What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-07 compared with 2022-10-27 · 125 added, 83 removed, 155 unchanged (57% of the section changed)

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In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Sports Corp.

and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”) including the impact of COVID-19 on our future operations.

and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”) on our future operations.

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.

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Factors that may cause such differences to occur include, but are not limited to:

• the duration and severity of the COVID-19 pandemic and our ability to effectively manage the impacts, including the availability of The Garden with no or limited fans, league decisions regarding play and other matters, the cancellation of games, the impact of governmental restrictions, reduced tourism, and general hesitancy among the public to engage in public activities due to COVID-19;

• the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams;

• costs associated with player injuries, waivers or contract terminations of players and other team personnel;

• changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;

• changes in professional sports teams’ compensation, including the impact of signing free agents and executing trades, subject to league salary caps and the impact of luxury tax;

• general economic conditions, especially in the New York City metropolitan area;

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• competition, for example, from other teams, and other sports and entertainment options;

• changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;

• changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements (“CBAs”) with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;

• any NBA, NHL or other work stoppage in addition to those related to COVID-19 impacts;

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• financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;

• our ownership of professional sports franchises in the NBA and NHL and certain related transfer restrictions on our common stock;

• Certain restrictions on transfer and ownership of our common stock related to our ownership of professional sports franchises in the NBA and NHL;

• the tax-free treatment of the MSGS Distribution and the MSGE Distribution;

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See Note 1, Description of Business and Basis of Presentation, to the Company’s audited consolidated financial statements and notes thereto for the year ended June 30, 2022 included in the Company’s Annual Report on Form 10-K for more information regarding the impact of the COVID-19 pandemic on our business during fiscal years 2020, 2021 and 2022.

It is unclear to what extent COVID-19, including new variants, could result in renewed governmental and league restrictions on attendance or otherwise impact the Company’s operations and operating results.

It is unclear to what extent COVID-19, including new variants thereof, could result in renewed governmental and/or league restrictions on attendance or otherwise impact the Company’s operations and operating results.

This 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 September 30, 2022 compared to the three months ended September 30, 2021.

This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021.

Liquidity and Capital Resources.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, and (iii) certain contractual obligations.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the six months ended December 31, 2022 compared to the six months ended December 31, 2021, and (iii) certain contractual obligations.

Seasonality of Our Business.

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Results of Operations

Comparison of the three months ended September 30, 2022 versus the three months ended September 30, 2021

Comparison of the three and six months ended December 31, 2022 versus the three and six months ended December 31, 2021

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

Three Months Ended

September 30, Change

Three Months Ended Six Months Ended

December 31, Change December 31, Change

2022 2021 $ % 2022 2021 $ %

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Depreciation and amortization 838 1,215 (377) (31) % 1,863 2,641 (778) (29) %

Operating loss (35,898) (34,938) (960) (3) %

Operating income 51,518 35,919 15,599 43 % 15,620 981 14,639 NM

Other expense:

Interest expense, net (5,512) (3,542) (1,970) (56) % (8,468) (6,595) (1,873) (28) %

Miscellaneous expense, net (166) (63) (103) NM

Loss from operations before income taxes (39,020) (38,054) (966) (3) %

Income tax benefit 20,493 21,169 (676) (3) %

Net loss (18,527) (16,885) (1,642) (10) %

Miscellaneous income (expense), net 385 (64) 449 NM 219 (127) 346 NM

Income (loss) from operations before income taxes 46,391 32,313 14,078 44 % 7,371 (5,741) 13,112 NM

Income tax (expense) benefit (24,555) (17,115) (7,440) (43) % (4,062) 4,054 (8,116) NM

Net income (loss) 21,836 15,198 6,638 44 % 3,309 (1,687) 4,996 NM

Net loss attributable to nonredeemable noncontrolling interests (655) (647) (8) (1) % (1,362) (1,127) (235) (21) %

Net loss attributable to Madison Square Garden Sports Corp.’s stockholders $ (17,820) $ (16,405) $ (1,415) (9) %

Revenues increased $5,295, or 28%, to $24,089 for the three months ended September 30, 2022 as compared to the prior year period.

The net increase was attributable to the following:

Increase in suite license fee revenues $ 1,543

Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders $ 22,491 $ 15,845 $ 6,646 42 % $ 4,671 $ (560) $ 5,231 NM

Revenues increased $64,113, or 22%, to $353,694 for the three months ended December 31, 2022 as compared to the prior year period.

Revenues increased $69,408 to $377,783 for the six months ended December 31, 2022 as compared to prior year period.

The net increases were attributable to the following:

Months Months

Increase in pre/regular season ticket-related revenues $ 29,671 $ 30,770

Increase in suite license fee revenues 12,484 14,027

Increase in sponsorship and signage revenues 10,003 10,105

Increase in pre/regular season food, beverage and merchandise sales 4,041 4,513

Increase in revenues from local media rights fees 3,916 4,317

Increase in revenues from league distributions 3,179 4,089

Other net increases 819 1,587

The increase in suite license fee revenues for the three months ended September 30, 2022 was primarily due to suite licenses including preseason home games at The Garden in the current year period compared to suites sold primarily on a single-event basis in the prior year period.

The increase in pre/regular season ticket-related revenues for the three months ended September 30, 2022 was primarily due to higher average per-game revenue.

$ 64,113 $ 69,408

The increases in pre/regular season ticket-related revenues for the three and six months ended December 31, 2022 were primarily due to higher average per-game revenue and the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods.

The Rangers played six more regular season games at The Garden during the current year periods as compared to the prior year periods.

The increases in suite license fee revenues for the three and six months ended December 31, 2022 were primarily due to the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods and higher net sales of suites products.

The increases in sponsorship and signage revenues for the three and six months ended December 31, 2022 were primarily due to (i) the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods, (ii) higher net sales of existing sponsorship and signage inventory, and (iii) sales of new sponsorship and signage inventory.

The increases in pre/regular season food, beverage, and merchandise sales for the three and six months ended December 31, 2022 were primarily due to higher average Knicks and Rangers per-game revenue and the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods.

The increases in revenues from local media rights for the three and six months ended December 31, 2022 were primarily due to contractual rate increases.

The increases in revenues from league distributions for the three and six months ended December 31, 2022 were primarily related to increased NBA and NHL national media rights fees and other league distributions in the current year periods.

Direct operating expenses

Direct operating expenses decreased $4,897, or 57%, to $3,681 for the three months ended September 30, 2022 as compared to the prior year period.

The net decrease was attributable to the following:

Decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ (3,630)

Direct operating expenses increased $32,855, or 17%, to $225,702 for the three months ended December 31, 2022 as compared to the prior year period.

Direct operating expenses increased $27,958, or 14%, to $229,383 for the six months ended December 31, 2022 as compared to the prior year period.

The net increases were attributable to the following:

Months Months

Increase in team personnel compensation $ 19,083 $ 19,338

Increase in other team operating expenses 7,406 7,036

Increase in operating lease costs associated with the Knicks and Rangers playing home games at The Garden 3,932 3,932

Increase in pre/regular season expense associated with merchandise sales 2,556 2,460

Increase (decrease) in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax 1,137 (2,493)

Decrease in net provisions for certain team personnel transactions (1,259) (2,315)

Other net decreases (211)

The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three months ended September 30, 2022 was primarily due to the net impact of adjustments to prior seasons’ revenue sharing expense (net of escrow).

Net provisions for certain team personnel transactions were as follows:

Three Months Ended

September 30,

$ 32,855 $ 27,958

The increases in team personnel compensation for the three and six months ended December 31, 2022 were primarily related to the impact of roster changes for the Knicks and the Rangers.

The increases in other team operating expenses for the three and six months ended December 31, 2022 were primarily related to higher per-game average expenses and the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods.

Other team operating expenses primarily consists of expenses associated with day-to-day operations, including variable day-of-event costs incurred at The Garden, team travel, player insurance, and league assessments.

The increases in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden for the three and six months ended December 31, 2022 were related to the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods.

The increases in pre/regular season expense associated with merchandise sales for the three and six months ended December 31, 2022 were primarily related to higher merchandise sales as a result of higher average Knicks and Rangers per-game revenue and the Rangers playing additional games at The Garden during the current year periods as compared to the prior year periods.

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax were as follows:

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 Increase 2022 2021 Decrease

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ 20,958 $ 19,821 $ 1,137 $ 18,784 $ 21,277 $ (2,493)

The increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three months ended December 31, 2022 was primarily related to the net impact of adjustments to prior seasons’ revenue sharing expense (net of escrow and excluding playoffs), partially offset by higher estimated recoveries of NBA luxury tax in the current year period.

The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the six months ended December 31, 2022 was primarily related to the net impact of adjustments to prior seasons’ revenue

sharing expense (net of escrow and excluding playoffs) and higher estimated recoveries of NBA luxury tax in the current year period.

The Knicks were not a luxury tax payer for the 2021-22 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams.

The Knicks’ roster as of December 31, 2022 would not result in the team being a luxury tax payer for the 2022-23 season.

The actual amounts for the 2022-23 seasons may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.

Net provisions for certain team personnel transactions were as follows:

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 Increase (Decrease) 2022 2021 Increase (Decrease)

Waivers/contract terminations $ 29 $ (69) $ 98 $ (1,392) $ 658 $ (2,050)

Player trades — — — 1,092 — 1,092

Season-ending player injuries — 1,357 (1,357) — 1,357 (1,357)

Net provisions for certain team personnel transactions $ 29 $ 1,288 $ (1,259) $ (300) $ 2,015 $ (2,315)

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2022 increased $11,553, or 26%, to $55,281 as compared to the prior year period primarily due to higher employee compensation and related benefits, including the impact of staffing increases relative to the prior year period reflecting the business’ return to normal operations and executive management transition costs recorded in the current year period, as well as higher other general and administrative expenses.

Selling, general and administrative expenses for the three months ended December 31, 2022 increased $16,036, or 27%, to $75,636 as compared to the prior year period.

Selling, general and administrative expenses for the six months ended December 31, 2022 increased by $27,589, or 27%, to $130,917 as compared to the prior ye ar period.

The increases were primarily due to higher employee compensation and related benefits, including executive management transition costs recorded in the current year periods, as well as higher marketing costs.

In addition, for the six months ended December 31, 2022, higher employee compensation and related benefits included the impact of staffing increases relative to the prior year period reflecting the business’ return to normal operations.

Depreciation and amortization

Depreciation and amortization for the three months ended September 30, 2022 decreased $401, or 28%, to $1,025 as compared to the prior year period.

Operating loss

Operating loss for the three months ended September 30, 2022 increased $960, or 3%, to $35,898 as compared to the prior year period primarily due to an increase in selling, general and administrative expenses, partially offset by higher revenues and lower direct operating expenses.

Depreciation and amortization for the three months ended December 31, 2022 decreased $377, or 31%, to $838 as compared to the prior year period.

Depreciation and amortization for the six months ended December 31, 2022 decreased by $778 or 29% to $1,863 as compared to the prior year period.

Operating income

Operating income for the three months ended December 31, 2022 increased $15,599, or 43%, to $51,518 as compared to the prior year period.

Operating income for the six months ended December 31, 2022 increased $14,639 to $15,620 as compared to the prior year period.

For the three and six months ended December 31, 2022 the increases in operating income were primaril y due to increases in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses.

Interest expense, net

Net interest expense for the three months ended September 30, 2022 decreased $97, or 3%, to $2,956 as compared to the prior year period primarily due to lower interest expense on the Rangers revolving credit facilities as there were no borrowings outstanding during the three months ended September 30, 2022, and higher interest income due to higher cash balances along with increased earned interest rates, partially offset by higher interest expense associated with the Knicks revolving credit facilities due to higher interest rates.

Net interest expense for the three months ended December 31, 2022 increased $1,970, or 56%, to $5,512 as compared to the prior year period.

Net interest expense for the six months ended December 31, 2022 increased $1,873, or 28%, to $8,468 as compared to the prior yea r period.

The increases were primarily due to higher interest rates in the current year periods causing increased interest expense under the Knicks and the Rangers revolving credit facilities.

The increases were partially offset by (i) higher interest income due to increased interest rates in the current year periods and (ii) the acceleration of previously incurred financing costs that were recognized in the prior year periods as a result of the Company terminating the 2020 Knicks Holdings Revolving Credit Facility.

In addition, for the six months ended December 31, 2022 the increase in interest expense was partially offset by lower average borrowings under the Rangers revolving credit facility in the current year period as compared to the prior year period.

See Note 16 to the consolidated financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s income taxes.

Adjusted operating loss

Adjusted operating income

The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) deferred rent expense under the Arena License Agreements with MSG Entertainment, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) share-based compensation expense or benefit, (iv) restructuring charges or credits, (v) gains or losses on sales or dispositions of businesses, (vi) the impact of purchase accounting adjustments related to business acquisitions, and (vii) gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan (which was established in November 2021), which is referred to as adjusted operating income (loss), a non-GAAP measure.

Management believes that given the length of the Arena License Agreements and resulting magnitude of the difference in deferred rent expense and the cash rent payments, the exclusion of deferred rent expense provides investors with a clearer picture of the Company’s operating performance.

Management believes that this adjustment is beneficial for other incremental reasons as well.

This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Entertainment.

In addition, this adjustment is a component of the performance measures used to evaluate, and compensate, senior management of the Company.

Management 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.

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The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company.

Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by

investors and analysts to analyze the Company’s performance.

Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance.

The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance and evaluates management’s effectiveness with specific reference to these indicators.

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The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).

The following are the reconciliations of operating loss to adjusted operating loss for the three months ended September 30, 2022 as compared to the prior year period:

Three Months Ended

September 30, Change

The following are the reconciliations of operating income to adjusted operating income for the three and six months ended December 31, 2022 as compared to the prior year periods:

Three Months Ended Six Months Ended

December 31, Change December 31, Change

2022 2021 $ % 2022 2021 $ %

Operating loss $ (35,898) $ (34,938) $ (960) (3) %

Operating income $ 51,518 $ 35,919 $ 15,599 43 % $ 15,620 $ 981 $ 14,639 NM

Deferred rent 12,202 11,179 12,708 11,708

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Remeasurement of deferred compensation plan liabilities 449 — 346 —

Adjusted operating loss $ (27,250) $ (28,132) $ 882 3 %

Adjusted operating loss for the three months ended September 30, 2022 decreased $882 to $27,250 as compared to the prior year period primarily due to higher revenues and lower direct operating expenses, partially offset by an increase in selling, general and administrative expenses.

Adjusted operating income $ 76,626 $ 55,667 $ 20,959 38 % $ 49,376 $ 27,535 $ 21,841 79 %

For the three months ended December 31, 2022, adjusted operating income incr eased $20,959 to $76,626 as compared to the prior year period.

For the six months ended December 31, 2022, adjusted operating income increased $21,841 to $49,376 as compared to the prior year period.

The increases in adjusted operating income were p rimarily due to higher revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses.

Liquidity and Capital Resources

Our operations and operating results were materially impacted by the COVID-19 pandemic and government and league actions taken in response during fiscal years 2020 and 2021.

Our operations and operating results were also impacted by temporary declines in fan attendance in fiscal year 2022, due to ongoing reduced tourism levels as well as an increase in cases during certain months of the fiscal year due to COVID-19 variants.

For more information about the impacts and risks to the Company as a result of COVID-19, see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” and “Item 1A.

Risk Factors — Sports Business Risks — Our Operations and Operating Results Have Been, and May in the Future be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

In addition, see also Note 1 to the consolidated financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Our primary sources of liquidity are cash and cash equivalents and available borrowing capacity under our credit facilities as well as cash flow from our operations.

Our primary sources of liquidity are cash and cash equivalents, available borrowing capacity under our credit facilities, and cash flow from our operations.

On December 14, 2021, the Company amended and extended the 2020 Knicks Credit Agreement and the 2020 Rangers Credit Agreement.

In addition, in March 2021, pursuant to the 2021 Rangers NHL Advance Agreement (the “2021 Rangers NHL Advance Agreement”), the NHL advanced the Company $30,000, which the league made available to each team.

See Note 11 to the consolidated financial statements included in “Part I - Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of the 2021 Knicks Credit Agreement, 2021 Rangers Credit Agreement, and 2021 Rangers NHL Advance Agreement.

Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, the payment of a special, one-time cash dividend of $7.00 per share (expected to be approximately $172,749) (the “Special Dividend”), and repurchases of shares of the Company’s Class A Common Stock, including approximately $75,000 under the accelerated share repurchase (“ASR”) program announced by the Company on October 6, 2022.

As of September 30, 2022, we had approximately $81,000 in Cash and cash equivale nts.

In addition, as of September 30, 2022, the Company’s deferred revenue obligations were approximately $266,439, net of billed, but not yet collected deferred revenue.

Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, the payment of a special, one-time cash dividend of $7.00 per share (the “Special Dividend”), repurchases of shares of the Company’s Class A Common Stock, including $75,000 under the ASR (as defined below), and investments.

As of December 31, 2022, we had approximatel y $44,000 in C ash and cash equivale nts.

In addition, as of December 31, 2022, the Company’s deferred revenue obligations were approximately $183,844, net of billed, but not yet collected deferred revenue.

This balance is primarily comprised of obligations in connection with tickets, suites and local media rights.

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We regularly monitor and assess our ability to meet our net funding and investing requirements.

The decisions of the Company as to the use of its available liquidity will be based upon the ongoing review of the funding needs of the business, management’s view of

a favorable allocation of cash resources, and the timing of cash flow generation.

To the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and NHL and challenging U.S.

The decisions of the Company as to the use of its available liquidity will be based upon the ongoing review of the funding needs of the business, management’s view of a favorable allocation of cash resources, and the timing of cash flow generation.

To the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and NHL and potentially challenging U.S.

and global economic and market conditions could adversely impact its ability to do so at that time.

We believe we have sufficient liquidity, including approximatel y $81,000 in Cash and cash equivalents as of September 30, 2022, along with $305,000 of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations, including with respect to the payment of the Special Dividend and the repurchase of shares of the Company’s Class A Common Stock under the ASR program, for the foreseeable future.

We believe we have sufficient liquidity, including approximatel y $44,000 in Cash and cash equivalents as of December 31, 2022, along with $120,000 of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations for the foreseeable future.

In addition, on February 3, 2023, the Company made an additional principal repayment of $15,000 under the 2021 Rangers Revolving Credit Facility.

Financing Agreements and Stock Repurchases

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Special Dividend and Accelerated Share Repurchase

On October 6, 2022, the Company announced that its Board of Directors declared the Special Dividend.

The Special Dividend is payable on October 31, 2022 to shareholders of record on October 17, 2022.

In addition, the Company’s Board of Directors has authorized a $75,000 ASR program under the Company’s existing share repurchase authorization.

As discussed in Note 14, the Company had $259,639 of availability remaining under its stock repurchase authorization as of September 30, 2022 and prior to the execution of the ASR program.

On October 6, 2022, the Company announced that its Board of Directors declared the Special Dividend payable on October 31, 2022 to shareholders of record on October 17, 2022.

During the three and six months ended December 31, 2022, the Company made payments of $170,683 related to the Special Dividend.

On October 6, 2022, the Company’s Board of Directors authorized a $75,000 accelerated share repurchase (“ASR”) program under the Company’s existing share repurchase authorization.

On October 28, 2022, the Company entered into a $75,000 ASR agreement with JPMorgan Chase Bank, National Association (“JP Morgan”).

Pursuant to the ASR agreement, the Company made a payment of $75,000 to JP Morgan and JP Morgan delivered 388,777 initial shares of Class A Common Stock to the Company on November 1, 2022, representing 80% of the total shares expected to be repurchased under the ASR (determined based on the closing price of the Company’s Class A Common Stock of $154.33 on October 28, 2022).

The ASR was completed on January 31, 2023 with JP Morgan delivering 67,681 additional shares of Class A Common Stock to the Company upon final settlement.

The average purchase price per share for shares of Class A Common Stock purchased by the Company pursuant to the ASR was $164.31 .

Borrowings under Revolving Credit Facilities

In connection with the Special Dividend and ASR, on October 27, 2022, the Company borrowed an additional $55,000 under the 2021 Knicks Revolving Credit Facility and $160,000 under the 2021 Rangers Revolving Credit Facility.

Following the additional borrowings, the Company has $90,000 of additional available borrowing capacity under existing credit facilities.

During the three months ended December 31, 2022, the Company made principal repayments of $15,000 under the 2021 Knicks Revolving Credit Facility and $15,000 under the 2021 Rangers Revolving Credit Facility.

Following the additional borrowings and principal repayments, the Company has $120,000 of additional available borrowing capacity under existing credit facilities.

Contractual Obligations

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Cash Flow Discussion

The following table summarizes the Company’s cash flow activities for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Net loss $ (18,527) $ (16,885)

Adjustments to reconcile net loss to net cash used in operating activities (11,994) (14,455)

(30,521) (31,340)

The following table summarizes the Company’s cash flow activities for the six months ended December 31, 2022 and 2021:

Six Months Ended December 31,

Net income (loss) $ 3,309 $ (1,687)

Adjustments to reconcile net income (loss) to net cash used in operating activities 25,283 12,053

Changes in working capital assets and liabilities 2,985 13,664

Net cash provided by (used in) operating activities 1,285 (19,310)

Net cash provided by operating activities 31,577 24,030

Net cash used in investing activities (1,314) (627)

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Operating Activities

Net cash provided by operating activities for the three months ended September 30, 2022 was $1,285 as compared to net cash used in operating activities in the prior year period of $19,310.

This was primarily due to the impact of changes in working capital assets and liabilities and, to a lesser extent, the decrease in net loss adjusted for non-cash items.

Net cash provided by operating activities for the six months ended December 31, 2022 was $31,577 as compared to net cash provided by operating activities in the prior year period of $24,030.

This was primarily due to the increase in net income (loss) adjusted for non-cash items partially offset by the impact of changes in working capital assets and liabilities.

Investing Activities

Net cash used in investing activities for the three months ended September 30, 2022 decreased by $35 to $271 as compared to the prior year period primarily due to higher other investing activities in the prior year period as compared to the current year period.

Net cash used in investing activities for the six months ended December 31, 2022 increased by $687 to $1,314 as compared to the prior year period primarily due to higher other investing activities and capital expenditures in the current year period as compared to the prior year period.

Financing Activities

Net cash used in financing activities for the three months ended September 30, 2022 decreased by $1,146 to $10,996 as compared to the prior year period primarily due to higher taxes paid in lieu of shares issued for equity-based compensation in the prior year period as compared to the current year period.

Net cash used in financing activities for the six months ended December 31, 2022 increased by $36,244 to $76,123 as compared to the prior year period primarily due to the payment of the Special Dividend and the ASR in the current year period, partially offset by additional net borrowings under the Knicks and the Rangers credit facilities in the current year period as compared to the prior year period.

Seasonality of Our Business

The Company’s dependence on revenues from its NBA and NHL sports teams generally means that it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year.

Critical Accounting Policies

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There have been no material changes to the Company’s critical accounting policies from those set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

The carrying amount of goodwill as of September 30, 2022 was $226,955.

The carrying amount of goodwill as of December 31, 2022 was $226,955.

Goodwill is tested annually for impairment as of August 31 st and at any time upon the occurrence of certain events or changes in circumstances.

19 unchanged sentences

The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2023, and there was no impairment of goodwill.

Based on this impairment test, the Company’s reporting unit had sufficient safety margins, defined as the excess of the amount by which the estimated fair value of the reporting unit exceeded the carrying value of the reporting unit, including goodwill.

The most recent quantitative assessments were used in making this determination.

The Company believes that if the fair value of a reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

Identifiable Indefinite-Lived Intangible Assets

Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31 st and at any time upon the occurrence of certain events or substantive changes in circumstances.

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of September 30, 2022:

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of December 31, 2022:

Sports franchises $ 111,064

3 unchanged sentences

The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely.

Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value.

Under the quantitative

assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value.

If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

9 unchanged sentences

The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2023, and there were no impairments identified.

Based on this impairment test, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value.

The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the indefinite-lived intangible assets was less than their carrying amount.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis