higher employee compensation and related benefits of $58,477,$27,829, primarily due to the Company’s Sphere initiative, higher professional fees of $11,808 which is net of a decrease in share-based compensation of $3,164 and (ii)was driven by an increase in professional feescosts related to the Company’s spin-off of $15,077, inclusiveits live entertainment businesses, and higher other general administrative expenses of merger and acquisition costs$$13,069, primarily due to the Company’s Sphere initiative of $5,772 and, to a lesser extent, initiatives for MSG Sphere development.$9,702.

DepreciationImpairment and amortizationother gains, net
Depreciation and amortization forFor the three and nine months ended March 31, 2022, decreased $559 or 3% to $18,522,2023, the Company recorded a net loss of $51 and $3,139, or 5% to $57,202, as compared toa net gain $7,361, respectively. The net gain for the prior year periodnine months ended March 31, 2023 was primarily due to lower depreciation expense as a resultthe gain on sale of certain assetsthe Company’s controlling interest in The Garden being fully depreciatedBCE and amortized, andreceipt of insurance proceeds related to the Company’s creative studio in Burbank, CA, partially offset by the net loss on the disposal of certain assets in the prior year period.a corporate aircraft.

Operating loss
Operating loss for the three months ended March 31, 2022,2023 was $43,221$81,140 as compared to a loss of $80,054$44,816 in the prior year period, an improvementincrease of $36,324. The increase in operating loss of $36,833, or 46%.was primarily due to an increase in direct operating expenses and selling, general and administrative expenses, partially offset by an increase in revenues. For the nine months ended March 31, 2022,2023, operating loss was $168,175$119,927 as compared to a loss of $287,793$172,809 in the prior year period, an improvement of $119,618 or 42%.$52,882. The improvements in operating loss were primarily due to increasesan 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.
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Adjusted operating lossincome (loss)
Adjusted operating loss for the three months ended March 31, 20222023 was $10,695$39,332 as compared to $12,290 in the prior year period, an increase of $27,042. The increase in adjusted operating loss of $50,471was primarily due to an increase in direct operating expenses and selling, general, and administrative expenses, partially offset by an increase in revenues.
For the nine months ended March 31, 2023, adjusted operating loss was $20,650 as compared to $71,739 in the prior year period, an improvement of $39,776.$51,089. The improvement in adjusted operating lossincome was lower than the improvement in operating loss of $36,833 primarily due to (i) thean increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $4,509, and (ii) a decrease in share-based compensation of $3,600, both of which are excluded in the calculation of adjusted operating income (loss). For the nine months ended March 31, 2022, adjusted operating loss was $67,105 as compared to $163,808 in the prior year period,revenues, partially offset by an improvement in adjusted operating loss of $96,703. The improvement in adjusted operating loss was lower than the improvement in operating loss of $119,618 primarily due to (i) restructuring charges of $21,299 in the prior year period as compared to merger and acquisition related costs of $17,095 in the current year period, (ii) the increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $15,222,direct operating expenses and (iii) a decrease in share-based compensation of $2,909, which are excluded in the calculation of adjusted operating loss.selling, general and administrative expenses.
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MSG Networks
The tables below 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 EndedThree Months Ended
March 31,ChangeMarch 31,Change
20222021AmountPercentage20232022AmountPercentage
RevenuesRevenues$167,569 $177,853 $(10,284)(6)%Revenues$161,436 $167,569 $(6,133)(4)%
Direct operating expensesDirect operating expenses87,174 74,392 12,782 17 %Direct operating expenses(89,251)(87,174)(2,077)2 %
Selling, general and administrative expensesSelling, general and administrative expenses32,237 31,743 494 2 %Selling, general and administrative expenses(60,052)(32,237)(27,815)86 %
Depreciation and amortizationDepreciation and amortization1,764 1,833 (69)(4)%Depreciation and amortization(1,689)(1,764)75 (4)%
Restructuring chargesRestructuring charges452 — 452 NMRestructuring charges— (452)452 (100)%
Operating incomeOperating income$45,942 $69,885 $(23,943)(34)%Operating income$10,444 $45,942 $(35,498)(77)%
Reconciliation to adjusted operating income:Reconciliation to adjusted operating income:Reconciliation to adjusted operating income:
Share-based compensationShare-based compensation1,758 3,324 Share-based compensation640 1,758 (1,118)(64)%
Depreciation and amortizationDepreciation and amortization1,764 1,833 Depreciation and amortization1,689 1,764 (75)(4)%
Amortization for capitalized cloud computing arrangement costs43 — 
Merger and acquisition related costs866 1,238 
Restructuring chargesRestructuring charges452 — Restructuring charges— 452 (452)NM
Merger and acquisition related costsMerger and acquisition related costs45,513 866 44,647 NM
Amortization for capitalized cloud computing arrangement costsAmortization for capitalized cloud computing arrangement costs43 43 — — %
Adjusted operating incomeAdjusted operating income$50,825 $76,280 $(25,455)(33)%Adjusted operating income$58,329 $50,825 $7,504 15 %
Nine Months EndedNine Months Ended
March 31,ChangeMarch 31,Change
20222021AmountPercentage20232022AmountPercentage
RevenuesRevenues$469,023 $481,455 $(12,432)(3)%Revenues$442,813 $469,023 $(26,210)(6)%
Direct operating expensesDirect operating expenses241,521 196,497 45,024 23 %Direct operating expenses(255,071)(241,521)(13,550)6 %
Selling, general and administrative expensesSelling, general and administrative expenses117,404 75,962 41,442 55 %Selling, general and administrative expenses(115,951)(117,404)1,453 (1)%
Depreciation and amortizationDepreciation and amortization5,317 5,463 (146)(3)%Depreciation and amortization(4,944)(5,317)373 (7)%
Restructuring chargesRestructuring charges452 — 452 NMRestructuring charges(3,988)(452)(3,536)NM
Operating incomeOperating income$104,329 $203,533 $(99,204)(49)%Operating income$62,859 $104,329 $(41,470)(40)%
Reconciliation to adjusted operating income:Reconciliation to adjusted operating income:Reconciliation to adjusted operating income:
Share-based compensationShare-based compensation15,290 14,217 Share-based compensation5,642 15,290 (9,648)(63)%
Depreciation and amortizationDepreciation and amortization5,317 5,463 Depreciation and amortization4,944 5,317 (373)(7)%
Amortization for capitalized cloud computing arrangement costs131 — 
Merger and acquisition related costs24,941 1,238 
Restructuring chargesRestructuring charges452 — Restructuring charges3,988 452 3,536 NM
Merger and acquisition related costsMerger and acquisition related costs52,958 24,941 28,017 112 %
Amortization for capitalized cloud computing arrangement costsAmortization for capitalized cloud computing arrangement costs131 131 — — %
Adjusted operating incomeAdjusted operating income$150,460 $224,451 $(73,991)(33)%Adjusted operating income$130,522 $150,460 $(19,938)(13)%
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Factors Affecting Results of Operations
Due to the COVID-19 pandemic, in March 2020, the 2019-20 NHL and NBA seasons were suspended. The leagues resumed play during the summer of 2020, with the Rangers and Islanders participating in the NHL’s return to play and the Islanders advancing to the 2019-20 playoffs. The NHL and NBA completed their shortened 2019-20 seasons in 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 aired full regular season telecast schedules for its five professional teams across both the NBA and NHL. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
Revenues
Revenues for the three and nine months ended March 31, 20222023 decreased $10,284, or 6% to $167,569$6,133 and $26,210, respectively, as compared to the prior year period. Revenues for the nine months ended March 31, 2022 decreased $12,432, or 3%, to $469,023 as compared to the prior year period.periods. The changes in revenues were attributable to the following:
Three Months EndedNine Months Ended
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022March 31, 2023March 31, 2023
Decrease in affiliation fee revenueDecrease in affiliation fee revenue$(20,579)$(48,958)Decrease in affiliation fee revenue$(11,051)$(37,561)
Increase in advertising revenueIncrease in advertising revenue9,855 34,600 Increase in advertising revenue4,476 10,702 
Other net increasesOther net increases440 1,926 Other net increases442 649 
$(10,284)$(12,432)$(6,133)$(26,210)
For the three months ended March 31, 2022, the decrease in2023, affiliation fee revenue wasdecreased $11,051, primarily due to a decrease in subscribers of approximately 10%. This decrease was partially offset by the impact of higher affiliation rates.
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For the nine months ended March 31, 2023, affiliation fee revenue decreased $37,561, primarily due to a decrease in subscribers of approximately 10% (excluding the impact of the non-renewal of MSG Networks’ carriage agreement with Comcast Corporation (“Comcast”) as of October 1, 2021,2021) and, to a decrease in subscribers of approximately 7% (excludinglesser extent, the impact of the non-renewal with Comcast).Comcast non-renewal. These decreases were partially offset by the absence of net unfavorablefavorable affiliate adjustments of approximately $5,800 recorded in the prior year quarter$10,400 and the impact of higher affiliation rates. For the nine months ended March 31, 2022, the decrease in affiliation fee revenue was primarily due to the impact of (i) a decrease in subscribers of approximately 7% (excluding the impact of the non-renewal with Comcast) and (ii) the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2021. These decreases were partially offset by the impact of higher affiliation rates and a decrease in net unfavorable affiliate adjustments of approximately $3,600.
Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date. The financial impact of Comcast’s non-carriage of MSG Networks will depend on many factors including if, when and on what terms Comcast and the Company reach a new carriage agreement and the extent to which Comcast subscribers switch to other Distributors that carry MSG Networks. As of October 1, 2021 Comcast’s non-carriage has reduced MSG Networks’ subscribers by approximately 10% and subject to the foregoing factors, has and is expected to reducereduced 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 bewere reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.
For the three and nine months ended March 31, 2022,2023, the increase in advertising revenue primarily reflected the impact of higher per-game advertising sales from the telecast of live professional sports programming and, to a lesser extent, an increase in advertising sales related to the Company’s non-ratings based advertising initiatives. These increases were partially offset byprofessional sports telecasts due to the impact of fewera higher number of live professional sports telecasts and an increase in per-game advertising sales as compared with the prior year period. For the nine months ended March 31, 2022, the increase in advertising revenue was primarily the impact of (i) a greater number of live NBA and NHL telecasts in the current year periodperiods, as compared with the prior year period (ii)well as higher per-game advertising sales from the telecast of live professional sports programming and (iii) increased advertising sales related to the Company’s non-ratings basednon-ratings-based advertising initiatives. As a result of the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast fewer NBA and NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period.

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Direct operating expenses

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

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

Adjusted operating income
Adjusted operating income for the three months ended March 31, 2022 decreased $25,455, or 33%, to $50,825 as compared to the prior year period, which is consistent with the decrease in operating income of $23,943, as discussed above. For the nine months ended March 31, 2022, adjusted operating income decreased $73,991, or 33%, to $150,460 as compared to the prior year period. The decrease in adjusted operating income for the nine months ended March 31, 2022 was lower than the decrease in operating income of $99,204 primarily due to the merger and acquisition-related costs of $25,400 recorded in the current year period, which are excluded in the calculation of adjusted operating income.
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Tao Group Hospitality
The tables below 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
March 31,Change
20222021AmountPercentage
Revenues$108,572 $12,790 $95,782 NM
Direct operating expenses63,783 10,480 53,303 NM
Selling, general and administrative expenses40,376 11,025 29,351 NM
Depreciation and amortization6,490 1,130 5,360 NM
Impairment and other (gains) losses, net(5,074)— (5,074)NM
Operating income (loss)$2,997 $(9,845)$12,842 NM
Reconciliation to adjusted operating income (loss):
Share-based compensation1,876 1,314 
Depreciation and amortization6,490 1,130 
Merger and acquisition related costs247 2,764 
Impairment and other (gains) losses, net(5,074)— 
Adjusted operating income (loss)$6,536 $(4,637)$11,173 NM
Nine Months Ended
March 31,Change
20222021AmountPercentage
Revenues$345,122 $30,502 $314,620 NM
Direct operating expenses185,756 31,288 154,468 NM
Selling, general and administrative expenses115,155 27,759 87,396 NM
Depreciation and amortization19,111 3,739 15,372 NM
Impairment and other (gains) losses, net(4,699)— (4,699)NM
Operating income (loss)$29,799 $(32,284)$62,083 NM
Reconciliation to adjusted operating income (loss):
Share-based compensation5,745 3,598 
Depreciation and amortization19,111 3,739 
Merger and acquisition related costs247 2,764 
Impairment and other (gains) losses, net(4,699)— 
Adjusted operating income (loss)$50,203 $(22,183)$72,386 NM
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. For the majority of Fiscal Year 2021, Tao Group Hospitality’s venues conducted limited operations, subject to significant regulatory requirements, which included limits on capacity, curfews and social distancing requirements for outdoor and indoor dining, while certain venues remained closed for the entire fiscal year. At the beginning of Fiscal Year 2022, government-mandated capacity restrictions were lifted in Tao Group Hospitality’s key U.S. markets. During the nine months ended March 31, 2022, operations were impacted by an increase in cases due to a COVID-19 variant which resulted in reduced operating schedules and reduced demand from guests, including corporate and private event cancellations and postponements in the second and third quarters. See “— Introduction —Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
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As of March 31, 2022, 56 of Tao Group Hospitality’s venues (26 legacy Tao Group Hospitality venue and 30 Hakkasan venues acquired in connection with the April 27, 2021 transaction) were open for outdoor dining, limited or full capacity indoor dining (depending on the market), and delivery/takeout, inclusive of Lavo Ristorante in Los Angeles, a venue that first opened in March 2022, while four venues remained closed (three legacy Tao Group Hospitality venues and one Hakkasan venue). As of the date of this filing, Tao Group Hospitality’s domestic venues no longer require guests to provide proof of COVID-19 vaccination before entering and Tao Group Hospitality is operating without capacity restrictions in domestic and key international markets.
Revenues
Revenues for the three months ended March 31, 2022 increased $95,782 to $108,572 as compared to the prior year period. For the nine months ended March 31, 2022, revenues increased $314,620 to $345,122 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in revenues due to Hakkasan, acquired in April 2021$47,171 $158,102 
Increase in revenues at venues subject to capacity restrictions in the prior year period (a)
33,801 96,529 
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the COVID-19 pandemic13,151 55,942 
Other net increases1,659 4,047 
$95,782 $314,620 
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(a) Includes the increases in revenues from converting previously managed venues to self-operated venues of $9,524 and $29,739 for the three and nine months ended March 31, 2022 as compared to the prior year periods.
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Direct operating expenses
Direct operating expenses for the three and nine months ended March 31, 20222023 increased $53,303 to $63,783$2,077 and $13,550, respectively, as compared to the prior year period. For the nine months ended March 31, 2022,periods. The changes in direct operating expenses increased $154,468, to $185,756 as compared to the prior year period. The net increases were attributable to the following: 
Three Months Ended March 31, 2022Nine Months Ended March 31, 2022
Increase in direct operating expenses due to Hakkasan, acquired in April 2021$25,352 $77,832 
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the COVID-19 pandemic12,563 34,251 
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the COVID-19 pandemic11,313 32,333 
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the COVID-19 pandemic2,745 8,027 
Other net increases1,330 2,025 
$53,303 $154,468 
Three Months EndedNine Months Ended
March 31, 2023March 31, 2023
Increase in rights fees expense$2,502 $11,508 
Change in other programming and production costs(425)2,042 
$2,077 $13,550 
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended March 31, 2022 increased $29,351 to $40,376 as compared to the prior year period. For the nine months ended March 31, 2022, selling, general and administrative expenses increased $87,396 to $115,155 as compared to the prior year period. For the three and nine months ended March 31, 2022, the increases were2023, right fees expense increased $2,502 and $11,508, respectively, primarily due to higher (i) expenses from the Hakkasan operations acquired in April 2021impact of $14,340 and $45,036, respectively, (ii) employee compensation and related benefits, inclusive of an increase in share-based compensation, of $6,231 and $16,871, respectively, (iii) restaurant expenses, as well as supplies, utilities, general liability insurance, pre-opening expenses and repairs and maintenance of $5,560 and $12,365, respectively, and (iv) marketing costs of $2,622 and $7,112, respectively. The increases were partially offset by a decrease in professional fees primarily related to the acquisition of Hakkasan, of $2,261 and $690, respectively.
Depreciation and amortization
Depreciation and amortization for the three months ended March 31, 2022 increased $5,360 to $6,490 as compared to the prior year period.annual contractual rate increases. For the nine months ended March 31, 2022, depreciation2023, the increase was also due to the absence of reductions in media rights fees related to the shortened 2020-21 NHL season recorded in the prior year first quarter.
For the three months ended March 31, 2023, other programming and amortizationproduction costs decreased $425, including the impact of the Company’s cost reduction program implemented during the current fiscal year. For the nine months ended March 31, 2023, other programming and production costs increased $15,372$2,042, primarily due to $19,111a higher number of professional sports telecasts in the current year period.

Selling, general and administrative expenses
For the three months ended March 31, 2023, selling, general and administrative expenses of $60,052 increased $27,815 as compared to the prior year period. The increases werequarter, primarily due to an approximately $44,600 increase in expenses, primarily litigation-related, associated with the acquisition of HakkasanMSG Networks Inc. by the Company (the “Merger”). This increase was partially offset by net lower advertising sales commissions of $8,318, due to the termination of the Networks Advertising Sales Representation Agreement in April 2021.
Impairmentthe current year period, lower advertising and marketing expenses of $4,966, lower employee compensation and related benefits of $1,252 and other (gains) losses,cost decreases.
For the nine months ended March 31, 2023, selling, general and administrative expenses of $115,951 decreased $1,453 as compared to the prior year, primarily due to lower advertising and marketing expenses of $1,1077, lower employee compensation and related benefits of $7,310 and net lower advertising commissions of $6,910, due to the termination of the Networks Advertising Sales Representation Agreement in the current period. These decreases were offset by a net increase in acquisition-related costs of $26,320 primarily due to litigation settlement expenses of $48,500 recognized in the current year period related to the Merger as discussed above which was partially offset by lower other acquisition-related costs as compared to the prior year period.
Operating income
For the three months ended March 31, 2022, the Company recorded net gains2023, operating income of $5,074 from extinguishment of lease liabilities associated with a Hakkasan venue.
Operating income (loss)
Operating income for the three months ended March 31, 2022 was $2,997$10,444 decreased $35,498, or 77%, as compared to an operating loss of $9,845 in the prior year period, anquarter, primarily due to the increase in selling, general and administrative expenses (including the impact of the Merger litigation settlement discussed above), and, to a lesser extent, the decrease in revenues and the increase in direct operating income of $12,842. expenses.
For the nine months ended March 31, 2022,2023, operating income was $29,799of $62,859 decreased $41,470, or 40%, as compared to an operating loss of $32,284 in the prior year period, an increase in operating income of $62,083. The increases in operating income for the three and nine months ended March 31, 2022 werequarter, primarily due to the acquisition of Hakkasandecrease in April 2021, increased revenues, and the net recovery of impairment of long-lived assets, partially offset by an increase in direct operations, selling, general and administrativeoperating expenses, and depreciation and amortization, as discussed above. All increased operations were significantly driven by the acquisitionimpact of Hakkasan in April 2021 and the prior year period disruptions caused by the COVID-19 pandemic.restructuring
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Adjusted operating income (loss)charges, partially offset by a decrease in selling, general and administrative expenses (including the impact of the Merger litigation settlement and restructuring expenses discussed above).
Adjusted operating income for
For the three months ended March 31, 2022 was $6,536 as compared to adjusted operating loss $4,637 in the prior year period, an increase in2023, adjusted operating income of $11,173. $58,329 increased $7,504, or 15%, as compared to the prior year quarter, primarily due to the decrease in selling, general and administrative expenses (excluding the impact of the Merger litigation settlement discussed above) partially offset by a decrease in revenues and to a lesser extent, higher direct operating expenses.
For the nine months ended March 31, 2022, adjusted operating income was $50,203, as compared to adjusted operating loss of $22,183 in the prior year period, an increase in2023, adjusted operating income of $72,386. The increase in adjusted operating income for the three months ended March 31, 2022 was higher$130,522 decreased $19,938, or 13%, as compared to the increase in operating incomeprior year quarter, primarily due to the higher depreciationdecrease in revenues and amortization,increase in direct operating expenses, partially offset by a decrease in selling, general and administrative expenses (excluding the net recoveryimpact of impairment of long-lived assets, asthe Merger litigation settlement and restructuring expenses discussed above. For the nine months ended March 31, 2022, the increase in adjusted operating income was higher than the increase in operating income primarily due to increased depreciation and amortization, as discussed above.above).
Liquidity and Capital Resources
OverviewSources and Uses of Liquidity
The Company’s operationsAs further described in “Item 2. - Management’s Discussion and operating results have been materially impacted byAnalysis - Introduction,” on April 20, 2023, the COVID-19 pandemic (including COVID-19 variants)Company completed the MSGE Spinco Distribution. Although the information set forth in this Quarterly Report on Form 10-Q generally is as of March 31, 2023 and actions takendoes not give effect to the MSGE Spinco Distribution, the information set forth in response by governmental authoritiesthis section also focuses on the liquidity and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all operationscapital resources of the Entertainment business were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. Fiscal Year 2022 has also been impacted byCompany following the pandemic, with fewer ticketed events at our venues in the first half of the year as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19) due to the lead-time required to book touring acts and artists, and an increase in cases due to a COVID-19 variant, which resulted in a number of events at our venues being cancelled or postponed in the second and third quarters.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in 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 were required to provide proof that they had received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. These requirements were lifted in Chicago, effective February 28, 2022 and in New York effective March 7, 2022, and, as a result, our performance venues no longer require guests to provide proof of COVID-19 vaccination before entering (although specific performers may require enhanced protocols).
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the nine months ended March 31, 2022 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 and third quarters of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact 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 Festival.
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. The Knicks and the Rangers each completed their 2021-2022 82-game regular seasons, with the Rangers advancing to the playoffs.
As a result of the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, its advertising revenue and certain operating expenses, including rights fees expense, reflect the same.
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Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to government 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. During Fiscal Year 2022, Tao Group Hospitality’s operations have also been impacted by an increase in cases due to a COVID-19 variant, which resulted in reduced operating schedules and reduced demand from guests, including corporate and private event cancellations and postponements in the second and third quarters.As of the date of this filing, Tao Group Hospitality is operating without capacity restrictions in domestic and key international markets.
It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in new government or league-mandated capacity restrictions or vaccination/mask requirements or impact 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.MSGE Spinco Distribution.
Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under ourthe Delayed Draw Term Loan Facility (the “DDTL Facility”) described below, as well as proceeds from the sale of a portion of the MSGE Retained Interest, if needed. MSGN Credit Agreement. Our principal uses of cash over the next 18 months are expected to be substantial and include working capital-related items (including funding our operations), capital spending (including ourcompleting construction of MSG Sphere at The Venetian in Las Vegas and related original content, as described below), debt service and payments we expect to make in connection with the refinancing of our indebtedness, and investments and related loans and advances that we may fund from time to time, and mandatory purchases from prior acquisitions.time. 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, including the construction of Sphere in Las Vegas and the refinancing of the MSG Networks Credit Facilities prior to their maturity in October 2024. As of May 9, 2023, after giving effect to the MSGE Spinco Distribution and including proceeds from the sale of our interest in Tao Group Hospitality (the “Tao Group Hospitality Disposition”), the Company’s unrestricted cash and cash equivalents balance was approximately $232,700. The Company’s unrestricted cash and cash equivalents balance as of March 31, 2023 was $217,576, which does not give effect to the MSGE Spinco Distribution, and was $432,173 as of December 31, 2022, which does not give effect to the MSGE Spinco Distribution or the Tao Group Hospitality Disposition. As of May 9, 2023 the Company’s restricted cash and cash equivalents balance was approximately $110,000, inclusive of $75,000 that is required to be held in an account pledged as collateral for the LV Sphere atTerm Loan Facility until its release upon the Liquidity Covenant Reduction Date (as defined under Note 10). The Venetian.principal balance of the Company’s total debt outstanding as of May 9, 2023, after giving effect to the MSGE Spinco Distribution and the Tao Group Hospitality Disposition, was $1,227,875. We believe we have sufficient liquidity from cash and cash equivalents, ($999,063 as of March 31, 2022) and futureavailable borrowing capacity under the DDTL Facility, cash flows from operations (including savings generated by the Company’s cost reduction program and expected cash from operations from Sphere in Las Vegas), as well as proceeds from the sale of a portion of the MSGE Retained Interest (which had an aggregate fair market value of approximately $575,000 as of May 9, 2023), if needed, to fund our operations and service the MSGN Credit Agreement, the National Properties Term Loan Facility and the Tao Credit Facilitiescredit facilities for the foreseeable future, as well as complete the construction of Sphere in Las Vegas. This also includes the Company’s expectation that it will pay down a portion of MSG Sphere at The Venetian. Networks’ term loan upon the refinancing of the loan prior to its maturity in October 2024.
The Company has undertaken and may seekcontinue to raise capital to fundundertake additional content,cost reduction efforts which would include further reductions in discretionary spend in normal course of business and reductions in investments in non-essential capital.
To the extent that proceeds from the sale of a portion of the MSGE Retained Interest are not required for the uses of liquidity cited in the previous paragraph, the MSGE Retained Interest may be expectedexchanged for our shares, distributed pro rata to generate significant revenue for MSG Sphere. our shareholders or used to repay borrowings under the DDTL Facility, if any.
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See Note 1410, 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 MSGNMSG Networks Credit Agreement,Facilities and the National PropertiesLV Sphere Term Loan FacilityFacility.
For additional information regarding the Company’s capital expenditures, including those related to Sphere in Las Vegas, see Note 22, Segment Information to the Company’s audited consolidated and combined financial statements and notes thereto for the Tao Revolving Credit Facilities. Our cash and cash equivalents at March 31,year ended June 30, 2022 included approximately $244,000 in advance cash proceeds primarily related to tickets, suites, and, to a lesser extent, sponsorships.

the Company’s Annual Report on Form 10-K.
On March 31, 2020, the Company’s Board of Directors authorized, effective following the 2020 Entertainment Distribution, a share repurchase program to repurchase up to $350,000 of the Company’s Class A Common Stock. The program was re-authorized by the Company’s Board of Directors on March 29, 2023. 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.
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 SphereSpheres
The Company has made significant progress on MSG Sphere at The Venetian,in Las Vegas, 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,Sphere Experiences, 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 Venetianin Las Vegas will generate substantial revenue and adjusted operating income on an annual basis.
MSG Sphere at The Venetian is a complex construction project that has become even more challenging due to the global impact of COVID-19. In April 2020, the Company announced that it was suspending construction due to COVID-19-related factors outside of its control, including supply chain issues. As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it resumed construction with a lengthened timetable. The Company
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remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in the second half of calendar yearSeptember 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 thatAs of May 9, 2023, our cost estimate, inclusive of core technology and soft costs, for MSG Sphere at The Venetian wasin Las Vegas is approximately $1,865,000.$2,300,000. This cost estimate wasis net of $75,000 that the SandsVenetian 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 incurredin Las Vegas paid through March 31, 2022May 9, 2023 were approximately $1,327,000,$2,080,000, which is net of $65,000 received from Sands. In addition, the amount of construction costs incurred as of March 31, 2022 includes approximately $177,600 of accrued expenses that were not yet paid as of that date.The Venetian.
With regard to MSG Sphere at The Venetian,in Las Vegas, the Company plans to finance the completion of the construction of the venue from cash-on-hand and cash flows from operations. IfThe Company may also access proceeds from the Company’s cash-on-handsale of a portion of the MSGE Retained Interest and cash flows from operations are not sufficient to finance the remaining construction costs of MSG Sphere at The Venetian, the Company would need to access additional capital, including potential incremental debt. There is no assurance that the Company will be able to obtain such capital.

While the Company plans to self-fund the construction of MSG Sphere at The Venetian,capacity 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.DDTL Facility, if needed.
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 planning applications to the local planning authority in March 2019 and that process, which will requirerequires 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. 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.
Financing Agreements
See Note 1410, 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 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. (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 Credit Facilities”), each with a term of five years. As of March 31, 2023, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility.
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MSGN Credit Facility

MSG Networks has made principal repayments aggregating to $89,375 through March 31, 2022 under the MSGN Credit Agreement.

The MSGN Term Loan Facility amortizes quarterly in accordance with its terms.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.
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 March 31, 2022, there was $1,010,625 outstanding under2023, the MSGN Term Loan Facility, and no borrowings under the MSGN Revolving Credit Facility. As of March 31, 2022, the Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants of the MSGN Credit Agreement. The scheduled repayments for the remainder of Fiscal Year 2022 are $12,375.covenants.
National PropertiesLV Sphere Term Loan Facility
The National PropertiesOn 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 “LV Sphere Term Loan Facility”). All obligations under the LV Sphere Term Loan Facility includes a minimum liquidity covenant, pursuantare guaranteed by Sphere Entertainment Group.
The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to whichmaturity. Under certain circumstances, MSG National PropertiesLV 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 LV Sphere Term Loan Facility and its restricted subsidiaries are requiredrelated guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring Sphere 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 Sphere in Las Vegas, 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 Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for Sphere 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 LV Sphere Term Loan Facility until its release upon the Liquidity Covenant Reduction Date, before stepping down to $50,000, with $25,000 required to be held in cash or cash equivalents, once Sphere in Las Vegas has been substantially completed and certain of average dailyits 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 Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last monthlines of each quarter.credit, as of such date. Following the first anniversarycompletion of the closingMSGE Spinco Distribution, the MSGE Retained Interest was pledged to secure the LV Sphere Term Loan Facility and will remain pledged until the Liquidity Covenant Reduction Date, and a portion of the facility in November 2021,value of the MSGE Retained Interest may also be counted toward the minimum liquidity level was reducedlevel.
Delayed Draw Term Loan Facility
As an additional source of liquidity for the Company, on April 20, 2023, the Company entered into a delayed draw term loan facility (the “DDTL Facility”) with MSG Entertainment Holdings, LLC (“MSG Entertainment Holdings”). Pursuant to $200,000. Ifthe DDTL Facility, MSG Entertainment Holdings has committed to lend up to $65,000 in delayed draw term loans to the Company on an unsecured basis for a period of 18 months following the consummation of the MSGE Spinco Distribution. The Company has not yet drawn upon the DDTL Facility.
The DDTL Facility will mature and any unused commitments thereunder will expire on October 20, 2024. Borrowings under the DDTL Facility will bear interest at any timea variable rate equal to either, at the total leverage ratiooption of the Company, (a) a base rate plus an applicable margin, or (b) Term SOFR plus 0.10%, plus an applicable margin. The applicable margin is equal to the applicable margin under the Credit Agreement, dated as of June 30, 2022, among MSG National Properties, LLC, the guarantors party thereto, the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., in its restricted subsidiaries is less than 5.00 to 1.00capacity as of the end of any four consecutive fiscal quarter periods or MSG Nationaladministrative agent (the “National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000. As of March 31, 2022, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.Credit Facilities), plus 1.00% per annum.

MSG National Properties has made principal repayments aggregating to 8,125 through March 31, 2022 under the National Properties Term Loan Facility, which amortizes quarterly in accordance with its terms. As of March 31, 2022, there was
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$641,875 outstandingSubject to customary borrowing conditions, the DDTL Facility may be drawn in up to six separate borrowings of $5 million or more. The DDTL Facility is prepayable at any time without penalty and amounts repaid on the DDTL Facility may not be reborrowed. If drawn, the Company will have the option to make any payments of principal, interest or fees under the National Properties Term Loan Facility. The scheduled repaymentsDDTL Facility either in cash or by delivering to MSG Entertainment Holdings shares of MSG Entertainment Class A common stock. If the Company elected to make any payment in the form of MSG Entertainment Class A common stock, the amount of such payment would be calculated based on the dollar volume-weighted average trading price for MSG Entertainment Class A common stock for the remaindertwenty trading days ending on the day on which the Company made such election. The Company shall only be permitted to use the proceeds of Fiscal Year 2022 are $1,625.the DDTL Facility (i) for funding costs associated with the Sphere initiative and (ii) in connection with refinancing of the indebtedness under MSG Networks Credit Facilities.

In addition to the minimum liquidity covenant, the National Properties Term LoanThe DDTL Facility and the related security agreement containcontains certain customary representations and warranties and affirmative and negative covenants, including, among others, financial reporting, notices of material events, and events of default. As of March 31, 2022, MSG National Propertieslimitations on asset dispositions restricted payments, and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
Tao Senior Secured Credit Facilities
As of March 31, 2022, there was $25,000 outstanding drawn on the Tao Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022 are $2,500. As of March 31, 2022, Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available was $24,250.
Disruptions caused by the COVID-19 pandemic had, and may in the future have, a significant and negative impact on Tao Group Hospitality’s operations and financial performance. On August 6, 2020, TAOIH and TAOG entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder through December 31, 2021, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. There was no balance in the reserve account as of March 31, 2022. As of March 31, 2022, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Tao Senior Credit Agreement.

As of March 31, 2022, the outstanding balance under the Tao Subordinated Credit Agreement was $63,000. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810, Consolidation. If the pandemic were to have significant negative impact on Tao Group Hospitality’s operations and financial performance in the future, Tao Group Hospitality may need to seek covenant waivers. 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.affiliate transactions.
Letters of Credit
The Company uses letters of credit to support its business operations. As of March 31, 2022,2023, the Company had a total of $8,447$8,860 of letters of credit outstanding, which included two outstanding letters of credit for an aggregate of $750$7,992 issued under the TaoNational Properties Revolving Credit Facility.
Contractual Obligations
TheAs of March 31, 2023, 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 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 LV Sphere Term Loan Facility on December 22, 2022. See Note 129, 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 March 31, 2022,2023, cash, cash equivalents and restricted cash totaled $1,020,753,$327,245, as compared to $1,539,976$822,885 as of June 30, 2021.2022. The following table summarizes the Company’s cash flow activities for the nine months ended March 31, 20222023 and 2021:2022:
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Nine Months Ended March 31,
20222021
Net loss$(90,942)$(126,229)
Adjustments to reconcile net loss to net cash provided by operating activities174,010 70,785 
Subtotal$83,068 $(55,444)
Changes in working capital assets and liabilities23,133 (58,672)
Net cash provided by (used in) operating activities$106,201 $(114,116)
Net cash (used in) provided by investing activities(547,926)21,834 
Net cash (used in) provided by financing activities(77,520)589,598 
Effect of exchange rates on cash, cash equivalents and restricted cash22 7,918 
Net (decrease) increase in cash, cash equivalents and restricted cash$(519,223)$505,234 
Nine Months Ended
March 31,
20232022
Net cash provided by operating activities$137,824 $106,201 
Net cash used in investing activities(825,484)(547,926)
Net cash provided by (used in) financing activities200,485 (77,520)
Effect of exchange rates on cash, cash equivalents and restricted cash(729)22 
Net decrease in cash, cash equivalents and restricted cash$(487,904)$(519,223)
Operating Activities
Net cash provided by operating activities for the nine months ended March 31, 2022 increased2023 improved by $220,317$31,623 to $106,201$137,824 as compared to net cash used in operating activities of $114,116 in the prior year period, primarily due to a lower net loss from continuing operations in the current year period, and changes in working capital assets and liabilities, which included (i) higher cash collection associated with deferred revenue including collections dueaccrued expenses related to promoters,the Merger litigation, and (ii) higher cash receipts from collections of accounts receivables, partially offset by (i) an increase in payables, includingdeferred production costs associated with Sphere in Las Vegas, and (ii) higher net related party payable.receivables. Our lower net loss from continuing operations in the current year period reflects significant non-cash items such as (i) lower deferred income tax benefitsa net unrealized gain of $11,872 in the current year period$6,275 as compared to $37,630 in the prior year period, and (ii)a net unrealized loss of $28,303 as compared to net unrealized gain of $52,662 in the prior year period.
Investing Activities
Net cash used in investing activities for the nine months ended March 31, 20222023 increased by $569,760$277,558 to $547,926$825,484 as compared to the prior year periodperiod primarily due to an increaseinvesting activities in continuing operations related to capital expenditures for Sphere in Las Vegas in the current year period, and to a lesser extent, the absence of proceeds from the maturity of short-term investments in the prior year period.
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Financing Activities
Net cash used inprovided by (used in) financing activities for the nine months ended March 31, 20222023 increased by $667,118$278,005 to $77,520$200,485 as compared to cash provided bythe prior year period primarily due to financing activities of $589,598 in prior year period duecontinuing operations related to the absence of proceeds received from the National PropertiesLV Sphere Term Loan Facility of $630,500 duringin the priorcurrent year period in November 2020.period.
Seasonality of Our Business
The revenuesPrior to the MSGE Spinco Distribution, the Company earns from the Christmas Spectacular and arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden generally means the Entertainment segment earnsearned a disproportionate share of its annual revenues and operating income in the second and third quarters of the Company’sits fiscal year with the first fiscal quarter being disproportionally lower.

Asas a result of the foregoing,production of the Company’sChristmas Spectacular, arena license fees in connection with the use of The Garden by the Knicks and the Rangers, and MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and operating income are disproportionallyNHL professional sports programming. Following the MSGE Spinco Distribution, our MSG Networks segment generally continues to expect to earn a higher share of its annual revenues in the fiscal second and third quarterquarters of theits fiscal year as a result of MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and lower in the first quarter of the fiscal year.

NHL professional sports programming.
Recently Issued Accounting Pronouncements and Critical Accounting PoliciesEstimates
Recently Issued and Adopted Accounting Pronouncements
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 PoliciesEstimates
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, 20212022 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.
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2023.
Impairment of Long-LivedGoodwill 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 March 31, 2022,2023, the Company had threetwo 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 threetwo reporting units: Entertainment and MSG Networks and Tao Group Hospitality.Networks.
The goodwill balance reported on the Company’s condensed consolidated balance sheet as of March 31, 20222023 by reporting unit was as follows: 
Entertainment$74,309 
MSG Networks424,508 
Tao Group Hospitality1,364 
Total Goodwill$500,181498,817 
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.
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The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year 20222023 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.
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 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.
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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 March 31, 2022:2023: 
Trademarks$61,881 
Photographic related rights1,920 
Total indefinite-lived intangibles$63,801 
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform the qualitative assessment of impairment for the photographic related rights and the trademarks. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair values of the intangible assets. Examples of such events and circumstances include:
•cost factors;
•financial performance;
•legal, regulatory, contractual, business or other factors;
•other relevant company-specific factors such as changes in management, strategy or customers;
•industry and market considerations; 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.
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Potential Interest Rate Risk Exposure
The Company, through its subsidiaries, MSGN L.P. and MSG National Properties (prior to the MSGE Spinco Distribution), MSG Networks and as a result of the consolidation of Tao Group Hospitality, hasMSG LV, 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 Facilities bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total net leverage ratio). Accordingly, the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities are subject to interest rate risk with respect to the tenor of any borrowings incurred. See Note 14 to the consolidated financial
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statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information on the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities.
For the twelve months ended March 31, 2022, the interest rate on the MSG Networks Senior Secured Credit Facilities ranged from 1.58% to 1.96% and was approximately 1.96% as of March 31, 2022. The interest rate on the Tao Senior Secured Credit Facilities ranged from 2.59% to 2.96% and it was 2.96% as of March 31, 2022. In addition, the interest rate on National Properties Term Loan Facility was 7.00% as of March 31, 2022 and has been unchanged since inception. The effect of a hypothetical 100200 basis point increase in floating interest ratesrate prevailing as of March 31, 20222023 and continuing for a full year would increase the Company’s interest expense by $14,800,payments on the outstanding balancesamounts under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Senior Secured Credit Facilities.credit facilities by $38,022.
Foreign Currency Exchange Rate Exposure
We are exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through our net investment position initiated with our acquisition of land in London in the second quarter of fiscal year 2018 for future MSG Sphere development and through cash and invested funds which will be deployed in the construction of our London venue. We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations by entering into foreign currency forward exchange contracts with financial institutions. If we were to enter into such hedging transactions, the market risk resulting from foreign currency fluctuations is unlikely to be entirely eliminated. We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes. During the past twelve months ended March 31, 2022,2023, the GBP/USD exchange rate ranged from 1.30031.0695 to 1.42181.3826 as compared to GBP/USD exchange rate of 1.3548 as of1.2343 on March 31, 2022,2023, a fluctuation range of approximately 4.95%12.01%. As of March 31, 2022,2023, a uniform hypothetical 4.57%13.71% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $8,300$23,900 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 March 31, 2022.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 March 31, 2022.
Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that the consolidated 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 March 31, 2022, the material weakness previously disclosed has not yet been fully remediated.
In response to the material weakness in the Company’s internal control over financial reporting, management has designed and implemented control activities related to the identification, calculation, and disclosure of capitalized interest expense. We will continue to work towards full remediation of this material weakness to improve our internal control over financial reporting.
The material weakness cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described above.2023.
Changes in Internal Control over Financial Reporting
Other than the material weakness described above, thereThere 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 March 31, 20222023, 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 MergerCompany’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.
Six complaints involved allegations of fiduciary breaches in connection with the negotiation and approval of the Merger and have since been consolidated into two remaining litigations.
On September 10, 2021, the Court of Chancery of the State of Delaware (the “Court”) entered an order consolidating two derivative complaints filed by purported Company stockholders. The consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. No. 2021-0468-KSJM.2021-0468-KSJM (the “MSG Entertainment Litigation”). The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative claims and alleges that the members of the board of directors and controlling stockholders violated their fiduciary duties in the course of negotiating and approving the Merger. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021,2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and are currently engaged in responding to the consolidated plaintiffs’on November 16, 2022, fact discovery requests.closed. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancinghas advanced the costs incurred by defendants in this action, and defendants may asserthave asserted indemnification rights in respect of any adverse judgment or settlement of the action.

On March 14, 2023, the parties to the MSG Entertainment Litigation reached an agreement in principle to settle the MSG Entertainment Litigation on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement (“MSGE Settlement Agreement”) that was filed with the Court on April 20, 2023. The MSGE Settlement Agreement provides for, among other things, the final dismissal of the MSG Entertainment Litigation in exchange for a settlement payment to the Company of $85 million, subject to customary reduction for attorneys’ fees and expenses, in an amount to be determined by the Court. The settlement amount will be fully funded by defendants’ insurers. The settlement of the MSG Entertainment Litigation is subject to the final approval of the Court.

On September 27, 2021, the Court of Chancery entered an order consolidating four complaints filed by purported stockholders of MSG Networks Inc. The consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. No. 2021-0575-KSJM.2021-0575-KSJM (the “MSG Networks Litigation”). 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 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 toin the MSG Networks Inc. consolidated actionLitigation filed answers to the complaint on December 30, 20212021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and are currently engaged in responding to the plaintiffs’on November 16, 2022 fact discovery requests.closed. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancinghas advanced the costs incurred by defendants in this action, and defendants may asserthave asserted indemnification rights in respect of any adverse judgment or settlement of the action.
On March 3, 2022April 6, 2023, the Courtparties to the MSG Networks Litigation reached an agreement in principle to settle the MSG Networks Litigation, without admitting liability, on the terms and conditions set forth in a binding term sheet (“MSG Networks Term Sheet”), which will be incorporated into a long-form settlement agreement. The MSG Networks Term Sheet provides for, among other things, the final dismissal of Chancery approvedthe MSG Networks Litigation in exchange for a case schedule, governingsettlement payment to the two consolidated actions, which set tentative trial datesplaintiffs and the class of $48.5 million.MSG Networks has a dispute with its insurers over whether and to what extent there is insurance coverage for April 2023.the settlement. Unless those parties settle that insurance dispute, it is expected to be resolved in a pending Delaware insurance coverage action.In the interim, and subject to final resolution of the parties’ insurance coverage dispute, certain of MSG Networks’ insurers have agreed to advance $20.5 million to fund the settlement and related class notice costs. The settlement of the MSG Networks Litigation is subject to the final approval of the Court.
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.
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Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as amended by Form 10-K/A filed on February 9, 2022 (the “Form 10-K”), which could materially affect the Company’s business, financial condition or future results. The risks described in 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
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Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
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, December 31, 2021 and March 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. For further discussion regarding the accounting error and the correction of such error to the Company’s previously issued consolidated and combined financial statements, see Note 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 March 31, 2022,2023, 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 initially authorized by the Company’s Board of Directors on March 31, 2020.2020 and reauthorized on March 29, 2023. 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
10.12.1
’2.2
3.1
3.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
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EXHIBIT
NO.		DESCRIPTION
10.13
10.14
10.15
10.16
10.17
31.1
31.2
32.1
32.2
101
The following materials from Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) Quarterly Report on Form 10-Q for the quarter ended March 31, 2022,2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated 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.
104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 20222023 formatted in Inline XBRL and contained in Exhibit 101.
_________________
†    This exhibit is a management contract or a compensatory plan or arrangement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 910th day of May 2022.2023.
Madison Square GardenSphere Entertainment Corp.Co.
By:
/S/    DAVID F. BYRNESGAUTAM RANJI
Name:David F. ByrnesGautam Ranji
Title:Executive Vice President, and
Chief Financial Officer and Treasurer

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