Sphere Entertainment Co. (SPHR)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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 our future operating and future financial performance, including (i) the ability of MSG Networks to successfully pursue a work-out with the lenders of its existing debt, (ii) the success of Sphere and The Sphere Experience, (iii) timing and costs of new venue construction and Sphere immersive productions content, (iv) our ability to reduce or defer certain discretionary capital projects, (v) our plans for possible additional debt financing and (vi) our execution of the strategy for and the success of MSG Networks’ DTC and authenticated streaming product, MSG+. 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 MSG Networks’ ability to successfully pursue a work-out with the lenders of its existing debt, and if successful, the terms of such work-out), the implications of a default under those credit facilities, our ability to make payments on our 3.50% Convertible Senior Notes (as defined below) and our ability to obtain additional financing, to the extent required, on terms favorable to us or at all;

•the popularity of The Sphere Experience, as well as our ability to continue to attract advertisers and marketing partners, and audiences to attend, and artists to perform at, residencies, concerts and other events at Sphere in Las Vegas;

•the successful development of The Sphere Experience and related original immersive productions and the investments associated with such development, as well as investment in personnel, content and technology for Sphere;

•our ability to successfully design, construct, finance and operate new Sphere venues, and the investments, costs and timing associated with those efforts, including obtaining financing, the impact of inflation and any construction delays and/or cost overruns;

•our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary;

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

•the demand for MSG Networks programming among Distributors and the number of 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 successfully execute MSG Networks’ strategy for its DTC and authenticated streaming product, MSG+, the success of such offering and our ability to adapt to new content distribution platforms or changes in consumer behavior resulting from emerging technologies;

•the ability of our Distributors to 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;

•MSG Networks’ ability to renew or replace its media rights agreements with professional sports teams and its ability to perform its obligations thereunder;

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

•general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have significant business activities;

•the demand for advertising and marketing partnership offerings at Sphere and advertising and viewer ratings for our networks;

45

•competition, for example, from other venues (including the construction of new competing venues) and other regional sports and entertainment offerings;

•our ability to effectively manage any impacts of future pandemics or public health emergencies, 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 of events by third-parties or the Company as a result of future pandemics, 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 of potential attendees or reduced tourism;

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

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

•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 the NHL, artists or employees involved in our productions or other work stoppages that may impact us or our business partners;

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

•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 Sphere or MSG Networks businesses 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 venue;

•the level of our capital expenditures and other investments (and any impairment charges related thereto);

•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 and remedy any future material weaknesses;

•the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;

•the impact of governmental regulations or laws, changes in these regulations or laws or how those regulations and laws are interpreted, as well as our ability to maintain necessary permits, licenses and easements;

•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 performance by our affiliated entities of their obligations under various agreements with us, as well as our performance of our obligations under such agreements and ongoing commercial arrangements;

•the tax-free treatment of the MSGE Distribution and the distribution from MSG Sports in 2020; and

•the additional factors described under “Part I — Item 1A. Risk Factors” included in this Form 10-K.

46

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements to actual results or to changes in our expectations.

Introduction

This MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations.

Our MD&A is organized as follows:

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

Results of Operations. This section provides an analysis of our results of operations for Fiscal Years 2024, 2023 and 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, as well as an analysis of our cash flows for Fiscal Years 2024, 2023 and 2022. The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity, our contractual obligations and off balance sheet arrangements that existed at June 30, 2024.

Seasonality of Our Business. This section discusses the seasonal performance of our business.

Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section cross-references a discussion of critical accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. Our critical accounting policies and recently issued accounting pronouncements, are discussed in Items 7 and 8, respectively, of this Form 10-K.

Business Overview

The Company is a premier live entertainment and media company comprised of two reportable segments, Sphere and MSG Networks. Sphere is a next-generation entertainment medium, and MSG Networks operates two regional sports and entertainment networks, as well as a DTC and authenticated streaming product.

Sphere: This segment reflects SphereTM, a next-generation entertainment medium powered by cutting-edge technologies to create multi-sensory experiences at an unparalleled scale. The Company’s first Sphere opened in Las Vegas on September 29, 2023. The venue can accommodate up to 20,000 guests and can host a wide variety of events year-round, including The Sphere ExperienceTM, which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and corporate events. Production efforts are supported by Sphere StudiosTM, an immersive content studio dedicated to creating multi-sensory experiences exclusively for Sphere. Sphere Studios, is home to a team of creative, production, technology and software experts who provide full in-house creative and production services. The studio campus in Burbank includes a 68,000-square-foot development facility, as well as Big Dome, a 28,000-square-foot, 100-foot high custom dome, with a quarter-sized version of the screen at Sphere in Las Vegas, that serves as a specialized screening, production facility, and lab for content at Sphere. The entire exterior surface of Sphere, referred to as the ExosphereTM, is covered with nearly 580,000 square feet of fully programmable LED paneling, creating the largest LED screen in the world and an impactful display for artists, brands and partners.

47

MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its DTC streaming product, MSG+. 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 exclusive live local games and other programming of the Knicks of the NBA and the Rangers, the Islanders, the Devils and the Sabres of the NHL, as well as significant coverage of the Giants and the Bills of the NFL.

Description of Our Segments

Sphere

Revenue Sources — Sphere

The Sphere segment earns revenue from several primary sources:

•ticket sales to our audiences for The Sphere Experience,

•license fees for our venue paid by third-party promoters or licensees in connection with events that we do not produce or promote/co-promote,

•sponsorships, signage and Exosphere advertising,

•suite license fees at Sphere,

•facility and ticketing fees,

•concessions, and

•the sale of merchandise.

The amount of revenue and expense recorded for a given event depends to a significant extent on whether the Company is promoting or co-promoting the event or is licensing the venue to a third party.

For Fiscal Year 2024, the Sphere segment represented approximately 48.4% of our consolidated revenues.

Ticket Sales and Suite Licenses

For The Sphere Experience we recognize revenues from the sale of tickets to our audiences. We sell tickets to the public through our box office, via our websites and ticketing agencies. The amount of revenue we earn from ticket sales depends on the number of shows and the mix of events that we promote, the available venue capacity, the extent to which we can sell to fully utilize the capacity, and our ticket prices.

Sphere in Las Vegas has 23 premium suites. Suite licenses at Sphere in Las Vegas are generally sold to corporate customers, including some with multi-year licenses with annual escalators.

Under standard suite licenses, the licensees pay an annual license fee, which varies depending on the location of the suite. The license fee includes, for each seat in the suite, tickets for events at Sphere in Las Vegas for which tickets are sold to the general public, subject to certain exceptions. In addition, suite holders separately pay for food and beverage service in their suites at Sphere in Las Vegas.

Venue License Fees

For entertainment events held at Sphere that we do not produce, promote or co-promote, we typically earn revenue from venue license fees charged to the third-party promoter or producer of the event (including live entertainment, marquee sporting and corporate events). The amount of license fees we charge varies by the size of the production and the number of days utilized, among other factors. Our fees typically include both the cost of renting Sphere in Las Vegas and costs for providing event staff, such as front-of-house and back-of-house staff, including stagehands, electricians, laborers, box office staff, ushers and security as well as production services such as staging, lighting and sound.

Sponsorship, Signage and Exosphere Advertising

We earn (or may in the future earn) revenues through the sale of advertising, signage space and sponsorship rights in connection with Sphere, The Sphere Experience and third-party live entertainment events, including advertising displayed on the Exosphere.

48

Sponsorship agreements may require us to use the name, logos and other trademarks of sponsors in our advertising and in promotions for Sphere, The Sphere Experience and other live entertainment events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to use the name, logos and other trademarks of Sphere, The Sphere Experience, and other events in connection with their own advertising and in promotions in our venue or in the community.

Facility and Ticketing Fees

For all public and ticketed events held in Sphere in Las Vegas we also earn additional revenues on substantially all tickets sold, whether we promote/co-promote the event or license the venue to a third party. These revenues are earned in the form of certain fees and assessments, including the facility fees we charge.

Concessions

We sell food and beverages during substantially all events held at Sphere in Las Vegas. In addition to concession-style sales of food and beverages, which represent the majority of our concession revenues, we also generate revenue from catering for our suites at Sphere in Las Vegas.

Merchandise

We earn revenues from the sale of merchandise related to The Sphere Experience and other live entertainment events that take place at Sphere. The majority of our merchandise revenues are generated through on-site sales during performances of The Sphere Experience and other live events. Typically, revenues from our merchandise sales at our non-proprietary events relate to sales of merchandise provided by the artist, the producer or promoter of the event and are generally subject to a revenue sharing arrangement and are generally recorded on a net basis (as agent).

See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding our accounting policies on revenue recognition.

Expenses — Sphere

The Sphere segment incurs expenses related to day-of-event costs associated with events, costs to produce The Sphere Experience and costs associated with the promotion of events through various advertising campaigns, including production costs for Exosphere advertising. Additionally, it incurs corporate and supporting department operating costs, including charges under the transition services agreement with MSG Entertainment (the “MSGE TSA”), and other operating expenses such as insurance, utilities, repairs and maintenance, labor related to the overall management of the Sphere segment, non-capitalizable content development and technology costs associated with the Company’s Sphere initiative, and depreciation and amortization expense related to certain corporate property, equipment and leasehold improvements.

Day-of-Event Costs

For days in which the Company promotes an event or licenses Sphere in Las Vegas to a third-party promoter under a license fee arrangement, the event is charged the variable costs associated with such event, including box office staff, stagehands, ticket takers, ushers, security, and other similar expenses. In situations where we license Sphere in Las Vegas to a third-party promoter under a license fee arrangement, day-of-event costs are typically included in the license fees charged to the promoter.

Production Costs

The Company incurs certain costs during the production phase of original immersive productions (which are part of The Sphere Experience) 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. Production costs are generally deferred when incurred and are subsequently amortized over the run of a production, in line with the corresponding proportional revenue.

Venue Usage

The Company’s consolidated financial statements include expenses associated with the ownership, maintenance and operation of Sphere.

49

Marketing and Advertising Costs

The Company incurs significant costs promoting The Sphere Experience and other events held at Sphere through various advertising campaigns, including advertising on social and digital platforms, television, outdoor platforms and radio, and in newspapers. In light of the intense competition for entertainment events, such expenditures are a necessity to drive interest in our productions and encourage members of the public to purchase tickets to our shows.

Exosphere Advertising Costs

The Company incurs in-house and third party production costs to create content for companies to advertise on the Exosphere. Production costs are generally deferred when incurred and are subsequently expensed when the advertisement runs on the Exosphere, in line with the corresponding proportional revenue.

Other Expenses

The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses. Operating expenses also include corporate overhead costs and venue operating expenses. Venue operating expenses include the non-event related costs of operating Sphere, and include such costs as real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venue.

See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding our accounting policies on direct operating expenses.

MSG Networks

Revenue Sources — MSG Networks

The MSG Networks segment generates revenues principally from distribution fees, as well as from the sale of advertising. For Fiscal Year 2024, this segment represented approximately 51.6% of our consolidated revenues.

Distribution Revenue

Distribution revenue includes both affiliation fee revenue earned from Distributors for the right to carry the Company’s networks as well as revenue earned from subscriptions and single game purchases on the Company’s DTC and authenticated streaming product. The fees we receive depend largely on the demand from subscribers for our programming.

Advertising Revenue

MSG Networks’ advertising revenue is largely derived from the sale of inventory in its live professional sports programming. As such, a disproportionate share of this revenue is earned in the second and third fiscal quarters. In certain advertising arrangements, the Company guarantees specific viewer ratings for its programming.

Expenses — MSG Networks

Direct operating expenses primarily include the cost of professional team rights acquired under media rights agreements to telecast various sporting events on our networks, and other direct programming and production-related costs of our networks.

MSG Networks is a party to long-term media rights agreements with the Knicks and the Rangers, which provide the Company with the exclusive live media rights to the teams’ games in their local markets. In addition, MSG Networks has multi-year media rights agreements with the Islanders, Devils and Sabres. The media rights acquired under these agreements to telecast various sporting events and other programming for exhibition on our networks are typically expensed on a straight-line basis over the applicable annual contract or license period. We negotiate directly with the teams to determine the fee and other provisions of the media rights agreements. Media rights fees for sports programming are influenced by, among other things, the size and demographics of the geographic area in which the programming is distributed, and the popularity and/or the competitiveness of a team.

Other direct programming and production-related costs include, but are not limited to, the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities.

50

Other Expenses

The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses. Selling, general and administrative expenses for periods prior to the MSGE Distribution include certain corporate overhead expenses that do not meet the criteria for inclusion in discontinued operations.

Prior to December 31, 2022, MSG Networks was party to an advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) with MSG Entertainment that gave MSG Entertainment the exclusive right and obligation to sell certain of MSG Networks’ advertising availabilities for a commission. The Networks Advertising Sales Representation Agreement was terminated effective as of December 31, 2022. Starting January 1, 2023, all costs incurred by MSG Networks to sell advertising (that was previously performed by MSG Entertainment) are included in selling, general, and administrative expenses.

Factors Affecting Operating Results

The operating results of our Sphere segment are largely dependent on our ability to continue to attract (i) audiences to The Sphere Experience, (ii) advertisers and marketing partners, and (iii) guests to attend, and artists to perform at, residencies, concerts and other events at our venue. The operating results of our MSG Networks segment are largely dependent on (i) the affiliation agreements MSG Networks negotiates with Distributors, (ii) the number of subscribers of certain Distributors, (iii) the success of MSG+, MSG Networks’ DTC and authenticated streaming product, and (iv) the advertising rates we charge advertisers. 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.

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 offerings (including The Sphere Experience) and programming content, which would also negatively affect concession and merchandise sales, and could lead to lower levels of advertising, sponsorship and venue signage. These conditions may also affect the number of immersive productions, concerts, residencies and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.

The Company continues to explore additional opportunities to expand our presence in the entertainment industry, both domestically and internationally. Any new investment may not initially contribute to operating income, but is intended to contribute to the success of the Company over time. Our results will also be affected by investments in, and the success of, new immersive productions.

Factors Affecting Comparability

MSGE Distribution

On April 20, 2023, the MSGE Distribution Date, the Company distributed approximately 67% of the outstanding common stock of MSG Entertainment to its stockholders, with the Company retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of MSG Entertainment Class A common stock) immediately following the MSGE Distribution. Following the MSGE Distribution Date, the Company retained the Sphere and MSG Networks businesses and MSG Entertainment now owns the traditional live entertainment business previously owned and operated by the Company through its Entertainment business segment, excluding the Sphere business. In the MSGE 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 Common Stock held of record as of the close of business, New York City time on 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, held of record as of the close of business, New York City time, on the Record Date. As of June 30, 2024, following the sales of portions of the MSGE Retained Interest and the repayment of the delayed draw term loan with MSG Entertainment using a portion of the MSGE Retained Interest, the Company no longer holds any of the outstanding common stock of MSG Entertainment.

As of April 20, 2023, the MSG Entertainment business met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3. Discontinued Operations to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding the MSGE Distribution.

51

Tao Group Hospitality Disposition

On May 3, 2023, the Company completed the sale of its 66.9% majority interest in Tao Group Hospitality to a subsidiary of Mohari Hospitality Limited, a global investment company focused on the luxury lifestyle and hospitality sectors.

Since March 31, 2023, the Tao Group Hospitality segment met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3. Discontinued Operations to the consolidated financial statements included in Item 8 of this Form 10-K for further details regarding the Tao Group Hospitality Disposition.

After giving effect to the MSGE Distribution and Tao Group Hospitality Disposition, the Company operates and reports financial information in two reportable segments: Sphere and MSG Networks.

The MSGE Distribution and Tao Group Hospitality Disposition both qualified for discontinued operations presentation under accounting principles generally accepted in the United States of America (“GAAP”) during Fiscal Year 2023. As such, the Company’s historical results for all periods presented have been recast to exclude the operations of each disposed business. In addition, results from continuing operations for these periods include certain corporate overhead expenses that the Company did not incur in the period after the completion of the MSGE Distribution and does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations. The reported financial results of the Company for the periods after the MSGE Distribution reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.

Change in Fiscal Year

On June 26, 2024, the Board of Directors approved a change in the Company’s fiscal year-end from June 30 to December 31, effective December 31, 2024. The Company plans to report its financial results for the six-month transition period of July 1, 2024 through December 31, 2024 on an Annual Report on Form 10-K/T and to thereafter file reports for the twelve-month period ending December 31 of each year, beginning with the twelve-month period ending December 31, 2025. Prior to filing the transition report, the Company will file its Quarterly Report on Form 10-Q for the quarter ending September 30, 2024.

52

Results of Operations

Comparison of the Fiscal Year Ended June 30, 2024 versus the Fiscal Year Ended June 30, 2023

Consolidated Results of Operations

The table below sets forth, for the periods presented, certain historical financial information.

