Madison Square Garden Entertainment : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

About this update from Madison Square Garden Entertainment Corp.

Management's Discussion and Analysis of Financial Condition and Results of Operations All dollar amounts included in the following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") are presented in thousands, except as otherwise noted. This 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 success of Sphere and The Sphere Experience and development of new immersive productions content, (ii) our plans to bring Sphere to Abu Dhabi, United Arab Emirates, under a franchise model , and to National Harbor, Maryland, (iii) our ability to reduce or defer certain discretionary capital projects, (iv) our plans for possible additional debt financing, and (v) MSG Networks subscriber declines. 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 make its quarterly principal amortization payments pursuant to its term loan facility), and, if unsuccessful, the implications thereof; • our ability to make payments on our 3.50% Convertible Senior Notes (as defined below); • 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 brands, advertisers and marketing partners, audiences to attend, and artists, entertainers and athletes to perform at, residencies, concerts and other events at Sphere in Las Vegas and other future Sphere venues; • 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 provide design, construction and pre- and post-opening services to Sphere partners, including the Department of Culture and Tourism - Abu Dhabi ("DCT Abu Dhabi") in connection with Sphere Abu Dhabi TM ; • DCT Abu Dhabi's ability to complete construction of Sphere Abu Dhabi; • our ability to negotiate and execute definitive agreements for the development of a Sphere venue at National Harbor, Maryland, as well as the receipt of certain governmental incentives and approvals from Prince George's County and the State of Maryland related to the development and construction of the venue; • our ability to 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 tariffs, and any construction delays and/or cost overruns; • general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have significant business activities, including the impact of a recession or a government shutdown on our business; • geopolitical risks, including the direct and indirect impacts of foreign wars and conflicts, including the conflict with Iran and related unrest in the Middle East, on international, domestic and local economies; • 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 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, including the terms of any such renewals, as well as the impact of consolidation among Distributors; • our ability to successfully execute MSG Networks' strategy for its direct-to-consumer ("DTC") and authenticated streaming offering, MSG+ (which is included in the Gotham Sports streaming product), 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; • any adverse changes in the distribution of our networks or 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, renegotiate 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; • the demand for advertising and marketing partnership offerings at Sphere and advertising sales 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 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, force majeure events and other health and safety concerns; • the extent to which attendance at Sphere in Las Vegas or future Sphere venues 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 National Basketball Association (the "NBA") and the National Hockey League (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 (including pandemics, such as 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 and secure intellectual property rights in territories where such businesses operate and/or conduct business; • the operating and financial performance of our strategic acquisitions and investments, including those we do not control, and the impact of goodwill and other impairments with respect to businesses (including as a result of changes to the MSG Networks business); • 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 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 distribution of Madison Square Garden Entertainment Corp. ("MSG Entertainment") from the Company in 2023 and the distribution from Madison Square Garden Sports Corp. ("MSG Sports") in 2020; and • the additional factors described under "Risk Factors" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the "SEC") on February 12, 2026 (the "Form 10-K"). These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" in the Form 10-K. 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-Q 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-Q 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 Company's unaudited condensed consolidated financial statements (the "financial statements") and accompanying notes thereto included in "- Item 1. Financial Statements" of this Form 10-Q, as well as the Company's audited consolidated financial statements and notes thereto as of and for the period ended December 31, 2025 (the "Audited Consolidated Financial Statements") included in the Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations. The Company was originally organized under the laws of the State of Delaware and, on June 4, 2025, redomesticated to the State of Nevada by conversion. The Company conducts substantially all of its business activities presented in the financial statements through Sphere Entertainment Group, LLC ("Sphere Entertainment Group") and MSG Networks Inc. (together with its subsidiaries, "MSG Networks"), and each of their direct and indirect subsidiaries. Business Overview The Company is a leader in immersive experiences, technology and media and is comprised of two reportable segments, Sphere and MSG Networks. Sphere ® is an experiential medium powered by advanced technologies, and MSG Networks operates two regional sports and entertainment networks, as well as a DTC and authenticated streaming product. Sphere : This segment reflects Sphere, an experiential medium powered by advanced technologies that bring storytelling to a new level. The Company's first Sphere venue opened in Las Vegas on September 29, 2023. The entire exterior surface of Sphere, referred to as the Exosphere ® , is covered with nearly 580,000 square feet of fully programmable LED lighting, creating the largest LED screen in the world and an impactful display for artistic and branded content. Inside, the venue features a 16K x 16K interior display plane - the world's highest-resolution LED screen that wraps up, over, and around the audience creating a fully immersive visual environment. In addition, Sphere's advanced technologies include Sphere Immersive Sound TM - Sphere's proprietary audio system - as well as haptic seating and 4D environmental effects. The venue can accommodate up to 20,000 guests and hosts a wide variety of events year-round, including The Sphere Experience TM , which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and brand events (formerly referred to as corporate events). Production efforts for Sphere events are supported by Sphere Studios TM , an immersive content studio dedicated to creating multi-sensory experiences exclusively for Sphere, using proprietary technology, tools and production facilities. Sphere Studios is home to a team of creative, production, technology and software engineering 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 interior display plane at Sphere in Las Vegas, that serves as a specialized screening, production facility, and lab for content at Sphere. The Company is focused on creating a global network of Spheres. The Company is working with DCT Abu Dhabi to bring Sphere to Abu Dhabi, United Arab Emirates. In January 2026, the Company, the State of Maryland, Prince George's County, and Peterson Companies announced the Company's intent to develop a new Sphere venue at National Harbor, Maryland. 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 and authenticated streaming offering, MSG+ (which is included in the Gotham Sports streaming product). 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 of the NBA and the New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres of the NHL, as well as significant coverage of the New York Giants and the Buffalo Bills of the National Football League. Our MD&A is organized as follows: Results of Operations. This section provides an analysis of our unaudited results of operations for the three months ended March 31, 2026 and 2025 on both a (i) consolidated basis and (ii) segment basis. Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the three months ended March 31, 2026 and 2025, as well as certain contractual obligations and off-balance sheet arrangements. Seasonality of Our Business. This section discusses the seasonal performance of our business. Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company's impairment testing of goodwill. This section should be read together with our critical accounting policies, which are discussed in the Form 10-K under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Recently Issued Accounting Pronouncements and Critical Accounting Estimates" and in the notes to the Audited Consolidated Financial Statements included therein. 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, entertainers and athletes, 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 terms of MSG Networks' affiliation agreements with Distributors (including renewals thereof), (ii) the number of subscribers of MSG Networks' Distributors, (iii) the terms of MSG Networks' media rights agreements (including renewals thereof), (iv) the ability of MSG Networks to make its required debt service payments, including quarterly principal amortization payments pursuant to the terms of its term loan facility, (v) the success of MSG+, MSG Networks' DTC and authenticated streaming offering (which is included in the Gotham Sports streaming product), and (vi) the advertising rates MSG Networks charges advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games MSG Networks broadcasts on its 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 tourism and 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. Recent developments relating to geopolitical events, including, foreign wars and conflicts, as well as tariffs, have intensified concerns over the global macroeconomic environment, which has resulted in a rise in volatility across financial markets and concerns over the prospect of a U.S. recession. 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. Condensed Consolidated Results of Operations Comparison of the Three Months Ended March 31, 2026 versus the Three Months Ended March 31, 2025 The tables below set forth, for the periods presented, certain historical financial information. Three Months Ended March 31, Change 2026 2025 Amount Percentage Revenues $ 386,412 $ 280,574 $ 105,838 38 % Operating expenses: Direct operating expenses 169,647 158,323 11,324 7 % Selling, general and administrative expenses 121703 114,269 7,434 7 % Depreciation and amortization 84,367 84,229 138 - % Impairments and other losses, net 79 521 (442) (85) % Restructuring charges 3,414 1,841 1,573 85 % Operating income (loss) 7,202 (78,609) 85,811 NM Other income (expense): Loss on extinguishment of debt (2,071) - (2,071) NM Interest income 3,951 3,878 73 2 % Interest expense (8,039) (26,206) 18,167 (69) % Other expense, net (1,424) (1,340) (84) 6 % Loss from continuing operations before income taxes (381) (102,277) 101,896 (100) % Income tax benefit 4,841 20,323 (15,482) (76) % Net income (loss) $ 4,460 $ (81,954) 86,414 (105) % Less: Net income attributable to participating securities 6,053 - 6,053 NM Net loss attributable to Sphere Entertainment Co.'s stockholders $ (1,593) $ (81,954) $ 80,361 (98) % _________________ 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 the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, which are discussed below under "-Business Segment Results." Three Months Ended March 31, 2026 Changes attributable to Revenues Direct operating expenses Selling, general and administrative expenses Depreciation and amortization Impairments and other losses, net Restructuring charges Operating income (loss) Sphere segment $ 108,420 $ 28,690 $ 10,192 $ 269 $ (442) $ 832 $ 68,879 MSG Networks segment (2,582) (17,366) (2,758) (131) - 741 16,932 $ 105,838 $ 11,324 $ 7,434 $ 138 $ (442) $ 1,573 $ 85,811 Depreciation and amortization For the three months ended March 31, 2026, depreciation and amortization increased $138 as compared to the prior year period due to the increase in total property and equipment, gross in 2026 as compared to 2025. Impairments and other losses, net During the three months ended March 31, 2026, the Company recognized impairments and other losses, net of $79. During the three months ended March 31, 2025, the Company recognized impairments and other losses, net of $521 relating to fixed assets at Sphere Las Vegas that were removed from the venue and were impaired. Restructuring charges For the three months ended March 31, 2026, the Company recorded restructuring charges of $3,414, as compared to restructuring charges of $1,841 in the three months ended March 31, 2025, respectively, primarily related to termination benefits provided as part of a voluntary exit program the Company implemented during the period. Loss on extinguishment of debt For the three months ended March 31, 2026, the Company recorded a loss on extinguishment of debt of $2,071, related to the write-off of deferred financing costs in connection with the partial repayment of its 2022 LV Term Loan Facility. Interest income For the three months ended March 31, 2026, interest income increased $73 as compared to the prior year period, primarily due to higher average cash and cash equivalent balances. Interest expense For the three months ended March 31, 2026, interest expense decreased $18,167 as compared to the prior year period primarily due to (i) a reduction in the average outstanding principal balance of the MSGN Term Loan Facility as compared to the prior year period and (ii) the application of troubled debt restructuring for interest expense recognition for the MSGN Term Loan Facility as described in Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q. Other expense, net For the three months ended March 31, 2026, other expense, net increased $84 as compared to the prior year period, primarily due to smaller losses on equity method investments and foreign exchange. Income tax expense In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or expense recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis. Income tax benefit for the three months ended March 31, 2026 of $4,841 reflects an effective tax rate of 1,271%. The estimated annual effective tax rate exceeds the statutory federal tax rate of 21% primarily due to excess tax benefit related to shared-based compensation. Income tax benefit for the three months ended March 31, 2025 of $20,323 reflects an effective tax rate of 20%. The estimated annual effective tax rate is lower than the statutory federal tax rate of 21% primarily due to income tax expense related to nondeductible officer's compensation, partially offset by income tax benefit from state and local taxes. Adjusted operating income The following is a reconciliation of operating income (loss) to adjusted operating income (as defined in Note 15. Segment Information to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q) for the three months ended March 31, 2026 as compared to the prior year period: Three Months Ended March 31, Change 2026 2025 Amount Percentage Operating income (loss) $ 7,202 $ (78,609) $ 85,811 (109) % Share-based compensation 13,910 21,595 (7,685) (36) % Depreciation and amortization 84,367 84,229 138 - % Restructuring charges 3,414 1,841 1,573 85 % Impairments and other losses, net 79 521 (442) (85) % Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries 87 4,791 (4,704) (98) % Amortization for capitalized cloud computing arrangement costs 917 1,579 (662) (42) % Remeasurement of deferred compensation plan liabilities - 21 (21) (100) % Adjusted operating income $ 109,976 $ 35,968 $ 74,008 NM ________________ NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful. Adjusted operating income for the three months ended March 31, 2026 increased $74,008 as compared to the prior year period adjusted operating income of $109,976. The changes in adjusted operating income were attributable to the Company's segments as follows: Three Months Ended Changes attributable to March 31, 2026 Sphere segment $ 61,143 MSG Networks segment 12,865 $ 74,008 For a discussion of these variances, see "-Business Segment Results" below. Business Segment Results Sphere The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income for the Company's Sphere segment. Three Months Ended March 31, Change 2026 2025 Amount Percentage Revenues $ 265,965 $ 157,545 $ 108,420 69 % Operating expenses: Direct operating expenses 99,226 70,536 28,690 41 % Selling, general and administrative expenses 106,596 96,404 10,192 11 % Depreciation and amortization 82,274 82,005 269 - % Impairments and other losses, net 79 521 (442) (85) % Restructuring charges 2,673 1,841 832 45 % Operating loss $ (24,883) $ (93,762) $ 68,879 (73) % Reconciliation to adjusted operating income: Share-based compensation 13,143 19,954 (6,811) (34) % Depreciation and amortization 82,274 82,005 269 NM Restructuring charges 2,673 1,841 832 45 % Impairments and other losses, net 79 521 (442) (85) % Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries 87 988 (901) (91) % Amortization for capitalized cloud computing arrangement costs 917 1,579 (662) (42) % Remeasurement of deferred compensation plan liabilities - 21 (21) (100) % Adjusted operating income $ 74,290 $ 13,147 $ 61,143 NM ________________ NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful. Revenues For the three months ended March 31, 2026, revenues increased $108,420 as compared to the prior year period. The change in revenues was attributable to the following: Three Months Ended March 31, 2026 Increase in revenues for The Sphere Experience $ 81,673 Increase in event-related revenues 24,430 Increase in revenues from sponsorship, signage, Exosphere advertising and suite license fee revenues 1,595 Other net increases 722 $ 108,420 For the three months ended March 31, 2026, the increase in revenues for The Sphere Experience primarily reflects higher average per-show revenue due to the impact of The Wizard of Oz at Sphere, which debuted on August 28, 2025. In the current year period, The Sphere Experience reflected 209 performances of The Wizard of Oz at Sphere (which generated per-show revenue of approximately $746). In the prior year period, The Sphere Experience reflected 200 total performances, comprised of 166 performances of Postcard From Earth and 34 performances of V-U2 An Immersive Concert Film (with generated a combined per-show revenue of approximately $371). For the three months ended March 31, 2026, the increase in event-related revenues reflects (i) higher revenues from brand events, due to the impact of one additional brand event held during the three months ended March 31, 2026 and higher per-event revenues, and (ii) higher revenues from concerts, primarily due to six additional concert residency shows held at Sphere in Las Vegas during the period. For the three months ended March 31, 2026, the increase in revenues from sponsorship, signage, Exosphere advertising and suite license fees primarily reflects higher sponsorship revenues (due to increased sales of existing sponsorship inventory) and suite license fee revenues. Direct operating expenses For the three months ended March 31, 2026, direct operating expenses increased by $28,690 as compared to the prior year period. The change in direct operating expenses was attributable to the following: Three Months Ended March 31, 2026 Increase in direct operating expenses for The Sphere Experience $ 18,126 Increase in event-related direct operating expenses 10,778 Increase in venue operating expenses 3,026 Decrease in Holoplot expenses (1,942) Decrease in expenses from sponsorship, signage, Exosphere advertising, and suite license fees (1,003) Other net decreases (295) $ 28,690 For the three months ended March 31, 2026, the increase in direct operating expenses for The Sphere Experience was primarily due to higher per-show expenses, primarily due to the impact of The Wizard of Oz at Sphere, which debuted on August 28, 2025. In the current year period, The Sphere Experience reflected 209 performances of The Wizard of Oz at Sphere (which incurred per-show direct operating expenses of approximately $213). In the prior year period, The Sphere Experience reflected 200 total performances, comprised of 166 performances of Postcard From Earth and 34 performances of V-U2 An Immersive Concert Film (with incurred combined per-show direct operating expenses of approximately $130). For the three months ended March 31, 2026, the increase in event-related direct operating expenses reflects (i) higher expenses from brand events, due to an increase in per-event expenses and the impact of one additional brand event held during the current year period, and (ii) higher expenses from concerts, primarily due to an increase in the number of concert residency shows held at Sphere in Las Vegas as compared to the prior year period, partially offset by lower per-concert expenses. For the three months ended March 31, 2026, the increase in venue operating expenses was primarily related to an increase in employee compensation and benefits and repairs and maintenance expenses. Selling, general and administrative expenses For the three months ended March 31, 2026, selling, general, and administrative expenses increased $10,192 as compared to the prior year period, primarily due to the impact of mark-to-market adjustments on certain share-based compensation awards as a result of the Company's stock price appreciation during the period. Impairments and other losses, net During the three months ended March 31, 2026, the Company recognized Impairments and other losses, net of $79. During the three months ended March 31, 2025, the Company recognized Impairments and other losses, net of $521 relating to fixed assets at Sphere Las Vegas that were removed from the venue and were impaired. Depreciation and amortization For the three months ended March 31, 2026, depreciation and amortization increased $269 as compared to the prior year period primarily due to the increase in total property and equipment, gross. Restructuring charges For the three months ended March 31, 2026, the Company recognized restructuring charges of $2,673 as compared to restructuring charges of $1,841 for the three months ended March 31, 2025, primarily due to termination benefits provided as part of a voluntary exit program the Company implemented during the three months ended March 31, 2026. Operating loss For the three months ended March 31, 2026, operating loss improved by $68,879 as compared to the prior year period, primarily due to an increase in revenue, offset by an increase in direct operating expenses and selling, general and administrative expenses. Adjusted operating income For the three months ended March 31, 2026, adjusted operating income improved by $61,143 as compared to the prior year period, primarily due to an increase in revenue, partially offset by an increase in direct operating expenses and selling, general and administrative expenses. MSG Networks The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company's MSG Networks segment. Three Months Ended March 31, Change 2026 2025 Amount Percentage Revenues $ 120,447 $ 123,029 $ (2,582) (2) % Operating expenses: Direct operating expenses 70,421 87,787 (17,366) (20) % Selling, general and administrative expenses 15,107 17,865 (2,758) (15) % Depreciation and amortization 2,093 2,224 (131) (6) % Restructuring charges 741 - 741 NM Operating income $ 32,085 $ 15,153 $ 16,932 112 % Reconciliation to adjusted operating income: Share-based compensation 767 1,641 (874) (53) % Depreciation and amortization 2,093 2,224 (131) (6) % Restructuring charges 741 - 741 NM Merger, debt work-out, and acquisition-related costs, including merger-related litigation expenses, net of insurance recoveries - 3,803 (3,803) (100) % Adjusted operating income $ 35,686 $ 22,821 $ 12,865 56 % ________________ NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful. Revenues For the three months ended March 31, 2026, revenues decreased $2,582, as compared to the prior year period. The change in revenues was attributable to the following: Three Months Ended March 31, 2026 Decrease in advertising revenue $ (4,896) Increase in distribution revenue 1,773 Other net increases 541 $ (2,582) For the three months ended March 31, 2026, advertising revenue decreased $4,896 primarily due to a lower number of live regular season professional sports telecasts. On December 31, 2024, MSG Networks' affiliation agreement with Altice expired, subsequent to which the Company's programming networks were not carried by Altice from January 1, 2025 through February 21, 2025. On February 22, 2025, MSG Networks reached a multi-year renewal of the affiliation agreement and Altice resumed carriage of the Company's programming networks. Furthermore, MSG Networks has experienced significant ongoing subscriber declines and is expected to continue to experience significant subscriber declines in the future, which is expected to negatively impact MSG Networks' revenue, operating income and AOI in future periods. For the three months ended March 31, 2026, distribution revenue increased $1,773, primarily due to the absence of revenues from Altice during the non-carriage period in the prior year period, partially offset by a decrease in total subscribers of approximately 16.0% (excluding the impact of the Altice non-carriage period in the prior year period). Direct operating expenses For the three months ended March 31, 2026, direct operating expenses decreased by $17,366 as compared to the prior year period. The change in direct operating expenses was attributable to the following: Three Months Ended March 31, 2026 Decrease in rights fees expense $ (16,500) Decrease in other programming and production content costs (866) $ (17,366) On June 27, 2025, MSG Networks completed the restructuring of its credit facilities and amended certain of its media rights agreements to, among other things, effect a reduction in the annual media rights fees payable under such agreements effective as of January 1, 2025, discussed in further detail in Note 10. Credit Facilities and Convertible Notes and Note 14. Related Party Transactions to the condensed consolidated financial statements included in Part I of this Form 10-Q. For the three months ended March 31, 2026, rights fees expense decreased by $16,500, primarily reflecting reductions in media rights fees for certain professional sports teams as a result of such amendments. Although the reductions in media rights fees for the certain professional sports teams were effective as of January 1, 2025, the media rights fees recorded in the three months ended March 31, 2025 were not impacted by those amendments given that the retroactive adjustments for the 2024-25 NBA and NHL seasons were recorded during the three months ended June 30, 2025. Selling, general and administrative expenses For the three months ended March 31, 2026, selling, general and administrative expenses decreased $2,758 as compared to the prior year period, primarily due to (i) lower professional fees of $3,643, mainly due to the absence of costs associated with pursuing a work-out of the Prior MSGN Credit Facilities with its syndicate of lenders recorded in the prior year period, and (ii) lower employee compensation and related benefits of $2,283, partially offset by (iii) higher advertising and marketing costs of $2,995. Operating income For the three months ended March 31, 2026, operating income increased by $16,932 as compared to the prior year period, primarily due to a decrease in direct operating expenses and lower selling, general and administrative expenses, partially offset by a decrease in revenues. Adjusted operating income For the three months ended March 31, 2026, adjusted operating income increased by $12,865 as compared to the prior year period, primarily due to a decrease in direct operating expenses, partially offset by a decrease in revenues and the absence of merger, debt work-out and acquisition related costs, net of insurance recoveries. Liquidity and Capital Resources Sources and Uses of Liquidity The Company's primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowings under the 2026 LV Sphere Revolving Credit Facility (as defined and described below). The Company's uses of cash over the next 12 months and thereafter are expected to be substantial and include working capital-related items (including funding its operations and satisfying its accounts payable and accrued liabilities), capital spending (including the creation of additional original content for Sphere), required debt service payments (including principal amortization payments and excess cash flow payments pursuant to the MSGN Term Loan Facility), and investments, including in connection with its Sphere initiative, and related loans and advances that the Company may fund from time to time. The Company may also use cash to repurchase its common stock. The Company's decisions as to the use of its available liquidity will be based upon the ongoing review of the funding needs of its businesses, the optimal allocation of cash resources, and the timing of cash flow generation. To the extent that the Company desires to access alternative sources of funding through the capital and credit markets, market conditions could adversely impact its ability to do so at that time. As of March 31, 2026, the Company's unrestricted cash and cash equivalents balance was $629,108, as compared to $507,776 as of December 31, 2025. Included in unrestricted cash and cash equivalents as of March 31, 2026 was (1) $380,923 in advance cash proceeds primarily from ticket sales, a portion of which the Company expects to pay to artists and promoters, and (2) $32,979 of cash and cash equivalents at MSG Networks, which were not available for distribution to the Company pursuant to the terms of the A&R MSGN Credit Agreement. In April 2026, MSGN L.P. made a $17,837 mandatory cash sweep payment based on excess cash as of March 31, 2026. In addition, as of March 31, 2026, the Company had $36,484 of Accounts payable and $427,060 of Accrued expenses and other current liabilities, including $127,512 of capital expenditure accruals primarily related to Sphere construction (a significant portion of which is in dispute). The balance of the Company's total debt outstanding as of March 31, 2026 was $810,390. We believe we have sufficient liquidity from cash and cash equivalents, cash flows from operations and available borrowings under the 2026 LV Sphere Revolving Credit Facility to fund our operations and service debt payments under our credit facilities for the foreseeable future. The Company's ability to have sufficient liquidity to fund its operations, refinance its indebtedness and make investments, including in connection with its Sphere initiative, 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 the Company anticipates 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 platform. Original immersive productions, such as Postcard From Earth, V-U2 An Immersive Concert Film and The Wizard of Oz at Sphere, have not been previously pursued on the scale of Sphere, which increases the uncertainty of our operating expectations. To the extent that the Company's efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, the Company may not generate the cash flows from operations necessary to fund its operations. To the extent the Company does not realize expected cash flows from operations from Sphere, it would have to take several actions to improve its 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 the Company currently believes it will have sufficient liquidity from cash and cash equivalents, cash flows from operations (including expected cash flows from operations from Sphere) and available borrowings under the 2026 LV Sphere Revolving Credit Facility to fund its operations, no assurance can be provided that its liquidity will be sufficient in the event any of the preceding uncertainties facing Sphere are realized over the next 12 months. 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" in the Form 10-K. For additional information regarding the Company's capital expenditures, including those related to Sphere in Las Vegas, see the Company's statements of cash flows included in the condensed consolidated financial statements in Part I - Item 1. of this Form 10-Q. 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 or private transactions, block trades or such other manner as the Company may determine, 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. During the three months ended March 31, 2026, the Company did not engage in any share repurchase activities under its share repurchase program. As of March 31, 2026, the Company had approximately $300,000 remaining available for repurchases of the Company's Class A Common Stock. Sphere The Company opened Sphere in Las Vegas in September 2023. See "Part I - Item 1. Our Business - Sphere" in the Form 10-K. The venue has a number of revenue streams, including The Sphere Experience (which includes original immersive productions), advertising and marketing partnerships, concert residencies, brand events 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. On October 15, 2024, the Company and DCT Abu Dhabi announced that they would work together to bring Sphere to Abu Dhabi, United Arab Emirates. On July 25, 2025, Sphere Entertainment Group and DCT Abu Dhabi finalized and entered into a Franchise Agreement, a Joint Development and Partnership Agreement and a Pre-Opening Services Agreement relating to the construction, development and operation of Sphere Abu Dhabi. Under the terms of the Franchise Agreement, DCT Abu Dhabi has agreed to pay Sphere Entertainment Group a franchise initiation fee (a portion of which has been received) and royalties in connection with DCT Abu Dhabi's use of Sphere Entertainment Group's intellectual property (including The Sphere Experience content and other creative content). Pursuant to the terms of the Pre-Opening Services Agreement, Sphere Entertainment Group is providing pre-construction and construction related services to DCT Abu Dhabi, with construction being funded by DCT Abu Dhabi. Following the venue's opening, the Company will receive annual royalty fees for creative and artistic content licensed by Sphere Entertainment Group, such as The Sphere Experience content, and use of Sphere's intellectual property and other ancillary content. In addition, prior to the opening of Sphere Abu Dhabi, Sphere Entertainment Group and DCT Abu Dhabi expect to enter into an Operational Services Agreement, pursuant to which Sphere Entertainment Group will provide to be agreed upon operational services to DCT Abu Dhabi prior to and following the opening of Sphere Abu Dhabi. In January 2026, the Company, the State of Maryland, Prince George's County, and Peterson Companies announced the intent to develop a new Sphere venue at National Harbor, Maryland. Any construction, development, financing and operation of a Sphere venue at National Harbor is contingent upon, among other things, negotiation and execution of definitive agreements, as well as receipt of certain governmental incentives and approvals from Prince George's County and the State of Maryland. The Company will continue to explore additional domestic and international markets where it believes 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 or franchise model, sale-leaseback arrangements and debt financing, which could include guarantees thereof by Sphere Entertainment Co. or its subsidiaries. Financing Agreements See Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I - Item 1. of this Form 10-Q for discussions of the Company's debt obligations and various financing arrangements. MSGN Term Loan Facility General. MSGN Holdings, L.P. ("MSGN L.P."), MSGN Eden, LLC ("MSGN Eden"), Regional MSGN Holdings LLC ("Regional MSGN"), and certain subsidiaries of MSGN L.P. had senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, and as further amended from time to time prior to June 27, 2025, the "Prior MSGN Credit Agreement") consisting of (i) an initial $1,100,000 term l oan facility and ( ii) a $250,000 revolving credit facility (together, the "Prior MSGN Credit Facilities"). The outstanding principal amount under the Prior MSGN Credit Agreement of $829,125 matured without repayment on October 11, 2024, and an event of default occurred pursuant to the Prior MSGN Credit Agreement due to MSGN L.P.'s failure to make payment on the outstanding principal amount on the maturity date. On June 27, 2025, MSG Networks, MSGN L.P., MSGN Eden, Regional MSGN, Rainbow Garden Corp. and certain subsidiaries of MSGN L.P. entered into a second amended and restated credit agreement (the "A&R MSGN Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the "MSGN Lenders"). The A&R MSGN Credit Agreement amended and restated the Prior MSGN Credit Agreement in its entirety. Pursuant to the A&R MSGN Credit Agreement, the Prior MSGN Credit Facilities were replaced with the MSGN Term Loan Facility, which had an original principal amount of $210,000 and matures on December 31, 2029. The outstanding balance under the MSGN Term Loan Facility was $284,852 as of March 31, 2026. In April 2026, MSGN L.P. made a mandatory cash sweep payment of $17,837 based on excess cash as of March 31, 2026. Interest Rates. Borrowings under the A&R MSGN Credit Agreement bear interest at a rate per annum, which at the option of MSGN L.P., may be equal to either (i) adjusted Term SOFR (i.e., Term SOFR as defined in the A&R MSGN Credit Agreement, plus 0.10%) plus 5.00% or (ii) Alternate Base rate, as defined in the A&R MSGN Credit Agreement, plus 4.00%. Upon a payment default in respect of principal, interest or other amounts due and payable under the A&R 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 interest rate on the MSGN Term Loan Facility as of March 31, 2026 was 8.77%. Covenants. The A&R MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, and certain affirmative covenants and events of default. The A&R MSGN Credit Agreement contains significant restrictions (and in some cases prohibitions) on the ability of MSGN L.P. and the MSGN Subsidiary Guarantors (as defined below) to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the A&R MSGN Credit Agreement, including without limitation the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating or granting 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 its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified agreements; (viii) with respect to restricted subsidiaries, issuing shares of stock such that MSGN L.P.'s ownership of any such restricted subsidiary is reduced; (ix) merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of its assets; (x) making certain dispositions; (xi) making certain changes to its accounting practices; (xii) entering into agreements that restrict the granting of liens; (xiii) requesting any borrowing the proceeds of which are used in violation of anti-corruption laws or sanctions; (xiv) engaging in a liability management transaction; and (xv) limiting certain operating expenses incurred by MSGN L.P. and the MSGN Guarantors (as defined below). The MSGN Holdings Entities are subject to the restrictions described in the foregoing clauses (iv) and (xv), as well as customary passive holding company covenants. Principal Repayments . Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily prepay outstanding loans under the A&R MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Term Benchmark (as defined in the A&R MSGN Credit Agreement) loans). The MSGN Term Loan Facility has a fixed amortization of $10,000 per quarter, which commenced on September 30, 2025. During the three months ended March 31, 2026, MSGN L.P. made a fixed amortization payment of $10,000. MSGN L.P. is required to make mandatory prepayments pursuant to a mandatory cash sweep, determined at the end of each fiscal quarter, that requires 100% of MSGN L.P.'s and the MSGN Subsidiary Guarantors' excess balance sheet cash over certain thresholds (subject to certain exclusions) to be used to repay the principal amount outstanding. In April 2026, MSGN L.P. made a $17,837 mandatory cash sweep payment based on excess cash as of March 31, 2026. MSGN L.P. is further required to make mandatory prepayments in certain circumstances, including from the net cash proceeds of certain dispositions of assets or casualty insurance and/or condemnation awards (subject to a threshold below which payments are not required, as well as certain reinvestment, repair and replacement rights) and upon the incurrence of indebtedness (subject to certain exceptions). In connection with the execution of the A&R MSGN Credit Agreement, the Limited Partnership Agreement of MSGN L.P. was amended to provide for the issuance of contingent interest units (the "Contingent Interest Units") to the MSGN Lenders. Beginning with the fiscal calendar year-end following the repayment in full of the MSGN Term Loan Facility, the Contingent Interest Units entitle the MSGN Lenders to receive annual payments in an amount equal to 50% of the difference between MSGN L.P.'s balance sheet cash (subject to certain exclusions) and certain minimum cash balances, specified with respect to the applicable measurement date, until the earlier of (i) December 31, 2029 and (ii) payment of $100,000 in the aggregate to the MSGN Lenders. The Contingent Interest Units are also entitled to receive 50% of the proceeds of a merger and/or acquisition event related to MSG Networks and its subsidiaries occurring prior to December 31, 2029, subject to an aggregate cap of $100,000 considered together with the annual payments of excess cash described in the previous sentence. Guarantors and Collateral. All obligations under the A&R MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.'s direct and indirect domestic subsidiaries that are not designated as unrestricted subsidiaries (the "MSGN Subsidiary Guarantors" and, together with the MSGN Holdings Entities, the "MSGN Guarantors"). All obligations under the A&R MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain of the 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. Sphere Entertainment Co., Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the "Non-Credit Parties") are not legally obligated to repay the outstanding borrowings under the MSGN Term Loan Facility, nor are the assets of the Non-Credit Parties pledged as security under the MSGN Term Loan Facility. 2026 LV Sphere Facilities General. On January 29, 2026, MSG Las Vegas, LLC ("MSG LV") entered into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, and the lenders party thereto, which refinanced in full the 2022 LV Sphere Term Loan Facility (as defined and described in Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I - Item 1. of this Form 10-Q). The new credit agreement provides for (i) a $275,000 senior secured term loan facility (the "2026 LV Sphere Term Loan Facility"), the proceeds of which were used to refinance the 2022 LV Sphere Term Loan Facility, and (ii) a senior secured revolving credit facility in the maximum principal amount of $275,000 (the "2026 LV Sphere Revolving Credit Facility" and collectively, the "2026 LV Sphere Facilities"), the proceeds of which are available to be used for working capital and general corporate purposes, including distributions to Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. None of Sphere Entertainment Co., MSG Networks, MSGN L.P. or any of the subsidiaries of MSGN L.P. are parties to the 2026 LV Sphere Facilities. Financial Covenants. The 2026 LV Sphere Facilities include financial covenants requiring MSG LV to maintain a minimum debt service coverage ratio of 2.50:1.00 and a maximum total leverage ratio of 3.50:1.00. Both covenants are tested quarterly based on the four consecutive fiscal quarters of MSG LV then most recently ended. As of March 31, 2026, MSG LV was in compliance with the financial covenants of the 2026 LV Sphere Facilities. Principal Repayments. The 2026 LV Sphere Facilities will mature on January 29, 2031. Commencing with the fiscal quarter ending March 31, 2028, the principal obligations under the 2026 LV Sphere Term Loan Facility will be subject to amortization payments of 5% per annum, paid in quarterly installments, with the remainder of the term loans due at maturity. Under certain circumstances, MSG LV is required to make mandatory prepayments on the loans, 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. Interest Rates. Borrowings under the 2026 LV Sphere Facilities bear interest at a floating rate, which at the option of MSG LV may be either (i) Term SOFR (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 2.50% to 3.00% based on MSG LV's total leverage ratio or (ii) the Alternative Base Rate (as defined in the 2026 LV Sphere Facilities) plus a margin that ranges from 1.50% to 2.00% based on MSG LV's total leverage ratio. The interest rate on the LV Sphere Term Loan Facility as of March 31, 2026 was 6.42%. Guarantors and Collateral. All obligations under the 2026 LV Sphere Facilities are guaranteed by Sphere Entertainment Group. All obligations under the 2026 LV Sphere Facilities, including the guarantees of those obligations, are secured by all of the assets of MSG LV, including, but not limited to, MSG LV's leasehold interest in the land on which the Sphere in Las Vegas is located and a pledge of the equity interests in MSG LV held directly by Sphere Entertainment Group. Covenants . In addition to the financial covenants described above, the 2026 LV Sphere Facilities and the related guaranty and security and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default. The 2026 LV Sphere Facilities contain certain restrictions on the ability of MSG LV to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2026 LV Sphere Facilities, including the following: (i) incurring additional indebtedness; (ii) incurring liens on its assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions to the extent a default or event of default under the 2026 LV Sphere Facilities is in effect at such time or the debt service reserve account is not funded to the extent required; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending organizational documents; (viii) merging or consolidating; and (ix) making certain dispositions. 3.50% Convertible Senior Notes On December 8, 2023, the Company completed a private unregistered offering of $258,750 in aggregate principal amount of its 3.50% Convertible Senior Notes due 2028 (the "3.50% Convertible Senior Notes"), which amount includes the full exercise of the initial purchasers' option to purchase additional 3.50% Convertible Senior Notes. See Note 14. Credit Facilities and Convertible Notes to the Audited Consolidated Financial Statements included in the Form 10-K, for details on the 3.50% Convertible Senior Notes. Letters of Credit The Company uses letters of credit to support its business operations. The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted. Contractual Obligations See Note 9. Commitments and Contingencies to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q. Cash Flow Discussion As of March 31, 2026, cash, cash equivalents and restricted cash totaled $630,151, as compared to $521,264 as of December 31, 2025. The following table summarizes the Company's cash flow activities for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net cash provided by operating activities $ 136,241 $ 6,348 Net cash used in investing activities (5,005) (17,570) Net cash used in financing activities (22,263) (26,307) Effect of exchange rates on cash, cash equivalents and restricted cash (86) 98 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 108,887 $ (37,431) Operating Activities Net cash provided by operating activities attributable to changes in assets and liabilities for the three months ended March 31, 2026 and 2025 equaled $27,575 and $(5,257), respectively, a net increase of $32,832. The primary drivers of that net change are as follows. The Company had increases in cash provided by operating activities related to (i) Prepaid expenses and other current and non-current assets of $40,667, primarily due lower deferred production cost spending related to Experiences, and the amortization of deferred production costs related to residencies and brand events (ii) Accounts payable of $11,633 due to the timing of payments to vendors, and (iii) Related party receivables and payables, net of $5,620 due to the timing of related party settlements. These increases in cash provided by operating activities were partially offset by increases in cash used in operating activities related to (i) Accrued and other current liabilities of $18,584 for accrued expenses, including compensation and employee related benefits, (ii) Deferred revenue of $4,225, primarily due to the timing and mix of events at the Sphere, and (iii) Accounts receivable of $2,315, primarily due to the timing of billings and cash collections. In addition to the net increase in cash used in operating activities driven by changes in assets and liabilities, the Company generated net income of $4,460 in the current year period, compared to a net loss of $81,954 in the prior year period, as adjusted by non-cash net amounts of $104,206 in the current year period, compared to $93,559 in the prior year period. Refer to "- Business Segment Results" for further detail pertaining to the Company's operating results. Investing Activities Net cash used in investing activities for the three months ended March 31, 2026 decreased by $12,565 as compared to the prior year period primarily due lower capital expenditures in the current year period. Financing Activities Net cash used in financing activities for the three months ended March 31, 2026 decreased by $4,044 as compared to the prior year period, primarily due to (i) a $6,149 decrease in principal repayments of debt in the current year period, and (ii) $2,507 in cash proceeds from the exercise of stock options, partially offset by (iii) $4,612 of taxes paid in lieu of shares issued for equity based compensation awards. Seasonality of Our Business Our MSG Networks segment generally earns a higher share of its annual revenues in the first and fourth quarters of the 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 and Adopted Accounting Pronouncements See Note 2. Accounting Policies to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q, for discussion of recently issued and adopted accounting pronouncements. Critical Accounting Estimates There have been no material changes to the Company's critical accounting policies. The following discussion has been included to provide the results of our annual impairment testing of goodwill performed during the quarterly period ended September 30, 2025. Impairment of Goodwill Goodwill is tested annually for impairment as of August 31 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. At the time of the annual impairment test and as of March 31, 2026, 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 goodwill balance reported on the Company's condensed consolidated balance sheets as of March 31, 2026 by reporting unit was as follows: As of March 31, 2026 Sphere $ 46,864 MSG Networks 297,908 Total Goodwill $ 344,772 The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company's reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. In the event a quantitative goodwill impairment assessment is performed, the reporting unit's amortizable intangible assets and other long-lived assets are first tested for impairment. In doing so, 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, before recording any impairment of goodwill. The amount of any remaining goodwill impairment loss is subsequently 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 its Sphere reporting unit during the quarterly period ended September 30, 2025. This assessment considered qualitative factors such as: • macroeconomic conditions; • industry and market considerations; • cost factors; • overall financial performance of the reporting units; • other relevant company-specific factors such as changes in management, strategy or customers; and • relevant reporting unit specific events such as changes in the carrying amount of net assets. No impairment of Sphere's goodwill was identified as a result of this assessment as the Company concluded that the 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 assessments, less its respective carrying value (including goodwill). 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 the Company's MSG Networks reporting unit, the Company performed a quantitative assessment of impairment. In doing so, the Company estimated the fair value of the MSG Networks reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments within the model that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company's estimates of future revenue, estimates of future operating cost, margin assumptions, terminal growth rates and the discount rate applied to estimate future cash flows. The assumptions utilized were subject to a high degree of judgment and complexity, particularly in light of economic and operational uncertainty relating to the MSG Networks business. Based upon the results of the Company's annual quantitative impairment test, the Company concluded that the carrying value of the MSG Networks reporting unit exceeded its estimated fair value as of the annual impairment testing date. Based on the evaluation of amortizable intangible assets and other long-lived assets performed as of the annual impairment testing date, the Company did not record any impairments of such assets. Th e Company did however record a non-cash goodwill impairment charge of $65,400 for the MSG Networks reporting unit as a result of the projected declines in the reporting unit's business. T he goodwill impairment charge was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value as of the annual impairment testing date. No additional indicators of impairment were identified through March 31, 2026. The Company continues to closely monitor the performance and fair value of its MSG Networks reporting unit. A significant adverse change in market factors or the business outlook for the MSG Networks reporting unit could negatively impact the fair value of the MSG Networks reporting unit and result in an additional goodwill impairment charge at that time.

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