UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

________________________

(Mark One)


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

For the quarterly period ended ~~December~~March 31, ~~2022~~2023


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

For the transition period from to

Commission File Number: 001-39245

~~MADISON SQUARE GARDEN~~SPHERE 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 Plaza

New York

10121

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

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

Number of shares of common stock outstanding as of ~~January 31,~~April 28, 2023:


Class A Common Stock par value $0.01 per share	—	~~27,687,166~~27,692,030
Class B Common Stock par value $0.01 per share	—	6,866,754

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

INDEX TO FORM 10-Q


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2022~~202 3 and June 30, 2022			1

Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~202 3 and ~~2021~~20 2 2			2

C ondensed Consolidated Statements of Comprehensive ~~Income~~(Loss ) for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~202 3 and ~~2021~~20 2 2			3

Condensed Consolidated Statements of Cash Flows for the nine ~~six~~ months ended ~~December~~March 31, ~~2022~~202 3 and ~~2021~~20 2 2			4

C ondensed Consolidated Statements of Stockholders' Equity and Redeemable Noncontrolling Interests for the three and ~~and six~~ nine months ended ~~December~~March 31, ~~2022~~202 3 and ~~2021~~202 2			5

Notes to Condensed Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3739

Item 3. Quantitative and Qualitative Disclosures About Market Risk			6158

Item 4. Controls and Procedures			6259

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			6360


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6461

Item 6. Exhibits			6562

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022

ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	553,736	$	846,010	Cash, cash equivalents and restricted cash	$	327,245	$	822,885

Accounts receivable, net	Accounts receivable, net	208,452		216,652		Accounts receivable, net	214,443		188,012

Prepaid expenses and other current assets	Prepaid expenses and other current assets	153,968		155,994		Prepaid expenses and other current assets	145,838		135,671

Current assets (Held for Sale) (c)						Current assets (Held for Sale) (c)	502,567		72,088
Total current assets	Total current assets	916,156		1,218,656		Total current assets	1,190,093		1,218,656

Non-Current Assets:	Non-Current Assets:					Non-Current Assets:
Property and equipment, net	Property and equipment, net	3,509,473		2,939,052		Property and equipment, net	3,690,234		2,853,656
Right-of-use lease assets	Right-of-use lease assets	499,279		446,499		Right-of-use lease assets	339,601		337,305
Goodwill	Goodwill	500,181		500,181		Goodwill	498,817		498,817
Intangible assets, net	Intangible assets, net	217,181		227,885		Intangible assets, net	82,490		86,464

Other non-current assets	Other non-current assets	207,392		189,887		Other non-current assets	248,246		173,298
Non-current assets (Held for Sale) (c)						Non-current assets (Held for Sale) (c)	—		400,430
Total assets	Total assets	$	5,849,662	$	5,522,160	Total assets	$	6,049,481	$	5,568,626

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY					LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable, accrued and other current liabilities	Accounts payable, accrued and other current liabilities	$	584,313	$	589,246	Accounts payable, accrued and other current liabilities	$	699,769	$	529,083

Current portion of long-term debt	Current portion of long-term debt	102,500		78,512		Current portion of long-term debt	98,750		74,762

Operating lease liabilities, current	Operating lease liabilities, current	67,775		65,310		Operating lease liabilities, current	46,086		45,559

Deferred revenue	Deferred revenue	209,882		228,032		Deferred revenue	265,611		208,895

Current liabilities (Held for Sale) (c)						Current liabilities (Held for Sale) (c)	289,817		102,801
Total current liabilities	Total current liabilities	964,470		961,100		Total current liabilities	1,400,033		961,100

Non-Current Liabilities:	Non-Current Liabilities:					Non-Current Liabilities:
Long-term debt, net of deferred financing costs	Long-term debt, net of deferred financing costs	1,885,251		1,664,576		Long-term debt, net of deferred financing costs	1,781,748		1,584,446
Operating lease liabilities, non-current	Operating lease liabilities, non-current	479,991		427,971		Operating lease liabilities, non-current	342,629		338,534

Deferred tax liabilities, net	Deferred tax liabilities, net	165,467		163,441		Deferred tax liabilities, net	209,742		209,907
Other non-current liabilities	Other non-current liabilities	145,341		145,496		Other non-current liabilities	142,531		144,103
Non-current liabilities (Held for Sale) (c)						Non-current liabilities (Held for Sale) (c)	—		170,960
Total liabilities	Total liabilities	3,640,520		3,362,584		Total liabilities	3,876,683		3,409,050
Commitments and contingencies (see Note 9)	Commitments and contingencies (see Note 9)					Commitments and contingencies (see Note 9)
Redeemable noncontrolling interests		190,222		184,192
Redeemable noncontrolling interests (Held for Sale)						Redeemable noncontrolling interests (Held for Sale)	138,812		184,192
Equity:	Equity:					Equity:
Class A Common Stock(a)	Class A Common Stock(a)	277		273		Class A Common Stock (a)	277		273
Class B Common Stock(b)	Class B Common Stock(b)	69		69		Class B Common Stock (b)	69		69

Additional paid-in capital	Additional paid-in capital	2,322,007		2,301,970		Additional paid-in capital	2,391,409		2,301,970

Accumulated deficit	Accumulated deficit	(267,909)		(290,736)		Accumulated deficit	(324,756)		(290,736)

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(48,563)		(48,355)		Accumulated other comprehensive loss	(46,439)		(48,355)
Total Madison Square Garden Entertainment Corp. stockholders’ equity		2,005,881		1,963,221
Nonredeemable noncontrolling interests		13,039		12,163
Total Sphere Entertainment Co. stockholders’ equity						Total Sphere Entertainment Co. stockholders’ equity	2,020,560		1,963,221
Nonredeemable noncontrolling interests (Held for Sale)						Nonredeemable noncontrolling interests (Held for Sale)	13,426		12,163
Total equity	Total equity	2,018,920		1,975,384		Total equity	2,033,986		1,975,384
Total liabilities, redeemable noncontrolling interests and equity	Total liabilities, redeemable noncontrolling interests and equity	$	5,849,662	$	5,522,160	Total liabilities, redeemable noncontrolling interests and equity	$	6,049,481	$	5,568,626

~~_________________~~__________________

(a)Class A Common Stock, $0.01 par value per share, 120,000 shares authorized;~~27,687~~27,692 and 27,368 shares outstanding as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022, respectively.

(b)Class B Common Stock, $0.01 par value per share, 30,000 shares authorized;6,867 shares outstanding as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022.

(c)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.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)

Three Months Ended Six Months Ended
December 31, December 31,
2022 2021 2022 2021
Revenues(a)
$ 642,198 $ 516,439 $ 1,043,416 $ 810,949
Direct operating expenses(a)
(348,959) (296,258) (602,860) (462,019)
Selling, general and administrative expenses(a)
(182,433) (162,277) (346,843) (337,116)
Depreciation and amortization (29,059) (30,533) (58,814) (59,963)
Impairment and other gains, net 5,885 7,979 7,885 161
Restructuring charges (13,682) — (13,682) —
Operating income (loss) 73,950 35,350 29,102 (47,988)
Interest income 3,603 773 7,557 1,548
Interest expense (894) (8,167) (3,061) (17,415)
Other expense, net (3,853) (18,874) (2,328) (22,628)
Income (loss) from operations before income taxes 72,806 9,082 31,270 (86,483)
Income tax (expense) benefit (2,249) (4,063) (4,756) 14,847
Net income (loss) 70,557 5,019 26,514 (71,636)
Less: Net income attributable to redeemable noncontrolling interests 3,029 2,642 4,153 4,854
Less: Net (loss) income attributable to nonredeemable noncontrolling interests (56) 106 (466) 471
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 67,584 $ 2,271 $ 22,827 $ (76,961)
Basic and diluted earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 1.95 $ 0.07 $ 0.66 $ (2.25)
Weighted-average number of common shares outstanding:
Basic 34,684 34,278 34,544 34,186
Diluted 34,710 34,436 34,609 34,186


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
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 income	2,640		767		10,161		2,311
Interest expense	—		(5,528)		—		(22,051)
Other income (expense), net	4,994		(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 diluted	34,727		34,320		34,604		34,230

_________________

(a)See Note 14, Related Party Transactions, for further information on related party revenues and ~~expenses~~

expenses.

See accompanying notes to the unaudited condensed consolidated financial statements.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

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

(Unaudited)

(in thousands)

Three Months Ended Six Months Ended
December 31, December 31,
2022 2021 2022 2021
Net income (loss) $ 70,557 $ 5,019 $ 26,514 $ (71,636)
Other comprehensive income (loss), before income taxes:
Amortization of net actuarial loss included in net periodic benefit cost 510 510 1,020 1,020
Cumulative translation adjustments 14,803 2,486 (1,277) (3,932)
Other comprehensive income (loss), before income taxes 15,313 2,996 (257) (2,912)
Income tax (expense) benefit related to items of other comprehensive loss (2,895) (568) 49 552
Other comprehensive income (loss), net of income taxes 12,418 2,428 (208) (2,360)
Comprehensive income (loss) 82,975 7,447 26,306 (73,996)
Less: Net income attributable to redeemable noncontrolling interests 3,029 2,642 4,153 4,854
Less: Net (loss) income attributable to nonredeemable noncontrolling interests (56) 106 (466) 471
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 80,002 $ 4,699 $ 22,619 $ (79,321)


	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2023		2022		2023		2022
Net loss	$	(53,979)	$	(20,291)	$	(39,589)	$	(111,341)
Other comprehensive income (loss), before income taxes:




Amortization of net actuarial loss included in net periodic benefit cost	464		510		1,484		1,530
Cumulative translation adjustments	1,972		(5,340)		637		(9,226)
Other comprehensive income (loss), before income taxes	2,436		(4,830)		2,121		(7,696)
Income tax (expense) benefit	(421)		919		(362)		1,463
Other comprehensive income (loss), net of income taxes	2,015		(3,911)		1,759		(6,233)
Comprehensive loss from continuing operations	(51,964)		(24,202)		(37,830)		(117,574)
Comprehensive (loss) income from discontinued operations	(4,467)		518		7,705		19,894
Comprehensive loss	(56,431)		(23,684)		(30,125)		(97,680)

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

Comprehensive 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.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


		Six Months Ended					Nine Months Ended
		December 31,					March 31,
		2022		2021			2023		2022
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income (loss)		$	26,514	$	(71,636)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Net loss						Net loss	$	(32,041)	$	(90,942)
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	58,814		59,963		Depreciation and amortization	89,234		88,602
Impairment and other gains, net	Impairment and other gains, net	(7,885)		(161)		Impairment and other gains, net	(7,834)		(5,480)
Amortization of deferred financing costs	Amortization of deferred financing costs	2,634		4,367		Amortization of deferred financing costs	4,186		6,548
Benefit (expense) from deferred income taxes		2,257		(17,173)
Benefit from deferred income taxes						Benefit from deferred income taxes	(5,031)		(11,872)
Share-based compensation expense	Share-based compensation expense	35,666		43,699		Share-based compensation expense	56,092		62,321

Amortization of right-of-use assets	Amortization of right-of-use assets	15,421		12,451		Amortization of right-of-use assets	23,712		19,452
Net unrealized loss on equity investments with and without readily determinable fair value		1,234		19,615
Net unrealized (gains) loss on equity investments with and without readily determinable fair value						Net unrealized (gains) loss on equity investments with and without readily determinable fair value	(6,276)		28,303

Other non-cash adjustments	Other non-cash adjustments	2,798		6,580		Other non-cash adjustments	6,432		5,588
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	9,421		(20,857)		Accounts receivable, net	(24,081)		(64,496)

Prepaid expenses and other current and non-current assets	Prepaid expenses and other current and non-current assets	(18,769)		4,907		Prepaid expenses and other current and non-current assets	(69,479)		(22,790)

Accounts payable, accrued and other current and non-current liabilities	Accounts payable, accrued and other current and non-current liabilities	(42,690)		35,984		Accounts payable, accrued and other current and non-current liabilities	68,650		31,928

Deferred revenue	Deferred revenue	(17,295)		47,016		Deferred revenue	53,688		54,195
Right-of-use lease assets and operating lease liabilities	Right-of-use lease assets and operating lease liabilities	(13,155)		8,031		Right-of-use lease assets and operating lease liabilities	(19,428)		4,844
Net cash provided by operating activities	Net cash provided by operating activities	$	54,965	$	132,786	Net cash provided by operating activities	$	137,824	$	106,201

INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Capital expenditures, net	Capital expenditures, net	$	(558,808)	$	(313,076)	Capital expenditures, net	$	(764,513)	$	(516,494)
Capitalized interest	Capitalized interest	(50,335)		(19,926)		Capitalized interest	(88,450)		(32,202)

Investments in nonconsolidated affiliates						Investments in nonconsolidated affiliates	(7,750)		—

Proceeds from dispositions, net	Proceeds from dispositions, net	27,904		—		Proceeds from dispositions, net	29,104		—

Proceeds from sale of equity securities	Proceeds from sale of equity securities	3,819		—		Proceeds from sale of equity securities	4,369		—

Distributions from equity method investments						Distributions from equity method investments	1,756		770
Net cash used in investing activities						Net cash used in investing activities	$	(825,484)	$	(547,926)

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

FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:

Proceeds from issuance of term loan		$	275,000	$	—
Proceeds from issuance of debt						Proceeds from issuance of debt	$	275,168	$	—

Taxes paid in lieu of shares issued for equity-based compensation	Taxes paid in lieu of shares issued for equity-based compensation	(14,980)		(15,240)		Taxes paid in lieu of shares issued for equity-based compensation	(14,980)		(15,652)
Noncontrolling interest holders’ capital contributions	Noncontrolling interest holders’ capital contributions	2,000		4,677		Noncontrolling interest holders’ capital contributions	3,000		2,033
Distributions to noncontrolling interest holders	Distributions to noncontrolling interest holders	(1,325)		(1,060)		Distributions to noncontrolling interest holders	(1,722)		—
Distributions to related parties associated with the settlement of certain share-based awards	Distributions to related parties associated with the settlement of certain share-based awards	(571)		(516)		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						Put option payments to redeemable noncontrolling interest holders	—		(895)
Repayments of revolving credit facility	Repayments of revolving credit facility	—		(15,000)		Repayments of revolving credit facility	(2,000)		(15,000)
Principal repayments on long-term debt	Principal repayments on long-term debt	(26,625)		(30,500)		Principal repayments on long-term debt	(52,250)		(45,750)

Payments for financing costs	Payments for financing costs	(5,112)		—		Payments for financing costs	(5,131)		—
Other financing activities	Other financing activities	788		—		Other financing activities	788		—
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	$	229,175	$	(57,639)	Net cash provided by (used in) financing activities	$	200,485	$	(77,520)

Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(505)		(572)		Effect of exchange rates on cash, cash equivalents and restricted cash	(729)		22
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(292,274)		(257,957)		Net decrease in cash, cash equivalents and restricted cash	(487,904)		(519,223)

Cash, cash equivalents and restricted cash from continuing operations, beginning of period						Cash, cash equivalents and restricted cash from continuing operations, beginning of period	822,885		1,508,174
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period						Cash, cash equivalents and restricted cash from discontinued operations, beginning of period	23,125		31,802
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	846,010		1,539,976		Cash, cash equivalents and restricted cash at beginning of period	846,010		1,539,976
Cash, cash equivalents and restricted cash from continuing operations, end of period						Cash, cash equivalents and restricted cash from continuing operations, end of period	327,245		987,922
Cash, cash equivalents and restricted cash from discontinued operations, end of period						Cash, cash equivalents and restricted cash from discontinued operations, end of period	30,861		32,831
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	553,736	$	1,282,019	Cash, cash equivalents and restricted cash at end of period	$	358,106	$	1,020,753
NON-CASH INVESTING AND FINANCING ACTIVITIES:	NON-CASH INVESTING AND FINANCING ACTIVITIES:					NON-CASH INVESTING AND FINANCING ACTIVITIES:
Investments and loans to nonconsolidated affiliates	Investments and loans to nonconsolidated affiliates	$	—	$	675	Investments and loans to nonconsolidated affiliates	$	12,859	$	731

Capital expenditures incurred but not yet paid	Capital expenditures incurred but not yet paid	$	38,127	$	42,620	Capital expenditures incurred but not yet paid	$	104,004	$	83,788
Share-based compensation capitalized in property and equipment	Share-based compensation capitalized in property and equipment	$	1,802	$	1,763	Share-based compensation capitalized in property and equipment	$	2,887	$	2,264

See accompanying notes to the unaudited condensed consolidated financial statements.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

(in thousands)


		Common Stock Issued		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests			Common Stock Issued		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Sphere Entertainment Co. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of September 30, 2022		$	342	$	2,303,135	$	(335,493)	$	(60,981)	$	1,907,003	$	11,723	$	1,918,726	$	185,711
Balance as of December 31, 2022																		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 income (loss)		—		—		67,584		—		67,584		(56)		67,528		3,029
Net loss																		Net loss	—		—		(56,847)		—		(56,847)		(216)		(57,063)		(1,492)
Other comprehensive income	Other comprehensive income	—		—		—		12,418		12,418		—		12,418		—		Other comprehensive income	—		—		—		2,124		2,124		—		2,124		—

Share-based compensation	Share-based compensation	—		20,784		—		—		20,784		—		20,784		—		Share-based compensation	—		20,714		—		—		20,714		—		20,714		—
Tax withholding associated with shares issued for equity-based compensation		4		(1,017)		—		—		(1,013)		—		(1,013)		—

BCE disposition		—		—		—		—		—		667		667		—

Redeemable noncontrolling interest adjustment to redemption fair value																		Redeemable noncontrolling interest adjustment to redemption fair value	—		50,045		—		—		50,045		—		50,045		(50,045)
Accretion of put options and adjustments	Accretion of put options and adjustments	—		(895)		—		—		(895)		—		(895)		1,482		Accretion of put options and adjustments	—		—		—		—		—		—		—		587

Contributions	Contributions	—		—		—		—		—		1,500		1,500		—		Contributions	—		—		—		—		—		1,000		1,000		—

Distributions	Distributions	—		—		—		—		—		(795)		(795)		—		Distributions	—		(1,357)		—		—		(1,357)		(397)		(1,754)		(460)
Balance as of December 31, 2022		$	346	$	2,322,007	$	(267,909)	$	(48,563)	$	2,005,881	$	13,039	$	2,018,920	$	190,222
Balance as of March 31, 2023																		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 September 30, 2021		$	342	$	2,293,157	$	(175,573)	$	(35,060)	$	2,082,866	$	13,141	$	2,096,007	$	140,410
Net income		—		—		2,271		—		2,271		106		2,377		2,642
Other comprehensive income		—		—		—		2,428		2,428		—		2,428		—
Balance as of December 31, 2021																		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																		Net loss	—		—		(17,491)		—		(17,491)		(1,373)		(18,864)		(442)
Other comprehensive loss																		Other comprehensive loss	—		—		—		(4,378)		(4,378)		—		(4,378)		—
Share-based compensation	Share-based compensation	—		24,595		—		—		24,595		—		24,595		—		Share-based compensation	—		18,537		—		—		18,537		—		18,537		—
Tax withholding associated with shares issued for equity-based compensation	Tax withholding associated with shares issued for equity-based compensation	—		(337)		—		—		(337)		—		(337)		—		Tax withholding associated with shares issued for equity-based compensation	—		(412)		—		—		(412)		—		(412)		—
Accretion of put options	Accretion of put options	—		—		—		—		—		—		—		587		Accretion of put options	—		—		—		—		—		—		—		587

Put option payments to redeemable noncontrolling interest holders																		Put option payments to redeemable noncontrolling interest holders			—						—				—		(895)
Contributions	Contributions	—		—		—		—		—		3,805		3,805		—		Contributions	—		—		—		—		—		723		723		—
Distributions	Distributions	—		—		—		—		—		(1,060)		(1,060)		(1,635)		Distributions	—		(1,269)		—		—		(1,269)		(530)		(1,799)		(3,476)
Balance as of December 31, 2021		$	342	$	2,317,415	$	(173,302)	$	(32,632)	$	2,111,823	$	15,992	$	2,127,815	$	142,004
Balance as of March 31, 2022																		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.	See accompanying notes to the unaudited condensed consolidated financial statements.																	See accompanying notes to the unaudited condensed consolidated financial statements.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

(in thousands)


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

Net income (loss)		—		—		22,827		—		22,827		(466)		22,361		4,153
Other comprehensive loss		—		—		—		(208)		(208)		—		(208)		—
Net (loss) income																		Net (loss) income	—		—		(34,020)		—		(34,020)		(682)		(34,702)		2,661
Other comprehensive income																		Other comprehensive income	—		—		—		1,916		1,916		—		1,916		—

Share-based compensation	Share-based compensation	—		36,295		—		—		36,295		—		36,295		—		Share-based compensation	—		57,009		—		—		57,009		—		57,009		—
Tax withholding associated with shares issued for equity-based compensation	Tax withholding associated with shares issued for equity-based compensation	4		(14,984)		—		—		(14,980)		—		(14,980)		—		Tax withholding associated with shares issued for equity-based compensation	4		(14,984)		—		—		(14,980)		—		(14,980)		—

BCE disposition	BCE disposition	—		—		—		—		—		667		667		—		BCE disposition	—		—		—		—		—		667		667		—

Redeemable noncontrolling interest adjustment to redemption fair value																		Redeemable noncontrolling interest adjustment to redemption fair value	—		50,045		—		—		50,045		—		50,045		(50,045)
Accretion of put options and adjustments	Accretion of put options and adjustments	—		(895)		—		—		(895)		—		(895)		2,069		Accretion of put options and adjustments	—		(895)		—		—		(895)		—		(895)		2,656

Contributions	Contributions	—		—		—		—		—		2,000		2,000		—		Contributions	—		—		—		—		—		3,000		3,000		—

Distributions	Distributions	—		(379)		—		—		(379)		(1,325)		(1,704)		(192)		Distributions	—		(1,736)		—		—		(1,736)		(1,722)		(3,458)		(652)
Balance as of December 31, 2022		$	346	$	2,322,007	$	(267,909)	$	(48,563)	$	2,005,881	$	13,039	$	2,018,920	$	190,222
Balance as of March 31, 2023																		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	Balance as of June 30, 2021	$	340	$	2,294,775	$	(96,341)	$	(30,272)	$	2,168,502	$	11,904	$	2,180,406	$	137,834	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	Net (loss) income	—		—		(76,961)		—		(76,961)		471		(76,490)		4,854		Net (loss) income	—		—		(94,452)		—		(94,452)		(902)		(95,354)		4,412
Other comprehensive loss	Other comprehensive loss	—		—		—		(2,360)		(2,360)		—		(2,360)		—		Other comprehensive loss	—		—		—		(6,738)		(6,738)		—		(6,738)		—
Share-based compensation	Share-based compensation	—		44,287		—		—		44,287		—		44,287		—		Share-based compensation	—		62,824		—		—		62,824		—		62,824		—
Tax withholding associated with shares issued for equity-based compensation	Tax withholding associated with shares issued for equity-based compensation	2		(15,242)		—		—		(15,240)		—		(15,240)		—		Tax withholding associated with shares issued for equity-based compensation	2		(15,654)		—		—		(15,652)		—		(15,652)		—
Accretion of put options	Accretion of put options	—		—		—		—		—		—		—		1,174		Accretion of put options	—		—		—		—		—		—		—		1,761
Put option payments to redeemable noncontrolling interest holders																		Put option payments to redeemable noncontrolling interest holders	—		—		—		—		—		—		—		(895)
Adjustments of redeemable noncontrolling interest	Adjustments of redeemable noncontrolling interest			(6,178)						(6,178)				(6,178)		66		Adjustments of redeemable noncontrolling interest			(6,178)						(6,178)				(6,178)		66
Contributions	Contributions	—		—		—		—		—		4,677		4,677		—		Contributions	—		—		—		—		—		5,400		5,400		—
Distributions	Distributions	—		(227)		—		—		(227)		(1,060)		(1,287)		(1,924)		Distributions	—		(1,496)		—		—		(1,496)		(1,590)		(3,086)		(5,400)
Balance as of December 31, 2021		$	342	$	2,317,415	$	(173,302)	$	(32,632)	$	2,111,823	$	15,992	$	2,127,815	$	142,004
Balance as of March 31, 2022																		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.	See accompanying notes to the unaudited condensed consolidated financial statements.																	See accompanying notes to the unaudited condensed consolidated financial statements.

~~MADISON SQUARE GARDEN~~SPHERE 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.

Note 1. Description of Business and Basis of Presentation

~~Description of Business~~Spin-off Transaction

On April 20, 2023 (the “MSGE Spinco Distribution Date”), Sphere Entertainment Co., formerly Madison Square Garden Entertainment Corp. ~~(together~~(“Sphere Entertainment” or the “Company”), distributed approximately 67% of the outstanding common stock of Madison Square Garden Entertainment Corp. (“MSG Entertainment”, formerly MSGE Spinco, Inc.) 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) immediately following the MSGE Spinco Distribution (the “MSGE Retained Interest”). 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.

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 MSGE Spinco Distribution, the historical financial results of the Company’s traditional live entertainment business, excluding Sphere, will be reflected in the Company’s consolidated financial statements as discontinued operations under U.S. generally accepted accounting principles (“GAAP”) for all periods 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 ~~“Company” or “MSG Entertainment”)~~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., isthe 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 ~~leader in live~~discontinued operation. See Note 3. Discontinued Operations and Dispositions, for details regarding the Tao Group Hospitality Disposition.

Description of Business

Following the MSGE Spinco Distribution and the Tao Group Hospitality Disposition, the Company’s business consists of Sphere, a next-generation entertainment ~~comprised of iconic venues, marquee entertainment brands,~~medium powered by new technologies to create experiences that transport audiences to places both real and imagined; MSG Networks, which operates two regional sports and entertainment networks, MSG Network and ~~popular dining~~MSG Sportsnet (formerly MSG+), as well as a companion streaming service, MSG GO, delivering a wide range of live

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

sports content and ~~nightlife offerings. Utilizing the Company’s powerful brands~~other programming; and ~~live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences.~~ an approximately 33% economic interest in MSG Entertainment.

The Company is comprised of ~~three~~two reportable segments: Entertainment and MSG ~~Networks and~~Networks. Historically, Tao Group ~~Hospitality. As~~Hospitality had been a reportable segment, but as of ~~December~~March 31, ~~2022, there have~~2023, has been ~~no changes to the reportable segments of the Company.~~classified as a discontinued operation, as discussed above. See Note 1,1. 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 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 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.

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, 2023 and 2022 are referred to as “Fiscal Year 2023” and “Fiscal Year 2022,” respectively. Certain Fiscal Year 2022 amounts have been reclassified to conform to the Fiscal Year 2023 presentation.

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

In the opinion of the Company, the accompanying financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of ~~December~~March 31, ~~2022,~~2023 and its results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, and ~~2021,~~2022, and cash flows for the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, and ~~2021.~~2022. The condensed consolidated financial statements and the accompanying notes as of Fiscal Year ~~2023,~~2022 were derived from audited annual financial statements but do not contain all of the footnote disclosures from the 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. AsPrior to the MSGE Spinco Distribution, the Company generally earned a disproportionate share of its annual revenues in the second and third quarters of its fiscal 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,~~programming. Following the ~~Company~~MSGE Spinco Distribution, our MSG Networks segment generally ~~earns~~continues to expect to earn a ~~disproportionate~~higher share of its annual revenues in the second and third quarters of its fiscal ~~year.~~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

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

reductions in media rights fees recognized in our ~~performance, entertainment dining and nightlife venues,~~MSG Networks segment, which ~~contributed to certain Tao Group Hospitality branded locations remaining closed during~~had a residual impact reflected in the ~~period.~~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 on our business.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

~~performance, entertainment 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 venues~~Sphere in Las Vegas (which may lead to difficulties in staffing) or otherwise materially impact our operations.

Note 2. Accounting Policies

Principles of Consolidation

The financial statements of the Company include the accounts of ~~Madison Square Garden~~Sphere Entertainment ~~Corp.~~Co. and its subsidiaries, ~~which include~~including Tao Group ~~Holdings, LLC and its subsidiaries (“Tao Group Hospitality”)~~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.

The financial statements of the Company ~~include~~historically included accounts of Tao Group Hospitality, which has been sold subsequent to March 31, 2023, and BCE (up to December 2, 2022) in which the Company ~~has~~had a controlling voting ~~interests.~~interest. The Company’s consolidation criteria are based on authoritative accounting guidance for identifying a controlling financial interest. Tao Group Hospitality and BCE ~~are~~were 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 earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss), respectively.

~~The Company disposed of its controlling interest in BCE on December 2, 2022 and these condensed consolidated financial statements reflect the results of operations of BCE until its disposition.~~ See Note 3, Discontinued Operations and Dispositions, for details regarding the ~~disposal.~~Tao Group Hospitality Disposition and the BCE disposition. See Note 2, Summary of Significant Accounting Policies, to the consolidated and combined financial statements included in the 2022 Form 10-K regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality.

Use of Estimates

The preparation of the accompanying financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the provision for credit losses, valuation of investments, goodwill, intangible assets, other long-lived assets, deferred tax assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, and other liabilities. In addition, estimates are used in revenue recognition, rights fees, performance and share-based compensation, depreciation and amortization, litigation matters and other ~~matters, as well as in the valuation of 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

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 the 2022 Form 10-K. The update primarily reflects the addition of a policy related to production costs for the Company’s Original Immersive Productions.

Production Costs for the Company’s Original Immersive Productions

The Company defers certain costs during the production phase of its original immersive productions for ~~MSG~~ Sphere that are directly related to production activities. Such costs include, but are not limited to, fees paid to writers, directors, and producers as well as video and music production costs and production specific overhead. Deferred immersive production costs are

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

amortized in the same ratio that current period actual revenue bears to estimated remaining unrecognized ultimate revenue as of the beginning of the current fiscal year. Estimates of ultimate revenues are prepared on an individual production basis and reviewed regularly by management and revised where necessary to reflect the most current information. Ultimate revenues reflect management’s estimates of future revenue over a period not to exceed ten years following the premiere of the production. Deferred immersive production costs are subject to recoverability assessments whenever there is an indication of potential impairment.

As of March 31, 2023, the Company recorded approximately $46,500 in Other non-current assets in the accompanying condensed consolidated balance sheets related to these production costs.

Recently Issued and 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 October 2021, the Financial Accounting Standards Board ~~(“FASB”)~~ issued Accounting Standards Update (“~~ASU~~ASU”)”) No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers. This ASU requires that the acquiring entity in a business combination recognize and measure contract assets and contract liabilities acquired in accordance with ~~ASC~~Accounting Standard Codification (“ASC”) Topic 606. This standard was adopted by the Company in the first quarter of Fiscal Year 2023. The adoption of this standard ~~had no~~did not have an impact on the Company’s financial statements.

Note 3. Discontinued Operations and Dispositions

Discontinued 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 Mohari 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.

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, net	25,301		28,640



Prepaid expenses and other current assets	17,890		20,323

Total current assets (a)	74,052		72,088


Non-Current Assets:
Property and equipment, net	87,529		85,396
Right-of-use lease assets	141,184		109,194
Goodwill	1,364		1,364
Intangible assets, net	131,413		141,421
Deferred tax assets, net	51,117		46,466
Other non-current assets	15,908		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 debt	3,750		3,750

Operating lease liabilities, current	19,168		19,751


Deferred revenue	15,295		19,137

Total current liabilities (a)	87,720		102,801

Non-Current Liabilities:
Long-term debt, net of deferred financing costs	77,486		80,130
Operating lease liabilities, non-current	123,191		89,437




Other non-current liabilities	1,420		1,393
Total non-current liabilities (a)	202,097		170,960
Total liabilities of the disposal group classified as held for sale	289,817		273,761



Net Assets of the disposal group classified as held for sale	212,750		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.

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
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 income	49		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 Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
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 expense	2,144		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 ~~FASB~~ ASC Topic 805 — Business Combinations. This disposition does not represent a strategic shift with a major effect on the Company’s operations, and as such, has not been reflected as a discontinued operation under ~~FASB~~ ASC Subtopic 205-20 — Discontinued Operations. The gain on the BCE Disposition was reported under the Entertainment segment and recorded in Impairment and other (losses) gains, net in the condensed consolidated statements of operations.

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 ~~$4,332,~~$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 2, Summary of Significant Accounting Policies and Note 4, Revenue Recognition, to the consolidated and combined financial statements included in the 2022 Form 10-K for more information regarding the details of the Company’s revenue recognition policies. All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, except for revenues from 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.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

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 ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended											Three Months Ended
		December 31, 2022											March 31, 2023
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)		$	238,888	$	—	$	117,365	$	(281)	$	355,972
Event-related and entertainment offerings (a)												Event-related and entertainment offerings (a)	$	102,314	$	—	$	—	$	102,314
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	68,997		2,404		193		(330)		71,264		Sponsorship, signage and suite licenses (b)	59,724		3,060		—		62,784
Media related, primarily from affiliation agreements (b)	Media related, primarily from affiliation agreements (b)	—		154,401		—		—		154,401		Media related, primarily from affiliation agreements (b)	—		156,162		—		156,162
Other (c)	Other (c)	15,353		2,093		18,436		(8,601)		27,281		Other (c)	7,173		2,214		—		9,387
Total revenues from contracts with customers	Total revenues from contracts with customers	323,238		158,898		135,994		(9,212)		608,918		Total revenues from contracts with customers	169,211		161,436		—		330,647
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	33,280		—		—		—		33,280		Revenues from Arena License Agreements, leases and subleases	32,650		—		—		32,650
Total revenues	Total revenues	$	356,518	$	158,898	$	135,994	$	(9,212)	$	642,198	Total revenues	$	201,861	$	161,436	$	—	$	363,297

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


		Six Months Ended											Three Months Ended
		December 31, 2022											March 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)		$	341,678	$	—	$	232,883	$	(329)	$	574,232
Event-related and entertainment offerings (a)												Event-related and entertainment offerings (a)	$	90,899	$	—	$	—	$	90,899
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	107,389		2,648		996		(744)		110,289		Sponsorship, signage and suite licenses (b)	55,609		2,688		—		58,297
Media related, primarily from affiliation agreements (b)	Media related, primarily from affiliation agreements (b)	—		276,213		—		—		276,213		Media related, primarily from affiliation agreements (b)	—		163,247		—		163,247
Other (c)	Other (c)	18,487		2,516		34,766		(9,153)		46,616		Other (c)	17,025		1,634		(9,620)		9,039
Total revenues from contracts with customers	Total revenues from contracts with customers	467,554		281,377		268,645		(10,226)		1,007,350		Total revenues from contracts with customers	163,533		167,569		(9,620)		321,482
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	36,066		—		—		—		36,066		Revenues from Arena License Agreements, leases and subleases	31,052		—		—		31,052
Total revenues	Total revenues	$	503,620	$	281,377	$	268,645	$	(10,226)	$	1,043,416	Total revenues	$	194,585	$	167,569	$	(9,620)	$	352,534

1013

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)


		Six Months Ended											Nine Months Ended
		December 31, 2021											March 31, 2023
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Event-related and entertainment dining and nightlife offerings (a)		$	177,492	$	—	$	216,931	$	(838)	$	393,585
Event-related and entertainment offerings (a)												Event-related and entertainment offerings (a)	$	443,992	$	—	$	—	$	443,992
Sponsorship, signage and suite licenses (b)	Sponsorship, signage and suite licenses (b)	57,956		2,423		625		(521)		60,483		Sponsorship, signage and suite licenses (b)	167,113		5,708		—		172,821
Media related, primarily from affiliation agreements (b)	Media related, primarily from affiliation agreements (b)	—		296,673		—		—		296,673		Media related, primarily from affiliation agreements (b)	—		432,375		—		432,375
Other (c)	Other (c)	14,889		2,358		18,994		(7,545)		28,696		Other (c)	25,660		4,730		(8,802)		21,588
Total revenues from contracts with customers	Total revenues from contracts with customers	250,337		301,454		236,550		(8,904)		779,437		Total revenues from contracts with customers	636,765		442,813		(8,802)		1,070,776
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	31,512		—		—		—		31,512		Revenues from Arena License Agreements, leases and subleases	68,716		—		—		68,716
Total revenues	Total revenues	$	281,849	$	301,454	$	236,550	$	(8,904)	$	810,949	Total revenues	$	705,481	$	442,813	$	(8,802)	$	1,139,492



	Nine Months Ended
	March 31, 2022
	Entertainment		MSG Networks		Eliminations		Total
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 customers	413,870		469,023		(17,015)		865,878
Revenues from Arena License Agreements, leases and subleases	62,564		—		—		62,564
Total revenues	$	476,434	$	469,023	$	(17,015)	$	928,442

_________________

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

(b)See Note 2, Summary of Significant Accounting Policies, Revenue Recognition, and Note 4, Revenue Recognition, to the 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) ~~Tao Group Hospitality’s managed venue revenues, and (iii)~~ advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of ~~$8,426~~$— and $8,802 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022, respectively,~~2023, and ~~$6,985~~$9,620 and ~~$7,395~~$17,015 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~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.

1114

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following tables disaggregate the Company’s consolidated revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended											Three Months Ended
		December 31, 2022											March 31, 2023
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Ticketing and venue license fee revenues (a)	Ticketing and venue license fee revenues (a)	$	173,725	$	—	$	—	$	—	$	173,725	Ticketing and venue license fee revenues (a)	$	45,547	$	—	$	—	$	45,547
Sponsorship and signage, suite, and advertising commission revenues (b)	Sponsorship and signage, suite, and advertising commission revenues (b)	92,174		—		—		(8,756)		83,418		Sponsorship and signage, suite, and advertising commission revenues (b)	78,504		—		—		78,504
Revenues from entertainment dining and nightlife offerings (c)		—		—		135,994		(456)		135,538
Food, beverage and merchandise revenues	Food, beverage and merchandise revenues	55,387		—		—		—		55,387		Food, beverage and merchandise revenues	43,021		—		—		43,021
Media networks revenues (d)		—		158,898		—		—		158,898
Media networks revenues (c)												Media networks revenues (c)	—		161,436		—		161,436
Other	Other	1,952		—		—		—		1,952		Other	2,139		—		—		2,139
Total revenues from contracts with customers	Total revenues from contracts with customers	323,238		158,898		135,994		(9,212)		608,918		Total revenues from contracts with customers	169,211		161,436		—		330,647
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	33,280		—		—		—		33,280		Revenues from Arena License Agreements, leases and subleases	32,650		—		—		32,650
Total revenues	Total revenues	$	356,518	$	158,898	$	135,994	$	(9,212)	$	642,198	Total revenues	$	201,861	$	161,436	$	—	$	363,297


		Three Months Ended											Three Months Ended
		December 31, 2021											March 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Ticketing and venue license fee revenues (a)	Ticketing and venue license fee revenues (a)	$	109,141	$	—	$	—	$	—	$	109,141	Ticketing and venue license fee revenues (a)	$	46,867	$	—	$	—	$	46,867
Sponsorship and signage, suite, and advertising commission revenues (b)	Sponsorship and signage, suite, and advertising commission revenues (b)	70,602		—		—		(7,506)		63,096		Sponsorship and signage, suite, and advertising commission revenues (b)	79,631		—		(9,620)		70,011
Revenues from entertainment dining and nightlife offerings (c)		—		—		117,086		(732)		116,354
Food, beverage and merchandise revenues	Food, beverage and merchandise revenues	37,765		—		—		—		37,765		Food, beverage and merchandise revenues	36,344		—		—		36,344
Media networks revenues (d)		—		159,981		—		—		159,981
Media networks revenues (c)												Media networks revenues (c)	—		167,569		—		167,569
Other	Other	906		—		—		—		906		Other	691		—		—		691
Total revenues from contracts with customers	Total revenues from contracts with customers	218,414		159,981		117,086		(8,238)		487,243		Total revenues from contracts with customers	163,533		167,569		(9,620)		321,482
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	29,196		—		—		—		29,196		Revenues from Arena License Agreements, leases and subleases	31,052		—		—		31,052
Total revenues	Total revenues	$	247,610	$	159,981	$	117,086	$	(8,238)	$	516,439	Total revenues	$	194,585	$	167,569	$	(9,620)	$	352,534



	Nine Months Ended
	March 31, 2023
	Entertainment		MSG Networks		Eliminations		Total
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 revenues	124,711		—		—		124,711
Media networks revenues (c)	—		442,813		—		442,813
Other	4,838		—		—		4,838
Total revenues from contracts with customers	636,765		442,813		(8,802)		1,070,776
Revenues from Arena License Agreements, leases and subleases	68,716		—		—		68,716
Total revenues	$	705,481	$	442,813	$	(8,802)	$	1,139,492

1215

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

Six Months Ended
December 31, 2022
Entertainment MSG Networks Tao Group
Hospitality Eliminations Total
Ticketing and venue license fee revenues (a)
$ 245,857 $ — $ — $ — $ 245,857
Sponsorship and signage, suite, and advertising commission revenues (b)
137,308 — — (9,547) 127,761
Revenues from entertainment dining and nightlife offerings (c)
— — 268,645 (679) 267,966
Food, beverage and merchandise revenues 81,690 — — — 81,690
Media networks revenues (d)
— 281,377 — — 281,377
Other 2,699 — — — 2,699
Total revenues from contracts with customers 467,554 281,377 268,645 (10,226) 1,007,350
Revenues from Arena License Agreements, leases and subleases 36,066 — — — 36,066
Total revenues $ 503,620 $ 281,377 $ 268,645 $ (10,226) $ 1,043,416


		Six Months Ended											Nine Months Ended
		December 31, 2021											March 31, 2022
		Entertainment		MSG Networks		Tao Group Hospitality		Eliminations		Total			Entertainment		MSG Networks		Eliminations		Total
Ticketing and venue license fee revenues (a)	Ticketing and venue license fee revenues (a)	$	125,977	$	—	$	—	$	—	$	125,977	Ticketing and venue license fee revenues (a)	$	172,844	$	—	$	—	$	172,844
Sponsorship and signage, suite, and advertising commission revenues (b)	Sponsorship and signage, suite, and advertising commission revenues (b)	81,415		—		—		(7,916)		73,499		Sponsorship and signage, suite, and advertising commission revenues (b)	161,046		—		(17,015)		144,031
Revenues from entertainment dining and nightlife offerings (c)		—		—		236,550		(988)		235,562
Food, beverage and merchandise revenues	Food, beverage and merchandise revenues	41,688		—		—		—		41,688		Food, beverage and merchandise revenues	78,032		—		—		78,032
Media networks revenues (d)		—		301,454		—		—		301,454
Media networks revenues (c)												Media networks revenues (c)	—		469,023		—		469,023
Other	Other	1,257		—		—		—		1,257		Other	1,948		—		—		1,948
Total revenues from contracts with customers	Total revenues from contracts with customers	250,337		301,454		236,550		(8,904)		779,437		Total revenues from contracts with customers	413,870		469,023		(17,015)		865,878
Revenues from Arena License Agreements, leases and subleases	Revenues from Arena License Agreements, leases and subleases	31,512		—		—		—		31,512		Revenues from Arena License Agreements, leases and subleases	62,564		—		—		62,564
Total revenues	Total revenues	$	281,849	$	301,454	$	236,550	$	(8,904)	$	810,949	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 ~~$8,426~~$8,802 for the nine months ended March 31, 2023, and ~~$8,802~~$9,620 and $17,015 for the three and ~~six months ended December 31, 2022 and~~ ~~$6,985~~ ~~and~~ ~~$7,395~~ ~~for the three and six~~nine month ended ~~December~~March 31, ~~2021,~~2022, 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~~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.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

Contract Balances

The following table provides information about contract balances from the Company’s contracts with customers as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022:


		December 31,		June 30,			March 31,		June 30,
		2022		2022			2023		2022
Receivables from contracts with customers, net (a)	Receivables from contracts with customers, net (a)	$	211,296	$	215,261	Receivables from contracts with customers, net (a)	$	225,644	$	192,630
Contract assets, current (b)	Contract assets, current (b)	8,645		5,503		Contract assets, current (b)	8,324		5,688
Contract assets, non-current (b)	Contract assets, non-current (b)	765		756		Contract assets, non-current (b)	—		756
Deferred revenue, including non-current portion (c)	Deferred revenue, including non-current portion (c)	210,210		228,703		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 ~~December~~March 31, ~~2022~~2023 and June 30, 2022, the Company’s receivables from contracts with customers above included ~~$11,105~~$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 does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.

(c)Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to the customers. Deferred revenue is reduced and the related revenue is recognized once the

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

underlying goods or services are transferred to a customer. Revenue recognized for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 relating to the deferred revenue balance as of June 30, 2022 was ~~$61,873~~$21,196 and ~~$167,459,~~$175,363, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of ~~December~~March 31, ~~2022,~~2023, the Company’s remaining performance obligations were approximately ~~$634,000~~$577,000 of which ~~47%~~40% is expected to be recognized over the next two years and an additional ~~37%~~42% of the balance to be recognized in the following two years. This primarily relates to performance 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 applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Note 5. Restructuring Charges

During Fiscal Year 2023, the Company implemented a cost reduction program which resulted in the ~~recording~~recognition of termination benefits for a workforce reduction of certain executives and employees in the Entertainment and MSG Networks ~~Segments.~~segments. As a result, the Company ~~recorded~~recognized restructuring charges of ~~$13,682~~$20,498 and $34,180 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, inclusive of ~~$2,293~~$7,384 and $9,677, respectively, of share-based compensation expenses, ~~none of~~ which ~~have been paid as of December 31, 2022 and~~ are accrued in accounts payable, accrued and other current liabilities and additional paid-in-capital on the condensed consolidated balance sheet. The Company recognized restructuring charges of $14,690 for the three and nine months ended March 31, 2022, inclusive of $4,589 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.

Changes to the Company’s restructuring liability through ~~December~~March 31, ~~2022~~2023 were as follows:


June 30, 2022	$	8,081
Restructuring charges (excluding share-based compensation expense)	~~11,389~~24,503
Payments	~~(3,079)~~(16,647)
~~December~~March 31, ~~2022~~2023	$	~~16,391~~15,937

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

Note 6. Investments in Nonconsolidated Affiliates

The Company’s investments in nonconsolidated affiliates, which are accounted for under the equity method of accounting or as equity investments without readily determinable fair value, are included within Other non-current assets in the accompanying condensed consolidated balance sheets and consisted of the following:


				Investment As of							Investment As of
		Ownership Percentage		December 31, 2022		June 30, 2022			Ownership Percentage		March 31, 2023		June 30, 2022

Equity method investments:	Equity method investments:							Equity method investments:
SACO Technologies Inc. (“SACO”)	SACO Technologies Inc. (“SACO”)	30	%	$	26,423	$	31,448	SACO Technologies Inc. (“SACO”)	30	%	$	23,733	$	31,448
Others				4,941		5,248
Holoplot Loan (a)								Holoplot Loan (a)			20,584		—
Holoplot								Holoplot	25	%	1,809		2,096
Equity securities without readily determinable fair values	Equity securities without readily determinable fair values			9,196		7,108		Equity securities without readily determinable fair values			9,195		7,102
Total investments in nonconsolidated affiliates	Total investments in nonconsolidated affiliates			$	40,560	$	43,804	Total investments in nonconsolidated affiliates			$	55,321	$	40,646

_________________

(a)In January 2023, the Company, through an indirect subsidiary, extended financing to Holoplot GmbH (“Holoplot”) in the form of a three-year convertible loan (the “Holoplot Loan”) of €18,804, equivalent to $20,484 using the applicable exchange rate at the time of the transaction. The Holoplot Loan is comprised of $7,625 cash and $12,859 of outstanding deposits paid by the Company to Holoplot in prior periods. Absent conversion, which is currently not 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.

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

Equity Investments with Readily Determinable Fair Value

In addition to the investments discussed above, the Company holds investments in (i) Townsquare Media, Inc. (“Townsquare”), and (ii) 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 carrying fair value of these investments, which are reported under Other non-current assets in the accompanying condensed balance sheets as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022, are as follows:

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

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~


Equity Investments with Readily Determinable Fair Value	March 31, 2023		June 30, 2022
Townsquare Class A common stock	$	4,665	$	4,776
Townsquare Class C common stock	21,000		21,499
DraftKings common stock	12,397		10,146
Total Equity Investments with Readily Determinable Fair Values	$	38,062	$	36,421

The following table summarizes the realized and unrealized gain (loss) ~~gain~~ on equity investments with and without readily determinable fair value, which is reported in Other expense, net, for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Unrealized (loss) gain — Townsquare		$	(32)	$	834	$	(3,015)	$	1,861
Unrealized loss — DraftKings		(2,512)		(17,989)		(188)		(21,476)
Unrealized gain (loss) — Townsquare										Unrealized gain (loss) — Townsquare	$	2,406	$	(1,732)	$	(609)	$	129
Unrealized gain (loss) — DraftKings										Unrealized gain (loss) — DraftKings	5,104		(6,956)		4,916		(28,432)
Unrealized gain — Other	Unrealized gain — Other	—		—		1,969		—		Unrealized gain — Other	—		—		1,969		—
Gain from shares sold — DraftKings	Gain from shares sold — DraftKings	—		—		1,489		—		Gain from shares sold — DraftKings	214		—		1,703		—
Total realized and unrealized (loss) gain		$	(2,544)	$	(17,155)	$	255	$	(19,615)
Total realized and unrealized gain (loss)										Total realized and unrealized gain (loss)	$	7,724	$	(8,688)	$	7,979	$	(28,303)
Supplemental information on realized gain:	Supplemental information on realized gain:									Supplemental information on realized gain:
Shares of common stock sold — DraftKings	Shares of common stock sold — DraftKings	—		—		200		—		Shares of common stock sold — DraftKings	29		—		229		—
Cash proceeds from common stock sold — DraftKings	Cash proceeds from common stock sold — DraftKings	$	—	$	—	$	3,819	$	—	Cash proceeds from common stock sold — DraftKings	$	550	$	—	$	4,369	$	—

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

Note 7. Property and Equipment

As of ~~December~~March 31, ~~2022~~2023 and June 30, 2022, property and equipment consisted of the following:


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022
Land	Land	$	139,838	$	140,239	Land	$	141,257	$	140,239
Buildings	Buildings	1,065,039		997,345		Buildings	1,066,722		997,345
Equipment, furniture and fixtures	Equipment, furniture and fixtures	524,266		477,040		Equipment, furniture and fixtures	516,266		455,463
Aircraft (a)	Aircraft (a)	—		38,090		Aircraft (a)	—		38,090

Leasehold improvements	Leasehold improvements	229,956		232,819		Leasehold improvements	124,369		124,369
Construction in progress (b)	Construction in progress (b)	2,558,838		2,031,972		Construction in progress (b)	2,818,995		2,024,117
Total Property and equipment	Total Property and equipment	4,517,937		3,917,505		Total Property and equipment	4,667,609		3,779,623
Less accumulated depreciation and amortization (a)	Less accumulated depreciation and amortization (a)	(1,008,464)		(978,453)		Less accumulated depreciation and amortization (a)	(977,375)		(925,967)
Property and equipment, net	Property and equipment, net	$	3,509,473	$	2,939,052	Property and equipment, net	$	3,690,234	$	2,853,656

_________________

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

(b)Construction in progress includes labor and interest that are capitalized during the construction period for significant long term construction projects. These costs primarily relate to the construction of ~~MSG~~ Sphere in Las Vegas. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the Company capitalized interest of ~~$29,869~~$38,115 and ~~$50,335~~$88,450 of interest, respectively. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, the Company capitalized ~~$10,600~~$12,272 and ~~$19,926~~$32,202 of interest, respectively.

The increase in Construction in progress is primarily associated with the development and construction of ~~MSG~~ Sphere in Las Vegas, which includes capitalized labor and interest. The property and equipment balances above include ~~$239,943~~$307,368 and $206,462 of capital expenditure accruals (primarily related to ~~MSG~~ Sphere construction) as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022, respectively, which are reflected in Accounts payable, accrued and other current liabilities in the accompanying condensed consolidated balance sheets.

Depreciation and amortization expense on property and equipment was ~~$25,029~~$22,220 and ~~$50,326~~$65,000 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$26,100~~$19,351 and ~~$51,221,~~$59,712, for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

Note 8. Goodwill and Intangible Assets

The carrying amount of goodwill as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022 are as follows:


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022
Entertainment	Entertainment	$	74,309	$	74,309	Entertainment	$	74,309	$	74,309
MSG Networks	MSG Networks	424,508		424,508		MSG Networks	424,508		424,508

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

Total Goodwill						Total Goodwill	$	498,817	$	498,817

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

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 ~~December~~March 31, ~~2022~~2023 and June 30, 2022 were as follows:


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022
Trademarks	Trademarks	$	61,881	$	61,881	Trademarks	$	61,881	$	61,881
Photographic related rights	Photographic related rights	1,920		1,920		Photographic related rights	1,920		1,920

Total		$	63,801	$	63,801
Total indefinite-lived intangible assets						Total indefinite-lived intangible assets	$	63,801	$	63,801

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

The Company’s intangible assets subject to amortization are as follows:
December 31, 2022 Gross Accumulated
Amortization Net
Trade names (a)
$ 108,956 $ (32,553) $ 76,403
Venue management contracts 83,963 (26,454) 57,509
Affiliate relationships 83,044 (63,576) 19,468
Non-compete agreements (b)
9,000 (9,000) —
Other intangibles (b)
4,217 (4,217) —
$ 289,180 $ (135,800) $ 153,380


March 31, 2023	Gross		Accumulated Amortization		Net


Affiliate relationships	83,044		(64,355)		18,689


Other intangibles (b)	4,217		(4,217)		—
Total amortizable intangible assets	$	87,261	$	(68,572)	$	18,689


June 30, 2022	June 30, 2022	Gross		Accumulated Amortization		Net		June 30, 2022	Gross		Accumulated Amortization		Net
Trade names(a)	Trade names(a)	$	112,094	$	(32,143)	$	79,951	Trade names(a)	$	2,530	$	(2,169)	$	361
Venue management contracts		84,855		(23,546)		61,309

Affiliate relationships	Affiliate relationships	83,044		(62,019)		21,025		Affiliate relationships	83,044		(62,019)		21,025

Non-compete agreements		9,000		(8,478)		522

Festival rights (a)	Festival rights (a)	8,080		(6,926)		1,154		Festival rights (a)	8,080		(6,926)		1,154
Other intangibles	Other intangibles	4,217		(4,094)		123		Other intangibles	4,217		(4,094)		123
		$	301,290	$	(137,206)	$	164,084
Total amortizable intangible assets								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 ~~of $674~~and accumulated amortization related to festival rights and ~~$210 related to trade names, and accumulated amortization of $7,406 related to festival rights and $2,320 related to~~ trade names, associated with the BCE Disposition.

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

(b) ~~The Non-compete agreements and~~ Other intangibles gross and accumulated amortization balances were fully amortized.

Amortization expense for intangible assets was ~~$4,030~~$779 and ~~$8,488,~~$3,090 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$4,433~~$1,112 and ~~$8,742~~$3,338 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively.

Note 9. Commitments and Contingencies

Commitments

See Note 14, Commitments and Contingencies, to the consolidated and combined financial statements included in the 2022 Form 10-K for details on the Company’s off-balance sheet commitments. The Company’s off-balance sheet commitments as of June 30, 2022 included a total of ~~$3,898,281~~$3,893,665 of contract obligations (primarily related to media rights agreements from the MSG Networks segment).

During the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the Company did not have any material changes in its non-cancelable contractual obligations (other than activities in the ordinary course of business), except for the execution of the ~~MSG~~LV Sphere Term Loan Facility (as defined below) on December 22, 2022. See Note 10, Credit Facilities for details of the principal repayments required under the Company’s various credit facilities, including the ~~MSG~~LV Sphere Term Loan Facility.

Legal Matters

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

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.

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. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and on November 16, 2022, fact discovery closed. ~~The Company continues to be engaged in responding to plaintiffs’ outstanding discovery requests.~~ Pursuant to the indemnity rights in its bylaws and Delaware law, the Company ~~is advancing~~has advanced the costs incurred by defendants in this action, and defendants ~~may assert~~have 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 (the “MSG Networks ~~Action”~~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 but has been subpoenaed to produce documents and testimony related to the Merger. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants in the MSG Networks ~~Action~~Litigation filed answers to the complaint on December 30, 2021. The Company substantially completed its production of documents responsive to plaintiffs’ requests on June 24, 2022, and on November 16, 2022 fact discovery closed. ~~The Company continues to be engaged in responding to plaintiffs’ outstanding discovery requests.~~Pursuant to the indemnity rights in its bylaws and Delaware law, the

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

Company ~~is advancing~~has advanced the costs incurred by defendants in this action, and defendants ~~may assert~~have asserted indemnification rights in respect of any adverse judgment or settlement of the action.

On ~~September 19, 2022, the Court of Chancery approved a case schedule, governing the two consolidated actions, which set trial dates for~~ April ~~2023. On January 3,~~6, 2023, the ~~Court of Chancery granted the unopposed motion for class certification in~~parties to the MSG Networks ~~Action. A joint-mediation session is scheduled for February 11 and 12, 2023.~~

~~We are currently unable~~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 the MSG Networks Litigation in exchange for a settlement payment to ~~determine a range~~the plaintiffs and the class of ~~potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters~~$48,500 which has been ~~made~~recorded in ~~our 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.

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

Note 10. Credit Facilities

See Note 15, Credit Facilities, to the consolidated and combined financial statements included in the 2022 Form 10-K for more information regarding the Company’s credit facilities. The following table summarizes the presentation of the outstanding balances under the Company’s credit agreements as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022:


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022
Current portion	Current portion					Current portion
MSG Networks Term Loan	MSG Networks Term Loan	$	82,500	$	66,000	MSG Networks Term Loan	$	82,500	$	66,000
National Properties Term Loan Facility	National Properties Term Loan Facility	16,250		8,125		National Properties Term Loan Facility	16,250		8,125
Tao Term Loan Facility		3,750		3,750

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

Other current portion of long-term debt						Other current portion of long-term debt	—		637
Total Current portion of long-term debt						Total Current portion of long-term debt	$	98,750	$	74,762


		December 31, 2022						June 30, 2022							March 31, 2023						June 30, 2022
		Principal		Unamortized Deferred Financing Costs		Net		Principal		Unamortized Deferred Financing Costs		Net			Principal		Unamortized Deferred Financing Costs		Net		Principal		Unamortized Deferred Financing Costs		Net
Non-current portion	Non-current portion													Non-current portion
MSG Networks Term Loan	MSG Networks Term Loan	$	891,000	$	(2,095)	$	888,905	$	932,250	$	(2,715)	$	929,535	MSG Networks Term Loan	$	870,375	$	(1,788)	$	868,587	$	932,250	$	(2,715)	$	929,535
National Properties Term Loan Facility	National Properties Term Loan Facility	633,750		(14,452)		619,298		641,875		(16,064)		625,811		National Properties Term Loan Facility	629,687		(13,645)		616,042		641,875		(16,064)		625,811
National Properties Revolving Credit Facility	National Properties Revolving Credit Facility	29,100		—		29,100		29,100		—		29,100		National Properties Revolving Credit Facility	27,100		—		27,100		29,100		—		29,100
MSG Sphere Term Loan Facility		275,000		(5,419)		269,581		—		—		—
Tao Term Loan Facility		69,375		(1,008)		68,367		71,250		(1,120)		70,130
Tao Revolving Credit Facility		10,000		—		10,000		10,000		—		10,000
LV Sphere Term Loan Facility														LV Sphere Term Loan Facility	275,000		(5,149)		269,851		—		—		—
Other long-term debt														Other long-term debt	168		—		168		—		—		—

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

Total Long-term debt, net of deferred financing costs														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 Credit Facilities

General. 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

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

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. Up to $35,000 of the MSGN Revolving Credit Facility is available for the issuance of letters of credit. As of ~~December~~March 31, ~~2022,~~2023, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit 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 ~~December~~March 31, ~~2022~~2023 was ~~6.73%~~6.86%.

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

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

customary breakage costs with respect to Eurodollar loans). The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024. MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

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

Guarantors and Collateral. 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.

National Properties Credit Facilities

General. On 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 credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto (the “National Properties Credit Agreement”), providing for a five-year, $650,000 senior secured term loan

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

facility (the “National Properties Term Loan Facility”) and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Credit Facilities”). As of ~~December~~March 31, ~~2022,~~2023, outstanding letters of credit were ~~$7,860~~$7,992 and the remaining balance available under the National Properties Revolving Credit Facility was ~~$63,040.~~$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 may be either (a) a base rate plus an applicable margin ranging from 1.50% to 2.50%per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties Base Rate”), or (b) Term SOFR plus an applicable margin ranging from 2.50% to 3.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties SOFR Rate”). The National Properties Credit Agreement requires MSG National Properties to pay a commitment fee ranging from 0.30% to 0.50% in respect of the daily unused commitments under the National Properties Revolving Credit Facility. MSG National Properties is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the National Properties Credit Agreement. The interest rate on the National Properties Credit Facilities as of ~~December~~March 31, ~~2022~~2023 was ~~8.18%~~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

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

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 over the life of the National Properties Credit Facilities. The debt service coverage ratio covenant began testing in the fiscal quarter ending December 31, 2022, and is set at a ratio of 2:1 before stepping up to 2.5:1 in the fiscal quarter ending September 30, 2024. The leverage ratio covenant begins testing in the fiscal quarter ending June 30, 2023. It is tested based on the ratio of MSG National Properties and its restricted subsidiaries’ consolidated total indebtedness to adjusted operating income, with an initial maximum ratio of 6:1, stepping down to 5.5:1 in the fiscal quarter ending June 30, 2024 and 4.5:1 in the fiscal quarter ending June 30, 2026. As of ~~December~~March 31, ~~2022,~~2023, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Credit Agreement.

In addition to the financial covenants discussed above, the National Properties Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The National Properties Credit Agreement contains certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the National Properties Credit Agreement, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the ability of MSG National Properties to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii) engage in certain transactions with affiliates; (viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions.

Guarantors and Collateral. ~~All~~As of March 31, 2023, obligations under the National Properties Credit Facilities ~~are~~were guaranteed by ~~MSG~~Sphere Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden and certain other excluded subsidiaries (the “Subsidiary Guarantors”).

All obligations under the National Properties 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

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

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 ~~“MSG~~“LV Sphere Term Loan Facility”).

Interest Rates. Borrowings under the ~~MSG~~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 ~~MSG~~LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the ~~MSG~~LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity.

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)

Under certain circumstances, MSG LV is required to make mandatory prepayments on the loan, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.

Covenants. The ~~MSG~~LV Sphere Term Loan Facility ~~includes~~and related guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring ~~MSG~~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 ~~the MSG~~ Sphere in Las Vegas, ~~(the “Opening Date”),~~ is also tested on a prospective basis. Both the historical and prospective debt service coverage ratios are set at 1.35:1. In addition, among other conditions, MSG LV is not permitted to make distributions to ~~MSG~~Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for ~~MSG~~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 ~~MSG~~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 ~~the MSG~~ Sphere in Las Vegas has been substantially completed and certain of its systems are ready to be used in live, immersive events (the “Liquidity Covenant Reduction Date”). The minimum liquidity level was tested on the closing date and is tested as of the last day of each fiscal quarter thereafter based on ~~MSG~~Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date. InFollowing the ~~event~~completion of the ~~Company completes~~MSGE Spinco Distribution, the spin-off of its traditional live entertainment business currently under consideration (the “MSGE Spin-off”) and retains an economic interest in the live entertainment company (the “Live Entertainment Company Retained Interest”), the Live Entertainment CompanyMSGE Retained Interest ~~will be~~was pledged to secure the ~~MSG~~LV Sphere Term Loan Facility and will remain pledged until ~~the pledge is released upon~~ the Liquidity Covenant Reduction Date, and a portion of the value of the ~~Live Entertainment Company~~MSGE Retained Interest may also be counted toward the minimum liquidity level. ~~See Note 17, Subsequent Events, for details regarding the MSGE Spin-off.~~

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

Guarantors and Collateral. All obligations under the ~~MSG~~LV Sphere Term Loan Facility are guaranteed by ~~MSG~~Sphere Entertainment Group. All obligations under the ~~MSG~~LV Sphere Term Loan Facility, including the guarantees of those obligations, are secured by all of the assets of MSG LV and certain assets of ~~MSG~~Sphere Entertainment Group including, but not limited to, MSG LV’s leasehold

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

interest in the land on which ~~the MSG~~ Sphere in Las Vegas is located, a pledge of all of the equity interests held directly by ~~MSG~~Sphere Entertainment Group in MSG LV and, until the Liquidity Covenant Reduction Date, the Pledged Account and a pledge of the ~~Live~~MSGE 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 delayed draw term loans to the Company ~~Retained Interest~~on an unsecured basis for a period of 18 months following the consummation of the MSGE ~~Spin-off.~~Spinco Distribution. The Company has not yet drawn upon the DDTL Facility.

~~Tao Credit Facilities~~

~~General.~~ ~~On June 9, 2022, TAO Group Intermediate Holdings LLC (“TAOIH”)~~The DDTL Facility will mature and TAO Group Operating LLC (“TAOG”) entered into an amended and restated credit agreement (the “Restated Tao Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as agent, and the lenders party thereto. The Restated Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “Tao Credit Facilities”) consisting of: (i) an initial $75,000 term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a $60,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit. As of December 31, 2022, outstanding letters of credit were $750 and the remaining borrowing available under the Tao Revolving Credit Facility was $49,250.

~~Interest Rates.~~any unused commitments thereunder will expire on October 20, 2024. Borrowings under the ~~Restated Tao Senior Credit Agreement~~DDTL Facility will bear interest at a ~~floating~~variable rate ~~which~~equal to either, at the option of the ~~Senior Borrower may be either~~Company, (a) a base rate plus an ~~additional rate ranging from 1.50% to 2.00% per annum (determined based on a total leverage ratio) (the “Tao Base Rate”),~~applicable margin, or (b) aTerm SOFR ~~rate~~plus 0.10%, plus an ~~additional rate ranging from 2.50%~~applicable margin. The applicable margin is equal to ~~3.00% per annum (determined based on a total leverage ratio) (the “Tao SOFR Rate”). The Restated Tao Senior Credit Agreement requires TAOG to pay a commitment fee of 0.375% in respect of~~ the ~~daily unused commitments~~applicable margin under the ~~Tao Revolving~~National Properties Credit ~~Facility (previously 0.50% prior to the amendment on~~ Facilities, plus 1.00% per annum.

~~June 9, 2022~~). TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Restated Tao Senior Credit Agreement. The interest rate on the Restated Tao Senior Credit Agreement as of ~~December 31, 2022~~ ~~was~~ ~~6.92%.~~

~~Principal Repayments.~~Subject to customary ~~notice and minimum amount~~borrowing conditions, ~~TAOG~~the DDTL Facility may ~~voluntarily repay outstanding loans under the Restated Tao Senior Credit Agreement~~be drawn in up to six separate borrowings of $5 million or more. The DDTL Facility is prepayable at any time ~~in whole or in part,~~ without premium or penalty. The Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 9, 2022 through the maturity date on June 9, 2027. TAOG is required to make mandatory prepayments of the Tao Term Loan Facility from the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights)penalty and ~~the incurrence of certain indebtedness, subject to certain exceptions.~~

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

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

~~Guarantors and Collateral.~~ All obligations under the Restated 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 Restated Tao Senior Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of TAOG and each Tao Guarantor (collectively, “Tao Collateral”),DDTL Facility may not be

2325

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

~~including, but not limited~~reborrowed. If drawn, the Company will have the option to ~~a pledge~~make any payments of principal, interest or fees under the 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 the Company made such election. The Company shall only be permitted to use the proceeds of the ~~equity interests~~DDTL Facility (i) for funding costs associated with the Sphere initiative and (ii) in ~~TAOG held directly by TAOIH~~connection with refinancing of the indebtedness under MSG Networks Credit Facilities.

The DDTL Facility contains certain representations and ~~the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.~~warranties and affirmative and negative covenants, including, among others, financial reporting, notices of material events, and limitations on asset dispositions restricted payments, and affiliate transactions.

Interest payments and loan principal repayments made by the Company under the credit agreements were as follows:


		Interest Payments				Loan Principal Repayments					Interest Payments				Loan Principal Repayments
		Six Months Ended				Six Months Ended					Nine Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
MSG Networks Credit Facilities	MSG Networks Credit Facilities	$	24,468	$	8,886	$	24,750	$	24,750	MSG Networks Credit Facilities	$	41,034	$	13,238	$	45,375	$	37,125
National Properties Credit Facilities	National Properties Credit Facilities	22,410		23,141		—		3,250		National Properties Credit Facilities	35,283		34,917		6,063		4,875
Tao Credit Facilities		2,259		415		1,875		17,500

		$	49,137	$	32,442	$	26,625	$	45,500
LV Sphere Term Loan Facility										LV Sphere Term Loan Facility	6,211		—		—		—
Total Payments										Total Payments	$	82,528	$	48,155	$	51,438	$	42,000

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


		December 31, 2022				June 30, 2022					March 31, 2023				June 30, 2022
		Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value			Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value
Liabilities:	Liabilities:									Liabilities:
MSG Networks Credit Facilities	MSG Networks Credit Facilities	$	973,500	$	951,596	$	998,250	$	958,320	MSG Networks Credit Facilities	$	952,875	$	938,582	$	998,250	$	958,320
National Properties Credit Facilities	National Properties Credit Facilities	679,100		672,309		679,100		679,100		National Properties Credit Facilities	673,037		666,307		679,100		679,100

MSG Sphere Term Loan Facility		275,000		275,000		—		—
Tao Senior Credit Facilities		83,125		83,428		85,000		82,569
LV Sphere Term Loan Facility										LV Sphere Term Loan Facility	275,000		269,500		—		—
Other debt										Other debt	168		168		637		637

Total Long-term debt	Total Long-term debt	$	2,010,725	$	1,982,333	$	1,762,350	$	1,719,989	Total Long-term debt	$	1,901,080	$	1,874,557	$	1,677,987	$	1,638,057

_________________

(a)The total carrying value of the Company’s financial instruments as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022 is equal to the current and non-current principal payments for the Company’s credit agreements excluding unamortized deferred financing costs of ~~$22,974~~$20,582 and ~~$19,899,~~$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 11. Pension Plans and Other Postretirement Benefit Plan

The Company sponsors several pension, savings and postretirement benefit plans including the Company’s defined benefit pension plans (“MSGE Pension Plans”), postretirement benefit plan (“MSGE Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “Savings Plans”), and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”). See Note 16, Pension Plans and Other Postretirement Benefit Plans, to the consolidated and combined financial statements included in the 2022 Form 10-K for more information regarding these plans.

2426

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(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 ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 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 Other expense, net.


		Pension Plans				Postretirement Plans					Pension Plans				Postretirement Plans
		Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Service cost	Service cost	$	123	$	118	$	15	$	16	Service cost	$	123	$	118	$	15	$	16
Interest cost	Interest cost	1,189		1,190		19		20		Interest cost	1,189		1,190		19		20
Expected return on plan assets	Expected return on plan assets	(1,719)		(1,719)		—		—		Expected return on plan assets	(1,719)		(1,719)		—		—
Recognized actuarial loss		501		501		9		9
Recognized actuarial loss (gain)										Recognized actuarial loss (gain)	476		501		(12)		9

Net periodic benefit cost	Net periodic benefit cost	$	94	$	90	$	43	$	45	Net periodic benefit cost	$	69	$	90	$	22	$	45


		Pension Plans				Postretirement Plans					Pension Plans				Postretirement Plans
		Six Months Ended				Six Months Ended					Nine Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Service cost	Service cost	$	246	$	236	$	30	$	32	Service cost	$	369	$	354	$	45	$	48
Interest cost	Interest cost	2,378		2,380		38		40		Interest cost	3,567		3,570		57		60
Expected return on plan assets	Expected return on plan assets	(3,438)		(3,438)		—		—		Expected return on plan assets	(5,157)		(5,157)		—		—
Recognized actuarial loss	Recognized actuarial loss	1,002		1,002		18		18		Recognized actuarial loss	1,478		1,503		6		27

Net periodic benefit cost	Net periodic benefit cost	$	188	$	180	$	86	$	90	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 its union employees (the “UTT Plan” and the “Networks 1212 Plan,” collectively the “Union Plans”). During the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the Company contributed $500 to the Networks 1212 Plan.

Contributions for Defined Contribution Plans

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 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:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Savings Plans	Savings Plans	$	2,742	$	2,475	$	5,307	$	4,494	Savings Plans	$	3,304	$	2,095	$	8,611	$	6,589
Union Savings Plan	Union Savings Plan	$	20	$	7	$	38	$	21	Union Savings Plan	$	371	$	24	$	409	$	45

Note 12. Share-based Compensation

The Company has three share-based compensation plans: the 2020 Employee Stock Plan, the 2020 Stock Plan for Non-Employee Directors and the MSG Networks Inc. 2010 Employee Stock Plan. See Note 17, Share-based Compensation, to the consolidated and combined financial statement included in the 2022 Form 10-K for more detail on these plans.

Share-based compensation expense for the Company’s restricted stock units (“RSUs”), performance stock units (“PSUs”) and/or stock options are recognized in the condensed consolidated statements of operations as a component of direct operating expenses or selling, general and administrative expenses.

2527

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

The following table summarizes the Company’s share-based compensation expense:

Three Months Ended Six Months Ended
December 31, December 31,
2022 2021 2022 2021
Share-based compensation(a)
$ 18,185 $ 24,171 $ 33,373 $ 43,699
Intrinsic value of awards vested(b)
$ 2,995 $ 492 $ 35,127 $ 32,734


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
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 ~~$1,802~~$2,887 and ~~$1,763~~$2,264 for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. For the three and ~~six~~nine months ended ~~December~~March 31, 2023, share-based compensation also excludes costs of $7,384 and $9,677, respectively, and for the three and nine months ended March 31, 2022, share-based compensation also excludes costs of ~~$2,293~~$4,589, that have been reclassified to Restructuring charges in the condensed consolidated statements of operations, as detailed in Note 5, Restructuring Charges.

(b)To fulfill required statutory tax withholding obligations for the applicable income and other employment taxes, RSUs and PSUs with an aggregate value of ~~$14,741~~$14,188 and ~~$15,652~~$15,548 were retained by the Company during the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, and ~~2021,~~2022, respectively. The aggregate value of the RSUs and PSUs retained included $305 and $477 related to MSG Sports employees, during the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, and ~~2021,~~2022, respectively.

As of ~~December~~March 31, ~~2022,~~2023, there was ~~$106,360~~$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 ~~1.8~~1.7 years.

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022, weighted-average anti-dilutive shares primarily consisted of approximately 1,671 units~~2023 and 1,433 units, respectively, of RSUs and stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the three months ended December 31, 2021, weighted-average anti-dilutive shares primarily consisted of approximately 668 units of RSUs and stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the six months ended December 31, 20212022 all restricted stock units and stock options were excluded from the anti-dilutive calculation because the Company reported a net loss for the period and, therefore, their impact on reported loss per share would have been antidilutive. ~~An anti-dilutive option exists when the average stock price for the period is less than the exercise price of the option or share.~~

Award Activity

RSUs

During the ~~six~~nine months ended ~~December~~March 31, 2023 and 2022, approximately 620 and ~~2021, approximately 650 and 445~~413 RSUs were granted and approximately ~~546~~526 and ~~332~~367 RSUs vested, respectively.

PSUs

During the ~~six~~nine months ended ~~December~~March 31, 2023 and 2022, approximately 529 and ~~2021, approximately 566 and 422~~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 ~~December~~March 31, ~~2022~~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.

2628

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

Accumulated Other Comprehensive Loss

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


		Three Months Ended							Three Months Ended
		December 31, 2022							March 31, 2023
		Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss			Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of September 30, 2022		$	(39,787)	$	(21,194)	$	(60,981)
Balance as of December 31, 2022								Balance as of December 31, 2022	$	(39,453)	$	(9,110)	$	(48,563)
Other comprehensive income	Other comprehensive income	—		14,803		14,803		Other comprehensive income	—		2,105		2,105
Amounts reclassified from accumulated other comprehensive loss (a)	Amounts reclassified from accumulated other comprehensive loss (a)	510		—		510		Amounts reclassified from accumulated other comprehensive loss (a)	464		—		464
Income tax expense	Income tax expense	(176)		(2,719)		(2,895)		Income tax expense	(58)		(387)		(445)

Other comprehensive income	Other comprehensive income	334		12,084		12,418		Other comprehensive income	406		1,718		2,124

Balance as of December 31, 2022		$	(39,453)	$	(9,110)	$	(48,563)
Balance as of March 31, 2023								Balance as of March 31, 2023	$	(39,047)	$	(7,392)	$	(46,439)

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



	Three Months Ended
	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) benefit	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)

Six Months Ended
December 31, 2022
Pension Plans and
Postretirement
Plans Cumulative
Translation
Adjustments Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2022 $ (40,287) $ (8,068) $ (48,355)
Other comprehensive loss — (1,277) (1,277)
Amounts reclassified from accumulated other comprehensive loss (a)
1,020 — 1,020
Income tax (expense) benefit (186) 235 49
Other comprehensive income (loss) 834 (1,042) (208)
Balance as of December 31, 2022 $ (39,453) $ (9,110) $ (48,563)



	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 income	1,240		676		1,916

Balance as of March 31, 2023	$	(39,047)	$	(7,392)	$	(46,439)

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~


		Six Months Ended							Nine Months Ended
		December 31, 2021							March 31, 2022
		Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss			Pension Plans and Postretirement Plans		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance as of June 30, 2021	Balance as of June 30, 2021	$	(45,425)	$	15,153	$	(30,272)	Balance as of June 30, 2021	$	(45,425)	$	15,153	$	(30,272)
Other comprehensive loss	Other comprehensive loss	—		(3,932)		(3,932)		Other comprehensive loss	—		(9,844)		(9,844)
Amounts reclassified from accumulated other comprehensive loss (a)	Amounts reclassified from accumulated other comprehensive loss (a)	1,020		—		1,020		Amounts reclassified from accumulated other comprehensive loss (a)	1,530		—		1,530
Income tax (expense) benefit		(191)		743		552
Income tax benefit (expense)								Income tax benefit (expense)	2,484		(908)		1,576

Other comprehensive income (loss)	Other comprehensive income (loss)	829		(3,189)		(2,360)		Other comprehensive income (loss)	4,014		(10,752)		(6,738)

Balance as of December 31, 2021		$	(44,596)	$	11,964	$	(32,632)
Balance as of March 31, 2022								Balance as of March 31, 2022	$	(41,411)	$	4,401	$	(37,010)

_________________

(a)Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net

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 Other income (expense), net in the accompanying condensed consolidated statements of operations (see Note 11, Pension Plans and Other Postretirement Benefit Plans).

Note 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 ~~December~~March 31, ~~2022,~~2023, members of the Dolan Family, including trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially owned 100% of the Company’s outstanding Class B Common Stock and approximately 5.5% of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of ~~December~~March 31, ~~2022)~~2023). Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 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., as well as MSG Entertainment following the MSGE Spinco Distribution.

See Note 21, Related Party Transactions, to the consolidated and combined financial statements included in the 2022 Form 10-K for a description of the Company’s ~~current~~ related party arrangements. ~~There have been~~Following the MSGE Spinco Distribution, the Company is no ~~material changes in such related~~longer party to the arrangements described thereunder, except ~~as described below.~~for the media rights agreements and 2020 distribution-related agreements with MSG Sports, and the sharing of 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 Entertainment, MSG Sports and AMC Networks.

From time to time the Company enters into arrangements with 605, LLC (“605”). James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and his spouse, Kristin A. Dolan (a director of the Company), own 50% of 605. Kristin A. Dolan is also the founder and ~~Chief Executive Officer~~Non-Executive Chairman of 605. 605 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 ~~$65~~$70 and ~~$135~~$205 of expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023, respectively, and as of ~~December~~March 31, ~~2022~~2023 approximately ~~$135~~$70 has been recognized in Prepaid expenses and other current ~~assets.~~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 June 30, 2022, the Company had $637 of notes payable with respect to a loan received by BCE from its noncontrolling interest holder. As of ~~December~~March 31, ~~2022~~2023 there were no notes payable with respect to this BCE loan as a result of the BCE ~~Disposition.~~Disposition (as defined below).

The Company has also entered into certain commercial agreements with its equity method investment nonconsolidated affiliates in connection with ~~MSG~~ Sphere. The ~~company~~Company recorded ~~$22,416~~$14,271 and ~~$28,064~~$46,577 for the three months ended ~~December~~March 31, 2023 and 2022, respectively, and ~~2021, and $73,086~~$87,357 and ~~$36,741~~$83,318 for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of ~~December~~March 31, ~~2022~~2023 and June 30, 2022, accrued capital expenditures associated with related parties were $~~27,401~~24,826 and $25,028, respectively, and are reported under Accounts payable, accrued and other current liabilities in the accompanying condensed consolidated balance sheets.

2830

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

Revenues and Operating Expenses

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 ~~six~~three and nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	41,087	$	35,099	$	46,284	$	39,467	Revenues	$	42,795	$	39,987	$	88,431	$	79,314
Operating expenses (credits):	Operating expenses (credits):									Operating expenses (credits):
Media rights fees	Media rights fees	$	43,433	$	40,813	$	86,200	$	81,258	Media rights fees	$	43,433	$	40,948	$	129,633	$	122,206
Revenue sharing expenses	Revenue sharing expenses	7,099		5,633		8,286		6,396		Revenue sharing expenses	7,353		5,791		15,639		12,187

Reimbursement under Arena License Agreements	Reimbursement under Arena License Agreements	(9,357)		(8,673)		(9,850)		(9,050)		Reimbursement under Arena License Agreements	(8,911)		(10,047)		(18,761)		(19,097)
Cost reimbursement from MSG Sports - per Transition services agreement	Cost reimbursement from MSG Sports - per Transition services agreement	(9,475)		(10,513)		(18,992)		(19,729)		Cost reimbursement from MSG Sports - per Transition services agreement	(9,789)		(9,159)		(28,781)		(28,888)

Origination, master control and technical services	Origination, master control and technical services	1,232		1,208		2,464		2,416		Origination, master control and technical services	1,257		1,232		3,721		3,648

Other operating expenses, net	Other operating expenses, net	1,454		792		2,292		2,914		Other operating expenses, net	851		279		3,143		3,193
Total operating expenses, net (a)	Total operating expenses, net (a)	$	34,386	$	29,260	$	70,400	$	64,205	Total operating expenses, net (a)	$	34,194	$	29,044	$	104,594	$	93,249

_________________

(a)Of the total operating expenses, net, ~~$43,808,~~$44,264 and ~~$38,992~~$37,949 for three months ended ~~December~~March 31, 2023 and 2022, respectively, and ~~2021,~~$133,071 and ~~$88,807, and $81,197,~~$119,146 for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and, ~~2021,~~2022, respectively, are included in direct operating expenses in the accompanying condensed consolidated statements of operations, and ~~$(9,422)~~$(10,070) and ~~$(9,732)~~$(8,905) for three months ended ~~December~~March 31, 2023 and 2022, respectively, and ~~2021,~~$(28,477) and ~~$(18,407) and $(16,992)~~$(25,897) for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, are included as net credits in selling, general and administrative expenses.

Revenues

The Company recorded ~~$31,825~~$31,163 and ~~$33,149~~$64,312 of revenues under the Arena License Agreements for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively. In addition to the Arena License Agreements, the Company’s revenues from related parties primarily reflected sponsorship sales and service representation agreements of ~~$6,031~~$7,079 and ~~$8,564~~$15,643 and merchandise sharing revenues of ~~$2,176~~$2,160 and ~~$2,291~~$4,451 with MSG Sports during the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively. The Company also earned sublease revenue from related parties of ~~$611~~$716 and ~~$1,222~~$2,100 during the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively.

The ~~company~~Company recorded ~~$27,853~~$29,616 and ~~$29,181~~$58,797 of revenues under the Arena License Agreements for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively. In addition, the Company recorded revenues under sponsorship sales and service representation agreements of ~~$4,831~~$7,027 and ~~$7,179~~$14,206 and merchandise sharing revenues of ~~$1,395~~$1,548 and ~~$1,452~~$3,000 with MSG Sports during the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively. The Company also earned sublease revenue from related parties of ~~$611~~$736 and ~~$1,222~~$1,958 during the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively.

Note 15. Segment Information

As of ~~December~~March 31, ~~2022,~~2023, the Company was comprised of ~~three~~two reportable segments: Entertainment and MSG ~~Networks and Tao Group Hospitality.~~Networks. 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. Following the MSGE Entertainment Distribution, the Company currently has two reportable segments.

The Company incurs non-capitalizable content development and technology costs associated with the Company’s ~~MSG~~ Sphere initiative, which are reported in 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

2931

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

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

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) as operating income (loss) excluding:

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

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

(iii) amortization for capitalized cloud computing arrangement costs,

(iv) share-based compensation expense,

(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,

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

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

The Company believes that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. Management believes that this adjustment is beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Sports. In addition, this adjustment is included under the Company’s debt covenant compliance calculations and is a component of the performance measures used to evaluate, and compensate, senior management of the Company. The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the 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. The Company eliminates merger and acquisition-related costs, when applicable, because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the 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).

3032

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

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

Three Months Ended
December 31, 2022
Entertainment MSG Networks Tao Group Hospitality Purchase
accounting adjustments Inter-segment eliminations Total
Revenues $ 356,518 $ 158,898 $ 135,994 $ — $ (9,212) $ 642,198
Direct operating expenses (181,042) (90,400) (76,483) (1,668) 634 (348,959)
Selling, general and administrative expenses (109,561) (38,083) (43,166) — 8,377 (182,433)
Depreciation and amortization (21,921) (1,637) (5,616) 115 — (29,059)
Impairment and other gains, net 5,412 — 473 — — 5,885
Restructuring charges (9,694) (3,988) — — — (13,682)
Operating income (loss) $ 39,712 $ 24,790 $ 11,202 $ (1,553) $ (201) $ 73,950
Interest income, net 2,709
Other expense, net (3,853)
Income from operations before income taxes $ 72,806
Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating income (loss) $ 39,712 $ 24,790 $ 11,202 $ (1,553) $ (201) $ 73,950
Add back:
Non-cash portion of arena license fees from MSG Sports (a)
(12,410) — — — — (12,410)
Share-based compensation 12,513 3,298 2,374 — — 18,185
Depreciation and amortization 21,921 1,637 5,616 (115) — 29,059
Impairment and other gains, net (5,412) — (473) — — (5,885)
Restructuring charges 9,694 3,988 — — — 13,682
Merger and acquisition related costs, net of insurance recovery (56) 5,544 — — — 5,488
Amortization for capitalized cloud computing costs 191 44 — — — 235
Other purchase accounting adjustments — — — 1,668 — 1,668
Remeasurement of deferred compensation plan liabilities 160 — — — — 160
Adjusted operating income (loss) $ 66,313 $ 39,301 $ 18,719 $ — $ (201) $ 124,132
Other information:
Capital expenditures $ 281,369 $ 2,665 $ 5,686 $ — $ — $ 289,720

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~

Three Months Ended
December 31, 2021
Entertainment MSG Networks Tao Group Hospitality Purchase
accounting adjustments Inter-segment eliminations Total
Revenues $ 247,610 $ 159,981 $ 117,086 $ — $ (8,238) $ 516,439
Direct operating expenses (147,343) (85,924) (60,880) (3,038) 927 (296,258)
Selling, general and administrative expenses (91,516) (37,192) (40,685) — 7,116 (162,277)
Depreciation and amortization (19,024) (1,756) (6,243) (3,510) — (30,533)
Impairment and other gains, net — — 7,443 536 — 7,979
Operating (loss) income $ (10,273) $ 35,109 $ 16,721 $ (6,012) $ (195) $ 35,350
Interest expense, net (7,394)
Other expense, net (18,874)
Income from operations before income taxes $ 9,082
Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income $ (10,273) $ 35,109 $ 16,721 $ (6,012) $ (195) $ 35,350
Add back:
Non-cash portion of arena license fees from MSG Sports (a)
(11,346) — — — — (11,346)
Share-based compensation 16,155 6,058 1,958 — — 24,171
Depreciation and amortization 19,024 1,756 6,243 3,510 — 30,533
Impairment and other gains, net — — (7,443) (536) — (7,979)
Merger and acquisition related costs, net of insurance recovery 1,456 875 — — — 2,331
Amortization for capitalized cloud computing costs (34) 44 — — — 10
Other purchase accounting adjustments — — — 3,038 — 3,038
Adjusted operating income (loss) $ 14,982 $ 43,842 $ 17,479 $ — $ (195) $ 76,108
Other information:
Capital expenditures $ 166,218 $ 600 $ 8,987 $ — $ — $ 175,805

~~MADISON SQUARE GARDEN ENTERTAINMENT CORP.~~

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

~~(Continued)~~


		Six Months Ended													Three Months Ended
		December 31, 2022													March 31, 2023
		Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total				Entertainment		MSG Networks		Other (b)		Total
Revenues	Revenues	$	503,620	$	281,377	$	268,645	$	—	$	(10,226)	$	1,043,416	Revenues		$	201,861	$	161,436	$	—	$	363,297
Direct operating expenses	Direct operating expenses	(282,807)		(165,820)		(153,060)		(2,254)		1,081		(602,860)		Direct operating expenses		(120,835)		(89,251)		(55)		(210,141)
Selling, general and administrative expenses	Selling, general and administrative expenses	(212,923)		(55,899)		(86,712)		—		8,691		(346,843)		Selling, general and administrative expenses		(120,307)		(60,052)		489		(179,870)
Depreciation and amortization	Depreciation and amortization	(41,204)		(3,255)		(12,246)		(2,109)		—		(58,814)		Depreciation and amortization		(21,310)		(1,689)		—		(22,999)
Impairment and other gains, net		7,412		—		473		—		—		7,885
Impairment and other losses, net														Impairment and other losses, net		(51)		—		—		(51)
Restructuring charges	Restructuring charges	(9,694)		(3,988)		—		—		—		(13,682)		Restructuring charges		(20,498)		—		—		(20,498)
Operating (loss) income	Operating (loss) income	$	(35,596)	$	52,415	$	17,100	$	(4,363)	$	(454)	$	29,102	Operating (loss) income		$	(81,140)	$	10,444	$	434	$	(70,262)

Interest expense, net												4,496
Other expense, net												(2,328)
Income from operations before income taxes												$	31,270
Reconciliation of operating (loss) income to adjusted operating income (loss):
Interest income, net														Interest income, net								2,640
Other income, net														Other income, net								4,994
Loss from operations before income taxes														Loss from operations before income taxes								$	(62,628)
Reconciliation of operating income (loss) to adjusted operating income (loss):														Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating (loss) income	Operating (loss) income	$	(35,596)	$	52,415	$	17,100	$	(4,363)	$	(454)	$	29,102	Operating (loss) income		$	(81,140)	$	10,444	$	434	$	(70,262)
Add back:	Add back:													Add back:
Non-cash portion of arena license fees from MSG Sports (a)	Non-cash portion of arena license fees from MSG Sports (a)	(12,929)		—		—		—		—		(12,929)		Non-cash portion of arena license fees from MSG Sports (a)		(12,149)		—		—		(12,149)
Share-based compensation	Share-based compensation	23,945		5,002		4,426		—		—		33,373		Share-based compensation		10,259		640		—		10,899
Depreciation and amortization	Depreciation and amortization	41,204		3,255		12,246		2,109		—		58,814		Depreciation and amortization		21,310		1,689		—		22,999
Impairment and other gains, net		(7,412)		—		(473)		—		—		(7,885)

Restructuring charges	Restructuring charges	9,694		3,988		—		—		—		13,682		Restructuring charges		20,498		—		—		20,498
Impairment and other losses, net														Impairment and other losses, net		51		—		—		51
Merger and acquisition related costs, net of insurance recovery														Merger and acquisition related costs, net of insurance recovery		1,528		45,513		—		47,041

Merger and acquisition related costs, net of insurance recovery		2,693		7,445		—		—		—		10,138
Amortization for capitalized cloud computing costs	Amortization for capitalized cloud computing costs	268		88		—		—		—		356		Amortization for capitalized cloud computing costs		185		43		—		228
Other purchase accounting adjustments		—		—		—		2,254		—		2,254

Remeasurement of deferred compensation plan liabilities	Remeasurement of deferred compensation plan liabilities	6		—		—		—		—		6		Remeasurement of deferred compensation plan liabilities		126		—		—		126
Adjusted operating income (loss)		$	21,873	$	72,193	$	33,299	$	—	$	(454)	$	126,911
Adjusted operating (loss) income														Adjusted operating (loss) income		$	(39,332)	$	58,329	$	434	$	19,431
Other information:	Other information:													Other information:
Capital expenditures	Capital expenditures	$	546,461	$	3,892	$	11,455	$	—	$	—	$	561,808	Capital expenditures		$	198,924	$	1,818	$	—	$	200,742

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)



	Three Months Ended
	March 31, 2022
	Entertainment		MSG Networks		Other (b)		Total
Revenues	$	194,585	$	167,569	$	(9,620)	$	352,534
Direct operating expenses	(110,688)		(87,174)		(105)		(197,967)
Selling, general and administrative expenses	(96,198)		(32,237)		9,647		(118,788)
Depreciation and amortization	(18,522)		(1,764)		(177)		(20,463)
Impairment and other gains, net	245		—		—		245
Restructuring charges	(14,238)		(452)		—		(14,690)
Operating (loss) income	$	(44,816)	$	45,942	$	(255)	$	871


Interest expense, net							(4,761)
Other expense, net							(10,052)
Loss from operations before income taxes							$	(13,942)
Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income	$	(44,816)	$	45,942	$	(255)	$	871
Add back:
Non-cash portion of arena license fees from MSG Sports (a)	(12,073)		—		—		(12,073)
Share-based compensation	10,399		1,758		—		12,157
Depreciation and amortization	18,522		1,764		177		20,463
Restructuring charges	14,238		452		—		14,690

Impairment and other gains, net	(245)		—		—		(245)
Merger and acquisition related costs, net of insurance recovery	1,647		866		—		2,513
Amortization for capitalized cloud computing costs	38		43		—		81

Adjusted operating (loss) income	$	(12,290)	$	50,825	$	(78)	$	38,457
Other information:
Capital expenditures	$	200,958	$	320	$	—	$	201,278

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)


		Six Months Ended													Nine Months Ended
		December 31, 2021													March 31, 2023
		Entertainment		MSG Networks		Tao Group Hospitality		Purchase accounting adjustments		Inter-segment eliminations		Total				Entertainment		MSG Networks		Other (b)		Total
Revenues	Revenues	$	281,849	$	301,454	$	236,550	$	—	$	(8,904)	$	810,949	Revenues		$	705,481	$	442,813	$	(8,802)	$	1,139,492
Direct operating expenses	Direct operating expenses	(183,645)		(154,347)		(121,973)		(3,123)		1,069		(462,019)		Direct operating expenses		(403,642)		(255,071)		(222)		(658,935)
Selling, general and administrative expenses	Selling, general and administrative expenses	(184,478)		(85,167)		(74,779)		—		7,308		(337,116)		Selling, general and administrative expenses		(336,421)		(115,951)		10,318		(442,054)
Depreciation and amortization	Depreciation and amortization	(38,680)		(3,553)		(12,621)		(5,109)		—		(59,963)		Depreciation and amortization		(62,514)		(4,944)		(632)		(68,090)
Impairment and other (losses) gains, net		—		—		(375)		536		—		161

Impairment and other gains, net														Impairment and other gains, net		7,361		—		—		7,361
Restructuring charges														Restructuring charges		(30,192)		(3,988)		—		(34,180)
Operating (loss) income	Operating (loss) income	$	(124,954)	$	58,387	$	26,802	$	(7,696)	$	(527)	$	(47,988)	Operating (loss) income		$	(119,927)	$	62,859	$	662	$	(56,406)

Interest expense, net	Interest expense, net											(15,867)		Interest expense, net								10,161
Other expense, net												(22,628)
Other income, net														Other income, net								1,939
Loss from operations before income taxes	Loss from operations before income taxes											$	(86,483)	Loss from operations before income taxes								$	(44,306)
Reconciliation of operating (loss) income to adjusted operating (loss) income:
Reconciliation of operating (loss) income to adjusted operating income (loss):														Reconciliation of operating (loss) income to adjusted operating income (loss):
Operating (loss) income	Operating (loss) income	$	(124,954)	$	58,387	$	26,802	$	(7,696)	$	(527)	$	(47,988)	Operating (loss) income		$	(119,927)	$	62,859	$	662	$	(56,406)
Add back:	Add back:													Add back:
Non-cash portion of arena license fees from MSG Sports (a)	Non-cash portion of arena license fees from MSG Sports (a)	(11,889)		—		—		—		—		(11,889)		Non-cash portion of arena license fees from MSG Sports (a)		(25,078)		—		—		(25,078)
Share-based compensation	Share-based compensation	26,298		13,532		3,869		—		—		43,699		Share-based compensation		34,204		5,642		—		39,846
Depreciation and amortization	Depreciation and amortization	38,680		3,553		12,621		5,109		—		59,963		Depreciation and amortization		62,514		4,944		632		68,090

Impairment and other (losses) gains, net		—		—		375		(536)		—		(161)
Restructuring charges														Restructuring charges		30,192		3,988		—		34,180
Impairment and other gains, net														Impairment and other gains, net		(7,361)		—		—		(7,361)
Merger and acquisition related costs, net of insurance recovery	Merger and acquisition related costs, net of insurance recovery	15,448		24,075		—		—		—		39,523		Merger and acquisition related costs, net of insurance recovery		4,221		52,958		—		57,179
Amortization for capitalized cloud computing costs	Amortization for capitalized cloud computing costs	7		88		—		—		—		95		Amortization for capitalized cloud computing costs		453		131		—		584
Other purchase accounting adjustments		—		—		—		3,123		—		3,123

Remeasurement of deferred compensation plan liabilities														Remeasurement of deferred compensation plan liabilities		132		—		—		132
Adjusted operating (loss) income	Adjusted operating (loss) income	$	(56,410)	$	99,635	$	43,667	$	—	$	(527)	$	86,365	Adjusted operating (loss) income		$	(20,650)	$	130,522	$	1,294	$	111,166
Other information:	Other information:													Other information:
Capital expenditures	Capital expenditures	$	299,756	$	2,049	$	11,271	$	—	$	—	$	313,076	Capital expenditures		$	745,385	$	5,710	$	—	$	751,095

SPHERE ENTERTAINMENT CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(continued)



	Nine Months Ended
	March 31, 2022
	Entertainment		MSG 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, net	245		—		—		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 compensation	36,697		15,290		—		51,987
Depreciation and amortization	57,202		5,317		531		63,050
Restructuring charges	14,238		452		—		14,690

Impairment and other gains, net	(245)		—		—		(245)
Merger and acquisition related costs, net of insurance recovery	17,095		24,941		—		42,036
Amortization for capitalized cloud computing costs	45		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) ~~$19,415~~$19,014 and ~~$20,220~~$39,234 of revenue collected in cash for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$16,507~~$17,543 and ~~$17,293~~$34,836 of revenue collected in cash for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively, and (ii) a non-cash portion of ~~$12,410~~$12,149 and ~~$12,929~~$25,078 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$11,346~~$12,073 and ~~$11,889 for~~$23,962for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively.

(b) Includes inter-segment eliminations and, for operating (loss) income, purchase accounting adjustments.

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

Concentration of Risk

Accounts receivable, net in the accompanying condensed consolidated balance sheets as of ~~December~~March 31, ~~2022~~2023 and June 30, 2022 include amounts due from the following individual customers, ~~substantially derived from the MSG Networks segment,~~ which accounted for the noted percentages of the gross balance:


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022

Customer A	Customer A	12	%	12	%	Customer A	14	%	16	%
Customer B	Customer B	10	%	10	%	Customer B	12	%	14	%
Customer C						Customer C	10	%	12	%

For the three and six months ended December 31, 2022, the Company had no customers that accounted for 10% or more of the Company’s revenues. The Company had no customers that accounted for 10% or more of the Company’s revenues for three months ended December 31, 2021. Revenues in the accompanying condensed consolidated statements of operations for the ~~six~~three and nine months ended ~~December~~March 31, ~~2021~~2023 and March 31, 2022 include amounts from the following individual ~~customers, primarily derived from the MSG Networks segment, which accounted for the noted percentages of the total:~~customers:


							Three Months Ended				Nine Months Ended
		Six Months Ended			March 31,				March 31,
		December 31,			2023		2022		2023		2022
			2022	2021
Customer 1	Customer 1		N/A	11	%	Customer 1	11	%	11	%	10	%	13	%
Customer 2	Customer 2		N/A	10	%	Customer 2	N/A		12	%	10	%	14	%

Note 16. Additional Financial Information

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


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	432,173	$	828,540	Cash and cash equivalents	$	217,576	$	805,415
Restricted cash	Restricted cash	121,563		17,470		Restricted cash	109,669		17,470
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	553,736	$	846,010	Total cash, cash equivalents and restricted cash	$	327,245	$	822,885

The Company’s cash, cash equivalents and restricted cash are classified within Level I of the fair value hierarchy as it is valued using observable inputs that reflect quoted prices for identical assets in active markets. The Company’s restricted cash includes cash deposited in escrow accounts. The Company has deposited cash in an interest-bearing escrow account related to credit support, debt facilities, and collateral to its workers compensation and general liability insurance obligations.

Prepaid expenses and other current assets consisted of the following:

December 31,
2022 June 30,
2022
Prepaid expenses $ 79,432 $ 86,022
Related party receivables 35,523 32,541
Inventory (a)
14,263 13,511
Notes and other receivables 1,822 2,726
Other 22,928 21,194
Total prepaid expenses and other current assets $ 153,968 $ 155,994

~~_________________~~

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



	March 31, 2023		June 30, 2022
Prepaid expenses	$	81,083	$	77,059


Related party receivables	24,729		32,541

Notes and other receivables	15,588		2,725
Current contract assets	8,324		5,688
Current deferred production costs	5,240		7,227
Other	10,874		10,431
Total prepaid expenses and other current assets	$	145,838	$	135,671

3537

~~MADISON SQUARE GARDEN~~SPHERE ENTERTAINMENT ~~CORP.~~CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Continued)~~(continued)

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


		December 31, 2022		June 30, 2022			March 31, 2023		June 30, 2022

Accounts payable	Accounts payable	$	46,234	$	31,980	Accounts payable	$	32,617	$	13,255
Related party payables	Related party payables	46,783		38,576		Related party payables	37,682		37,746
Accrued payroll and employee related liabilities	Accrued payroll and employee related liabilities	107,524		154,134		Accrued payroll and employee related liabilities	99,376		130,287
Cash due to promoters	Cash due to promoters	34,912		78,428		Cash due to promoters	84,975		78,428

Capital expenditure accruals	Capital expenditure accruals	239,943		206,462		Capital expenditure accruals	307,368		206,462
Accrued expenses	Accrued expenses	108,917		79,666		Accrued expenses	137,751		62,905

Total accounts payable, accrued and other current liabilities	Total accounts payable, accrued and other current liabilities	$	584,313	$	589,246	Total accounts payable, accrued and other current liabilities	$	699,769	$	529,083

Other expense, net includes the following:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2022		2021		2022		2021			2023		2022		2023		2022

Loss on equity method investments	Loss on equity method investments	$	(1,105)	$	(1,774)	$	(3,233)	$	(2,981)	Loss on equity method investments	$	(2,883)	$	(1,555)	$	(6,287)	$	(4,064)
Gains from shares sold — DraftKings	Gains from shares sold — DraftKings	—		—		1,489		—		Gains from shares sold — DraftKings	214		—		1,703		—
Net unrealized loss on equity investments with readily determinable fair value		(2,544)		(17,155)		(3,203)		(19,615)
Net unrealized gain (loss) on equity investments with readily determinable fair value										Net unrealized gain (loss) on equity investments with readily determinable fair value	7,510		(8,688)		4,307		(28,303)
Unrealized gain on equity investments without readily determinable fair value	Unrealized gain on equity investments without readily determinable fair value	—		—		1,969		—		Unrealized gain on equity investments without readily determinable fair value	—		—		1,969		—
Other	Other	(204)		55		650		(32)		Other	153		191		247		63
Total Other expense, net		$	(3,853)	$	(18,874)	$	(2,328)	$	(22,628)
Total other expense, net										Total other expense, net	$	4,994	$	(10,052)	$	1,939	$	(32,304)

Income Taxes

During the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023, the Company made income tax payments, net of refunds, of ~~$2,004.~~$3,341. During the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, the Company received income tax refunds, net of payments, of ~~$7,063.~~

~~Note 17. Subsequent Events~~

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

On January 19, 2023, the Company, through an indirect subsidiary, entered into a three-year convertible loan agreement, for approximately €18,800, with Holoplot GmbH, a related party, and will bear interest of 5% per-annum.

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

$3,959.

3638

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of ~~Madison Square Garden~~Sphere Entertainment ~~Corp.~~Co. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” ~~“MSG~~“Sphere Entertainment,” or the “Company”), including the timing and costs of new venue construction and the development of related content, our ~~possible disposition of the Company’s interest in Tao Group Hospitality and the related proceeds,~~plans to refinance our existing debt, the impact of run-rate savings expected to be generated by the Company’s cost reduction program, the ability to reduce or defer certain discretionary capital projects, the potential disposition of the Company’s retained interest in ~~the live entertainment business upon completion of the proposed spin-off,~~MSG Entertainment and possible additional debt ~~financing and our plans to refinance our existing 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 obtain additional financing, to the extent 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 inflation and any 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;

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

•our ability to effectively manage any impacts of the COVID-19 pandemic (including COVID-19 variants) as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable;

•the effect of any postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic due to operational challenges and other health and safety concerns (such as the partial cancellation of the 2021 production of the Christmas Spectacular Starring the Radio City Rockettes (the “~~Christmas Spectacular”));~~

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

•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements, if any, at games of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”);

•the level of our revenues, which depends in part on the popularity of the ~~Christmas Spectacular, the~~ sports teams whose games are ~~played at The Garden and~~ broadcast on our networks, ~~the appeal of our Tao Group Hospitality branded locations,~~ 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, fiber-optic and other platforms that distribute its networks (“Distributors”) and the subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors;

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

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

•the impact of subscribers selecting Distributors’ packages that do not include our networks or distributors 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 metropolitan areas where we have (or plan to have) significant business activities;

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

•the demand for sponsorship 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;~~

•MSG Networks’ ability to renew or replace our media rights agreements with professional sports 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 branded locations;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;

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

•our internal control environment 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, including those related to the Company’s acquisition of MSG Networks Inc. (the “Merger”);~~acquire;

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

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

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

•financial community 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~~MSGE Spinco Distribution;

•the performance by Madison Square Garden Entertainment Corp. (“MSG ~~Sports~~Entertainment”, 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 ~~Entertainment~~MSGE Spinco Distribution and ongoing commercial ~~arrangements, including the Arena License Agreements;~~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, 2022 filed on August 19, 2022 (the “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)

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.

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 Form 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 segment ~~includes~~included the Company’s portfolio of ~~venues:~~venues as of March 31, 2023: Madison Square Garden (“The Garden”), ~~Hulu~~The Theater at Madison Square Garden, ~~(“Hulu Theater”),~~ 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~~completing construction of its first such venue in Las Vegas. ~~The~~As of March 31, 2023, the Entertainment segment also ~~includes~~included the original production, the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”). ~~This~~As of March 31, 2023, this segment also ~~includes~~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 entertainment production company that owns and operates the Boston Calling Music Festival. The Company disposed of its controlling interest in BCE on December 2, 2022.

The MSG Networks segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet (formerly MSG+), as well as a companion streaming ~~app,~~service, MSG ~~GO, and other digital properties.~~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”).

~~The Tao Group Hospitality segment features~~As of March 31, 2023, the Company’s controlling interest in TAO Group Holdings LLC (“Tao Group Hospitality”), a hospitality group with globally-recognized entertainment dining and nightlife brands including: Tao, Hakkasan, Omnia, Marquee, Lavo, Beauty & Essex, and Cathédrale. Tao Group Hospitality operates over 70 entertainment dining and nightlife branded locations in over 20 markets across four continents.

~~The~~ Company ~~conducts~~conducted a significant portion of its operations at venues that it ~~either~~ owns or operates under long-term leases. ~~The~~As of March 31, 2023 the Company ~~owns~~owned The Garden, ~~Hulu~~The Theater at Madison Square Garden and The Chicago Theatre, and ~~leases~~leased Radio City Music Hall and the Beacon Theatre. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in Las Vegas, New York, Southern California, London, Singapore, and various other domestic and international locations.

Our MD&A is organized as follows:

Results of Operations. This section provides an analysis of our unaudited results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022 on both a (i) consolidated basis and (ii) segment basis.

Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 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 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 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.

Factors Affecting Results of Operations

~~Impact of the COVID-19 Pandemic on Our Business~~

The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during the ~~six~~three and nine months ended ~~December~~March 31, ~~2022,~~2023, as compared to the prior year period, which was impacted by ~~(i)~~ fewer ticketed events at our performance venues in the first half of the fiscal year due to the lead-time required to book touring acts and artists ~~(ii)~~and the postponement or cancellation of select events at our performance venues (including the partial cancellation of the 2021 production of the Christmas Spectacular),during the second and ~~a temporary impact to both demand and operations at Tao Group Hospitality~~third quarters of Fiscal Year 2022 as a result of an increase in COVID-19 ~~cases during~~cases. In addition, due to the ~~fiscal second quarter,~~COVID-19 pandemic, the 2020-21 NHL season was shortened and ~~(iii) certain regulatory requirements, including vaccination/mask requirements for~~resulted in reductions in media rights fees recognized in our ~~performance, entertainment dining and nightlife venues,~~MSG Networks segment, which ~~contributed to certain Tao Group Hospitality branded locations remaining closed during~~had a residual impact reflected in the ~~period.~~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 on 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 performance, entertainment 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 venues~~Sphere in Las Vegas (which may lead to difficulties in staffing) or otherwise materially impact our operations.

In addition to the ~~above,~~above, the operating results of our segments ~~are~~will be largely dependent on our ability to attract audiences to our Sphere Experiences, concerts and other events to ~~our venues, as well as customers to our entertainment~~Sphere in Las Vegas, and ~~nightlife offerings, revenues under various agreements entered into with MSG Sports, the continuing popularity of the~~ ~~Christmas Spectacular~~,are dependent on the affiliation agreements MSG Networks negotiates with Distributors, the number of Distributor subscribers that receive our networks, ~~and~~ 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 whose games we broadcast on our ~~networks and host in our venues.~~networks.

Our Company’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers. Weak economic conditions may lead to lower demand for our entertainment ~~and nightlife~~ offerings and programming content, ~~suite licenses and tickets to our live productions, concerts, family shows and other events,~~ which would also ~~negatively affect concession and merchandise sales, lower levels of sponsorship and venue signage and~~ decrease advertising revenues. These conditions may also affect the number of concerts, ~~family shows~~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 ~~our media rights agreements with the NBA and NHL teams appearing on our networks and~~ the generally recurring nature of our affiliation fee revenue, the MSG Networks segment has consistently produced operating profits for a number of years. Advertising revenues are less predictable and can vary based upon a number of factors, including general economic conditions and team performance.

Additionally, 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 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.

The Company continues to explore additional opportunities to expand our presence in the entertainment industry. Any new investment may not initially contribute to operating income, but is intended to become operationally profitable over time. Our results will also be affected by investments in, and the success of, new ~~productions.~~attractions, such as Sphere Experiences.

Consolidated Results of Operations

Comparison of the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2022~~2023 versus the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022

The tables below set forth, for the periods presented, certain historical financial information.

Three Months Ended
December 31, Change
2022 2021 Amount Percentage
Revenues $ 642,198 $ 516,439 $ 125,759 24 %
Direct operating expenses (348,959) (296,258) (52,701) 18 %
Selling, general and administrative expenses (182,433) (162,277) (20,156) 12 %
Depreciation and amortization (29,059) (30,533) 1,474 (5) %
Impairment and other gains, net 5,885 7,979 (2,094) (26) %
Restructuring charges (13,682) — (13,682) NM
Operating income 73,950 35,350 38,600 109 %
Interest income 3,603 773 2,830 NM
Interest expense (894) (8,167) 7,273 (89) %
Other expense, net (3,853) (18,874) 15,021 (80) %
Income from operations before income taxes 72,806 9,082 63,724 NM
Income tax expense (2,249) (4,063) 1,814 (45) %
Net income 70,557 5,019 65,538 NM
Less: Net income attributable to redeemable noncontrolling interests 3,029 2,642 387 15 %
Less: Net (loss) income attributable to nonredeemable noncontrolling interests (56) 106 (162) NM
Net income attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 67,584 $ 2,271 $ 65,313 NM
Six Months Ended
December 31, Change
2022 2021 Amount Percentage
Revenues $ 1,043,416 $ 810,949 $ 232,467 29 %
Direct operating expenses (602,860) (462,019) (140,841) 30 %
Selling, general and administrative expenses (346,843) (337,116) (9,727) 3 %
Depreciation and amortization (58,814) (59,963) 1,149 (2) %
Impairment and other gains, net 7,885 161 7,724 NM
Restructuring charges (13,682) — (13,682) NM
Operating income (loss) 29,102 (47,988) 77,090 NM
Interest income 7,557 1,548 6,009 NM
Interest expense (3,061) (17,415) 14,354 (82) %
Other expense, net (2,328) (22,628) 20,300 (90) %
Income (loss) from operations before income taxes 31,270 (86,483) 117,753 NM
Income tax (expense) benefit (4,756) 14,847 (19,603) NM
Net income (loss) 26,514 (71,636) 98,150 NM
Less: Net income attributable to redeemable noncontrolling interests 4,153 4,854 (701) (14) %
Less: Net (loss) income attributable to nonredeemable noncontrolling interests (466) 471 (937) NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders $ 22,827 $ (76,961) $ 99,788 NM



	Three Months Ended
	March 31,				Change
	2023		2022		Amount		Percentage
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 income	2,640		767		1,873		NM
Interest expense	—		(5,528)		5,528		(100)	%
Other income (expense), net	4,994		(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



	Nine Months Ended
	March 31,				Change
	2023		2022		Amount		Percentage
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, net	7,361		245		7,116		NM
Restructuring charges	(34,180)		(14,690)		(19,490)		133	%
Operating loss	(56,406)		(69,409)		13,003		19	%
Interest income	10,161		2,311		7,850		NM
Interest expense	—		(22,051)		22,051		(100)	%
Other income (expense), net	1,939		(32,304)		34,243		(106)	%
Loss from continuing operations before income taxes	(44,306)		(121,453)		77,147		64	%
Income tax benefit	4,717		10,112		(5,395)		(53)	%
Loss from continuing operations	(39,589)		(111,341)		71,752		64	%
Income from discontinued operations, net of taxes	7,548		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 operations	2,661		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.

~~Factors Affecting Results of Operations~~

The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during the three and six months ended December 31, 2022, as compared to the prior year period, which was impacted by (i) fewer ticketed events at our performance venues due to the lead-time required to book touring acts and artists, (ii) the postponement or cancellation of select events at our performance venues (including the partial cancellation of the 2021 production of the ~~Christmas Spectacular)~~, and a temporary impact to both demand and operations at Tao Group Hospitality as a result of an increase in COVID-19 cases during the fiscal second quarter, and (iii) certain regulatory requirements, including vaccination/mask requirements for our performance, entertainment dining and nightlife venues, which contributed to certain Tao Group Hospitality branded locations remaining closed during the period. See “— 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.

The following is a summary of changes in our segments’ operating results for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 as compared to the prior year period, which are discussed below under “Business Segment Results.”


		Three Months Ended														Three Months Ended
		December 31, 2022														March 31, 2023
Changes attributable to	Changes attributable to	Revenues		Direct operating expenses		Selling, general and administrative expenses		Depreciation and amortization		Impairment and other gains, net		Restructuring charges		Operating income (loss)			Changes attributable to	Revenues		Direct operating expenses		Selling, general and administrative expenses		Depreciation and amortization		Impairment and other losses, net		Restructuring charges		Operating income (loss)
Entertainment segment	Entertainment segment	$	108,908	$	(33,699)	$	(18,045)	$	(2,897)	$	5,412	$	(9,694)	$	49,985		Entertainment segment	$	7,276	$	(10,147)	$	(24,109)	$	(2,788)	$	(296)	$	(6,260)	$	(36,324)
MSG Networks segment	MSG Networks segment	(1,083)		(4,476)		(891)		119		—		(3,988)		(10,319)			MSG Networks segment	(6,133)		(2,077)		(27,815)		75		—		452		(35,498)
Tao Group Hospitality segment (a)		18,908		(15,603)		(2,481)		627		(6,970)		—		(5,519)
Purchase accounting adjustments		—		1,370		—		3,625		(536)		—		4,459
Inter-segment eliminations		(974)		(293)		1,261		—		—		—��		(6)
		$	125,759	$	(52,701)	$	(20,156)	$	1,474	$	(2,094)	$	(13,682)	$	38,600

Other (a)																	Other (a)	9,620		50		(9,158)		177		—		—		689
																		$	10,763	$	(12,174)	$	(61,082)	$	(2,536)	$	(296)	$	(5,808)	$	(71,133)

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



	Nine Months Ended
	March 31, 2023
Changes attributable to	Revenues		Direct operating expenses		Selling, general and administrative expenses		Depreciation and amortization		Impairment and other gains, net		Restructuring charges		Operating income (loss)
Entertainment segment	$	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 ~~December~~March 31, ~~2022~~2023 decreased ~~$2,094,~~$296, to ~~$5,885~~$51 as compared to the prior year period primarily due to the absence of prior year net gains from the write-off and modification of lease liabilities associated with certain Tao Group Hospitality venues and a net loss on disposal of a corporate aircraft partially offset by the gain on sale of the company’s controlling interest in BCE and receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA.

period. Impairment and other gains, net for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased ~~$7,724,~~$7,116 to ~~$7,885~~$7,361 as compared to the prior year period primarily due to the gain on sale of the ~~company’s~~Company’s controlling interest in BCE and receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA, partially offset by the net loss on the disposal of a corporate aircraft.

42Restructuring 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 ~~Charges~~

~~For~~chargesfor the ~~three and six~~nine months ended ~~December~~March 31, ~~2022,~~2023 increased $19,490 to $34,180 as compared to the ~~Company recorded total restructuring charges of $13,682 related~~prior year period due to termination benefits provided for a workforce reduction of certain executives and employees within the Entertainment and MSG Networks ~~Segment~~segments as part of the Company’s cost reduction program implemented in Fiscal Year 2023. ~~No amounts were recorded as restructuring charges during the comparative prior period.~~

Interest income

Interest income for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased ~~$2,830~~$1,873 and ~~$6,009,~~$7,850, respectively, as compared to the prior year periods primarily due to higher ~~rates and average investment balances.~~interest rates.

Interest expense

Interest expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 decreased ~~$7,273~~$5,528 and ~~$14,354,~~$22,051, respectively, as compared to the prior year periods primarily due to a higher amount of interest cost capitalization of ~~$19,285~~$23,347 and ~~$30,405~~$52,383 related to ~~MSG~~ Sphere ~~construction partially offset by higher rates related to the MSG Networks Term Loan.~~construction.

Other ~~expense,~~income (expense), net

Other ~~expense,~~income (expense), net for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022, decreased $15,021~~2023, increased $15,046 and ~~$20,300,~~$34,243, respectively, as compared to the prior year periods, primarily due to ~~lower~~unrealized gains of approximately $5,000 for the three and nine months ended March 31, 2023, as compared to unrealized losses ~~of approximately $15,500 and $21,300, respectively,~~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 recognized 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 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 ~~December~~March 31, 2022 of ~~$2,249 reflected~~$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 3% and differs from the income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to tax benefit of $7,044 resulting from a decrease in the valuation allowance, partially offset by (i) tax expense related to state and local taxes of $8,737 and (ii) tax expense of $1,507 related to nondeductible officers’ compensation.

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

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

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

8%.

4345

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

The following is a reconciliation of operating (loss) income ~~(loss)~~ to adjusted operating income (as defined in Note 15. Segment Information in the notes to the financial statements) for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 as compared to the prior year ~~period:~~periods:


		Three Months Ended									Three Months Ended
		December 31,				Change					March 31,				Change
		2022		2021		Amount		Percentage			2023		2022		Amount		Percentage
Operating income (loss)		$	73,950	$	35,350	$	38,600	109	%
Operating (loss) income										Operating (loss) income	$	(70,262)	$	871	$	(71,133)	NM
Non-cash portion of arena license fees from MSG Sports (a)	Non-cash portion of arena license fees from MSG Sports (a)	(12,410)		(11,346)		(1,064)		(9)	%	Non-cash portion of arena license fees from MSG Sports (a)	(12,149)		(12,073)		(76)		(1)	%
Share-based compensation	Share-based compensation	18,185		24,171		(5,986)		(25)	%	Share-based compensation	10,899		12,157		(1,258)		(10)	%
Depreciation and amortization ~~(b)~~	Depreciation and amortization ~~(b)~~	29,059		30,533		(1,474)		(5)	%	Depreciation and amortization ~~(b)~~	22,999		20,463		2,536		12	%
Impairment and other gains, net		(5,885)		(7,979)		2,094		26	%

Restructuring charges	Restructuring charges	13,682		—		13,682		NM		Restructuring charges	20,498		14,690		5,808		40	%
Impairment and other losses (gains), net										Impairment and other losses (gains), net	51		(245)		296		121	%
Merger and acquisition related costs, net of insurance recovery	Merger and acquisition related costs, net of insurance recovery	5,488		2,331		3,157		135	%	Merger and acquisition related costs, net of insurance recovery	47,041		2,513		44,528		NM
Amortization for capitalized cloud computing costs	Amortization for capitalized cloud computing costs	235		10		225		NM		Amortization for capitalized cloud computing costs	228		81		147		181	%

Other purchase accounting adjustments		1,668		3,038		(1,370)		(45)	%

Remeasurement of deferred compensation plan liabilities	Remeasurement of deferred compensation plan liabilities	160		—		160		NM		Remeasurement of deferred compensation plan liabilities	126		—		126		NM
Adjusted operating income	Adjusted operating income	$	124,132	$	76,108	$	48,024	63	%	Adjusted operating income	$	19,431	$	38,457	$	(19,026)	(49)	%


		Six Months Ended									Nine Months Ended
		December 31,				Change					March 31,				Change
		2022		2021		Amount		Percentage			2023		2022		Amount		Percentage
Operating income (loss)		$	29,102	$	(47,988)	$	77,090	161	%
Operating loss										Operating loss	$	(56,406)	$	(69,409)	$	13,003	19	%
Non-cash portion of arena license fees from MSG Sports (a)	Non-cash portion of arena license fees from MSG Sports (a)	(12,929)		(11,889)		(1,040)		(9)	%	Non-cash portion of arena license fees from MSG Sports (a)	(25,078)		(23,962)		(1,116)		(5)	%
Share-based compensation	Share-based compensation	33,373		43,699		(10,326)		(24)	%	Share-based compensation	39,846		51,987		(12,141)		(23)	%
Depreciation and amortization ~~(b)~~	Depreciation and amortization ~~(b)~~	58,814		59,963		(1,149)		(2)	%	Depreciation and amortization ~~(b)~~	68,090		63,050		5,040		8	%

Restructuring charges										Restructuring charges	34,180		14,690		19,490		133	%
Impairment and other gains, net	Impairment and other gains, net	(7,885)		(161)		(7,724)		NM		Impairment and other gains, net	(7,361)		(245)		(7,116)		NM
Restructuring charges		13,682		—		13,682		NM
Merger and acquisition related costs, net of insurance recovery	Merger and acquisition related costs, net of insurance recovery	10,138		39,523		(29,385)		(74)	%	Merger and acquisition related costs, net of insurance recovery	57,179		42,036		15,143		36	%
Amortization for capitalized cloud computing costs	Amortization for capitalized cloud computing costs	356		95		261		NM		Amortization for capitalized cloud computing costs	584		176		408		NM
Other purchase accounting adjustments		2,254		3,123		(869)		(28)	%

Remeasurement of deferred compensation plan liabilities	Remeasurement of deferred compensation plan liabilities	6		—		6		NM		Remeasurement of deferred compensation plan liabilities	132		—		132		NM
Adjusted operating income	Adjusted operating income	$	126,911	$	86,365	$	40,546	47	%	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.

Adjusted operating income for the three months endedMarch 31, 2023 decreased $19,026 to $19,431. Adjusted operating income for the nine months ended March 31, 2023 increased $32,843 to $111,166. The changes in adjusted operating income were attributable to the following:


	Three Months Ended		Nine Months Ended
Changes attributable to	March 31, 2023		March 31, 2023
Entertainment segment	$	(27,042)	$	51,089
MSG Networks segments	7,504		(19,938)

Other (a)	512		1,692
	$	(19,026)	$	32,843

_________________

(a) Other relates to inter-segment eliminations.

Net income (loss) attributable to nonredeemable noncontrolling interests

For the three months endedMarch 31, 2023, the Company recorded $0 of net income attributable to nonredeemable noncontrolling interests as compared to $212 of net loss attributable to nonredeemable noncontrolling interests for the three months ended March 31, 2022. For the nine months endedMarch 31, 2023, the Company recorded $554 of net loss attributable to nonredeemable noncontrolling interests as compared to $579 of net loss attributable to nonredeemable noncontrolling interests for the nine months ended March 31, 2022. These amounts represent the share of net income (loss) from the Company’s investments in BCE that are not attributable to the Company up to the disposition date.

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 loss for the Company’s Entertainment segment.



	Three Months Ended
	March 31,				Change
	2023		2022		Amount		Percentage
Revenues	$	201,861	$	194,585	$	7,276	4	%
Direct operating expenses	(120,835)		(110,688)		(10,147)		9	%
Selling, general and administrative expenses	(120,307)		(96,198)		(24,109)		25	%
Depreciation and amortization	(21,310)		(18,522)		(2,788)		15	%
Impairment and other (losses) gains, net	(51)		245		(296)		121	%
Restructuring charges	(20,498)		(14,238)		(6,260)		44	%

Operating loss	$	(81,140)	$	(44,816)	$	(36,324)	(81)	%
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports (a)	(12,149)		(12,073)		(76)		1	%
Share-based compensation	10,259		10,399		(140)		(1)	%
Depreciation and amortization	21,310		18,522		2,788		15	%

Restructuring charges	20,498		14,238		6,260		44	%
Impairment and other losses (gains), net	51		(245)		296		121	%
Merger and acquisition related costs, net of insurance recovery	1,528		1,647		(119)		(7)	%
Amortization for capitalized cloud computing arrangement costs	185		38		147		NM


Remeasurement of deferred compensation plan liabilities	126		—		126		NM
Adjusted operating loss	$	(39,332)	$	(12,290)	$	(27,042)	NM



	Nine Months Ended
	March 31,				Change
	2023		2022		Amount		Percentage
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, net	7,361		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 compensation	34,204		36,697		(2,493)		(7)	%
Depreciation and amortization	62,514		57,202		5,312		9	%

Restructuring charges	30,192		14,238		15,954		112	%
Impairment and other gains, net	(7,361)		(245)		(7,116)		NM
Merger and acquisition related costs, net of insurance recovery	4,221		17,095		(12,874)		(75)	%
Amortization for capitalized cloud computing arrangement costs	453		45		408		NM
Remeasurement of deferred compensation plan liabilities	132		—		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) ~~$19,415~~$19,014 and ~~$20,220~~$39,234 of revenue collected in cash for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$16,507~~$17,543 and ~~$17,293~~$34,836 of revenue collected in cash for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively, and (ii) a non-cash portion of ~~$12,410~~$12,149 and ~~$12,929~~$25,078 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, respectively, and ~~$11,346~~$12,073 and ~~$11,889~~$23,962 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021, respectively.~~

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

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

~~Adjusted operating income for the three months ended~~December 31, 2022 increased $48,024, to $124,132. Adjusted operating income for the six months ended December 31, 2022 increased $40,546 to $126,911. The increases in adjusted operating income were attributable to the following:

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

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

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

~~Business Segment Results~~

~~Entertainment~~

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 Entertainment segment.

Three Months Ended
December 31, Change
2022 2021 Amount Percentage
Revenues $ 356,518 $ 247,610 $ 108,908 44 %
Direct operating expenses (181,042) (147,343) (33,699) 23 %
Selling, general and administrative expenses (109,561) (91,516) (18,045) 20 %
Depreciation and amortization (21,921) (19,024) (2,897) 15 %
Impairment and other gains, net 5,412 — 5,412 NM
Restructuring charges (9,694) — (9,694) NM
Operating income (loss) $ 39,712 $ (10,273) $ 49,985 NM
Reconciliation to adjusted operating income:
Non-cash portion of arena license fees from MSG Sports (a)
(12,410) (11,346) (1,064) 9 %
Share-based compensation 12,513 16,155 (3,642) (23) %
Depreciation and amortization 21,921 19,024 2,897 15 %
Impairment and other gains, net (5,412) — (5,412) NM
Restructuring charges 9,694 — 9,694 NM
Merger and acquisition related costs, net of insurance recovery (56) 1,456 (1,512) NM
Amortization for capitalized cloud computing arrangement costs 191 (34) 225 NM
Remeasurement of deferred compensation plan liabilities 160 — 160 NM
Adjusted operating income $ 66,313 $ 14,982 $ 51,331 NM

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

~~_________________~~

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

~~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 six months ended December 31, 2021, the Entertainment segment operations and operating results were materially impacted by the COVID-19 pandemic, including as a result of the lead-time required to book touring acts and artists, which is the majority of our Entertainment business, and the postponement or cancellation of select events at our performance venues (including the partial cancellation of the 2021 production of the ~~Christmas Spectacular~~) as a result of an increase in COVID-19 cases during the fiscal second quarter. As of the date of this report, live events are permitted to be held at all of our performance venues without capacity restrictions and we are continuing 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.~~

Revenues

Revenues for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased ~~$108,908~~$7,276 and ~~$221,771,~~$229,047, respectively, as compared to the prior year periods. The changes in revenues were attributable to the following:


		Three Months Ended		Six Months Ended			Three Months Ended		Nine Months Ended
		December 31, 2022		December 31, 2022			March 31, 2023		March 31, 2023
Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements						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	Increase in revenues from the presentation of the Christmas Spectacular	$	71,092	$	71,414	Increase in revenues from the presentation of the Christmas Spectacular	3,533		74,947
Increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements		17,075		35,404
Increase in event-related revenues		7,576		88,214
Increase in venue-related sponsorship, signage and suite license fee revenues	Increase in venue-related sponsorship, signage and suite license fee revenues	4,479		16,643		Increase in venue-related sponsorship, signage and suite license fee revenues	1,872		18,958
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements	Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements	3,972		3,968		Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements	1,547		5,515

(Decrease) increase in event-related revenues						(Decrease) increase in event-related revenues	(527)		87,244
Decrease in commissions due to termination of the Networks Advertising Sales Representation Agreement						Decrease in commissions due to termination of the Networks Advertising Sales Representation Agreement	(9,621)		(8,213)
Other net increases	Other net increases	4,714		6,128		Other net increases	361		5,080
		$	108,908	$	221,771		$	7,276	$	229,047

For the three months ended March 31, 2023, the increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects higher food, beverage and merchandise sales and higher suite

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 (due to the COVID-19 pandemic), 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 ~~174~~7 took place in the ~~second~~third quarter of Fiscal Year 2023, as compared to 101 performances in the prior year’s holiday season (due to the partial cancellation of the 2021 production as a result of an increase in COVID-19 cases), all of which took place in the second quarter of Fiscal Year 2022. For this year’s holiday season, ~~more than~~approximately 930,000 tickets were sold, representing an over 25% increase in attendance on a per-show basis as compared to the prior year.

For the three ~~and six~~ months ended ~~December~~March 31, ~~2022,~~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 ~~prior year periods,~~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 ~~periods~~period and, to a lesser extent, higher per-show paid attendance.

For the three months ended ~~December~~March 31, ~~2022,~~2023, the increase in ~~revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflected higher~~venue-related sponsorship, signage and suite license fee revenues ~~and~~was primarily due to higher ~~food, beverage and merchandise sales at Knicks and Rangers games.~~suite sales. For the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the increase in ~~revenues primarily reflects higher~~venue-related sponsorship, signage and suite license fee revenues ~~which~~ was ~~mainly~~primarily due to the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 ~~(due to the COVID-19 pandemic).~~and higher suite sales.

For the three ~~and six~~ months ended ~~December~~March 31, ~~2022,~~2023, the ~~increase~~decrease in event-related revenues primarily reflects ~~higher~~lower revenues from concerts of ~~$7,866~~$10,656 which was partially offset by an increase in revenues from other sporting and ~~$88,072, respectively. The increase for~~live entertainment events (excluding the ~~three months ended December 31, 2022~~Knicks and Rangers) of 10,129.The decrease in revenues from concerts was due to ~~an increase~~a decrease in the number of concerts at the Company’s venues as compared to the prior year period, partially offset by ~~lower~~higher per-concert ~~revenues primarily due to the mix of events.~~revenues. The increase in revenues ~~for~~from other sporting and live entertainment events (excluding the ~~six~~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 ~~December~~March 31, ~~2022~~2023, the increase in event-related revenues primarily reflects higher revenues from concerts of $77,416 which was primarily due to the return of live events at the Company’s venues as compared to limited live events held during the first quarter of Fiscal Year 2022 (due to the COVID-19 pandemic). See “— Introduction — Factors Affecting Results of ~~Operations~~ — ~~Impact of the COVID-19 Pandemic on Our Business~~”Operations” for more information.

Direct operating expenses

Direct operating expenses for the three and ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased ~~$33,699~~$10,147 and ~~$99,162,~~$109,309, respectively, as compared to the prior year periods. The changes in direct operating expenses were attributable to the following:

Three Months Ended Six Months Ended
December 31, 2022 December 31, 2022
Increase in expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements $ 10,977 $ 28,693
Increase in direct operating expenses associated with the Christmas Spectacular 10,560 9,854
Increase in event-related direct operating expenses 5,282 47,644
Increase in direct operating expenses associated with the Arena License Agreements 4,188 4,732
Increase in venue operating costs 2,131 6,627
Other net increases 561 1,612
$ 33,699 $ 99,162


	Three Months Ended		Nine Months Ended
	March 31, 2023		March 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 periods	4,389		4,389
Increase in direct operating expenses associated with the Arena License Agreements	3,748		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 increases	281		1,892
	$	10,147	$	109,309

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the increase in direct operating expenses associated with the sharing of economics with MSG Sports pursuant to the Arena License Agreements primarily reflects the increase in suite license fees and, to a lesser extent, the increase in Knicks’ and Rangers’ food and beverage sales.

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

For the three and ~~six~~nine months ended ~~December~~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 ~~and six~~ months ended ~~December~~March 31, ~~2022,~~2023, the decrease in event-related direct operating expenses reflects lower direct operating expenses from concerts of $6,785 which was primarily due to the decrease in the number of concerts held at the Company’s venues as compared to the prior year period, partially offset by higher direct operating expenses from other sporting and live entertainment events (excluding the Knicks and Rangers) of $2,269 which was primarily due to the increase in the number of sporting events held at the Company’s venues as compared to the prior year period. For the nine months ended March 31, 2023, the increase in event-related direct operating expenses reflects higher direct operating expenses from concerts of ~~$4,914, and $46,422, respectively,~~$39,637 which was primarily due to the increase in the number of events held at the Company’s venues as compared to the prior year ~~periods.~~period.

For the three and six months ended December 31, 2022, the increase in expenses associated with the Arena License Agreements primarily reflects an increase in food and beverage costs associated with the increase in Knicks’ and Rangers’ food and beverage sales.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended ~~December~~March 31, ~~2022~~2023 increased ~~$18,045,~~$24,109, or ~~20%~~25% to ~~$109,561~~$120,307 as compared to the prior year period. The increase primarily reflects 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 $7,967, and other general administrative expenses of $4,704, both primarily due to the Company’s Sphere initiative.

For the nine months ended March 31, 2023, selling, general and administrative expenses increased $52,706, or 19%, to $336,421 as compared to the prior year period. The increase primarily reflects higher employee compensation and related benefits of ~~$9,501,~~$27,829, primarily due to the Company’s ~~MSG~~ Sphere initiative, ~~and~~ higher professional fees of ~~$4,704,~~$11,808 which ~~reflects~~was driven by an increase in costs related to the Company’s ~~potential~~ spin-off of its live entertainment ~~business, partially offset by a decrease in costs, primarily litigation-related and net of insurance recovery~~, ~~associated with the acquisition of MSG Networks by MSG Entertainment and a decrease in costs related to the Company’s MSG Sphere initiative.~~

For the six months ended December 31, 2022, selling, general and administrative expenses increased $28,445, or 15%, to $212,923 as compared to the prior year period. The increase primarily reflects higher employee compensation and related benefits of $19,862, primarily due to the Company’s MSG Sphere initiative,businesses, and higher other general administrative expenses of ~~$9,713.~~$$13,069, primarily due to the Company’s Sphere initiative of $9,702.

Impairment and other gains, net

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the Company recorded a net ~~gains~~loss of ~~$5,412~~$51 and ~~$7,412, respectively,~~a net gain $7,361, respectively. The net gain for the nine months ended March 31, 2023 was primarily due to the gain on sale of the ~~company’s~~Company’s controlling interest in BCE and receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA, partially offset by the net loss on the disposal of a corporate aircraft. ~~In addition, the six months ended December 31, 2022 also reflects receipt of insurance proceeds related to the Company’s creative studio in Burbank, CA.~~

Operating ~~income (loss)~~loss

Operating ~~income~~loss for the three months ended ~~December~~March 31, ~~2022~~2023 was ~~$39,712~~$81,140 as compared to a$44,816 in the prior year period, an increase of $36,324. The increase in operating loss ~~of $10,273~~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, 2023, operating loss was $119,927 as compared to $172,809 in the prior year period, an improvement of ~~$49,985. For the six months ended December 31, 2022, operating loss was $35,596 as compared to a loss of $124,954 in the prior year period, an improvement of $89,358, or 72%.~~$52,882. The improvements in operating ~~income (loss)~~loss were primarily due to an increase in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses, as discussed above.

Adjusted operating income (loss)

Adjusted operating ~~income~~loss for the three months ended ~~December~~March 31, ~~2022~~2023 was ~~$66,313~~$39,332 as compared to ~~adjusted operating income of $14,982~~$12,290 in the prior year period, an increase of ~~$51,331.~~$27,042. The increase in adjusted operating ~~income~~loss was primarily due to ~~an increase in revenues, partially offset by~~ an increase in direct operating expenses and selling, general, and administrative ~~expenses.~~expenses, partially offset by an increase in revenues.

For the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, adjusted operating ~~income~~loss was ~~$21,873~~$20,650 as compared to ~~a loss of $56,410~~$71,739 in the prior year period, an improvement of ~~$78,283.~~$51,089. The improvement in adjusted operating income was primarily due to an increase in revenues, partially offset by an increase in direct operating expenses and selling, general and administrative expenses.

4950

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 Ended									Three Months Ended
		December 31,				Change					March 31,				Change
		2022		2021		Amount		Percentage			2023		2022		Amount		Percentage
Revenues	Revenues	$	158,898	$	159,981	$	(1,083)	(1)	%	Revenues	$	161,436	$	167,569	$	(6,133)	(4)	%
Direct operating expenses	Direct operating expenses	(90,400)		(85,924)		(4,476)		5	%	Direct operating expenses	(89,251)		(87,174)		(2,077)		2	%
Selling, general and administrative expenses	Selling, general and administrative expenses	(38,083)		(37,192)		(891)		2	%	Selling, general and administrative expenses	(60,052)		(32,237)		(27,815)		86	%
Depreciation and amortization	Depreciation and amortization	(1,637)		(1,756)		119		(7)	%	Depreciation and amortization	(1,689)		(1,764)		75		(4)	%

Restructuring charges	Restructuring charges	(3,988)		—		(3,988)		NM		Restructuring charges	—		(452)		452		(100)	%
Operating income	Operating income	$	24,790	$	35,109	$	(10,319)	(29)	%	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 compensation	Share-based compensation	3,298		6,058		(2,760)		(46)	%	Share-based compensation	640		1,758		(1,118)		(64)	%
Depreciation and amortization	Depreciation and amortization	1,637		1,756		(119)		(7)	%	Depreciation and amortization	1,689		1,764		(75)		(4)	%

Restructuring charges	Restructuring charges	3,988		—		3,988		NM		Restructuring charges	—		452		(452)		NM
Merger and acquisition related costs	Merger and acquisition related costs	5,544		875		4,669		NM		Merger and acquisition related costs	45,513		866		44,647		NM
Amortization for capitalized cloud computing arrangement costs	Amortization for capitalized cloud computing arrangement costs	44		44		—		—	%	Amortization for capitalized cloud computing arrangement costs	43		43		—		—	%

Adjusted operating income	Adjusted operating income	$	39,301	$	43,842	$	(4,541)	(10)	%	Adjusted operating income	$	58,329	$	50,825	$	7,504	15	%


		Six Months Ended									Nine Months Ended
		December 31,				Change					March 31,				Change
		2022		2021		Amount		Percentage			2023		2022		Amount		Percentage
Revenues	Revenues	$	281,377	$	301,454	$	(20,077)	(7)	%	Revenues	$	442,813	$	469,023	$	(26,210)	(6)	%
Direct operating expenses	Direct operating expenses	(165,820)		(154,347)		(11,473)		7	%	Direct operating expenses	(255,071)		(241,521)		(13,550)		6	%
Selling, general and administrative expenses	Selling, general and administrative expenses	(55,899)		(85,167)		29,268		(34)	%	Selling, general and administrative expenses	(115,951)		(117,404)		1,453		(1)	%
Depreciation and amortization	Depreciation and amortization	(3,255)		(3,553)		298		(8)	%	Depreciation and amortization	(4,944)		(5,317)		373		(7)	%

Restructuring charges	Restructuring charges	(3,988)		—		(3,988)		NM		Restructuring charges	(3,988)		(452)		(3,536)		NM
Operating income	Operating income	$	52,415	$	58,387	$	(5,972)	(10)	%	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 compensation	Share-based compensation	5,002		13,532		(8,530)		(63)	%	Share-based compensation	5,642		15,290		(9,648)		(63)	%
Depreciation and amortization	Depreciation and amortization	3,255		3,553		(298)		(8)	%	Depreciation and amortization	4,944		5,317		(373)		(7)	%

Restructuring charges	Restructuring charges	3,988		—		3,988		NM		Restructuring charges	3,988		452		3,536		NM
Merger and acquisition related costs	Merger and acquisition related costs	7,445		24,075		(16,630)		(69)	%	Merger and acquisition related costs	52,958		24,941		28,017		112	%
Amortization for capitalized cloud computing arrangement costs	Amortization for capitalized cloud computing arrangement costs	88		88		—		—	%	Amortization for capitalized cloud computing arrangement costs	131		131		—		—	%

Adjusted operating income	Adjusted operating income	$	72,193	$	99,635	$	(27,442)	(28)	%	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.

~~Factors Affecting Results of Operations~~Revenues

~~Due~~Revenues for the three and nine months ended March 31, 2023 decreased $6,133 and $26,210, respectively, as compared to the ~~COVID-19 pandemic,~~prior year periods. The changes in revenues were attributable to the ~~2020-21 NHL season was shortened and resulted in reductions in media rights fees which had a residual impact reflected in~~following:


	Three Months Ended		Nine Months Ended
	March 31, 2023		March 31, 2023

Decrease in affiliation fee revenue	$	(11,051)	$	(37,561)
Increase in advertising revenue	4,476		10,702
Other net increases	442		649
	$	(6,133)	$	(26,210)

For the three months ended ~~September 30, 2021. See “—~~March 31, 2023, affiliation fee revenue decreased $11,051, primarily due to a decrease in subscribers of approximately 10%. ~~Introduction~~ — ~~Factors Affecting Results~~This decrease was partially offset by the impact of ~~Operations~~ — ~~Impact of the COVID-19 Pandemic on Our Business” for more information.~~higher affiliation rates.

5051

~~Revenues~~

For the ~~three~~nine months ended ~~December~~March 31, 2022, MSG Networks generated total revenues of $158,898, a decrease of $1,083, or 1%, as compared to the prior year quarter. For the six months ended December 31, 2022, MSG Networks generated total revenues of $281,377, a decrease of $20,077, or 7%, as compared to the prior year period. The changes in revenues were attributable to the following:

Three Months Ended Six Months Ended
December 31, 2022 December 31, 2022
Decrease in affiliation fee revenue $ (7,549) $ (26,510)
Increase in advertising revenue 6,315 6,226
Other net increases 151 207
$ (1,083) $ (20,077)

~~For the three months ended December 31, 2022,~~2023, affiliation fee revenue decreased ~~$7,549,~~$37,561, primarily due to a decrease in subscribers of approximately ~~10.5%. These decreases were partially offset by net favorable affiliate adjustments of approximately $4,100 and the impact of higher affiliation rates.~~

~~For the six months ended December 31, 2022, affiliation fee revenue decreased $26,510, primarily due to~~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 10.0% (excluding~~lesser extent, the impact of the ~~non-renewal with Comcast).~~Comcast non-renewal. These decreases were partially offset by net favorable affiliate adjustments of approximately $10,400 and the impact of higher affiliation rates.

Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date. Comcast’s non-carriage ~~has~~ reduced MSG Networks’ subscribers by approximately ~~10.0%~~10% and ~~has~~ reduced MSG Networks’ revenue by a comparable percentage. In addition, MSG Networks’ segment operating income and AOI ~~have been~~were reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, the increase in advertising revenue primarily reflected higher advertising sales related to professional sports telecasts due to the impact of a higher number of live ~~professional sports~~ telecasts and an increase in per-game advertising sales as compared with the prior year periods, ~~and~~as well as higher sales related to the Company’s non-ratings-based advertising initiatives.

Direct operating expenses

Direct operating expenses for the three and nine months ended ~~December~~March 31, ~~2022~~2023 increased ~~$4,476 to $90,400~~$2,077 and $13,550, respectively, as compared to the prior year ~~period. For the six months ended December 31, 2022,~~periods. The changes in direct operating expenses ~~increased $11,473 to $165,820 as compared to the prior year period. The increases~~ were attributable to the following:

Three Months Ended Six Months Ended
December 31, 2022 December 31, 2022
Increase due to higher rights fees expense primarily due to the impact of annual contractual rate increases in the current year period and the absence of reductions in media rights fees related to the shortened 2020-21 NHL season recorded in the prior year first quarter $ 3,072 $ 9,005
Increase in other programming and production costs including the impact of a higher number of live professional sports telecasts in the current year period 1,404 2,468
$ 4,476 $ 11,473


	Three Months Ended		Nine Months Ended
	March 31, 2023		March 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

For the three and nine months ended March 31, 2023, right fees expense increased $2,502 and $11,508, respectively, primarily due to the impact of annual contractual rate increases. For the nine months ended March 31, 2023, 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 production 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 $2,042, primarily due to a higher number of professional sports telecasts in the current year period.

Selling, general and administrative expenses

For the three months ended ~~December~~March 31, ~~2022,~~2023, selling, general and administrative expenses of ~~$38,083~~$60,052 increased ~~$891~~$27,815 as compared to the prior year ~~quarter.~~ quarter, primarily due to an approximately $44,600 increase in expenses, primarily litigation-related, associated with the acquisition of MSG 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 the current year period, lower advertising and marketing expenses of $4,966, lower employee compensation and related benefits of $1,252 and other cost decreases.

For the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, selling, general and administrative expenses of ~~$55,899~~$115,951 decreased ~~$29,268~~$1,453 as compared to the prior year, ~~quarter.~~

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.

Three Months Ended Six Months Ended
December 31, 2022 December 31, 2022
Impact of the acquisition of MSG Networks by MSG Entertainment in July 2021, including litigation costs in the current year period $ 4,669 $ (18,328)
Increase in advertising commissions and other expenses 1,717 1,228
Decrease due to lower employee compensation and related benefits (2,834) (6,057)
Decrease due to lower advertising and marketing expenses (2,661) (6,111)
$ 891 $ (29,268)

Operating income

For the three months ended ~~December~~March 31, ~~2022,~~2023, operating income of ~~$24,790~~$10,444 decreased ~~$10,319,~~$35,498, or ~~29%~~77%, as compared to the prior year quarter, primarily due to the increase in ~~direct operating~~selling, general and administrative expenses (including the impact of ~~restructuring charges~~the Merger litigation settlement discussed above), and, to a lesser extent, the decrease in revenues and the increase in ~~selling, general and administrative expenses (including the impact of higher acquisition-related costs).~~direct operating expenses.

For the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, operating income of ~~$52,415~~$62,859 decreased ~~$5,972,~~$41,470, or ~~10%~~40%, as compared to the prior year quarter, primarily due to the decrease in revenues, increase in direct operating expenses, and the impact of restructuring

charges, partially offset by a decrease in selling, general and administrative expenses (including the impact of ~~lower acquisition-related costs)~~the Merger litigation settlement and restructuring expenses discussed above).

Adjusted operating income

For the three months ended ~~December~~March 31, ~~2022,~~2023, adjusted operating income of ~~$39,301 decreased $4,541,~~$58,329 increased $7,504, or ~~10%~~15%, as compared to the prior year quarter, primarily due to the ~~increase in direct operating expenses and, to a lesser extent, the~~ decrease in ~~revenues, partially offset by lower~~ 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 ~~acquisition-related costs).~~direct operating expenses.

For the ~~six~~nine months ended ~~December~~March 31, ~~2022,~~2023, adjusted operating income of ~~$72,193~~$130,522 decreased ~~$27,442,~~$19,938, or ~~28%~~13%, as compared to the prior year quarter, primarily due to the decrease in revenues and increase in direct operating expenses, partially offset by a decrease in selling, general and administrative expenses (excluding the impact of ~~lower acquisition-related costs).~~

~~Tao Group Hospitality~~

~~The tables below set forth, for~~ the ~~periods presented, certain historical financial information~~Merger litigation settlement and ~~a reconciliation of operating income to adjusted operating income for the Company’s Tao Group Hospitality segment.~~

Three Months Ended
December 31, Change
2022 2021 Amount Percentage
Revenues $ 135,994 $ 117,086 $ 18,908 16 %
Direct operating expenses (76,483) (60,880) (15,603) 26 %
Selling, general and administrative expenses (43,166) (40,685) (2,481) 6 %
Depreciation and amortization (5,616) (6,243) 627 (10) %
Impairment and other gains, net 473 7,443 (6,970) (94) %
Operating income $ 11,202 $ 16,721 $ (5,519) (33) %
Reconciliation to adjusted operating income:
Share-based compensation 2,374 1,958 416 21 %
Depreciation and amortization 5,616 6,243 (627) (10) %
Impairment and other gains, net (473) (7,443) 6,970 (94) %
Adjusted operating income $ 18,719 $ 17,479 $ 1,240 7 %

Six Months Ended
December 31, Change
2022 2021 Amount Percentage
Revenues $ 268,645 $ 236,550 $ 32,095 14 %
Direct operating expenses (153,060) (121,973) (31,087) 25 %
Selling, general and administrative expenses (86,712) (74,779) (11,933) 16 %
Depreciation and amortization (12,246) (12,621) 375 (3) %
Impairment and other gains, net 473 (375) 848 NM
Operating income $ 17,100 $ 26,802 $ (9,702) (36) %
Reconciliation to adjusted operating income:
Share-based compensation 4,426 3,869 557 14 %
Depreciation and amortization 12,246 12,621 (375) (3) %
Impairment and other gains, net (473) 375 (848) NM
Adjusted operating income $ 33,299 $ 43,667 $ (10,368) (24) %

~~_________________~~

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

~~Factors Affecting Results of Operations~~

For the three and six months ended December 31, 2021, Tao Group Hospitality’s operations and operating results were impacted by the COVID-19 pandemic. This included certain regulatory requirements such as vaccination/mask requirements, which contributed to certain branded locations remaining closed during the period, and a temporary impact to both demand and operations as a result of an increase in COVID-19 cases during the fiscal 2022 second quarter. As of December 31, 2022 and as of the date of this filing, Tao Group Hospitality’s domestic venues no longer require guests to provide proof of COVID-19 vaccination before entering, and Tao Group Hospitality is operating without capacity restrictions in all markets. See “— ~~Introduction~~ —~~Factors Affecting Results of Operations~~ — ~~Impact of the COVID-19 Pandemic on Our Business” for more information.~~

~~Revenues~~

Revenues for the three months ended December 31, 2022 increased $18,908, or 16%, to $135,994 as compared to the prior year period. For the six months ended December 31, 2022, revenues increased $32,095, or 14% to $268,645. The changes in revenue were attributable to the following:

Three Months Ended Six Months Ended
December 31, 2022 December 31, 2022
Increase in revenues for comparable venues that opened more than 15 months ago $ 9,259 $ 10,736
Increase in revenues associated with new venue openings 6,377 13,914
Increase in revenues associated with venues that were temporarily closed in the prior year as a result of the COVID-19 pandemic 2,685 5,798
Other net increases 587 1,647
$ 18,908 $ 32,095

For the three and six months ended December 31, 2022, the increase in revenues associated with new venue openings was primarily due to the opening of Lavo Ristorante in Los Angeles, a venue that first opened in March 2022, Lavo San Diego, which first opened in June 2022 following the rebranding of a legacy Hakkasan venue, Fleur Room in Los Angeles, a venue that first opened in August 2022, and Tao Beach in Las Vegas which reopened in April 2022 following a multi-year renovation.

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

~~Direct operating~~restructuring expenses

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

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

~~Selling, general and administrative expenses~~

Selling, general and administrative expenses for the three months ended December 31, 2022 increased $2,481, or 6%, to $43,166 as compared to the prior year period. For the six months ended December 31, 2022, selling, general and administrative expenses increased $11,933, or 16% to $86,712. For the three and six months ended December 31, 2022, the net increases were primarily due to (i) higher employee compensation and related benefits of $3,076 and $9,705, respectively, reflecting the impact of increased staffing as the business returns to normal operations and (ii) a net increase of $402 and $2,298, respectively, in restaurant expenses, as well as supplies, utilities, general liability insurance, pre-opening expenses, and repairs and maintenance, and marketing expenses, partially offset by other net decreases.

~~Impairment and other gains (losses)~~

For the three and six months ended December 31, 2022, the Company recorded a net gain of $473 related to the sale of certain leasehold improvements in connection with closing of a venue. For the three months ended December 31, 2021, the Company recorded net gains of $7,443 principally from the write-off and modification of lease liabilities associated with certain venues.

~~Operating income~~

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

Operating income for the six months ended December 31, 2022 was $17,100 as compared to $26,802 in the prior year period, a decrease of $9,702, or 36%. This decrease was primarily due to an increase in direct operating expenses and an increase in selling, general and administrative expenses, partially offset by increased revenues.

~~Adjusted operating income~~

Adjusted operating income for the three months ended December 31, 2022 was $18,719 as compared to $17,479 in the prior year period, an increase of $1,240, or 7%. The increase in adjusted operating income for the three months ended December 31, 2022 was due to an increase in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses.

Adjusted operating income for the six months ended December 31, 2022 was $33,299 as compared to $43,667 in the prior year period, a decrease of $10,368, or 24%. The decrease in adjusted operating income for the six months ended December 31, 2022 was due to higher direct operating expenses and selling, general and administrative expenses, partially offset by an increase in revenues.

Liquidity and Capital Resources

Sources and Uses of Liquidity

As further described in “Item 2. - Management’s Discussion and Analysis - Introduction,” on April 20, 2023, the Company completed the MSGE Spinco Distribution. Although the information set forth in this Quarterly Report on Form 10-Q generally is as of March 31, 2023 and does not give effect to the MSGE Spinco Distribution, the information set forth in this section also focuses on the liquidity and capital resources of the Company following the MSGE Spinco Distribution.

Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under ~~our credit facilities.~~the 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. 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 ~~our~~completing 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 ~~Sphere at The Venetian.~~Networks Credit Facilities prior to their maturity in October 2024. As of ~~December 31, 2022,~~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 ~~inclusive~~was approximately $232,700. The Company’s unrestricted cash and cash equivalents balance as of ~~approximately $218,000 in advance cash proceeds primarily related~~March 31, 2023 was $217,576, which does not give effect to ~~tickets, suites~~the MSGE Spinco Distribution, and ~~sponsorships,~~ was $432,173 as ~~compared to $441,350 as of September 30, 2022. 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 ~~$121,563,~~approximately $110,000, inclusive of $75,000 that is required to be held in an account pledged as collateral for the ~~MSG~~LV Sphere Term Loan Facility until its release upon the Liquidity Covenant Reduction Date (as defined under Note 10). The principal balance of the Company’s total debt outstanding as of ~~December 31, 2022~~May 9, 2023, after giving effect to the MSGE Spinco Distribution and the Tao Group Hospitality Disposition, was ~~$2,010,725, compared to $1,756,898 as of September 30, 2022.~~$1,227,875. We believe we have sufficient liquidity from cash and cash equivalents, available borrowing capacity under ~~our credit facilities and~~the DDTL Facility, cash flows from operations (including savings generated by the Company’s cost reduction program and expected cash from operations from ~~MSG~~ Sphere atin Las Vegas), as well as proceeds from the ~~Venetian )~~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 credit facilities for the foreseeable future, as well as complete the construction of ~~MSG~~ Sphere ~~at The Venetian.~~in Las Vegas. This also includes the Company’s expectation that it will pay down a portion of MSG Networks’ term loan upon the refinancing of the loan prior to its maturity in October 2024.

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

To the extent that proceeds from the sale of a portion of the MSGE Retained Interest are not ~~essential~~required for ~~MSG Sphere.~~the uses of liquidity cited in the previous paragraph, the MSGE Retained Interest may be exchanged for our shares, distributed pro rata to our shareholders or used to repay borrowings under the DDTL Facility, if any.

See Note 10, Credit Facilities to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the MSG Networks Credit Facilities and the ~~National Properties Credit Facilities, the MSG~~LV Sphere Term Loan ~~Facility and the Tao Credit Facilities.~~

Facility.

For additional information regarding the Company’s capital expenditures, including those related to ~~MSG~~ Sphere in Las Vegas, see Note 22, Segment Information to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2022 included in the Company’s Annual Report on Form 10-K.

On March 31, 2020, the Company’s Board of Directors authorized, effective following the 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.

~~MSG~~ Spheres

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 Venetian~~in 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 ~~remains committed to bringing MSG Sphere to Las Vegas and~~ expects to open the venue in September 2023. As with any major construction project, the construction of ~~MSG~~ Sphere is subject to potential delays, unexpected complications or cost fluctuations.

As of ~~December 31, 2022,~~May 9, 2023, our cost estimate, inclusive of core technology and soft costs, for ~~MSG~~ Sphere ~~at The Venetian was~~in Las Vegas is approximately ~~$2,175,000.~~$2,300,000. This cost estimate ~~was~~is net of $75,000 that the Venetian has agreed to pay to defray certain construction costs and also excludes significant capitalized and non-capitalized costs for items such as content creation, internal labor, capitalized interest, and furniture and equipment. Relative to our cost estimate above, our actual construction costs for ~~MSG~~ Sphere ~~at The Venetian incurred~~in Las Vegas paid through ~~December 31, 2022~~May 9, 2023 were approximately ~~$2,015,000,~~$2,080,000, which is net of $65,000 received from ~~the~~The Venetian. ~~The amount of construction costs incurred as of December 31, 2022 includes approximately $236,000 of accrued expenses that were not yet paid as of that date.~~

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 (including savings generated by the Company’s cost reduction program and expected cash from operations from MSG Sphere at the Venetian).~~operations. The Company may also ~~continues to have revolver~~access proceeds from the sale of a portion of the MSGE Retained Interest and capacity ~~available~~ under ~~its credit facilities,~~the DDTL Facility, if needed.

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

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 requires various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time.

We will continue to explore additional domestic and international markets where we believe next-generation venues such as ~~MSG~~ Sphere can be successful. 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 10, Credit Facilities, to the 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~~ (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 ~~December~~March 31, ~~2022,~~2023, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility.

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.

The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. As of ~~December~~March 31, ~~2022,~~2023, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants.

~~National Properties Credit Facilities~~

On June 30, 2022, MSG National Properties, LLC (“MSG National Properties”) an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto (the “National Properties Credit Agreement”), providing for a five-~~year, $650,000~~, senior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Credit Facilities”).

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

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

The National Properties Credit Agreement includes financial covenants requiring MSG National Properties and its restricted subsidiaries to maintain a specified minimum liquidity level, a specified minimum debt service coverage ratio and specified maximum total leverage ratio. The minimum liquidity level is set at $50,000, and is tested based on the level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter over the life of the National Properties Credit Facilities. The debt service coverage ratio covenant began testing in the fiscal quarter ending December 31, 2022, and is set at a ratio of 2:1 before stepping up to 2.5:1 in the fiscal quarter ending September 30, 2024. The leverage ratio covenant begins testing in the fiscal quarter ending June 30, 2023. It is tested based on the ratio of MSG National Properties and its restricted subsidiaries’ consolidated total indebtedness to adjusted operating income, with an initial maximum ratio of 6:1, stepping down to 5.5:1 in the fiscal quarter ending June 30, 2024 and 4.5:1 in the fiscal quarter ending June 30, 2026. As of December 31, 2022, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Credit Agreement.

~~MSG~~LV Sphere Term Loan Facility

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

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

The ~~MSG~~LV Sphere Term Loan Facility ~~includes~~and related guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring ~~MSG~~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 ~~the MSG~~ Sphere in Las Vegas, ~~(the “Opening Date”),~~ is also tested on a prospective basis. Both the historical and prospective debt service coverage ratios are set at 1.35:1. In addition, among other conditions, MSG LV is not permitted to make distributions to ~~MSG~~Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1. The minimum liquidity level for ~~MSG~~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 ~~MSG~~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 ~~the MSG~~ Sphere in Las Vegas has been substantially completed and certain of its systems are ready to be used in live, immersive events (the “Liquidity Covenant Reduction Date”). The minimum liquidity level was tested on the closing date and is tested as of the last day of each fiscal quarter thereafter based on ~~MSG~~Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date. InFollowing the ~~event~~completion of the ~~Company completes~~MSGE Spinco Distribution, the spin-off of its traditional live entertainment business currently under consideration (the “MSGE Spin-off”) and retains an economic interest in the live entertainment company (the “Live Entertainment Company Retained Interest”), the Live Entertainment CompanyMSGE Retained Interest ~~will be~~was pledged to secure the ~~MSG~~LV Sphere Term Loan Facility and will remain pledged until ~~the pledge is released upon~~ the Liquidity Covenant Reduction Date, and a portion of the value of the ~~Live Entertainment Company~~MSGE Retained Interest may also be counted toward the minimum liquidity level.

~~Tao Credit Facilities~~Delayed Draw Term Loan Facility

~~On June 9, 2022, TAO Group Intermediate~~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 (“~~TAOIH”~~MSG Entertainment Holdings”). Pursuant to the 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 a variable rate equal to either, at the option of the Company, (a) a base rate plus an applicable margin, or ~~“Intermediate Holdings”)~~(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 ~~TAO Group Operating LLC (“TAOG” or “Senior Borrower”) entered into an amended and restated credit agreement (the “Restated Tao Senior Credit Agreement”) with~~ JPMorgan Chase Bank, N.A., in its capacity as administrative agent (the “National Properties Credit Facilities), plus 1.00% per annum.

Subject 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 ~~lenders party thereto.~~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 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 the Company made such election. The ~~Restated Tao Senior Credit Agreement provides TAOG~~Company shall only be permitted to use the proceeds of the DDTL Facility (i) for funding costs associated with ~~senior secured credit facilities (the “Tao Credit Facilities”) consisting of: (i) an initial $75,000 term loan facility with a term of five years (the “Tao Term Loan Facility”)~~the Sphere initiative and (ii) ~~a $60,000 revolving credit facility~~in connection with ~~a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000~~refinancing of the ~~Tao Revolving~~indebtedness under MSG Networks Credit Facility is available for the issuance of letters of credit. As of December 31, 2022, outstanding letters of credit were $750 and the remaining borrowing available under the Tao Revolving Credit Facility was $49,250.Facilities.

The ~~Tao Term Loan~~DDTL Facility ~~amortizes quarterly in accordance with its terms from June 9, 2022 through the maturity date~~contains certain representations and warranties and affirmative and negative covenants, including, among others, financial reporting, notices of material events, and limitations on June 9, 2027. TAOG is required to make mandatory prepayments of the Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights)asset dispositions restricted payments, and ~~the incurrence of certain indebtedness, subject to certain exceptions.~~

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

Letters of Credit

The Company uses letters of credit to support its business operations. As of ~~December~~March 31, ~~2022,~~2023, the Company had a total of ~~$9,478~~$8,860 of letters of credit outstanding, which included ~~two letters of credit for an aggregate of $750 issued under the Tao Revolving Credit Facility and~~ two outstanding letters of credit for an aggregate of ~~$7,860~~$7,992 issued under the National Properties Revolving Credit Facility.

Contractual Obligations

As of ~~December~~March 31, ~~2022,~~2023, the Company did not have any material changes in its non-cancelable contractual obligations (other than activities in the ordinary course of business), except for the execution of the ~~MSG~~LV Sphere Term Loan Facility on December 22, 2022. See Note 9, Commitments and Contingencies, to the financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details on the timing and amount of payments under various media rights agreements.

Cash Flow Discussion

As of ~~December~~March 31, ~~2022,~~2023, cash, cash equivalents and restricted cash totaled ~~$553,736,~~$327,245, as compared to ~~$846,010~~$822,885 as of June 30, 2022. The following table summarizes the Company’s cash flow activities for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:


		Six Months Ended					Nine Months Ended
		December 31,					March 31,
		2022		2021			2023		2022

Net cash provided by operating activities	Net cash provided by operating activities	$	54,965	$	132,786	Net cash provided by operating activities	$	137,824	$	106,201
Net cash used in investing activities	Net cash used in investing activities	(575,909)		(332,532)		Net cash used in investing activities	(825,484)		(547,926)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	229,175		(57,639)		Net cash provided by (used in) financing activities	200,485		(77,520)
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(505)		(572)		Effect of exchange rates on cash, cash equivalents and restricted cash	(729)		22
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	$	(292,274)	$	(257,957)	Net decrease in cash, cash equivalents and restricted cash	$	(487,904)	$	(519,223)

Operating Activities

Net cash provided by operating activities for the ~~six~~nine months ended ~~December~~March 31, ~~2022 decreased~~2023 improved by ~~$77,821~~$31,623 to ~~$54,965~~$137,824 as compared to 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) ~~a decrease in deferred revenue associated with customers’ advanced payments,~~higher accrued expenses related to the Merger litigation, and (ii) higher cash ~~payments to promoters, (iii) lower accrued and other liabilities, including related party payables, and (iv) higher prepaid expenses,~~receipts from collections of accounts receivables, partially offset by ~~operating income~~(i) an increase in deferred production costs associated with Sphere in Las Vegas, and (ii) higher net related party receivables. Our lower net loss from continuing operations in the current year period reflects significant non-cash items such as a net unrealized gain of $6,275 as compared to a net unrealized loss of $28,303 in the prior year period.

Investing Activities

Net cash used in investing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased by ~~$243,377~~$277,558 to ~~$575,909~~$825,484 as compared to the prior year period primarily due to ~~an increase~~investing activities in continuing operations related to capital expenditures ~~mainly~~ for ~~the MSG~~ Sphere in Las Vegas in the current year period.

Financing Activities

Net cash provided by (used in) financing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2022~~2023 increased by ~~$286,814~~$278,005 to ~~$229,175~~$200,485 as compared to the prior year period primarily due to ~~the~~financing activities in continuing operations related to proceeds received from the ~~MSG~~LV Sphere Term Loan Facility in the current year period.

Seasonality of Our Business

~~The revenues~~Prior 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 that the Entertainment segment earns~~earned a disproportionate share of its annual revenues ~~and operating income~~ in the second and third quarters of ~~the Company’s~~its fiscal year as a result of the production of the Christmas Spectacular, arena license fees in connection with the ~~first fiscal quarter being disproportionally lower. Similarly,~~use of The Garden by the Knicks and the Rangers, and MSG Networks’ advertising revenue isbeing largely derived from the sale of inventory in its live NBA and NHL professional sports ~~programming, and as such,~~programming. Following the MSGE Spinco Distribution, our MSG Networks segment generally continues to expect to earn a ~~disproportionate~~higher share of ~~this revenue has historically been earned~~its annual revenues in the second and third quarters of its fiscal ~~quarters.~~

Asyear as a result of MSG Networks’ advertising revenue being largely derived from the ~~foregoing, the Company’s revenue~~sale of inventory in its live NBA and ~~operating income are disproportionally higher in the fiscal second and third quarter of the fiscal year and lower in the first quarter of the fiscal year.~~NHL professional sports programming.

Recently Issued Accounting Pronouncements and Critical Accounting Estimates

Recently Issued and Adopted Accounting Pronouncements

See Note 2, Accounting Policies, to the 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 Estimates

There have been no 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, 2022 included in the Form 10-K. The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of Fiscal Year 2023.

Impairment of Goodwill and Indefinite-Lived Assets

Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is one level below the operating segment level. As of ~~December~~March 31, ~~2022,~~2023, the Company had ~~three~~two operating and reportable segments consistent with the process the Company’s management followed in making decisions and allocating resources to the business.

For purposes of evaluating goodwill for impairment, the Company has ~~three~~two 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 ~~December~~March 31, ~~2022~~2023 by reporting unit was as follows:


Entertainment	$	74,309
MSG Networks	424,508
~~Tao Group Hospitality~~	~~1,364~~
Total Goodwill	$	~~500,181~~498,817

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.

The Company elected to perform the qualitative assessment of impairment for all of the Company’s reporting units for the Fiscal Year 2023 annual impairment test. These assessments considered factors such as:

•macroeconomic conditions;

•industry and market considerations;

•cost factors;

•overall financial performance of the reporting units;

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

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

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

Identifiable Indefinite-Lived Intangible Assets

Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s condensed consolidated balance sheet as of ~~December~~March 31, ~~2022:~~2023:


Trademarks	$	61,881
Photographic related rights	1,920
Total indefinite-lived intangibles	$	63,801

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform the qualitative assessment of impairment for the photographic related rights and the trademarks. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair values of the intangible assets. Examples of such events and circumstances include:

•cost factors;

•financial performance;

•legal, regulatory, contractual, business or other factors;

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

•industry and market considerations; and

•macroeconomic conditions.

During the first quarter of Fiscal Year 2023, the Company performed its most recent annual impairment test of the identifiable indefinite-lived intangible assets and determined that there were no impairments identified. Based on these impairment tests, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value. The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K.

Potential Interest Rate Risk Exposure

The Company, through its subsidiaries, MSG National Properties (prior to the MSGE Spinco Distribution), MSG Networks and MSG LV, ~~and the consolidation of Tao Group Hospitality,~~ is subject to potential interest rate risk exposure related to borrowings incurred under their respective credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under these credit facilities. The effect of a hypothetical 200 basis point increase in floating interest rate prevailing as of ~~December~~March 31, ~~2022~~2023 and continuing for a full year would increase the Company’s interest ~~expense~~payments on the outstanding amounts under the credit facilities by ~~$40,215.~~$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 ~~December~~March 31, ~~2022,~~2023, the GBP/USD exchange rate ranged from 1.0695 to ~~1.3967~~1.3826 as compared to GBP/

USD exchange rate of ~~1.2120~~1.2343 on ~~December~~March 31, ~~2022,~~2023, a fluctuation range of approximately ~~15.24%~~12.01%. As of ~~December~~March 31, ~~2022,~~2023, a uniform hypothetical ~~14.28%~~13.71% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately ~~$23,200~~$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. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of ~~December~~March 31, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended ~~December~~March 31, ~~2022,~~2023, 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 Company’s acquisition of MSG Networks Inc. (the “Merger”) by purported stockholders of the Company and MSG Networks Inc.

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 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 January 12, 2023, the Court of Chancery granted a stipulation and order dismissing former MSG Networks Inc. directors William Bell, Stephen Mills and Hank Ratner from~~Litigation reached an agreement in principle to settle the MSG Networks ~~Action.~~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 the MSG Networks Litigation in exchange for a settlement payment to the plaintiffs 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 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 financial statements.

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

As of ~~December~~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						~~2020 Employee Stock Plan,~~Distribution Agreement, dated as ~~amended~~of March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco Inc.) (incorporated by reference to ~~Annex B~~Exhibit 2.1 to the Company’s ~~Definitive Proxy Statement~~Current Report on ~~Schedule 14A~~form 8-K filed on ~~October 26, 2022)~~March 30, 2023).
10 .22.2						~~2020 Stock Plan for Non- Employee Directors,~~Contribution Agreement, dated as ~~amended~~of March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.), Sphere Entertainment Group, LLC (formerly MSG Entertainment Group, LLC) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco Inc.) (incorporated by reference to ~~Annex C~~Exhibit 2.2 to the Company’s ~~Definitive Proxy Statement~~Current Report on ~~Schedule 14A~~Form 8-K filed on ~~October 26, 2022)~~March 30, 2023).
~~10.~~33.1						Certificate of Amendment ~~No. 2~~ to ~~Dry Lease~~the Amended and Restated Certificate of Incorporation of Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.), dated April 20, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 24, 2023).
3.2						Amended By-Laws of Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.), date d April 20, 2023 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April 24, 2023).
10.1						Transition Services Agreement, dated ~~December 17, 2018 between Sterling2K LLC and MSG Entertainment Group, LLC (formerly MSG Sports & Entertainment, LLC) (for the DFO G550), effective~~ as of ~~November 4, 2022~~March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco, Inc.) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 30, 2023).
10.2						Tax Disaffiliation Agreement, dated as of March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco, Inc.) (incorporated by reference to Exhibit 10.2 to the ~~Company's Quarterly~~Company’s Current Report on Form ~~10-Q~~8-K filed on ~~November 9, 2022)~~March 30, 2023).
~~10.~~410.3						~~Credit~~Employee Matters Agreement, dated March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco, Inc.) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 30, 2023).
10.4						S hare holder ’s and Registration Rights Agreement, dated March 29, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and Madison Square Garden Entertainment Corp. (formerly MSGE Spinco, Inc.) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 30, 2023).
10.5						NBA Transaction Agreement dated as of ~~December 22, 2022,~~April 18, 2023, by and among ~~MSG Las Vegas,~~Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.), Madison Square Garden Entertainment Corp. (formerly MSGE Spinco, Inc.) and certain other parties thereto.
10.6						Transaction Agreement, dated as of April 17, 2023, by and among TAO Group Sub-Holdings LLC, ~~the lenders party thereto~~Disco Holdings Intermediate LLC, TAO Group Holdings LLC, Hakkasan USA Inc. and ~~JPMorgan Chase Bank, N.A., as administrative agent~~others (incorporated by reference to Exhibit 10.1 to the ~~Company's~~Company’s Current Report on Form 8-K filed on ~~December 22, 2022)~~April 17, 2023).
~~10.~~510.7						~~Pledge~~Delayed Draw Term Loan Credit Agreement, dated April 20, 2023, between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.), as Borrower, and ~~Security~~MSG Entertainment Holdings, LLC, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 24, 2023).
10.8						Employment Agreement dated as of December ~~22, 2022, by~~27, 2021 between Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) and ~~between MSG Las Vegas, LLC~~James L. Dolan, as amended and ~~JPMorgan Chase Bank, N.A.~~restated as of April 20, 2023 (incorporated by reference to Exhibit 10.2 to the ~~Company's~~Company’s Current Report on Form 8-K filed on ~~December 22, 2022)~~April 24, 2023). †
~~10.~~610.9						~~Guaranty~~Employment Agreement dated as of ~~December 22, 2022, by MSG~~April 20, 2023 between Sphere Entertainment ~~Group, LLC in favor of JPMorgan Chase Bank, N.A. on behalf of the lenders~~Co. (formerly Madison Square Garden Entertainment Corp.) and Gautam Ranji (incorporated by reference to Exhibit 10.3 to the ~~Company's~~Company’s Current Report on Form 8-K filed on ~~December 22, 2022)~~April 24, 2023). †
~~10.~~710.10						~~Pledge~~Employment Agreement dated as of ~~December 22, 2022, by MSG~~April 20, 2023 between Sphere Entertainment ~~Group, LLC in favor of JPMorgan Chase Bank, N.A. on behalf of the lenders~~Co. (formerly Madison Square Garden Entertainment Corp.) and Gregory Brunner (incorporated by reference to Exhibit 10.4 to the ~~Company's~~Company’s Current Report on Form 8-K filed on ~~December 22, 2022)~~April 24, 2023). †
10.11						Form of Restricted Stock Units Agreement Under the MSG Networks Inc. 2010 Employee Stock Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
10.12						Form of Restricted Stock Units Agreement Under the 2020 Employee Stock Plan (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †


EXHIBIT NO.						DESCRIPTION
10.13						Form of Option Agreement Under the 2020 Employee Stock Plan (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
10.14						Form of Performance Restricted Stock Units Agreement Under the MSG Networks Inc. 2010 Employee Stock Plan (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
10.15						Form of Performance Restricted Stock Units Agreement Under the 2020 Employee Stock Plan (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
10.16						Form of Performance Option Agreement Under the 2020 Employee Stock Plan (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
10.17						Sphere Entertainment Co. Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on April 24, 2023). †
31.1						Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp.) Quarterly Report on Form 10-Q for the quarter ended ~~December~~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.
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2022~~2023 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 ~~February~~May 2023.


~~Madison Square Garden~~Sphere Entertainment ~~Corp.~~Co.

By:	/S/ ~~DAVID F. BYRNES~~GAUTAM RANJI
	Name:	~~David F. Byrnes~~Gautam Ranji
	Title:	Executive Vice President, ~~and~~ Chief Financial Officer and Treasurer

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