UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

________________________

(Mark One)

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

For the quarterly period ended March 31, 2023

OR

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

For the transition period from             to

Commission File Number: 001-41627

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

(Exact name of registrant as specified in its charter) 

Delaware	92-0318813
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Two Penn Plaza	New York	,	NY	10121
(Address of principal executive offices)				(Zip Code)

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

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

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☑

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

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

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

Class A Common Stock par value $0.01 per share	—	44,900,926
Class B Common Stock par value $0.01 per share	—	6,866,754

INDEX TO COMBINED FINANCIAL STATEMENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Combined Balance Sheets as of March 31, 2023 and June 30, 2022	2
Condensed Combined Statements of Operations for the three and nine months ended March 31, 2023 and 2022	3
Condensed Combined Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2023 and 2022	4
Condensed Combined Statements of Cash Flows for the nine months ended March 31, 2023 and 2022	5
Condensed Combined Statements of Divisional Equity (Deficit) for the three and nine months ended March 31, 2023 and 2022	6
Notes to the Condensed Combined Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	41
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6. Exhibits	43

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED COMBINED BALANCE SHEETS (Unaudited)
(in thousands)
	March 31,		June 30,
	2023		2022
ASSETS
Current Assets:
Cash, cash equivalents and restricted cash	$	122,981	$	62,573
Accounts receivable, net	130,642		102,501
Related party receivables, current	80,463		96,938
Prepaid expenses and other current assets	74,289		79,441
Total current assets	408,375		341,453
Non-Current Assets:
Property and equipment, net	637,644		696,079
Right-of-use lease assets	248,366		271,154
Goodwill	69,041		69,041
Intangible assets, net	63,801		65,439
Other non-current assets	118,506		83,535
Total assets	$	1,545,733	$	1,526,701
LIABILITIES AND DIVISIONAL EQUITY (DEFICIT)
Current Liabilities:
Accounts payable, accrued and other current liabilities	$	199,796	$	221,961
Related party payables, current	42,620		72,683
Current portion of long-term debt	16,250		8,762
Operating lease liabilities, current	38,298		39,006
Deferred revenue	258,132		202,678
Total current liabilities	555,096		545,090
Non-Current Liabilities:
Long-term debt, net of deferred financing costs	643,311		654,912
Operating lease liabilities, non-current	229,501		254,114
Deferred tax liabilities, net	23,377		23,253
Other non-current liabilities	50,945		50,921
Total liabilities	1,502,230		1,528,290
Commitments and contingencies (see Note 9.)
MSG Entertainment Divisional Equity (Deficit):
Sphere Entertainment investment	77,365		33,265
Accumulated other comprehensive loss	(33,862)		(34,740)
Total MSG Entertainment divisional equity (deficit)	43,503		(1,475)
Nonredeemable noncontrolling interest	—		(114)
Total liabilities and divisional equity (deficit)	$	1,545,733	$	1,526,701

See accompanying notes to the unaudited condensed combined financial statements.

2

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED COMBINED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands)

	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Revenues (a)	$	201,229	$	193,988	$	703,561	$	475,150
Direct operating expenses (a)	(115,133)		(109,962)		(397,398)		(292,198)
Selling, general and administrative expenses (a)	(44,122)		(47,027)		(127,537)		(128,725)
Depreciation and amortization	(14,798)		(16,007)		(46,369)		(49,166)
(Loss) gains, net on dispositions	(51)		—		4,361		—
Restructuring charges	(2,461)		(5,171)		(9,820)		(5,171)
Operating income (loss)	24,664		15,821		126,798		(110)
Interest income (a)	2,482		1,541		5,804		5,145
Interest expense	(13,423)		(13,009)		(38,055)		(39,804)
Other income (expense), net	8,070		(8,495)		6,784		(27,742)
Income (loss) from operations before income taxes	21,793		(4,142)		101,331		(62,511)
Income tax expense	(73)		—		(804)		—
Net income (loss)	21,720		(4,142)		100,527		(62,511)
Less: Net loss attributable to nonredeemable noncontrolling interest	—		(212)		(553)		(579)
Net income (loss) attributable to MSG Entertainment’s stockholders	$	21,720	$	(3,930)	$	101,080	$	(61,932)
Basic and diluted earnings (loss) per common share attributable to the MSG Entertainment’s stockholders	$	0.42	$	(0.08)	$	1.95	$	(1.20)

_________________

(a) See Note 15. Related Party Transactions, for further information on related party arrangements.

See accompanying notes to the unaudited condensed combined financial statements.

3

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in thousands)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Net income (loss)	$	21,720	$	(4,142)	$	100,527	$	(62,511)
Other comprehensive income (loss), before income taxes:
Amortization of net actuarial loss included in net periodic benefit cost	323		371		1,063		1,114
Other comprehensive income, before income taxes	323		371		1,063		1,114
Income tax expense	(56)		(65)		(185)		(196)
Other comprehensive income, net of income taxes	267		306		878		918
Comprehensive income (loss)	21,987		(3,836)		101,405		(61,593)
Less: Comprehensive loss attributable to nonredeemable noncontrolling interest	—		(212)		(553)		(579)
Comprehensive income (loss) attributable to MSG Entertainment	$	21,987	$	(3,624)	$	101,958	$	(61,014)

See accompanying notes to the unaudited condensed combined financial statements.

4

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
	Nine Months Ended March 31,
	2023		2022
OPERATING ACTIVITIES:
Net income (loss)	$	100,527	$	(62,511)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	46,369		49,166
Share-based compensation expense	24,273		31,480
Amortization of deferred financing costs	2,409		5,088
Related party paid in kind interest	(2,939)		(3,111)
Net unrealized (gain) loss on equity investments with readily determinable fair value	(4,307)		28,303
Amortization of right-of-use assets	9,975		8,061
Gains, net on dispositions	(4,361)		—
Other non-cash adjustments	83		—
Change in assets and liabilities:
Accounts receivable, net	(27,890)		(74,943)
Related party receivables, net of payables	(5,292)		43,976
Prepaid expenses and other current and non-current assets	(29,938)		(46,450)
Accounts payable, accrued and other current and non-current liabilities	(20,812)		50,033
Deferred revenue	56,531		38,375
Operating lease right-of-use assets and lease liabilities	(12,287)		(7,129)
Net cash provided by operating activities	$	132,341	$	60,338
INVESTING ACTIVITIES:
Capital expenditures	(12,187)		(10,725)
Proceeds from dispositions, net	27,904		—
Proceeds (purchases) from investments	4,244		(250)
Proceeds from loan receivable	—		4,695
Loan to related parties	(6,700)		(6,780)
Net cash provided by (used in) investing activities	$	13,261	$	(13,060)
FINANCING ACTIVITIES:
Proceeds from issuance of debt	168		—
Principal repayments on long-term debt	(6,063)		(4,875)
Net transfers to Sphere Entertainment and Sphere Entertainment’s subsidiaries	(79,299)		(145,160)
Net cash used in financing activities	$	(85,194)	$	(150,035)
Net increase (decrease) in cash, cash equivalents and restricted cash	60,408		(102,757)
Cash, cash equivalents and restricted cash, beginning of period	62,573		318,069
Cash, cash equivalents and restricted cash, end of period	$	122,981	$	215,312
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	504	$	228
Non-cash reduction of loan receivable from related party	$	5,350	$	4,019

See accompanying notes to the unaudited condensed combined financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONDENSED COMBINED STATEMENTS OF DIVISIONAL EQUITY (DEFICIT) (Unaudited)
(in thousands)
	Sphere Entertainment Investment		Accumulated Other Comprehensive Income (Loss)		Total MSG Entertainment Divisional Equity (Deficit)		Nonredeemable Noncontrolling Interest		Total Divisional Equity (Deficit)
Balance as of December 31, 2022	$	133,018	$	(34,129)	$	98,889	$	—	$	98,889
Net income	21,720		—		21,720		—		21,720
Other comprehensive income	—		267		267		—		267
Comprehensive income	—		—		21,987		—		21,987
Net decrease in Sphere Entertainment Investment	(77,373)		—		(77,373)		—		(77,373)
Balance as of March 31, 2023	$	77,365	$	(33,862)	$	43,503	$	—	$	43,503
Balance as of December 31, 2021	$	358,035	$	(32,986)	$	325,049	$	2,383	$	327,432
Net loss	(3,930)		—		(3,930)		(212)		(4,142)
Other comprehensive income	—		306		306		—		306
Comprehensive loss	—		—		(3,624)		(212)		(3,836)
Net decrease in Sphere Entertainment Investment	(3,091)		—		(3,091)		—		(3,091)
Balance as of March 31, 2022	$	351,014	$	(32,680)	$	318,334	$	2,171	$	320,505
Balance as of June 30, 2022	$	33,265	$	(34,740)	$	(1,475)	$	(114)	$	(1,589)
Net income (loss)	101,080		—		101,080		(553)		100,527
Other comprehensive income	—		878		878		—		878
BCE disposition	—		—		—		667		667
Comprehensive income	—		—		101,958		114		102,072
Net decrease in Sphere Entertainment Investment	(56,980)		—		(56,980)		—		(56,980)
Balance as of March 31, 2023	$	77,365	$	(33,862)	$	43,503	$	—	$	43,503
Balance as of June 30, 2021	$	529,500	$	(33,598)	$	495,902	$	2,750	$	498,652
Net loss	(61,932)		—		(61,932)		(579)		(62,511)
Other comprehensive income	—		918		918		—		918
Comprehensive loss	—		—		(61,014)		(579)		(61,593)
Net decrease in Sphere Entertainment Investment	(116,554)		—		(116,554)		—		(116,554)
Balance as of March 31, 2022	$	351,014	$	(32,680)	$	318,334	$	2,171	$	320,505

See accompanying notes to the unaudited condensed combined financial statements.

6

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

All amounts included in the following Notes to Condensed Combined Financial Statements (unaudited) are presented in thousands, except as otherwise noted.

Note 1. Description of Business and Basis of Presentation

Description of Business

The Company is a live entertainment company comprised of iconic venues and marquee entertainment content. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences. The Company is comprised of one reportable segment. As of March 31, 2023, there have been no changes to the reportable segment structure of the Company. See Note 1. to the Company’s audited combined financial statements and notes thereto as of June 30, 2022 and 2021 and for the three years ended June 30, 2022, 2021 and 2020 (“Audited Combined Annual Financial Statements”) included in the Company’s Information Statement, dated April 3, 2023 (the “Information Statement”), filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 4, 2023 for additional information regarding the details of the Company’s business.

Spin-off Transaction

On April 20, 2023 (the “MSGE Spinco Distribution Date”), Sphere Entertainment Co., formerly Madison Square Garden Entertainment Corp. (“Sphere Entertainment”), distributed approximately 67% of the outstanding common stock of Madison Square Garden Entertainment Corp., formerly MSGE Spinco, Inc. (“MSG Entertainment” or the “Company”), to its stockholders (the “MSGE Spinco Distribution”), with Sphere Entertainment retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of Class A common stock) (the “MSGE Retained Interest”) immediately following the MSGE Spinco Distribution. The Company owns the traditional live entertainment business previously owned and operated by Sphere Entertainment through its Entertainment business segment, excluding Sphere (which was retained by Sphere Entertainment after the MSGE Spinco Distribution Date). In the MSGE Spinco Distribution, stockholders of Sphere Entertainment received (a) one share of MSG Entertainment’s Class A common stock, par value $0.01 per share, for every share of Sphere Entertainment’s Class A common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on April 14, 2023 (the “Record Date”), and (b) one share of MSG Entertainment’s Class B common stock, par value $0.01 per share, for every share of Sphere Entertainment’s Class B common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on the Record Date. The Company’s combined statements of operations for the three and nine months ended March 31, 2023 and 2022 were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Sphere Entertainment, and are presented as carve-out financial statements, because the Company was not a standalone public company prior to the MSGE Spinco Distribution.

Advertising Sales Representation Agreement Termination

The advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) between the Company and Sphere Entertainment’s subsidiary, MSGN Holdings, L.P. (“MSG Networks”), pursuant to which the Company had the exclusive right and obligation to sell MSG Networks advertising availabilities for a commission, was terminated effective as of December 31, 2022. The Company recognized $0 and $8,802 of revenue from the Networks Advertising Sales Representation Agreement for the three and nine months ended March 31, 2023, respectively, and $9,621 and $17,015 of revenue for the three and nine months ended March 31, 2022, respectively. The termination of the Networks Advertising Sales Representation Agreement has impacted the operating results of the Company for the three and nine months end March 31, 2023 and will impact the operating results of the Company on a go forward basis. As a result, after December 31, 2022, the Company no longer recognizes advertising sales commission revenue or the employee costs related to the MSG Networks advertising sales agency.

Basis of Presentation

The Company reports on a fiscal year basis ending on June 30th (“Fiscal Year”). In these unaudited condensed combined interim 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 interim condensed combined financial statements of the Company (the “condensed combined financial statements”) were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of

7

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Sphere Entertainment. These financial statements reflect the combined historical results of operations, financial position and cash flows of the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, the instructions of Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”), and SEC Staff Accounting Bulletin (SAB) Topic 1-B, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity, and should be read in conjunction with the Company’s Audited Combined Annual Financial Statements. References to U.S. GAAP issued by the Financial Accounting Standards Board (“FASB”) in these footnotes are to the FASB Accounting Standards Codification, also referred to as “ASC.”

Prior to the MSGE Spinco Distribution, separate financial statements have not been prepared for the Company and it has not operated as a stand-alone business from Sphere Entertainment. The condensed combined financial statements include certain assets and liabilities that have historically been held by Sphere Entertainment or by other Sphere Entertainment subsidiaries but are specifically identifiable or otherwise attributable to the Company. The condensed combined financial statements are presented as if the Company’s businesses had been combined for all periods presented. The assets and liabilities in the condensed combined financial statements have been reflected on a historical cost basis, as immediately prior to the MSGE Spinco Distribution, all of the assets and liabilities presented were wholly owned by Sphere Entertainment and were transferred to the Company at a carry-over basis.

The condensed combined statements of operations include allocations for certain support functions that are provided on a centralized basis and not historically recorded at the business unit level by Sphere Entertainment, such as expenses related to executive management, finance, legal, human resources, government affairs, and information technology, among others. As part of the MSGE Spinco Distribution, certain corporate and operational support functions were transferred to the Company and therefore, charges were reflected in order to properly burden all business units comprising Sphere Entertainment’s historical operations. These expenses have been allocated to Sphere Entertainment on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined assets, headcount or other measures of the Company or Sphere Entertainment, which are recorded as a reduction of either direct operating expenses or selling, general and administrative expenses.

Management believes the assumptions underlying the condensed combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the condensed combined financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company is unable to quantify the amounts that it would have recorded during the historical periods on a stand-alone basis as it is not practicable to do so. See Note 15. Related Party Transactions for more information regarding allocations of certain costs from the Company to Sphere Entertainment.

Sphere Entertainment uses a centralized approach to cash management and financing of operations. Cash is managed centrally with net earnings reinvested and working capital requirements met from existing liquid funds. The Company’s cash in excess of minimum liquidity requirements under the credit facilities was available for use and was regularly “swept” historically. Cash and cash equivalents were attributed to the Company for each of the periods presented, as such cash was held in accounts legally owned by the Company. See Note 10. Credit Facilities for more information regarding the Company’s debt facilities. Transfers of cash both to and from Sphere Entertainment are included as components of Sphere Entertainment investment on the condensed combined statements of divisional equity (deficit).

Sphere Entertainment’s net investment in the Company has been presented as a component of divisional equity (deficit) in the condensed combined financial statements. Distributions made by Sphere Entertainment to the Company or to Sphere Entertainment from the Company are recorded as transfers to and from Sphere Entertainment, and the net amount is presented on the condensed combined statements of cash flows as “Net transfers to Sphere Entertainment and Sphere Entertainment’s subsidiaries.”

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 March 31, 2023 and its results of operations for the three and nine months ended March 31, 2023, and 2022, and cash flows for the nine months ended March 31, 2023 and 2022. The condensed combined balance sheet as of Fiscal Year 2022 was derived from the Audited Combined Annual

8

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Financial Statements but does not contain all of the footnote disclosures from the Audited Combined Annual Financial Statements.

The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. As a result of the production of the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”), and 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”), the Company generally earns a disproportionate share of its annual revenues in the second and third quarters of its fiscal year.

Impact of the COVID-19 Pandemic

The Company’s operations and operating results were not materially impacted by the COVID-19 pandemic during the three and nine months ended March 31, 2023, as compared to the prior year period, which was impacted by fewer ticketed events at our venues in the first half of the fiscal year due to the lead-time required to book touring acts and artists and the postponement or cancellation of select bookings at our venues (including the partial cancellation of the 2021 production of the Christmas Spectacular) during the second and third quarters of the fiscal year. See Note 1. Description of Business and Basis of Presentation in the Company’s Audited Combined Annual Financial Statements for additional information regarding the impact of the COVID-19 pandemic on the Company’s business.

It is unclear to what extent COVID-19 concerns, including new variants, could result in new government- or league-mandated capacity, other restrictions, vaccination/mask requirements, or impact the use of and/or demand for our venues, demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venues (which may lead to difficulties in staffing) or otherwise materially impact our operations.

Note 2. Summary of Significant Accounting Policies

A. Principles of Combination

All significant intracompany transactions and balances within the Company’s condensed combined businesses have been eliminated. Certain historical intercompany transactions between Sphere Entertainment and the Company have been included as components of Sphere Entertainment investment in the condensed combined financial statements, as they are considered effectively settled upon effectiveness of the MSGE Spinco Distribution and were not historically settled in cash. Certain other historical intercompany transactions between Sphere Entertainment and the Company have been classified as related party, rather than intercompany, in the condensed combined financial statements as they were historically settled in cash. Expenses related to corporate allocations from the Company to Sphere Entertainment prior to the MSGE Spinco Distribution, are considered to be effectively settled in the condensed combined financial statements at the time the transaction is recorded, with the offset recorded against Sphere Entertainment investment. See Note 15. Related Party Transactions, for further information on related party arrangements.

The Company disposed of its controlling interest in Boston Calling Events, LLC (“BCE”) on December 2, 2022 and these condensed combined financial statements reflect the results of operations of BCE until its disposition. See Note 3. Dispositions, for details regarding the disposal.

B. Use of Estimates

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

Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances

9

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s condensed combined financial statements in future periods.

C. Significant Accounting Policies

The following is an update to the Company’s Summary of Significant Accounting Policies disclosed in the Company’s Audited Combined Annual Financial Statements:

Earnings (Loss) Per Common Share

Basic earnings (loss) per common share (“EPS”) is based upon net income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. On the MSGE Spinco Distribution Date, 51,768 common shares of the Company, inclusive of 17,021 common shares related to the MSGE Retained Interest, were outstanding as of April 20, 2023. This share amount is being utilized for the calculation of basic earnings (loss) per share for both the three and nine months ended March 31, 2023 and 2022 because the Company was not a standalone public company prior to the MSGE Spinco Distribution. In addition, the computation of diluted earnings per share equals the basic earnings (loss) per common share calculation since there was no stock trading information available to compute dilutive effect of shares issuable under share-based compensation plans needed under the treasury method in accordance with ASC Topic 260, Earnings Per Share.

D. Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

No recently issued accounting pronouncements are expected to materially impact the Company's financial statements.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued Accounting Standards Update (“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 Topic 606. This standard was adopted by the Company in the first quarter of Fiscal Year 2023. The adoption of this standard had no impact on the Company’s condensed combined financial statements.

Note 3. Dispositions

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 recorded in (Loss) gains, net on dispositions in the condensed combined statements of operations.

Disposition of Corporate Aircraft

On December 30, 2022, the Company sold its owned aircraft for $20,375. In connection with the sale, the Company recognized a loss of $4,383, net of transaction costs. The loss on the aircraft disposition was recorded in (Loss) gains, net on dispositions in the condensed combined statements of operations.

Note 4. Revenue Recognition

Contracts with Customers

See Note 2. Summary of Significant Accounting Policies and Note 4. Revenue Recognition, included in the Company’s Audited Combined Annual Financial Statements for more information regarding the details of the Company’s revenue

10

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

recognition policies. All revenue recognized in the condensed combined statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606, except for revenues from the arena license agreements that require the Knicks and the Rangers to play their home games at The Garden (the “Arena License Agreements”), leases and subleases that are accounted for in accordance with ASC Topic 842.

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer for the three and nine months ended March 31, 2023 and 2022:

	Three Months Ended March 31,
	2023		2022
Event-related and entertainment offerings (a)	$	102,314	$	90,899
Sponsorship, signage and suite licenses (b)	59,724		55,609
Other (c)	7,174		16,994
Total revenues from contracts with customers	169,212		163,502
Revenues from Arena License Agreements, leases and subleases	32,017		30,486
Total revenues	$	201,229	$	193,988

	Nine Months Ended March 31,
	2023		2022
Event-related and entertainment offerings (a)	$	443,992	$	268,391
Sponsorship, signage and suite licenses (b)	167,113		113,565
Other (c)	25,637		31,881
Total revenues from contracts with customers	636,742		413,837
Revenues from Arena License Agreements, leases and subleases	66,819		61,313
Total revenues	$	703,561	$	475,150

___________

(a)    Event-related and entertainment offerings revenues are recognized at a point in time.

(b)    See Note 2. Summary of Significant Accounting Policies and Note 4. Revenue Recognition, included in the Company’s Audited Combined Annual Financial Statements for further details on the pattern of recognition of sponsorship, signage, and suite license revenues.

(c)    Primarily consists of (i) revenues from sponsorship sales and representation agreements with Madison Square Garden Sports Corp. (“MSG Sports”) and (ii) advertising commission revenues recognized under the Networks Advertising Sales Representation Agreement. The Networks Advertising Sales Representation Agreement was terminated as of December 31, 2022, as discussed in Note 1. Description of Business.

11

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

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 combined revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three and nine months ended March 31, 2023 and 2022.

	Three Months Ended March 31,
	2023		2022
Ticketing and venue license fee revenues (a)	$	45,547	$	46,867
Sponsorship and signage, suite, and advertising commission revenues (b)	78,504		79,631
Food, beverage and merchandise revenues	43,021		36,344
Other	2,140		660
Total revenues from contracts with customers	169,212		163,502
Revenues from Arena License Agreements, leases and subleases	32,017		30,486
Total revenues	$	201,229	$	193,988

	Nine Months Ended March 31,
	2023		2022
Ticketing and venue license fee revenues (a)	$	291,404	$	172,844
Sponsorship and signage, suite, and advertising commission revenues (b)	215,812		161,046
Food, beverage and merchandise revenues	124,711		78,032
Other	4,815		1,915
Total revenues from contracts with customers	636,742		413,837
Revenues from Arena License Agreements, leases and subleases	66,819		61,313
Total revenues	$	703,561	$	475,150

 _________________

(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 under the Networks Advertising Sales Representation Agreement. The Networks Advertising Sales Representation Agreement was terminated as of December 31, 2022, as discussed in Note 1. Description of Business.

Contract Balances

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

	March 31,		June 30,
	2023		2022
Receivables from contracts with customers, net (a)	$	139,719	$	106,664
Contract assets, current (b)	$	7,548	$	5,503
Deferred revenue, including non-current portion (c)	$	258,347	$	203,256

 ________________

(a)    Receivables from contracts with customers, net, which are reported in Accounts receivable, net and Related party receivables, current in the Company’s condensed combined balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of March 31, 2023 and June 30, 2022, the Company’s receivables from contracts with customers above included $9,077 and $4,163, respectively, related to various related parties. See Note 15. Related Party Transactions for further details on related party arrangements.

(b)    Contract assets, current, which are reported as Prepaid expenses and other current assets in the Company’s condensed combined balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to

12

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.

(c)    Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to the customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the three and nine months ended March 31, 2023 relating to the deferred revenue balance as of June 30,2022 was $21,196 and $175,326, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2023, the Company’s remaining performance obligations were approximately $485,000, of which 39% is expected to be recognized over the next two years and an additional 41% of the balance is expected to be recognized in the following two years. This primarily relates to performance obligations under sponsorship and suite license agreements that have original expected durations longer than one year and for which the consideration is not variable. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Note 5. Restructuring Charges

During Fiscal Year 2023, Sphere Entertainment implemented a cost reduction program which resulted in the recording of termination benefits for a workforce reduction of certain executives and employees. The Company recorded restructuring charges of $2,461 and $9,820, net of contributory credits from the Company to Sphere Entertainment for the Company’s corporate employees, for the three and nine months ended March 31, 2023, respectively. Restructuring charges are inclusive of $0 and $2,293 of share-based compensation expenses for the three and nine months ended March 31, 2023, respectively. As of March 31, 2023 and June 30, 2022, the Company had a restructuring accrual of $6,036 and $3,210, respectively, shown in accounts payable, accrued and other current liabilities and divisional equity (deficit).

For Fiscal Year 2022, Sphere Entertainment underwent organizational changes to further streamline operations. These measures included termination of certain executive and management level functions. The Company recorded restructuring charges of $5,171, net of contributory credits from the Company to Sphere Entertainment for the Company’s corporate employees, for the three and nine months ended March 31, 2022. Restructuring charges are inclusive of $1,612 of share-based compensation expenses for the three and nine months ended March 31, 2022.

Note 6. Equity Investments With Readily Determinable Fair Value

As of March 31, 2023, the Company held investments of (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”.

The fair value of the Company’s investments in Class A common stock of Townsquare and Class A common stock of DraftKings is 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.

13

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

The carrying fair value of these investments, which are reported under Other non-current assets in the accompanying condensed combined balance sheets as of March 31, 2023 and June 30, 2022, are as follows:

	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 Value	$	38,062	$	36,421

The following table summarizes the realized and unrealized (loss) gain on equity investments with readily determinable fair value, which is reported in Other income (expenses), net for the three and nine months ended March 31, 2023 and 2022:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Unrealized gain (loss) — Townsquare	$	2,406	$	(1,732)	$	(609)	$	129
Unrealized gain (loss) — DraftKings	5,104		(6,956)		4,916		(28,432)
Gain from shares sold — DraftKings	214		—		1,703		—
Total realized and unrealized gain (loss)	$	7,724	$	(8,688)	$	6,010	$	(28,303)
Supplemental information on realized gain:
Shares of common stock sold — DraftKings	29		—		229		—
Cash proceeds from common stock sold — DraftKings	$	550	$	—	$	4,369	$	—

Note 7. Property and Equipment, Net

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

	March 31,		June 30,
	2023		2022
Land	$	62,768	$	62,768
Buildings	998,231		995,965
Equipment	334,555		323,741
Aircraft (a)	—		38,090
Furniture and fixtures	29,308		28,976
Leasehold improvements	105,877		105,877
Construction in progress	1,240		3,139
Total Property and equipment	$	1,531,979	$	1,558,556
Less: accumulated depreciation and amortization (a)	(894,335)		(862,477)
Property and equipment, net	$	637,644	$	696,079

  ________________

(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 related accumulated depreciation of $13,689.

Depreciation and amortization expense on property and equipment was $14,798 and $45,615 for the three and nine months ended March 31, 2023, respectively, and $15,760 and $48,425, for the three and nine months ended March 31, 2022, respectively.

Note 8. Goodwill and Intangible Assets

As of March 31, 2023 and June 30, 2022, the carrying amount of goodwill was $69,041. 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

14

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

identified as of the impairment test date.

The Company’s indefinite-lived intangible assets as of March 31, 2023 and June 30, 2022 were as follows:

	March 31,		June 30,
	2023		2022
Trademarks	$	61,881	$	61,881
Photographic related rights	1,920		1,920
Total indefinite-lived intangible assets	$	63,801	$	63,801

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

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

March 31, 2023	Gross		Accumulated Amortization		Net
Other intangibles (b)	$	4,217	$	(4,217)	$	—
Total amortizable intangible assets	$	4,217	$	(4,217)	$	—

June 30, 2022	Gross		Accumulated Amortization		Net
Trade names (a)	$	2,530	$	(2,169)	$	361
Festival rights (a)	8,080		(6,926)		1,154
Other intangibles	4,217		(4,094)		123
Total amortizable intangible assets	$	14,827	$	(13,189)	$	1,638

  ________________

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

(b)    The Other intangibles were fully amortized.

Amortization expense for intangible assets was $0 and $754 for the three and nine months ended March 31, 2023, respectively, and $247 and $741 for the three and nine months ended March 31, 2022, respectively.

Note 9. Commitments and Contingencies

Commitments

See Note 13. Commitments and Contingencies, included in the Company’s Audited Combined Annual Financial Statements 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 $21,422 of contractual obligations.

During the nine months ended March 31, 2023, the Company’s off-balance sheet commitments increased by a total of $6,478 of contractual obligations offset by an immaterial decrease in marketing partnerships agreement-related commitments. The increase in contractual obligations primarily relates to future performances at The Garden. See Note 10. Credit Facilities for details of the principal repayments required under the Company’s various credit facilities.

Delayed Draw Term Loan Facility

On April 20, 2023, a subsidiary of the Company, MSG Entertainment Holdings, LLC (“MSG Entertainment Holdings”), entered into a delayed draw term loan facility (the “DDTL Facility”) with Sphere Entertainment. Pursuant to the DDTL Facility, MSG Entertainment Holdings has committed to lend up to $65,000 in delayed draw term loans to Sphere Entertainment on an unsecured basis until October 20, 2024. As of the date of this filing, Sphere Entertainment has not yet drawn upon the DDTL Facility.

15

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

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 Sphere Entertainment, (a) a base rate plus an applicable margin, or (b) Term SOFR plus 0.10%, plus an applicable margin. The applicable margin is equal to the applicable margin under the National Properties Facilities (as defined below), plus 1.00% per annum.

Subject to customary borrowing conditions, the DDTL Facility may be drawn in up to 6 separate borrowings of $5,000 or more. The DDTL Facility is prepayable at any time without penalty and amounts repaid on the DDTL Facility may not be reborrowed. If drawn, Sphere Entertainment 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 Sphere Entertainment elects 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 20 trading days ending on the day on which Sphere Entertainment made such election. Sphere Entertainment shall only be permitted to use the proceeds of the DDTL Facility (i) for funding costs associated with its Sphere initiative and (ii) in connection with refinancing of the indebtedness under certain senior secured credit facilities by and among MSG Networks, MSGN Eden, LLC, Regional MSGN Holdings LLC, and certain subsidiaries of MSG Networks pursuant to a credit agreement as amended and restated on October 11, 2019.

The DDTL Facility contains certain representations and 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.

Legal Matters

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

Note 10. Credit Facilities

See Note 14. Credit Facilities, included in the Company’s Audited Combined Annual Financial Statements for more information regarding the Company’s credit facilities. The following table summarizes the outstanding balances under the Company’s credit facilities as of March 31, 2023 and June 30, 2022:

	March 31,  2023		June 30, 2022
	Principal
Current Portion
National Properties Term Loan Facility	$	16,250	$	8,125
Other debt	—		637
Current portion of long-term debt	$	16,250	$	8,762

	March 31, 2023						June 30, 2022
	Principal		Unamortized Deferred Financing Costs		Net		Principal		Unamortized Deferred Financing Costs		Net
Non-current Portion
National Properties Term Loan Facility	$	629,687	$	(13,644)	$	616,043	$	641,875	$	(16,063)	$	625,812
National Properties Revolving Credit Facility	27,100		—		27,100		29,100		—		29,100
Other long-term loan	168		—		168		—		—		—
Long-term debt, net of deferred financing costs	$	656,955	$	(13,644)	$	643,311	$	670,975	$	(16,063)	$	654,912

National Properties Facilities

General. On June 30, 2022, MSG National Properties, LLC (“MSG National Properties”), Sphere Entertainment Group, LLC

16

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

(formerly known as MSG Entertainment Group, LLC and referred to herein as “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 (as amended, the “National Properties Credit Agreement”), providing for a five-year, $650,000 senior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year, $100,000 revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Facilities”). As of March 31, 2023 outstanding letters of credit were $7,992 and the remaining balance available under the National Properties Revolving Credit Facility was $64,908.

Interest Rates. Borrowings under the current National Properties Facilities bear interest at a floating rate, which at the option of MSG National Properties may be either (a) a base rate plus an applicable margin ranging from 1.50% to 2.50% per annum, determined based on the total leverage ratio of MSG National Properties and its restricted subsidiaries (the “National Properties Base Rate”), or (b) 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 Facilities as of March 31, 2023 was 7.41%.

Principal Repayments. Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans under the National Properties Facilities and terminate commitments under the National Properties Revolving Credit Facility, at any time, in whole or in part, subject only to customary breakage costs in the case of prepayment of Term SOFR loans. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments beginning with the fiscal quarter ending March 31, 2023, in an aggregate amount equal to 2.50% per annum (0.625% per quarter), stepping up to 5.00% 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 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 March 31, 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. As of March 31, 2023, all obligations under the National Properties Facilities were guaranteed by Sphere Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other

17

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

than the subsidiaries that own The Garden and certain other excluded subsidiaries (the “Subsidiary Guarantors”). In connection with the MSGE Spinco Distribution, on April 18, 2023, the National Properties Credit Agreement was amended to change the parent guarantor from Sphere Entertainment Group to MSG Entertainment Holdings, the direct parent of MSG National Properties.

All obligations under the National Properties Facilities, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Garden or the leasehold interests in Radio City Music Hall and the Beacon Theatre.

Interest payments and loan principal repayments made by the Company under the National Properties Credit Agreement were as follows:

	Interest Payments				Loan Principal Repayments
	Nine Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
National Properties Term Loan Facility	$	35,283	$	34,917	$	6,063	$	4,875

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

	March 31, 2023				June 30, 2022
	Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value
Liabilities:
National Properties Facilities	$	673,037	$	666,307	$	679,100	$	679,100
Other debt	168		168		637		637
Total Long-term debt	673,205		666,475		679,737		679,737

   ________________

(a)    The total carrying value of the Company’s financial instruments as of March 31, 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 $13,644 and $16,063, 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 Plans

Sphere Entertainment sponsors several pension, savings and postretirement benefit plans including the defined benefit pension plans (“Pension Plans”), postretirement benefit plan (“Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Entertainment Group, LLC Excess Savings Plan (collectively, the “Savings Plans”), and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”). Certain of these Pension Plans and the Postretirement Plan, such as the Cash Balance Plan and Excess Plans, historically included participants of the Company as well as Sphere Entertainment and MSG Sports (“Shared Plans”). Other plans, such as the Union Plan, only included participants of the Company and not of MSG Sports and Sphere Entertainment (“Direct Plan”). See Note 15. Pension Plans and Other Postretirement Benefit Plans, included in the Company’s Audited Combined Annual Financial Statements for more information regarding these plans.

Defined Benefit Pension Plans and Postretirement Benefit Plan

For the historical periods, Sphere Entertainment was the legal sponsor of the Pension Plans and Postretirement Plan. For purposes of the condensed combined financial statements, it was determined that these plans’ assets and liabilities were attributable to the Company. Therefore, the condensed combined financial statements reflect the full impact of the Shared Plans

18

MADISON SQUARE GARDEN ENTERTAINMENT CORP.

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

and the Direct Plan on both the condensed combined statements of operations and condensed combined balance sheets. The pension expense and liabilities related to employees of other Sphere Entertainment businesses participating in the Shared Pension Plans and Postretirement Plan were immaterial for the three and nine months ended March 31, 2023 and 2022.

The following table presents components of net periodic benefit cost for the Pension Plans and Postretirement Plan included in the accompanying condensed combined statements of operations for the three and nine months ended March 31, 2023 and 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 income (expense), net.