_________________

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

The following is a summary of changes in our segments’ operating results for Fiscal Year 2024 as compared to Fiscal Year 2023, which are discussed below under “Business Segment Results.”

Depreciation and amortization

Depreciation and amortization for Fiscal Year 2024 increased $225,778, to $256,494 as compared to Fiscal Year 2023 primarily due to assets related to Sphere in Las Vegas that were placed in service during the first quarter of Fiscal Year 2024.

Impairment and other (losses) gains, net

Impairment and other (losses) gains, net, were $121,473 for Fiscal Year 2024 as compared to other gains of $6,120 for Fiscal Year 2023. The increase in the impairment and other losses, net of $127,593 was primarily due to the Company’s decision in November 2023 to no longer pursue the development of a Sphere in the United Kingdom.

Restructuring charges

Restructuring charges for Fiscal Year 2024 were $9,486, related to termination benefits provided for certain executives and employees, as compared to restructuring charges of $27,924 for the prior year, as a result of the Company’s cost reduction program implemented during Fiscal Year 2023.

53

Interest income

Interest income for Fiscal Year 2024 increased $14,102, as compared to the prior year primarily due to higher interest rates and higher average cash and cash equivalents.

Interest expense

Interest expense for Fiscal Year 2024 increased $79,868, as compared to the prior year primarily due to (i) the Company discontinuing the capitalization of interest expense during the second quarter of Fiscal Year 2024 as assets were placed in service following the opening of the Sphere in Las Vegas in September 2023 and (ii) interest expense on the 3.50% Convertible Senior Notes, which were issued in December 2023.

Other income, net

Other income, net for Fiscal Year 2024, was $35,197, primarily due to a realized gain of $62,647 related to the settlement of litigation related to the merger between a subsidiary of the Company and MSG Networks Inc. (the “Networks Merger”), partially offset by a realized loss of $19,027 related to the sale of the remaining portion of the MSGE Retained Interest during the first quarter of Fiscal Year 2024, as compared to Other income, net $536,887 in the prior year, related to unrealized gains of $341,039 and realized gains of $204,676 associated with the Company’s partial sale of the MSGE Retained Interest.

Income taxes

Income tax benefit from continuing operations for Fiscal Year 2024 of $135,592 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) tax benefit of $60,877 related to the state rate change used to measure the deferred taxes, (ii) income tax benefit of $13,757 related to the nontaxable gain on the repayment of all amounts outstanding under the delayed draw term loan facility (the “DDTL Facility”), and (iii) tax benefit of $13,337 related to state and local taxes, partially offset by tax expense of $29,189 related to an increase in the valuation allowance.

Income tax expense from continuing operations for Fiscal Year 2023 of $103,403 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 $35,656 related to state and local taxes, (ii) tax expense of $4,814 related to nondeductible officers’ compensation, and (iii) tax expense related to excess share based compensation of 4,678, partially offset by a decrease in the valuation allowance of $2,053.

See Note 17. Income Taxes to the consolidated financial statements included in Item 8 of this Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.

Adjusted operating income (loss) (“AOI”)

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

(ii) amortization for capitalized cloud computing arrangement costs,

(iii) share-based compensation expense,

(iv) restructuring charges or credits,

(v) merger and acquisition-related costs, net of insurance recoveries,

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

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

(viii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan.

See Note 19. Segment Information to the consolidated financial statements included in Item 8 of this Form 10-K for further discussion on the definition of AOI.

The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance 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 provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the

54

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 AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. AOI 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 AOI measures as the most important indicators of its business performance, and evaluates management’s effectiveness with specific reference to these indicators.

AOI 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 AOI 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 AOI.

The following is a reconciliation of operating loss to adjusted operating income (loss):

_________________

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

(a)For periods through the MSGE Distribution, share-based compensation includes expenses related to corporate employees that the Company does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations.

Adjusted operating income (loss) for Fiscal Year 2024 increased $203,251 to $80,731 as compared to Fiscal Year 2023. The net increase was attributable to the following:

55

Business Segment Results

Sphere

The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating loss for the Company’s Sphere segment.

_________________

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

Revenues

Revenues increased $494,549 from $2,610 for Fiscal Year 2023 to $497,159 for Fiscal Year 2024. The net increase was attributable to the following:

The increase in revenues for The Sphere Experience was due to the October 6, 2023 debut of The Sphere Experience featuring Postcard From Earth, with 657 performances taking place during Fiscal Year 2024, generating average revenues of approximately $408 per performance.

The increase in event-related revenues was primarily due to revenues from concerts and, to a lesser extent, revenues from one corporate keynote event and two marquee sporting events held at Sphere in Las Vegas.

The increase in revenues from sponsorship, signage, Exosphere advertising and suite license fee revenues primarily reflects advertising campaigns on the venue’s Exosphere, which began in September 2023, and, to a lesser extent, suite license fee revenues, which reflects the opening of Sphere in Las Vegas on September 29, 2023.

56

Direct operating expenses

Direct operating expenses increased $199,762 from $5,545 for Fiscal Year 2023 to $205,307 for Fiscal Year 2024. The net increase was primarily attributable to the following:

The increase in direct operating expenses for The Sphere Experience reflects expenses associated with 657 performances of The Sphere Experience featuring Postcard From Earth taking place during Fiscal Year 2024, equating to average direct operating expenses of approximately $125 per performance.

The increase in event-related direct operating expenses was primarily due to expenses from concerts and, to a lesser extent, expenses from one corporate keynote event and two marquee sporting events held at Sphere in Las Vegas.

The increase in venue operating expenses reflects the opening of Sphere in Las Vegas on September 29, 2023.

The increase in direct operating expenses from sponsorship, signage, Exosphere advertising, and suite license fees primarily reflects expenses related to advertising campaigns on the venue’s Exosphere, which began in September 2023.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $67,379, or 21%, for Fiscal Year 2024 to $393,039 as compared to Fiscal Year 2023. The increase was primarily due to the impact of the MSGE TSA, higher employee compensation and related benefits, and other cost increases.

The overall increase was partially offset by the absence of certain corporate expenses that were included in the results for the pre-MSGE Distribution period (July 1, 2022 through April 20, 2023) in Fiscal Year 2023. While the Company did not incur these corporate costs after the MSGE Distribution Date (April 20, 2023) and does not expect to incur these corporate costs in future periods, they did not meet the criteria for inclusion in discontinued operations for all periods prior to the MSGE Distribution Date.

Depreciation and amortization

Depreciation and amortization for Fiscal Year 2024 increased $224,200, to $248,248 as compared to Fiscal Year 2023 primarily due to assets related to Sphere in Las Vegas that were placed in service during the first quarter of Fiscal Year 2024.

Restructuring charges

Restructuring charges for Fiscal Year 2024 were $9,476 related to termination benefits provided for certain executives and employees, as compared to restructuring charges of $23,136 for the prior year, as a result of the Company’s cost reduction program implemented during Fiscal Year 2023.

Operating loss

Operating loss for Fiscal Year 2024 increased $110,834 to $480,384 as compared to an operating loss of $369,550 in Fiscal Year 2023. The increased operating loss was primarily due to the increase in direct operating expenses, selling, general and administrative expenses, higher depreciation and amortization, and an increase in impairment and other losses, net, offset by an increase in revenues and a decrease in restructuring charges.

Adjusted operating loss

Adjusted operating loss for Fiscal Year 2024 decreased $230,866 to $61,543 as compared to Fiscal Year 2023. The decreased adjusted operating loss was primarily due to an increase in revenues, partially offset by an increase in direct operating expenses and selling, general and administrative expenses (excluding share-based compensation expense and merger and acquisition related costs, net of insurance recoveries).

57

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.

_________________

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

(a)    As a result of the MSGE Distribution on April 20, 2023 (which is presented as discontinued operations under GAAP), prior period results of the MSG Networks segment have been recast to exclude expenses of approximately $8,800 for Fiscal Year 2023, related to the MSG Networks’ Advertising Sales Representation Agreement with MSG Entertainment, which was terminated effective as of December 31, 2022. A portion of these expenses were absorbed directly by MSG Networks following the termination of the advertising sales representation agreement and are reflected in MSG Networks’ results beginning January 1, 2023.

Revenues

Revenues for Fiscal Year 2024 decreased $41,491, or 7%, to $529,730 as compared to the prior year. The changes in revenues were attributable to the following:

In June 2023, MSG Networks introduced MSG+, a DTC and authenticated streaming product, which allows subscribers to access MSG Network and MSG Sportsnet as well as on demand content across various devices. MSG+ is available on a free, authenticated basis to subscribers of participating Distributors (including all of MSG Networks’ major Distributors), as well as for purchase by viewers on a DTC basis through monthly and annual subscriptions, as well as single game purchases. As a result, (i) distribution revenue as presented above includes both affiliation fee revenue earned from Distributors for the right to carry the Company’s networks as well as revenue earned from subscriptions and single game purchases on MSG+; (ii) advertising revenue as presented above includes the impact of MSG+ advertising revenue; and (iii) total subscribers as discussed below includes both subscribers of Distributors as well as monthly and annual subscribers of MSG+.

For Fiscal Year 2024, distribution revenue decreased $42,551, primarily due to a decrease in subscribers of approximately 12.5%, and the absence of a favorable affiliate adjustment of approximately $2,300 recorded in the prior year, partially offset by the impact of higher affiliation rates in the current year period.

For Fiscal Year 2024, advertising revenue increased $1,622, primarily due to higher advertising revenue related to MSG+, partially offset by lower per-game advertising revenue related to live professional sports telecasts on the linear networks and lower advertising revenue from branded content.

58

Direct operating expenses

For Fiscal Year 2024, direct operating expenses increased $5,851, or 2%, to $342,517 as compared to the prior year. The changes were attributable to the following:

For Fiscal Year 2024, other programming and production costs increased $3,774 primarily due to the impact of MSG+ in the current year periods, partially offset by other net cost decreases.

For Fiscal Year 2024, right fees expense increased $2,077 primarily due to the impact of annual contractual rate increases, substantially offset by reductions resulting from fewer NBA and NHL games made available to MSG Networks for exclusive broadcast.

Selling, general and administrative expenses

For Fiscal Year 2024, selling, general and administrative expenses decreased $86,668, to $39,814 as compared to the prior year primarily due to (i) lower professional fees of $59,221 inclusive of litigation-related insurance recoveries associated with the Networks Merger in the current year, (ii) lower advertising and marketing costs of $10,625, and (iii) lower employee compensation and related benefits of $8,891.

Operating income

For Fiscal Year 2024, operating income increased $42,635, or 44%, to $139,143 as compared to the prior year. The increase in operating income was primarily due to the decrease in selling, general and administrative expenses, partially offset by the decrease in revenues and to a lesser extent, the increase in direct operating expenses.

Adjusted operating income

For Fiscal Year 2024, adjusted operating income decreased $27,615, or 16%, to $142,274 as compared to the prior year, primarily due to the decrease in revenues and, to a lesser extent, the increase in direct operating expenses, partially offset by the decrease in selling, general and administrative expenses (excluding share-based compensation expense and merger and acquisition related costs).

Comparison of the Fiscal Year Ended June 30, 2023 versus the Fiscal Year Ended June 30, 2022

Analysis of our results of operations for Fiscal Year 2023, including a comparison of Fiscal Year 2023 to Fiscal Year 2022, is included in the Company’s Annual Report on Form 10-K for Fiscal Year 2023, filed on August 22, 2023.

59

Liquidity and Capital Resources

Sources and Uses of Liquidity

As of June 30, 2024, the Company’s unrestricted cash and cash equivalents balance was $559,757, as compared to $680,575 as of March 31, 2024. Included in unrestricted cash and cash equivalents as of June 30, 2024 was (1) $72,619 in advance cash proceeds primarily from ticket sales, a majority of which the Company expects to pay to artists and promoters, and (2) $117,807 of cash and cash equivalents at MSG Networks, which is not available for distribution to the Company in order to maintain compliance with the covenants under the MSG Networks Credit Facilities (as defined below) (which, for the avoidance of doubt, remain available to be used in connection with the work-out of such facilities as discussed below). In addition, as of June 30, 2024, the Company had $417,087 of accounts payable, accrued and other current liabilities, including $156,234 of capital expenditure accruals primarily related to Sphere construction (a significant portion of which is in dispute and which the Company does not expect to pay).

Our primary sources of liquidity are cash and cash equivalents and cash flows from the operations of our businesses. The Company’s uses of cash over the next 12 months beyond the issuance date of the accompanying consolidated financial statements included in Item 8 of this Form 10-K (the “issuance date”) and thereafter are expected to be substantial and include working capital-related items (including funding our operations), capital spending (including the creation of additional original content for Sphere), required debt service payments, payments we expect MSG Networks to make in connection with the work-out of its indebtedness, and investments and related loans and advances that we may fund from time to 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 our businesses, 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, market conditions could adversely impact our ability to do so at that time.

Our ability to have sufficient liquidity to fund our operations and refinance our indebtedness is dependent on the ability of Sphere to generate significant positive cash flow. Although Sphere has been embraced by guests, artists, promoters, advertisers and marketing partners, and we anticipate that Sphere will generate substantial revenue and adjusted operating income on an annual basis over time, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform. Original immersive productions, such as Postcard From Earth, have not been previously pursued on the scale of Sphere, which increases the uncertainty of our operating expectations. To the extent that our efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may not generate the cash flows from operations necessary to fund our operations. To the extent we do not realize expected cash flows from operations from Sphere, we would have to take several actions to improve our financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending. Therefore, while we currently believe we will have sufficient liquidity from cash and cash equivalents and cash flows from operations (including expected cash flows from operations from Sphere) to fund our operations and, at a minimum, make a required quarterly amortization payment of $20,625 on the MSG Networks Credit Facilities, as described below, no assurance can be provided that our liquidity will be sufficient in the event any of the preceding uncertainties facing Sphere are realized over the next 12 months beyond the issuance date. See “Part I —Item 1A. Risk Factors — Risks Related to Our Indebtedness, Financial Condition, and Internal Control — We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business.”

The principal balance of the Company’s total debt outstanding as of June 30, 2024 was $1,383,500, including $849,750 of debt under the MSG Networks Credit Facilities which is classified as short-term on the consolidated balance sheets. Prior to maturity of the MSG Networks Credit Facilities in October 2024, MSG Networks expects to make a $20,625 required quarterly amortization payment on the MSG Networks Credit Facilities. The remaining outstanding borrowings under the MSG Networks Credit Facilities of $829,125 are scheduled to mature in October 2024, which is within one year of the issuance date. However, MSG Networks will be unable to generate sufficient operating cash flows prior to the maturity to settle the remaining outstanding borrowings under the MSG Networks Credit Facilities when they become due absent action taken by management to refinance the outstanding borrowings.

As of the issuance date, MSG Networks has not been able to finalize refinancing the MSG Networks Credit Facilities with its existing syndicate of lenders. Consequently, MSG Networks has decided to pursue a work-out of the MSG Networks Credit Facilities with its existing syndicate of lenders. The Company has been advised that a cash equity contribution from Sphere Entertainment Group to MSG Networks will be required in connection with a work-out. If a contribution is made, it is not expected to adversely impact Sphere Entertainment Co.’s ability to fund its operations.

As disclosed in Note 13. Credit Facilities and Convertible Notes, all of the outstanding borrowings under the MSG Networks Credit Facilities are guaranteed by the MSGN Guarantors (as defined below) and secured by the MSGN Collateral (as defined

60

below). In the event MSG Networks is unable to successfully refinance the MSG Networks Credit Facilities through a work-out or otherwise, the lenders could exercise their remedies under the MSG Networks Credit Facilities, which would include, but not be limited to, declaring an event of default and foreclosing on the MSGN Collateral. MSG Networks and its subsidiaries could also seek bankruptcy protection prior to the lenders exercising their rights under the MSG Networks Credit Facilities. However, as of the issuance date, MSG Networks and its subsidiaries do not intend to seek such bankruptcy protection. See “Part I —Item 1A. Risk Factors — Risks Related to Our Indebtedness, Financial Condition, and Internal Control —Although MSG Networks Is Pursuing a Work-out of Its Credit Facilities, There Can Be No Assurances That It Will Be Successful; If MSG Networks Is Unable to Refinance the MSG Networks Credit Facilities Through a Work-Out or Otherwise, the Outstanding Debt Thereunder Could Be Accelerated and the Lenders Could Foreclose Upon the MSG Networks Business.” Sphere Entertainment Co., Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the “Non-Credit Parties”) are not legally obligated to fund the outstanding borrowings under the MSG Networks Credit Facilities, nor are the assets of the Non-Credit Parties pledged as security under the MSG Networks Credit Facilities. In the event of an exercise of post-default rights and remedies, the Company believes the lenders would have no remedies or recourse against the Non-Credit Parties pursuant to the terms of the MSG Networks Credit Facilities. While this condition raises substantial doubt about the Company’s ability to continue as a going concern, for the reasons stated above, we have concluded this condition has been effectively alleviated as of the issuance date by the lenders’ right to foreclose only on the MSGN Collateral.

See Note 13. Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this Form 10-K for a discussion of the MSG Networks Credit Facilities, the LV Sphere Term Loan Facility and the 3.50% Convertible Senior Notes.

For additional information regarding the Company’s capital expenditures, including those related to Sphere in Las Vegas, see Note 19. Segment Information to the consolidated financial statements included in Item 8 of this Form 10-K.

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

Sphere

The Company opened Sphere in Las Vegas in September 2023. See “Part I — Item 1. Our Business — Sphere” in this Form 10-K. The venue has a number of revenue streams, including The Sphere Experience (which includes original immersive productions), advertising and marketing partnerships, and concert residencies, corporate and marquee sporting events, each of which the Company expects to become significant over time. As a result, we anticipate that Sphere in Las Vegas will generate substantial revenue and adjusted operating income on an annual basis over time.

In February 2018, we announced the purchase of land in Stratford, London, which we expected would become home to a future Sphere. The Company submitted planning applications to the local planning authority in March 2019. On November 21, 2023, the Company announced it no longer plans to allocate resources towards the development of a Sphere in the United Kingdom. In connection with this decision, we recorded an impairment charge of $116.5 million in the quarter ended December 31, 2023.

We will continue to explore additional domestic and international markets where we believe Sphere venues can be successful. The Company’s intention for any future venues is to utilize several options, such as joint ventures, equity partners, a managed venue model and non-recourse debt financing.

Financing Agreements

See Note 13. Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this Form 10-K for discussions of the Company’s debt obligations and various financing arrangements.

61

MSG Networks Credit Facilities

General. MSGN L.P., MSGN Eden, LLC, an indirect subsidiary of the Company and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P. (collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. have senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, the “MSGN Credit Agreement”) consisting of: (i) an initial $1,100,000 term loan facility (the “MSGN Term Loan Facility”) and (ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility” and, together with the MSGN Term Loan Facility, the “MSG Networks Credit Facilities”), each with a term of five years. Up to $35,000 of the MSGN Revolving Credit Facility is available for the issuance of letters of credit. As of June 30, 2024, 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), or (ii) adjusted Term SOFR (i.e., Term SOFR plus 0.10%) plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total leverage ratio). 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 June 30, 2024 was 7.44%.

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

Covenants. The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. As of June 30, 2024, the total leverage ratio was 5.10:1.00. 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 June 30, 2024, the interest coverage ratio was 2.25:1.00. All borrowings under the MSGN Credit Agreement are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties. As of June 30, 2024, 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 MSGN Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P.

62

LV Sphere Term Loan Facility

General. On December 22, 2022, 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 (as amended, the “LV Sphere Term Loan Facility”).

Interest Rates. Borrowings under the LV Sphere Term Loan Facility bear interest at a floating rate, which at the option of MSG LV may be either (i) a base rate plus a margin of 3.375% per annum or (ii) adjusted Term SOFR (i.e., Term SOFR plus 0.10%) plus a margin of 4.375% per annum. The interest rate on the LV Sphere Term Loan Facility as of June 30, 2024 was 9.80%.

Principal Repayments. The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity. 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 LV Sphere Term Loan Facility and related guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring Sphere Entertainment Group to maintain a specified minimum liquidity level. The debt service coverage ratio covenant began testing in the fiscal quarter ended December 31, 2023 on a historical basis and on a prospective basis. Both the historical and prospective debt service coverage ratios are required to be at least 1.35:1.00. In addition, among other conditions, MSG LV is not permitted to make distributions to Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1.00. The minimum liquidity level for Sphere Entertainment Group is set at $50,000, with $25,000 required to be held in cash or cash equivalents, and is tested as of the last day of each fiscal quarter based on Sphere Entertainment Group’s unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date.

In addition to the covenants described above, the 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 LV Sphere Term Loan Facility contains certain restrictions on the ability of MSG LV and Sphere Entertainment Group to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the LV Sphere Term Loan Facility and the related guaranty and security and pledge agreements, including the following: (i) incur additional indebtedness; (ii) make investments, loans or advances in or to other persons; (iii) pay dividends and distributions (which will restrict the ability of MSG LV to make cash distributions to the Company); (iv) change its lines of business; (v) engage in certain transactions with affiliates; (vi) amend organizational documents; (vii) merge or consolidate; and (viii) make certain dispositions.

Guarantors and Collateral. All obligations under the LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group. All obligations under the LV Sphere Term Loan Facility, including the guarantees of those obligations, are secured by all of the assets of MSG LV and certain assets of Sphere Entertainment Group including, but not limited to, MSG LV’s leasehold interest in the land on which Sphere in Las Vegas is located, and a pledge of all of the equity interests held directly by Sphere Entertainment Group in MSG LV.

3.50% Convertible Senior Notes

On December 8, 2023, the Company completed the Offering of $258,750 in aggregate principal amount of its 3.50% Convertible Senior Notes which amount includes the full exercise of the initial purchasers’ option to purchase additional 3.50% Convertible Senior Notes.

The Company used $14,309 of the net proceeds from the Offering to fund the cost of entering into the capped call transactions described below, with the remaining net proceeds from the Offering designated for general corporate purposes, including capital for Sphere-related growth initiatives. The capped call transactions met all of the applicable criteria for equity classification in accordance with ASC Subtopic 815-10-15-74(a), “Derivatives and Hedging—Embedded Derivatives—Certain Contracts Involving an Entity’s Own Equity,” and were recorded as a reduction to Equity on the Company’s consolidated statements of stockholder’s equity and consolidated balance sheets.

On December 8, 2023, the Company entered into an Indenture (the “Indenture”) with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), relating to the 3.50% Convertible Senior Notes. The 3.50% Convertible Senior Notes constitute a senior general unsecured obligation of the Company.

The 3.50% Convertible Senior Notes bear interest at a rate of 3.50% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2024. The 3.50% Convertible Senior Notes will mature on December 1, 2028, unless earlier redeemed, repurchased or converted.

63

Subject to the terms of the Indenture, the 3.50% Convertible Senior Notes may be converted at an initial conversion rate of 28.1591 shares of Class A Common Stock per $1,000 principal amount of 3.50% Convertible Senior Notes (equivalent to an initial conversion price of approximately $35.51 per share of Class A Common Stock). Upon conversion of the 3.50% Convertible Senior Notes, the Company will pay or deliver, as the case may be, cash, shares of Class A Common Stock or a combination of cash and shares of Class A Common Stock, at the Company’s election, in accordance with the Indenture. Holders of the 3.50% Convertible Senior Notes may convert their 3.50% Convertible Senior Notes at their option at any time on or after September 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 3.50% Convertible Senior Notes will also have the right to convert the 3.50% Convertible Senior Notes prior to September 1, 2028, but only upon the occurrence of specified events described in the Indenture. The conversion rate is subject to anti-dilution adjustments if certain events occur.

Prior to December 6, 2026, the 3.50% Convertible Senior Notes will not be redeemable. On or after December 6, 2026, the Company may redeem for cash all or part of the 3.50% Convertible Senior Notes (subject to certain exceptions), at its option, if the last reported sale price of the Class A Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any period of 30 consecutive trading days (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 3.50% Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date. No sinking fund is provided for the 3.50% Convertible Senior Notes.

If certain corporate events occur or the Company delivers a notice of redemption prior to the maturity date of the 3.50% Convertible Senior Notes, and a holder elects to convert its 3.50% Convertible Senior Notes in connection with such corporate event or notice of redemption, as the case may be, the Company will, under certain circumstances, increase the conversion rate for the 3.50% Convertible Senior Notes so surrendered for conversion by a number of additional shares of Class A Common Stock in accordance with the Indenture. No adjustment to the conversion rate will be made if the price paid or deemed to be paid per share of Class A Common Stock in such corporate event or redemption, as the case may be, is either less than $28.41 per share or exceeds $280.00 per share.

If a specified “Fundamental Change” (as defined in the Indenture) occurs prior to the maturity date of the 3.50% Convertible Senior Notes, under certain circumstances each holder may require the Company to repurchase all or part of its 3.50% Convertible Senior Notes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the repurchase date.

Under the Indenture, the 3.50% Convertible Senior Notes may be accelerated upon the occurrence of certain events of default. In the case of an event of default with respect to the 3.50% Convertible Senior Notes arising from specified events of bankruptcy or insolvency of the Company, 100% of the principal of and accrued and unpaid interest on the 3.50% Convertible Senior Notes will automatically become due and payable. If any other event of default with respect to the 3.50% Convertible Senior Notes under the Indenture occurs or is continuing, the Trustee or holders of at least 25% in aggregate principal amount of the then outstanding 3.50% Convertible Senior Notes may declare the principal amount of the 3.50% Convertible Senior Notes to be immediately due and payable.

On December 5, 2023, in connection with the pricing of the 3.50% Convertible Senior Notes, and on December 6, 2023, in connection with the exercise in full by the initial purchasers of their option to purchase additional 3.50% Convertible Senior Notes, the Company entered into capped call transactions with certain of the initial purchasers of the 3.50% Convertible Senior Notes or their respective affiliates and other financial institutions, pursuant to capped call confirmations. The capped call transactions are expected generally to reduce the potential dilution to the Class A Common Stock upon any conversion of the 3.50% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 3.50% Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on a cap price initially equal to approximately $42.62 per share (which represents a premium of approximately 50% over the last reported sale price of the Class A Common Stock of $28.41 per share on the NYSE on December 5, 2023), and is subject to certain adjustments under the terms of the capped call transactions.

Letters of Credit

The Company uses letters of credit to support its business operations. As of June 30, 2024, there were no borrowings or letters of credit issued and outstanding under the MSGN Revolving Credit Facility. The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted.

64

Cash Flow Discussion

As of June 30, 2024, cash, cash equivalents and restricted cash totaled $573,233, as compared to $429,114 as of June 30, 2023 and $760,312 as of June 30, 2022. The following table summarizes the Company’s cash flow activities for Fiscal Years 2024, 2023 and 2022:

Operating Activities

Net cash used in operating activities for Fiscal Year 2024 increased by $173,249 to $19,658 as compared to Fiscal Year 2023, primarily due to a net loss in the current year period driven by higher direct operating expenses and selling, general, and administrative expenses as compared to net income in the prior year, as well as changes in working capital assets and liabilities, which included fewer collections from customers and related parties, a larger amount of payments to vendors and related parties, and fewer cash collections related to deferred revenue, as compared to the corresponding prior year.

Investing Activities

Net cash used in investing activities for Fiscal Year 2024 decreased by $608,740 to $45,183 as compared to Fiscal Year 2023 primarily due to a decrease in capital expenditures and capitalized interest for Sphere in Las Vegas after the assets were placed in service during the first quarter of Fiscal Year 2024, as well as the proceeds from the sale of MSGE Retained Interest, offset by the absence of proceeds received from sales of investments and dispositions of Tao Group Hospitality, Boston Calling Events, LLC, and the corporate aircraft as compared to the corresponding prior year.

Financing Activities

Net cash provided by financing activities for Fiscal Year 2024 increased by $124,189 to $209,731 as compared to Fiscal Year 2023 primarily due to proceeds of $251,634 from the issuance of 3.50% Convertible Senior Notes, $65,000 from the DDTL Facility, and the decrease in cash transferred in connection with the MSGE Distribution, as compared to proceeds of $302,668 from the term loan issuance in the corresponding prior period.

Contractual Obligations

As of June 30, 2024, the approximate future payments under our contractual obligations are as follows:

_________________

(a)    Includes contractually obligated minimum lease payments for operating leases having an initial noncancellable term in excess of one year for various office space and equipment. These commitments are presented exclusive of the imputed interest used to reflect the payment’s present value. See Note 10. Leases to the consolidated financial statements included in Item 8 of this Form 10-K for more information.

(b)    See Note 13. Credit Facilities and Convertible Notes to the consolidated financial statements included in Item 8 of this Form 10-K for more information surrounding the principal repayments required under the credit agreements.

(c)    Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 14. Pension Plans and Other Postretirement Benefit Plan to the consolidated financial statements included in Item 8 of this Form 10-K for more information on the future funding requirements under our pension obligations.

65

Off Balance Sheet Arrangements

As of June 30, 2024, the Company has the following off balance sheet arrangements:

Seasonality of Our Business

Our MSG Networks segment generally earns a higher share of its annual revenues in the second and third quarters of its fiscal year as a result of MSG Networks’ advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming.

Recently Issued Accounting Pronouncements and Critical Accounting Estimates

Recently Issued Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Form 10-K for discussion of recently issued accounting pronouncements.

Critical Accounting Estimates

Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions.

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Management believes its use of estimates in the consolidated financial statements to be reasonable. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition - Arrangements with Multiple Performance Obligations

The Company may enter into arrangements with multiple performance obligations, such as multi-year sponsorship agreements which may derive revenues for the Company as well as MSG Entertainment and MSG Sports within a single arrangement. The Company may also derive revenue from similar types of arrangements which are entered into by MSG Entertainment or MSG Sports. Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term. The performance obligations included in each sponsorship agreement vary and may include advertising and other benefits such as, but not limited to, signage at Sphere, digital advertising, event or property specific advertising, as well as non-advertising benefits such as suite licenses and event tickets. To the extent the Company’s multi-year arrangements provide for performance obligations that are consistent over the multi-year contractual term, such performance obligations generally meet the definition of a series as provided for under the accounting guidance. If performance obligations are concluded to meet the definition of a series, the contractual fees for all years during the contract term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied.

66

The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company’s satisfaction of its respective performance obligation. The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated relative standalone selling price of the performance obligation. The Company’s process for determining its estimated standalone selling prices involves management’s judgment and considers multiple factors including company specific and market specific factors that may vary depending upon the unique facts and circumstances related to each performance obligation. Key factors considered by the Company in developing an estimated standalone selling price for its performance obligations include, but are not limited to, prices charged for similar performance obligations, the Company’s ongoing pricing strategy and policies, and consideration of pricing of similar performance obligations sold in other arrangements with multiple performance obligations.

The Company may incur costs such as commissions to obtain its multi-year sponsorship agreements. The Company assesses such costs for capitalization on a contract by contract basis. To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated customer life depending on the facts and circumstances surrounding the contract. The contract asset is amortized over the estimated useful life.

Impairment of Long-Lived and Indefinite-Lived Assets

The Company’s long-lived and indefinite-lived assets accounted for approximately 79% of the Company’s consolidated total assets as of June 30, 2024 and consisted of the following:

In assessing the recoverability of the Company’s long-lived and indefinite-lived assets when there is an indicator of potential impairment, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized as well as the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve significant uncertainties and judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived and/or indefinite-lived assets.

Goodwill

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. As of June 30, 2024, the Company had two reportable segments and two reporting units, Sphere and MSG Networks, consistent with the way management makes decisions and allocates resources to the business.

The Sphere segment’s goodwill carrying amount increased during Fiscal Year 2024 due to the acquisition of Holoplot. The goodwill balance reported on the Company’s consolidated balance sheets as of June 30, 2024 by reportable segment was as follows:

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, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

67

The estimates of the fair values 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 2024 annual impairment test. These assessments considered factors such as:

•macroeconomic conditions;

•industry and market considerations;

•cost factors;

•overall financial performance of the reporting unit;

•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 2024, the Company performed its most recent annual impairment test of goodwill for the MSG Networks reporting unit and determined that there were no impairments of goodwill as of the impairment test date. Based on the impairment test, the Company’s MSG Networks reporting unit had a sufficient safety margin, representing the excess of the estimated fair value of the reporting unit, derived from the most recent quantitative assessment, less its carrying value (including goodwill allocated to the 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.

For periods prior to the MSGE Distribution, including at the date of the annual goodwill impairment test, Sphere was included with the MSG Entertainment business in a combined reporting unit for purposes of goodwill impairment testing. No impairment of goodwill was identified for this reporting unit as of the annual impairment test date. In connection with the MSGE Distribution, the goodwill balance associated with this reporting unit was allocated between MSG Entertainment discontinued operations and Sphere based upon a relative fair value approach, resulting in $32,299 of goodwill attributed to Sphere. Goodwill attributed to the MSG Entertainment business is included in the carrying value of MSG Entertainment discontinued operations.

Other Long-Lived Assets

For other long-lived assets, including right-of-use lease assets and intangible assets that are amortized, the Company evaluates assets for recoverability when there is an indication of potential impairment. Amortizable intangible assets and other long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent from cash flows from other assets and liabilities. In determining whether an impairment of long-lived assets has occurred, the Company considers both qualitative and quantitative factors. The quantitative analysis involves estimating the undiscounted future cash flows directly related to that asset group and comparing the resulting value against the carrying value of the asset group. If the carrying value of the asset group is greater than the sum of the undiscounted future cash flows, an impairment loss is recognized for the difference between the carrying value of the asset group and its estimated fair value.

The Company has recognized intangible assets for affiliate relationships as a result of purchase accounting, and has determined that these intangible assets have finite lives. The Company also recognized intangible assets subject to amortization during Fiscal Year 2024 as a result of the acquisition of Holoplot. Refer to Note 2 Summary of Significant Accounting Policies for the estimated useful lives of the Company’s major classes of intangible assets subject to amortization as of June 30, 2024.

The useful lives of the Company’s long-lived assets are based on estimates of the period over which the Company expects the assets to be of economic benefit to the Company. In estimating the useful lives, the Company considers factors such as, but not limited to, risk of obsolescence, anticipated use, plans of the Company, and applicable laws. In light of these facts and circumstances, the Company has determined that its estimated useful lives are appropriate.

68

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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 Sphere Entertainment Co. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “Sphere Entertainment,” or the “Company”), including (i) the timing and costs of venue construction and the development of related content, (ii) our plans to refinance MSG Networks’ existing debt, (iii) the success of Sphere and The Sphere Experience, (iv) our plans for the potential disposition of the Company’s retained interest in Madison Square Garden Entertainment Corp. (“MSG Entertainment”), (v) our strategy for MSG Networks’ direct-to-consumer product, (vi) the impact of run-rate savings that could be generated by the Company’s cost reduction program, the ability to reduce or defer certain discretionary capital projects, and (viii) our plans for possible additional debt financing. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:

•the substantial amount of debt we have incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities (including refinancing the MSG Networks debt prior to its maturity in October 2024), and our ability to obtain additional financing, to the extent required, on terms favorable to us or at all;

•the popularity of The Sphere Experience, as well as our ability to attract advertisers and marketing partners, and audiences and artists to residencies, concerts and other events at Sphere in Las Vegas;

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

•the successful development of The Sphere Experience and related original immersive productions 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;

•our ability to dispose of all or a portion of the remainder of the MSGE Retained Interest (as defined below) on favorable terms due to market conditions or otherwise;

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

•the demand for MSG Networks programming among cable, satellite, fiber-optic and other platforms that distribute its networks (“Distributors”) and the number of 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 successfully execute MSG Networks’ strategy for a direct-to-consumer offering and our ability to adapt to new content distribution platforms or changes in consumer behavior resulting from emerging technologies;

•the ability of our Distributors to 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;

•MSG Networks’ ability to renew or replace its media rights agreements with professional sports teams and its ability to perform its obligations thereunder;

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

39

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

•the demand for advertising and marketing partnership offerings at Sphere and advertising and viewer ratings for our networks;

•competition, for example, from other venues (including the construction of new competing venues) and other regional sports and entertainment offerings;

•our ability to effectively manage any impacts of the COVID-19 pandemic or future pandemics or public health emergencies, 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 or future pandemics 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 and popularity of the professional sports teams whose games we broadcast on our networks;

•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 that may impact us or our business partners;

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

•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 Sphere or MSG Networks businesses 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 venue;

•the level of our capital expenditures and other investments;

•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 and remedy any future material weaknesses;

•the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;

•the impact of governmental regulations or laws, changes in these regulations or laws or how those regulations and laws are interpreted, as well as our ability to maintain necessary permits, licenses and easements;

•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;

40

•the performance by our affiliated entities of their obligations under various agreements with us, as well as our performance of our obligations under such agreements and ongoing commercial arrangements;

•the tax-free treatment of the MSGE Distribution (as defined below) and the distribution from MSG Sports in 2020;

•our ability to achieve the intended benefits of the MSGE Distribution; and

•the additional factors described under “Part I — Item 1A. Risk Factors” included in this Annual Report on Form 10-K.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements to actual results or to changes in our expectations.

MSGE Distribution

On April 20, 2023 (the “MSGE Distribution Date”), the Company distributed approximately 67% of the outstanding common stock of MSG Entertainment (the “MSGE Distribution”), with the Company retaining approximately 33% of the outstanding common stock of MSG Entertainment (in the form of MSG Entertainment Class A common stock) immediately following the MSGE Distribution (the “MSGE Retained Interest”). Following the MSGE Distribution Date, the Company retained the Sphere and MSG Networks businesses and MSG Entertainment now owns the traditional live entertainment business previously owned and operated by the Company through its Entertainment business segment, excluding the Sphere business. In the MSGE 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 (“Class A common stock”), 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 (“Class B common stock”), held of record as of the close of business, New York City time, on the Record Date. Concurrently with the MSGE Distribution, the Company entered into a delayed draw term loan (the “DDTL Facility”) with a subsidiary of MSG Entertainment that provided for a $65,000 senior unsecured delayed draw term loan facility. The DDTL Facility was fully drawn on July 14, 2023 and on August 9, 2023, the Company repaid all amounts outstanding under the DDTL Facility (including accrued interest and commitment fees) using a portion of the MSGE Retained Interest.

Following the sale of a portion of the MSGE Retained Interest and the repayment of the DDTL Facility, the Company now holds approximately 17% of the outstanding common stock of MSG Entertainment (in the form of MSG Entertainment Class A common stock), based on 49,128 total shares of MSG Entertainment common stock outstanding as of August 18, 2023.

As of April 20, 2023, the MSG Entertainment business met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3. Discontinued Operations to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding the MSGE Distribution.

Tao Group Hospitality Disposition

On May 3, 2023, the Company completed the sale of 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”).

Since March 31, 2023, the Tao Group Hospitality segment met the criteria for discontinued operations and was classified as a discontinued operation. See Note 3. Discontinued Operations to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding the Tao Group Hospitality Disposition.

41

After giving effect to the MSGE Distribution and Tao Group Hospitality Disposition, the Company operates and reports financial information in two reportable segments: Sphere and MSG Networks.

Introduction

This MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations.

Our MD&A is organized as follows:

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

Results of Operations. This section provides an analysis of our results of operations for Fiscal Years 2023, 2022, and 2021 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, as well as an analysis of our cash flows for Fiscal Years 2023, 2022, and 2021. The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity, our contractual obligations and off balance sheet arrangements that existed at June 30, 2023.

Seasonality of Our Business. This section discusses the seasonal performance of our business.

Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section cross-references a discussion of critical accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. Our critical accounting policies and recently issued accounting pronouncements, are discussed included in Items 7 and 8, respectively, of this Annual Report on Form 10-K.

Business Overview

Sphere Entertainment Co. is a premier live entertainment and media company comprised of two reportable segments, Sphere and MSG Networks. Sphere is a next-generation entertainment medium, and MSG Networks operates two regional sports and entertainment networks, as well as a direct-to-consumer and authenticated streaming product.

Sphere: This segment reflects Sphere, a next-generation entertainment medium powered by cutting-edge technologies that we believe will enable multi-sensory storytelling at an unparalleled scale. The Company’s first Sphere is expected to open in Las Vegas in September 2023. The venue can accommodate up to 20,000 guests and is expected to host a wide variety of events year-round, including The Sphere ExperienceTM, which will feature original immersive productions, as well as concerts and residencies from renowned artists, and marquee sporting and corporate events. Supporting this strategy is Sphere Studios, which is home to a team of creative, production, technology and software experts who provide full in-house creative and production services. The studio campus in Burbank includes a 68,000-square-foot development facility, as well as Big Dome, a 28,000-square-foot, 100-foot high custom dome, with a quarter-sized version of the screen at Sphere in Las Vegas, that serves as a specialized screening, production facility, and lab for content at Sphere.

MSG Networks: This segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its direct-to-consumer streaming product, MSG+. 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 exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders (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 the Buffalo Bills (the “Bills”) of the National Football League (the “NFL”).

Description of Our Segments

Sphere

Revenue Sources — Sphere

The Sphere segment has yet to generate material revenue during Sphere’s pre-opening period. See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding our accounting policies on revenue recognition.

42

Expenses — Sphere

The Sphere segment incurs non-capitalizable content development and technology costs associated with the Company’s Sphere initiative. Sphere also incurs corporate and supporting department operating costs that are attributable to Sphere development, including charges under the transition services agreement with MSG Entertainment (the “MSGE TSA”), costs associated with the promotion of events through various advertising campaigns, and non-event related operating expenses such as insurance, utilities, repairs and maintenance, labor related to the overall management of the Sphere segment and depreciation and amortization expense related to certain corporate property, equipment and leasehold improvements. See Note 2. Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details regarding our accounting policies on direct operating expenses.

MSG Networks

Revenue Sources — MSG Networks

The MSG Networks segment generates revenues principally from affiliation fees, as well as from the sale of advertising. For Fiscal Year 2023, this segment represented approximately 99.5% of our consolidated revenues.

Affiliation Fee Revenue

Affiliation fee revenue is earned from Distributors for the right to carry the Company’s networks. The fees we receive depend largely on the demand from subscribers for our programming.

Advertising Revenue

The MSG Networks’ advertising revenue is largely derived from the sale of inventory in its live professional sports programming. As such, a disproportionate share of this revenue is earned in the second and third fiscal quarters. In certain advertising arrangements, the Company guarantees specific viewer ratings for its programming.

Expenses — MSG Networks

Direct operating expenses primarily include the cost of professional team rights acquired under media rights agreements to telecast various sporting events on our networks, and other direct programming and production-related costs of our networks.

MSG Networks is a party to long-term media rights agreements with the Knicks and the Rangers, which provide the Company with the exclusive live media rights to the teams’ games in their local markets. In addition, MSG Networks has media rights agreements with the Islanders, Devils and Sabres. The media rights acquired under these agreements to telecast various sporting events and other programming for exhibition on our networks are typically expensed on a straight-line basis over the applicable annual contract or license period. We negotiate directly with the teams to determine the fee and other provisions of the media rights agreements. Media rights fees for sports programming are influenced by, among other things, the size and demographics of the geographic area in which the programming is distributed, and the popularity and/or the competitiveness of a team.

Other direct programming and production-related costs include, but are not limited to, the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities.

Other Expenses

The Company’s selling, general and administrative expenses primarily consist of administrative costs, including compensation, professional fees, advertising sales commissions, as well as sales and marketing costs, including non-event related advertising expenses. Selling, general and administrative expenses for periods prior to the MSGE Distribution include certain corporate overhead expenses that do not meet the criteria for inclusion in discontinued operations.

Prior to December 31, 2022, MSG Networks was party to an advertising sales representation agreement (the “Networks Advertising Sales Representation Agreement”) with MSG Entertainment that gave MSG Entertainment the exclusive right and obligation to sell certain of MSG Networks’ advertising availabilities for a commission. The Networks Advertising Sales Representation Agreement was terminated effective as of December 31, 2022. Starting January 1, 2023, all costs incurred by MSG Networks to sell advertising (that was previously performed by MSG Entertainment) are included in selling, general, and administrative expenses.

43

Factors Affecting Operating Results

The operating results of our Sphere segment will be largely dependent on our ability to attract audiences to The Sphere Experience, and advertisers and marketing partners, as well as guests and artists to residencies, concerts and other events at our venue. The operating results of our MSG Networks segment are largely dependent on the affiliation agreements MSG Networks negotiates with Distributors, the number of subscribers of certain Distributors, the success of our DTC product, and the advertising rates we charge advertisers. 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.

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 offerings (including The Sphere Experience) and programming content, which would also negatively affect concession and merchandise sales, and could lead to lower levels of advertising, sponsorship and venue signage. These conditions may also affect the number of immersive productions, concerts, residencies and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.

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 contribute to the success of the Company over time. Our results will also be affected by investments in, and the success of, new immersive productions.

Factors Affecting Comparability

The Company’s operations and operating results were materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities and certain professional sports leagues during Fiscal Year 2021. As a result of the shortened 2020-21 NBA and NHL seasons, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks aired full regular season telecast schedules in Fiscal Year 2022 and Fiscal Year 2023 for its five professional teams across both the NBA and NHL, and, as a result, its advertising revenue and certain operating expenses, including rights fees expense, reflect the same.

It is unclear to what extent pandemic concerns, including with respect to COVID-19 or other future pandemics, could (i) result in new government-mandated capacity or other restrictions or vaccination/mask requirements or impact the use of and/or demand for Sphere in Las Vegas, impact demand for the Company’s sponsorship and advertising assets, deter employees and vendors from working at Sphere in Las Vegas (which may lead to difficulties in staffing), deter artists from touring or (ii) result in professional sports leagues suspending, cancelling or otherwise reducing the number of games scheduled in the regular reason or playoffs, which could have a material impact on the distribution and/or advertising revenues of the MSG Networks segment, or otherwise materially impact our operations.

For more information about the risks to the Company as a result of the COVID-19 pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors — Operational and Economic Risks—Our Operations and Operating Results Were Materially Impacted by the COVID-19 Pandemic and Actions Taken in Response by Governmental Authorities and Certain Professional Sports Leagues, and a Resurgence of the COVID-19 Pandemic or Another Pandemic or Public Health Emergency Could Adversely Affect Our Business and Results of Operations.”

In addition to the above items, the MSGE Distribution and Tao Group Hospitality Disposition both qualified for discontinued operations presentation under GAAP during Fiscal Year 2023. As such, the Company’s historical results for all periods presented have been recast to exclude the operations of each disposed business. See below for further discussion.

44

Results of Operations

Comparison of the Fiscal Year Ended June 30, 2023 versus the Fiscal Year Ended June 30, 2022

Consolidated Results of Operations

The table below sets forth, for the periods presented, certain historical financial information.

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

For all periods through the MSGE Distribution, the reported financial results of the Company reflect the results of the MSG Entertainment business, previously owned and operated by the Company through its Sphere segment, as discontinued operations and for all periods through the Tao Group Hospitality Disposition, the reported financial results of the Company reflect the results of the Tao Group Hospitality segment, previously owned and operated by the Company, as discontinued operations. In addition, results from continuing operations for these periods include certain corporate overhead expenses that the Company did not incur in the period after the completion of the MSGE Distribution and does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations. The reported financial results of the Company for the periods after the MSGE Distribution reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.

The following is a summary of changes in our segments’ operating results for Fiscal Year 2023 as compared to Fiscal Year 2022, which are discussed below under “Business Segment Results.”

Depreciation and amortization

Depreciation and amortization for Fiscal Year 2023 increased $8,154, or 36%, to $30,716 as compared to Fiscal Year 2022 primarily due to an increase in depreciation of Big Dome, the Company’s creative studio in Burbank, California, due to certain assets being placed in service during Fiscal Year 2023.

45

Impairment and other gains, net

Impairment and other gains, net, were $6,120 for Fiscal Year 2023 as compared to $245 for Fiscal Year 2022. The increase in the net gain of $5,875 was primarily due to the receipt of insurance proceeds related to Big Dome, the Company’s creative studio in Burbank, California.

Restructuring charges

Restructuring charges for Fiscal Year 2023 increased $14,520, or 108%, to $27,924 as compared to Fiscal Year 2022 primarily due to termination benefits provided for a workforce reduction of certain executives and employees within the Sphere and MSG Networks segments as part of the Company’s cost reduction program implemented in Fiscal Year 2023.

Interest income

Interest income for Fiscal Year 2023 increased $8,010, as compared to the prior year period primarily due to higher interest rates.

Other income (expense), net

Other income (expense), net for Fiscal Year 2023, increased $542,405, as compared to the prior year period, primarily due to unrealized gains of $341,039 and realized gains of $204,676 associated with the Company’s retained interest in MSG Entertainment.

Income taxes

Income tax expense from continuing operations for Fiscal Year 2023 of $103,403 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 $35,656 related to state and local taxes, (ii) tax expense of $4,814 related to nondeductible officers’ compensation, and (iii) tax expense related to excess share based compensation of $4,678, partially offset by a decrease in the valuation allowance of $2,053.

Income tax benefit from continuing operations for Fiscal Year 2022 of $29,830 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 $12,759 related to nondeductible officers’ compensation, partially offset by state income tax benefit of $3,970 and a decrease in the valuation allowance of $2,200.

See Note 16. Income Taxes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.

Adjusted operating income (loss) (“AOI”)

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

(ii) amortization for capitalized cloud computing arrangement costs,

(iii) share-based compensation expense,

(iv) restructuring charges or credits,

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

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

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

(viii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan.

See Note 18. Segment Information to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on the definition of AOI.

The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance 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 provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the

46

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 AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. AOI 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 AOI measures as the most important indicators of its business performance, and evaluates management’s effectiveness with specific reference to these indicators.

AOI 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 AOI 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 AOI.

The following is a reconciliation of operating loss to adjusted operating loss: