What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-08-17 compared with 2022-08-18 · 171 added, 201 removed, 348 unchanged (52% 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.

See “Part I — Item 1.

Business” for further discussion of the MSGE Distribution (defined below).

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

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 Madison Square Garden Arena (“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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• changes in laws, National Basketball Association (“NBA”)or National Hockey League (“NHL”) rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements (each, a “CBA”) 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;

• labor market disruptions due to the COVID-19 pandemic or otherwise;

• the performance by our affiliates of their obligations under various agreements with the Company, including the potential for financial difficulties that may impact MSG Networks Inc.

(“MSG Networks”);

• a resurgence of the COVID-19 pandemic or another pandemic or public health emergency, and our ability to effectively manage the impacts, including labor market disruptions;

• any NBA, NHL or other work stoppage;

• any economic, political or other actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;

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• a default by our subsidiaries under their respective credit facilities;

• the evolution of the esports industry and its potential impact on our esports businesses;

• the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;

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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;

• the tax-free treatment of the distribution of the outstanding common stock of the Company to the former shareholders of MSG Networks Inc.

(“MSG Networks”) in fiscal year 2016 and the MSGE Distribution (as defined below);

• the performance by MSG Entertainment and its subsidiaries of its obligations under various agreements with the Company related to the MSGE Distribution and ongoing commercial arrangements;

• 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 Sphere Distribution (as defined below) and;

• the factors described under “Part I — Item 1A.

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

MSGE Distribution

On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of MSG Entertainment to its stockholders (the “MSGE Distribution”).

MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment.

In the MSGE Distribution, (a) each holder of the Company’s Class A common stock, received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock, received one share of MSG Entertainment Class B common stock, par value $0.01 per share, for every share of the Company’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.

Subsequent to the MSGE Distribution, the Company no longer consolidates the financial results of MSG Entertainment for purposes of its own financial reporting and the historical financial results of MSG Entertainment have been reflected in the Company’s consolidated financial statements as discontinued operations for all periods presented through the MSGE Distribution Date.

After giving effect to the MSGE Distribution, the Company operates and reports financial information in one segment.

Sphere Distribution

On April 17, 2020 (the “Sphere Distribution Date”), the Company distributed all of the outstanding common stock of Sphere Entertainment Co.

(formerly Madison Square Garden Entertainment Corp.

and referred to herein as “Sphere Entertainment”) to its stockholders (the “Sphere Distribution”).

Prior to the MSGE Distribution (as defined below), Sphere Entertainment owned, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment.

Subsequent to the Sphere Distribution, the Company no longer consolidates the financial results of Sphere Entertainment for purposes of its own financial reporting.

After giving effect to the Sphere Distribution, the Company operates and reports financial information in one segment.

On April 20, 2023 (the “MSGE Distribution Date”), Sphere Entertainment distributed approximately 67% of the issued and outstanding shares of common stock of Madison Square Garden Entertainment Corp.

(formerly MSGE Spinco, Inc.

and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”).

All agreements between the Company and MSG Entertainment described herein were between the Company and Sphere Entertainment prior to the MSGE Distribution (except agreements entered into after the MSGE Distribution).

Unless the context otherwise requires, all references to MSG Entertainment, Sphere Entertainment and MSG Networks refer to such entity, together with its direct and indirect subsidiaries.

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

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Seasonality of Our Business.

This section discusses the seasonal performance of our Company .

This section discusses the seasonal performance of the Company .

Recently Issued Accounting Pronouncements and Critical Accounting Policies.

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The Company’s other professional sports franchises include two development league teams — the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League.

Our professional sports franchises are collectively referred to herein as “our sports teams.” In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization.

The Company also operates two professional sports team performance centers - the Madison Square Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA.

CLG and Knicks Gaming are collectively referred to herein as “our esports teams,” and together with the sports teams, the “teams.”

Our professional sports franchises are collectively referred to herein as “our sports teams.” In addition, the Company previously owned a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization.

In April 2023, the Company sold its controlling interest in CLG to Hard Carry Gaming Inc.

(“NRG”), a professional gaming and entertainment company, in exchange for a noncontrolling equity interest in the combined NRG/CLG company.

CLG and the sports teams are collectively referred to herein as the “teams.” The Company also operates a professional sports team performance center — the Madison Square Garden Training Center in Greenburgh, NY.

Revenue Sources

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The amount of revenue we earn is influenced by many factors, including the popularity and on-court or on-ice performance of our sports teams and general economic and health and safety conditions.

In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets, potentially greater food and merchandise sales from increased attendance and increased sponsorship opportunities.

In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets and premium hospitality, potentially greater food and merchandise sales from increased attendance and increased sponsorship opportunities.

When our sports teams qualify for the playoffs, we also benefit from the attendance and in-game spending at the playoff games.

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In addition, due to the NBA and NHL playing seasons, revenues from our business are typically concentrated in the second and third quarters of each fiscal year.

The concentration of our revenues and expenses, however, was different in fiscal year 2021 due to the effects of the COVID-19 pandemic.

Ticket Sales and Facility and Ticketing Fees

Ticket sales have historically constituted our largest single source of revenue .

Tickets to our sports teams’ home games are sold through season tickets (full and partial plans), which are typically held by long-term season subscribers, through group sales, and through single-game tickets, which are purchased by fans either individually or in multi-game packages .

Tickets to our sports teams’ home games are sold through season tickets (full and partial plans), which are typically held by long-term season ticket members, through group sales, and through single-game tickets, which are purchased by fans either individually or in multi-game packages .

We generally review and set the price of our tickets before the start of each team’s season.

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The Company and MSG Networks are parties to media rights agreements covering the local telecast rights for the Knicks and the Rangers .

The financial success of the Company is significantly dependent on the rights fees we receive from MSG Networks in connection with the telecast of our Knicks and Rangers games.

National and international telecast arrangements differ by league .

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Food and non-alcoholic beverage service is included in the annual license fee paid by club members.

Because suite and club licenses cover both our games and events that MSG Entertainment presents at The Garden, suite and club rental revenue is shared between us and MSG Entertainment under the arena license agreements (the “Arena License Agreements”) we entered into in connection with the MSGE Distribution.

Pursuant to the Arena Licenses Agreements, the Knicks and the Rangers are entitled to 35% and 32.5%, respectively, of the revenues received by MSG Entertainment in connection with suite and club licenses.

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We also incur costs for travel, player insurance, league operating assessments (including a 6% NBA assessment on regular season ticket sales), NBA and NHL revenue sharing and, when applicable, NBA luxury tax.

In addition, in connection with the MSGE Distribution we entered into long term leases with MSG Entertainment that end June 30, 2055 and allow the Knicks and the Rangers to play their home games at The Garden (the “Arena License Agreements”).

In addition, we are party to long term leases with MSG Entertainment that end June 30, 2055 that allow the Knicks and the Rangers to play their home games at The Garden (the “Arena License Agreements”).

The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term.

The contracted license fee for the first full contract year ending June 30, 2021 was approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees are 103% of the license fees for the immediately preceding contract year.

At the time of the MSGE Distribution, the Garden was not available for use due to the government-mandated suspension of events in response to COVID-19, and was only available at reduced capacity beginning in December 2020 through May 2021.

As a result, the Company was not required to pay license fees to MSG Entertainment under the Arena License Agreements until games resumed at The Garden, and the Company paid substantially reduced fees while attendance was limited.

Effective July 1, 2021, the Company began paying license fees to MSG Entertainment under the Arena License Agreements in their full contractual amounts.

Player Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax

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The leagues’ CBAs typically contain restrictions on when players may move between league clubs following expiration of their contracts and what rights their current and former clubs have.

The NBA CBA expires after the 2023-24 season (although each of the NBA and the National Basketball Players Association (“NBPA”) has the right (which must be exercised by December 15, 2022) to terminate the CBA effective following the 2022-23 season).

On April 26, 2023, the NBA and the National Basketball Players Association (“NBPA”) announced that a new seven-year CBA had been ratified by the NBA Board of Governors and the NBA players.

The new NBA CBA expires after the 2029-30 season, but each of the NBA and the NBPA has the right to terminate the CBA effective following the 2028-29 season.

The new CBA includes certain changes to certain league rules and regulations, including revised luxury tax rates which will become effective with the 2025-26 season.

The NBA CBA contains a salary floor (i.e., a floor on each team’s aggregate player salaries with a requirement that the team pay any deficiency to the players on its roster) and a “soft” salary cap (i.e., a cap on each team’s aggregate player salaries but with certain exceptions that enable teams to pay players more, sometimes substantially more, than the cap).

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The Company recognizes the estimated amount associated with luxury tax expense or the amount it expects to receive as a non-tax paying team, if applicable, on a straight-line basis over the NBA regular season as a component of direct operating expenses.

The revised luxury tax rates will become effective with the 2025-26 season.

NBA Escrow System/Revenue Sharing .

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The percentage of league-wide revenues paid as compensation and retained by the teams does not apply evenly across all teams and, accordingly, the Company may pay its players a higher or lower percentage of the Knicks’ revenues than other NBA teams.

For the 2020-21 season and the remainder of the CBA, a new “Ten-and-Spread” system was put in place.

During the 2020-21 season a new “Ten-and-Spread” escrow system was put in place.

Under the Ten-and-Spread system, based upon league-wide revenues, aggregate player compensation will be reduced by up to 10% of each player’s salary.

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Each team is entitled to receive an equal one-thirtieth share of the compensation reductions up to 10% and the excess above 10% is allocated in proportion to each team’s player payroll.

This system was in place until the new CBA took effect on July 1, 2023.

The NBA also has a revenue sharing plan that generally requires the distribution of a pool of funds to teams with below-average net revenues (as defined in the plan), subject to reduction or elimination based on individual team market size and profitability.

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Additional amounts may also be distributed on a discretionary basis, funded by assessments on playoff ticket revenues and through collective league sources and are recorded as revenues from league distributions.

We record our revenue sharing expense net of escrow.

Our net provisions for these items for the year ended June 30, 2022 was approximately $34,186.

Our net provisions for revenue sharing, net of escrow, for the year ended June 30, 2023 was approximately $21,458.

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

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If the league’s aggregate player compensation for a season exceeds the designated percentage (50%) of that season’s league-wide revenues, the excess is retained by the league.

Any such excess funds are distributed to all teams in equal shares.

Any such excess funds are distributed to all teams.

In addition, the NHL CBA limits the amount of deductions to be withheld from player salaries each year.

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and (c) the remainder from centrally-generated NHL sources .

We record our revenue sharing expense net of the amount we expect to receive from escrow recoveries.

Our net provisions for these items for the year ended June 30, 2022 was approximately $48,209.

Our net provisions for revenue sharing, net of escrow, for the year ended June 30, 2023 was approximately $41,075.

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

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Other Expenses

Other expenses primarily include Selling, general and administrative (“SG&A”) expenses that consist of administrative costs, including compensation, professional fees, and costs related to the Company’s services agreement with MSGE Entertainment, as well as sales and marketing costs, including fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment and non-event related advertising expenses.

Factors Affecting Operating Results

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These expenses add to the volatility of our operating results .

We expect to continue to pursue opportunities to improve the overall quality of our

sports teams and our efforts may result in continued significant expenses and charges .

We expect to continue to pursue opportunities to improve the overall quality of our sports teams and our efforts may result in continued significant expenses and charges .

Such expenses and charges may result in future operating losses although it is not possible to predict their timing or amount.

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See “Part I — Item 1A.

Risk Factors — Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations .”

Risk Factors — Economic and Business Relationship Risks — Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations .”

In addition to our future performance being dependent upon the continued popularity and/or on-court or on-ice competitiveness of our Knicks and Rangers teams, it is also dependent on general economic conditions, in particular those in the New York City metropolitan area, and the effect of these conditions on our customers.

An economic downturn could adversely affect our business and results of operations as it may lead to lower demand for suite licenses and tickets to the games of our sports teams, which would also negatively affect merchandise and concession sales, as well as decrease levels of sponsorship and venue signage revenues.

In addition, remote and/or hybrid in-office work arrangements in the New York City metropolitan area resulting from COVID-19 could result in reduced attendance at Knicks and Rangers games.

In addition, remote and/or hybrid in-office work arrangements in the New York City metropolitan area resulting from COVID-19 or another pandemic or public health emergency could result in reduced attendance at Knicks and Rangers games.

Impact of COVID-19 on Our Business

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

Fiscal Years 2020 and 2021

In March 2020, the NBA and NHL suspended their 2019-20 seasons due to COVID-19.

As a result of the suspension of the 2019-20 NBA and NHL seasons and subsequent resumption of play in July and August 2020, respectively, during the first quarter of fiscal year 2021, the Company recognized certain revenues that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

In addition, the start of the 2020-21 NBA and NHL regular seasons were delayed.

The Knicks and the Rangers did not start their seasons until December 16, 2020 and January 14, 2021, respectively, initially with no fans and then with fan attendance limited to 10% capacity starting on February 23 and February 26, respectively, due to government-mandated assembly restrictions.

Effective May 19, 2021, event venues such as The Garden were permitted to host guests at full capacity, subject to certain restrictions, including, for example, restrictions for unvaccinated guests.

As a result, the Knicks played three home playoff games with ticket sales of approximately 15,000-16,500 per game during the fiscal year ended June 30, 2021.

During the 2020-2021 season, the Knicks and the Rangers each played fewer games than their traditional 82-game regular season schedules, with the NBA playing a 72-game regular season schedule and the NHL playing a 56-game regular season schedule.

These disruptions materially impacted the Company’s revenues across a number of areas, including, ticket sales;

the Company’s share of suite licenses;

sponsorships;

signage and in-venue advertising at The Garden;

local media rights fees;

and food, beverage and merchandise sales.

In connection with the MSGE Distribution, we entered into the Arena License Agreements with MSG Entertainment.

Effective July 1, 2021, the Company began paying license fees to MSG Entertainment under the Arena License Agreements in their full contractual amounts.

During fiscal year 2021, as a result of COVID-19, the Company implemented cost-reduction measures that included workforce reductions and limits on discretionary spending.

In addition, as a result of the disruptions caused by COVID-19, certain operating expenses were reduced, including (i) payments to MSG Entertainment under the Arena License Agreements described above, (ii) NBA league assessments and day-of-game expenses for Knicks and Rangers games, and (iii) league revenue sharing, net of escrow and team personnel expense.

These expense reductions did not fully offset revenue losses.

Fiscal Year 2022

Starting August 17, 2021, indoor entertainment venues such as The Garden were permitted to host guests at full capacity, subject to certain restrictions, including vaccination and/or mask requirements for guests.

In March 2022, New York City lifted all COVID-19 vaccination requirements pertaining to guests and professional athletes at indoor entertainment venues such as The Garden.

There are no capacity restrictions or vaccination requirements applicable to fan attendance at games at The Garden as of the date of this filing.

The Knicks and the Rangers each completed their full 82-game regular season schedules for the 2021-22 season in April 2022 and the Rangers competed in the playoffs in May and June 2022, playing ten home playoff games in total.

Fan attendance during fiscal year 2022 was impacted by the COVID-19 pandemic, including the emergence of certain variants and ongoing reduced tourism levels.

It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in renewed governmental and league restrictions on attendance or otherwise impact attendance of games at The Garden.

It is unclear to what extent COVID-19, including variants thereof, or another pandemic or public health emergency, could result in renewed governmental and/or league restrictions on attendance or otherwise impact attendance of games at The Garden, demand for our sponsorship, tickets and other premium inventory or otherwise impact the Company’s operations and operating results.

Any such impacts could materially adversely impact our business and results of operations.

See “Item 1A.

Risk Factors — Sports Business Risks — Our Operations and Operating Results Were Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response, and a Resurgence of the Pandemic or Another Pandemic or Public Health Emergency Could Adversely Affect Our Business and Results of Operations.”

Results of Operations

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

Years Ended June 30, Change (a)

Years Ended June 30, Change

2023 2022 Amount Percentage

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Depreciation and amortization 3,577 5,042 (1,465) (29) %

Operating income (loss) 86,080 (78,443) 164,523 NM

Other expense:

Operating income 85,174 86,080 (906) (1) %

Other income (expense):

Interest expense, net (20,492) (11,422) (9,070) (79) %

Miscellaneous expense, net (726) (346) (380) NM

Income (loss) from operations before income taxes 73,932 (89,318) 163,250 NM

Income tax benefit (expense) (25,052) 73,421 (98,473) NM

Net income (loss) 48,880 (15,897) 64,777 NM

Net loss attributable to nonredeemable noncontrolling interests from continuing operations

(2,251) (1,943) (308) (16) %

Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders $ 51,131 $ (13,954) $ 65,085 NM

Miscellaneous income (expense), net 25,239 (726) 25,965 NM

Income before income taxes 89,921 73,932 15,989 22 %

Income tax expense (44,293) (25,052) (19,241) (77) %

Net income 45,628 48,880 (3,252) (7) %

Net loss attributable to nonredeemable noncontrolling interests (2,165) (2,251) 86 4 %

Net income attributable to Madison Square Garden Sports Corp.’s stockholders $ 47,793 $ 51,131 $ (3,338) (7) %

NM — Percentage is not meaningful

(a) Operating results in the prior year were materially impacted by the coronavirus pandemic.

Please see “— Factors Affecting Operating Results — Impact of COVID-19 on Our Business” for more information.

Revenues for the year ended June 30, 2023 increased $66,093, or 8%, to $887,447 as compared to the prior year.

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Increase in pre/regular season ticket-related revenues $ 33,335

Increase in suite license fee revenues 86,754

Increase in playoff related revenues 49,570

Increase in suite revenues 15,237

Increase in sponsorship and signage revenues 9,545

Increase in revenues from local media rights fees 9,303

Increase in pre/regular season food, beverage and merchandise sales 6,086

Increase in local media rights fees 17,942

Decrease in playoff related revenues (8,625)

Decrease in revenues from league distributions (211)

Other net increases 1,423

The increase in pre/regular season ticket-related revenues was a result of increased attendance due to the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year.

In the prior year, the Knicks and the Rangers played games at The Garden with no fans in attendance until February 23 and 26, 2021, respectively, and after that, played games with attendance restricted to 10% capacity.

The increase in suite license fee revenues was a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

In the prior year, for Knicks and Rangers games played with a limited number of fans in attendance, access to suites was sold by way of individual tickets and, as a result, minimal suite license fee revenues were recognized.

The increase in playoff related revenues was primarily due to the Rangers playing ten home playoff games as the team advanced to the Eastern Conference Finals in the current year as compared to the Knicks playing three home playoff games in the prior year.

The increase in sponsorship and signage revenues was a result of the shortened NBA and NHL 2020-21 regular season schedules in the prior year, as well as the elimination of government mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

The increase in pre/regular season food, beverage and merchandise sales was a result of increased attendance due to the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

The increase in local media rights fees was primarily due to the impact of the shortened NBA and NHL 2020-21 regular season schedules in the prior year, as well as contractual rate increases.

The increase was slightly offset by the recognition of local media rights fees in the prior year associated with the Rangers’ participation in the Stanley Cup Qualifiers.

The decrease in revenues from league distributions was primarily due to the recognition of (i) the remainder of national media rights fees related to the 2019-20 NBA and NHL seasons during the first quarter of fiscal year 2021 that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020 and (ii) a $21,043 expansion fee from the NHL in the prior year.

The decrease was partially offset by increased NBA and NHL national media rights fees and other league distributions in the current year.

The increase in pre/regular season ticket-related revenues was primarily due to higher average per-game revenue.

The increase in suite revenues was primarily due to higher net sales of suite products.

The increase in sponsorship and signage revenues was primarily due to higher net sales of existing sponsorship and signage inventory and sales of new sponsorship and signage inventory.

The increase in revenues from local media rights fees was primarily due to contractual rate increases.

The increase in pre/regular season food, beverage and merchandise sales was primarily due to higher average Knicks and Rangers per-game revenue and higher online sales of merchandise.

The decrease in playoff related revenues was primarily due to the Rangers playing fewer home playoff games at The Garden as compared to the prior year.

The Rangers played ten home playoff games at The Garden in the prior year as the team advanced to the Eastern Conference Finals, resulting in higher per-game revenue in the prior year, as compared to three home playoff games during the current year.

This decrease was partially offset by the Knicks playing five home playoff games at The Garden in the current year as the team advanced to the second round of the playoffs as compared to not qualifying for the playoffs in the prior year.

The decrease in revenues from league distributions was primarily due to lower other league distributions, partially offset by increased national media rights fees in the current year.

Direct operating expenses

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• cost of team personnel transactions for waivers/contract termination costs, trades, and season-ending player injuries (net of anticipated insurance recoveries) of players and other team personnel;

• NBA and NHL revenue sharing (net of escrow), league assessments and NBA luxury tax receipts;

• NBA and NHL revenue sharing (net of escrow and excluding playoffs) and NBA luxury tax receipts;

• Other team operating expenses including variable day-of-event costs, operating costs of the Company’s training center, and league assessments;

• the cost of merchandise sales.

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The net increase is attributable to the following:

Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ 95,574

Increase in team personnel compensation $ 56,040

Increase in other team operating expenses not discussed elsewhere in this table 38,739

Increase in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden 32,200

Increase in playoff related expenses 20,230

Increase in other team operating expenses 8,260

Increase in pre/regular season expense associated with merchandise sales 3,743

Decrease in net provisions for certain team personnel transactions (21,216)

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

Years Ended June 30, Increase

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

$ 57,843 $ (37,731) $ 95,574

The increase in net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax was primarily due to higher provisions for league revenue sharing expense (net of escrow) of $102,589 as a result of higher escrow recoveries and lower revenue sharing expense in the prior year, which reflected the impact of the COVID-19 pandemic, partially offset by higher recoveries of NBA luxury tax in the current year.

The Knicks were not a luxury tax payer for the 2020-21 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 June 30, 2022 did not result in the team being a luxury tax payer for the 2021-22 season and the Company will receive an equal share of the portion of luxury tax receipts that are distributed to non-tax paying teams.

The actual amounts for the 2021-22 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.

The increase in team personnel compensation was primarily due to the impact of the shortened 2020-21 NBA and NHL regular seasons in the prior year and higher player compensation in the current year, partially offset by the recognition of player compensation expense during the prior year that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020 as a result of the NBA completing the 2019-20 season in October 2020.

The increase in other team operating expenses not discussed elsewhere in the table was a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

Increase in net provisions for certain team personnel transactions 2,085

Decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax (21,340)

Decrease in playoff related expenses (541)

The increase in team personnel compensation was primarily due to the impact of roster changes for the Knicks and the Rangers.

The increase in other team operating expenses was primarily a result of higher average per-game expenses.

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

The increase in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden was primarily a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

The increase in playoff related expenses was primarily due to the Rangers playing ten home playoff games as the team advanced to the Eastern Conference Finals in the current year as compared to the Knicks playing three home playoff games in the prior year.

The increase in pre/regular season expense associated with merchandise sales was a result of increased attendance due to the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year, as discussed above.

The increase in pre/regular season expense associated with merchandise sales was primarily related to higher merchandise sales as a result of higher average Knicks and Rangers per-game revenue and higher online sales of merchandise.

Net provisions for certain team personnel transactions were as follows:

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Net provisions for certain team personnel transactions $ 4,412 $ 2,327 $ 2,085

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

Years Ended June 30, Decrease

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

$ 36,503 $ 57,843 $ (21,340)

The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax was primarily due to (i) lower provisions for league revenue sharing expense (net of escrow and excluding playoffs) of $12,642, (ii) higher recoveries of NBA luxury tax in the current year, and (iii) the net impact of adjustments to prior seasons’ revenue sharing expense (net of escrow and excluding playoffs).

The Knicks were not a luxury tax payer for the 2021-22 or 2022-23 seasons and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams.

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.

Selling, general and administrative expenses

Selling, general and administrative expenses primarily consist of (i) administrative costs, including compensation, professional fees, costs under the Company’s services agreement with MSG Entertainment, (ii) fees related to the Company’s sponsorship sales and service representation agreements, and (iii) sales and marketing costs.

Selling, general and administrative expenses for the year ended June 30, 2022 increased $22,968, or 11%, to $229,668 as compared to the prior year primarily due to higher (i) marketing costs, (ii) playoff related expenses, (iii) fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment, (iv) costs related to the Company’s services agreement with MSG Entertainment and (v) other general and administrative expenses, partially offset by lower employee compensation and related benefits, including the absence of severance related to team executives incurred in the prior year.

Selling, general and administrative expenses primarily consist of (i) administrative costs, including compensation, professional fees and costs under the Company’s services agreement with MSG Entertainment, (ii) fees related to the Company’s sponsorship sales and service representation agreements, and (iii) sales and marketing costs.

Selling, general and administrative expenses generally do not fluctuate in line with changes in the Company’s revenues and direct operating expenses.

Selling, general and administrative expenses for the year ended June 30, 2023 increased $20,217, or 9%, to $249,885 as compared to the prior year primarily due to (i) higher employee compensation and related benefits of $10,195, including the net impact of executive management transition costs, (ii) an increase in sales and marketing costs of $5,205, (iii) an increase in professional fees of $2,133, and (iv) higher fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment of $1,451, partially offset by lower costs related to the Company’s services agreement with MSG Entertainment of $2,324.

Depreciation and amortization

Depreciation and amortization for the year ended June 30, 2023 decreased $1,465, or 29%, to $3,577 as compared to the prior year.

Operating income (loss)

For the year ended June 30, 2022, operating income of $86,080 improved $164,523 as compared to the prior year.

The improvement to operating income was primarily due to higher revenues, partially offset by higher direct operating costs and, to a lesser extent, higher selling, general and administrative expenses.

Operating income

For the year ended June 30, 2023, operating income decreased $906, or 1%, to $85,174 as compared to the prior year.

The decrease in operating income was primarily due to higher direct operating expenses and selling, general and administrative expenses, partially offset by higher revenues and to a lesser extent, lower depreciation and amortization.

Interest expense, net

Net interest expense increased $893 to $11,422 as compared to the prior year.

The increase was primarily driven by (i) increased interest expense under the Knicks revolving credit facility as a result of higher interest rates, (ii) interest expense related to the advances received in March 2021 under the 2021 Rangers NHL Advance Agreement, and (iii) acceleration of certain previously incurred financing costs when the Company terminated the 2020 Knicks Holdings Revolving Credit Facility in its entirety during December 2021, partially offset by decreased interest expense under the Rangers revolving credit facility as a result of principal repayments made during the current year.

Net interest expense increased $9,070, or 79%, to $20,492 as compared to the prior year.

The increase was primarily due to higher average interest rates in the current year causing increased interest expense under the Knicks and the Rangers revolving credit facilities.

The increase was partially offset by (i) higher interest income due to increased interest rates in the current year, (ii) lower average borrowings under the Rangers revolving credit facility in the current year as compared to the prior year, and (iii) the acceleration of previously incurred financing costs that were recognized in the prior year as a result of the Company terminating the 2020 Knicks Holdings Revolving Credit Facility.

Miscellaneous income (expense), net

Miscellaneous income (expense), improved $25,965 as compared to the prior year.

The improvement was primarily due to the recognition of unrealized gains related to the Company’s investments in Xtract One common stock and warrants in the current year.

Income tax expense for the year ended June 30, 2023 of $44,293 differs from the income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due to state and local tax expense of $15,066, nondeductible officers’ compensation of $5,238, a change in the estimated tax rate used to determine deferred taxes of $1,788, and nondeductible disability insurance premiums expense of $1,227.

Income tax expense for the year ended June 30, 2022 of $25,052 differs from the income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due to state and local tax expense of $8,763 and nondeductible officers’ compensation of $5,156, partially offset by a change in the estimated tax rate used to determine deferred taxes of $3,191 and return to provision adjustments of $2,476.

See Note 18 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.

Income tax benefit for the year ended June 30, 2021 of $73,421 differs from the income tax benefit derived from applying the statutory federal rate of 21% to pretax loss primarily due to a decrease in valuation allowance of $52,108 and state and local tax benefit of $7,331, partially offset by nondeductible officers’ compensation of $4,081.

Adjusted operating income (loss)

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.

Adjusted operating income

The Company has amended the definition of adjusted operating income so that the impact of the non-cash portion of operating lease costs related to the Company’s Arena License Agreements with MSG Entertainment is no longer excluded in all periods presented.

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

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.

In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan, which are included for the first time this period, provides investors with a clearer picture of the Company’s operating performance given that, in accordance with GAAP, gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan are recognized in Operating (income) loss whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Miscellaneous income (expense), net, which is not reflected in Operating income (loss).

In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan provides investors with a clearer picture of the Company’s operating performance given that, in accordance with generally accepted accounting principles (“GAAP”), gains and losses related to the remeasurement of liabilities under the Company’s Executive Deferred Compensation Plan are recognized in Operating income (loss) whereas gains and losses related to the remeasurement of the assets under the Company’s Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Miscellaneous income (expense), net, which is not reflected in Operating income (loss).

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

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

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP.

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows provided by (used in) operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP.

Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

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

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

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

Years Ended June 30,

2022 2021 Change

Operating income (loss) $ 86,080 $ (78,443) $ 164,523

Deferred rent 27,305 28,305

2023 2022 Change Percentage

Operating income $ 85,174 $ 86,080 $ (906) (1) %

Depreciation and amortization 3,577 5,042

Share-based compensation 25,203 24,245

Restructuring charges — 1,597

Remeasurement of deferred compensation plan liabilities

Adjusted operating income (loss) $ 142,211 $ (12,530) $ 154,741

For the year ended June 30, 2022, adjusted operating income of $142,211 improved $154,741 as compared to the prior year.

The improvement to adjusted operating income was primarily due to higher revenues, partially offset by higher direct operating costs and, to a lesser extent, higher selling, general and administrative expenses.

Adjusted operating income (a)

$ 115,045 $ 114,906 $ 139 NM

_________________

(a) The Company has amended the definition of adjusted operating income so that the impact of the non-cash portion of operating lease costs related to the Company’s Arena License Agreements with MSG Entertainment is no longer excluded.

Pursuant to GAAP, recognition of operating lease costs is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement.

As a result, operating lease costs is comprised of a contractual cash component plus or minus a non-cash component for each period presented.

Adjusted operating income includes operating lease costs of (i) $41,524 and $40,314 of expense paid in cash for the years ended June 30, 2023 and 2022, respectively, and (ii) a non-cash expense of $26,096 and $27,305, for the years ended June 30, 2023 and 2022, respectively.

For the year ended June 30, 2023, adjusted operating income increased $139 to $115,045 as compared to the prior year.

The increase in adjusted operating income was primarily due to higher revenues, 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 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 Operating Results — 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 addition, see also Note 1 to the consolidated financial statements included in “Part II — Item 8.

Financial Statements and Supplementary Data” of this Annual Report on Form 10-K 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.

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 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K 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, and potential repurchases of shares of the Company’s Class A Common Stock.

As of June 30, 2022, we had approximately $91,000 in Cash and cash equivalents.

In addition, as of June 30, 2022, the Company’s deferred revenue obligations were approximately $141,176, net of billed, but not yet collected deferred revenue.

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

Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, repurchases of shares of the Company’s Class A Common Stock, including $75,000 under the ASR (as defined below), dividends, if declared, and investments.

As of June 30, 2023, we had $40,398 in Cash and cash equivalents.

In addition, as of June 30, 2023, the Company’s deferred revenue obligations were $147,561, net of billed, but not yet collected deferred revenue.

The current portion of this balance is primarily comprised of obligations in connection with tickets and suites.

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

We believe we have sufficient liquidity, including approximately $91,000 in Cash and cash equivalents as of June 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 return or application of deferred revenue, for the foreseeable future.

We believe we have sufficient liquidity, including approximately $40,398 in Cash and cash equivalents as of June 30, 2023, along with $230,000 of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations, for the foreseeable future.

In addition, on July 10, 2023, the Company borrowed an additional $25,000 under the 2021 Knicks Revolving Credit Facility.

Financing Agreements and Stock Repurchases

See Note 13 and Note 16 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussions of the Company’s debt obligations and various financing agreements, and the Company’s stock repurchases, respectively.

Special Dividend and Accelerated Share Repurchase

On October 6, 2022, the Company announced that its Board of Directors declared a one-time cash dividend of $7.00 per share (the “Special Dividend”), which was paid on October 31, 2022 to stockholders of record as of October 17, 2022.

During the year ended June 30, 2023 , the Company made payments of $170,923 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.

Cash Flow Discussion

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Years Ended June 30,

Net income (loss) $ 48,880 $ (15,897)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities 55,600 (36,744)

Subtotal $ 104,480 $ (52,641)

Net income $ 45,628 $ 48,880

Adjustments to reconcile net income to net cash provided by operating activities 20,571 56,061

Changes in working capital assets and liabilities 86,274 73,115

Net cash provided by (used in) operating activities $ 178,056 $ (35,326)

Net cash provided by operating activities $ 152,473 $ 178,056

Net cash used in investing activities (17,759) (2,932)

Net cash (used in) provided by financing activities (156,142) 17,155

Net increase (decrease) in cash, cash equivalents and restricted cash $ 18,982 $ (18,637)

Net cash used in financing activities (185,273) (156,142)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (50,559) $ 18,982

Operating Activities

Net cash provided by operating activities for the year ended June 30, 2022 was $178,056 as compared to net cash used in operating activities in the prior year of $35,326.

This was primarily due to the increase in net income adjusted for non-cash items and, to a lesser extent, changes in working capital assets and liabilities driven by the COVID-19 pandemic in the prior year.

Net cash provided by operating activities for the year ended June 30, 2023 decreased by $25,583 to $152,473 as compared to the prior year.

The decrease was primarily due to the decrease in net income adjusted for non-cash items, partially offset by the impact of changes in working capital assets and liabilities.

The changes in working capital assets and liabilities were primarily driven by (i) lower Net related party receivables of $32,618, due to the timing of collections related to the Company’s Arena License Agreements, (ii) increased accrued and other liabilities of $28,806, primarily due to the timing of payments and recognition for compensation and (iii) an increase in deferred revenue of $6,818 primarily due to higher collections of ticket sales.

These changes are partially offset by (i) increased Accounts receivable, net of $20,981 primarily due to collections of league related receivables, including escrow and player compensation recoveries, luxury tax, and league distributions related to prior NBA and NHL seasons in the prior year, (ii) lower Net related party payables of $16,434 due to the timing of payments related to the Company’s services agreement and employee matters agreements, (iii) lower Accounts payable of $11,028 due to the timing of payments and (iv) increased payments for Investments of $7,382 related to the Company’s Executive Deferred Compensation Plan.

Investing Activities

Net cash used in investing activities for the year ended June 30, 2022 increased by $2,466 to $2,932 as compared to the prior year primarily due to higher other investing activities and capital expenditures in the current year.

Net cash used in investing activities for the year ended June 30, 2023 increased by $14,827 to $17,759 as compared to the prior year primarily due to higher purchases of investments in the current year and to a lesser extent, cash balances disposed of as part of the sale of CLG in the current year.

Financing Activities

Net cash used in financing activities for the year ended June 30, 2022 was $156,142 as compared to net cash provided by financing activities in the prior year of $17,155.

This was due to (i) principal repayments on the 2021 Rangers Credit Agreement in the current year period, (ii) proceeds from the 2021 Rangers NHL Advance Agreement in the prior year as compared to none in the current year, and (iii) additional borrowings in the prior year under the amended and extended 2021 Knicks Credit Agreement and 2021 Rangers Credit Agreement (prior to the amendment and restatement thereof) as compared to no borrowings in the current year.

Net cash used in financing activities for the year ended June 30, 2023 increased by $29,131 to $185,273 as compared to the prior year primarily due to the payment of the Special Dividend and the ASR in the current year, partially offset by additional net borrowings under the 2021 Knicks Revolving Credit Facility and the 2021 Rangers Revolving Credit Facility in the current year as compared to the prior year.

Contractual Obligations and Off Balance Sheet Arrangements

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Contractual obligations reflected on the balance sheet:

Short-term debt (b)

30,000 30,000 — — —

Long-term debt (c)

2,306,023 51,577 103,836 108,435 2,042,175

Contractual obligations (d)

Long-term debt (d)

295,000 — — 295,000 —

Contractual obligations (e)

126,341 104,683 9,135 4,984 7,539

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$ 3,428,749 $ 386,821 $ 454,191 $ 506,109 $ 2,081,628

_________________

(a) Contractual obligations not reflected on the balance sheet consist principally of the Company’s obligations under employment agreements that the Company has with certain of its professional sports teams’ personnel where services are to be performed in future periods and that are generally guaranteed regardless of employee injury or termination.

(b) Includes contractually obligated minimum license fees under the Arena License Agreement, which fees are characterized as lease payments for operating leases having an initial noncancelable term in excess of one year under GAAP.

(b) Consists of amounts under the 2021 Rangers NHL Advance Agreement.

See Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.

(c) Includes contractually obligated minimum license fees under the Arena License Agreement, which fees are characterized as lease payments for operating leases having an initial noncancelable term in excess of one year under GAAP.

These commitments are presented exclusive of the imputed interest used to reflect the payment’s present value.

See Note 7 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for information on the contractual obligations related to future lease payments, which are reflected on the consolidated balance sheet as lease liabilities as of June 30, 2023.

(d) Consists of amounts drawn under the 2021 Knicks Revolving Credit Facility and 2021 Rangers Revolving Credit Facility.

See Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.

(d) Contractual obligations reflected on the balance sheet consist principally of the Company’s obligations under employment agreements that the Company has with certain of its professional sports teams’ personnel where services have been fully performed and that are being paid on a deferred basis.

(e) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain.

(e) Contractual obligations reflected on the balance sheet consist principally of the Company’s obligations under employment agreements that the Company has with certain of its professional sports teams’ personnel where services have been fully performed and that are being paid on a deferred basis.

(f) Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain.

See Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on the Company’s pension obligations.

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.

On March 11 and 12, 2020, respectively, the NBA and NHL suspended their 2019-20 seasons due to COVID-19.

In July and August 2020, the NBA and NHL, respectively, resumed their seasons and the NHL and NBA subsequently completed their seasons in September and October 2020, respectively.

As a result, during the first quarter of fiscal year 2021, the Company recognized certain revenues that otherwise would have typically been recognized during the third and fourth quarter of fiscal year 2020.

In addition, due to the delayed start of the 2020-21 NBA and NHL seasons in December 2020 and January 2021, respectively, the Company recognized certain revenues during the third and fourth quarters of fiscal year 2021, that otherwise would have typically been recognized during the second and third quarters of fiscal year 2021.

Recently Issued Accounting Pronouncements and Critical Accounting Policies

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Indefinite-lived intangible assets 103,644

Amortizable intangible assets, net of accumulated amortization 636

Property and equipment, net 30,501

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The Company has one operating and reportable segment, and for the year ended June 30, 2023, the Company had one reporting unit for goodwill impairment testing purposes.

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit.

If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

The estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows and comparable market transactions.

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The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows.

Subsequent to the adoption of ASU No.

2017-04 in the third quarter of fiscal year 2020, the amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value determined in step one, not to exceed the carrying amount of goodwill.

Prior to the adoption of ASU No.

2017-04, if the carrying amount of a reporting unit exceeded its fair value, the second step of the goodwill impairment test was performed to measure the amount of impairment loss, if any.

The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value determined in step one, not to exceed the carrying amount of goodwill.

The second step of the goodwill impairment test compared the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

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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

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For all periods presented, the Company elected to perform a qualitative assessment of impairment for the indefinite-lived intangible assets.

These assessments considered the events

and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset.

These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset.

Examples of such events and circumstances include:

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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.

Lease Accounting

The Company’s leases primarily consist of the lease of the Company’s corporate offices under the Sublease Agreement with MSG Entertainment (the “Sublease Agreement”) for our principal executive offices at Two Pennsylvania Plaza in New York and the lease of CLG Performance Center.

In, addition, the Company accounts for the rights of use of The Garden pursuant to the Arena License Agreements as leases under the Accounting Standards Codification Topic 842, Leases.

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The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and non-lease components together as a single lease component.

ROU assets associated with finance leases are presented separate from operating leases ROU assets and are included within Property and equipment, net on the Company’s consolidated balance sheet.

ROU assets associated with finance leases, if any, are presented separate from operating leases ROU assets and are included within Property and equipment, net on the Company’s consolidated balance sheet.

For purposes of measuring the present value of the Company’s fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in the underlying leasing arrangements are typically not readily determinable.

The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment surrounding the associated lease.

On April 17, 2020, in connection with the MSGE Distribution, we entered into a sublease agreement with MSG Entertainment (the “Sublease Agreement”) for our principal executive offices at Two Pennsylvania Plaza in New York.

The Sublease Agreement right of use assets and liabilities are recorded on the balance sheet at lease commencement based on the present value of minimum base rent and other fixed payments over the reasonably certain lease term.

In November 2021, MSG Entertainment entered into a new lease for principal executive offices at Two Pennsylvania Plaza in New York (the “New MSGE Lease Agreement”).

We are party to a sublease agreement with MSG Entertainment (the “Sublease Agreement”) for our principal executive offices at Two Pennsylvania Plaza in New York.

The Sublease Agreement ROU assets and liabilities are recorded on the balance sheet at lease commencement based on the present value of minimum base rent and other fixed payments over the reasonably certain lease term.

In November 2021, Sphere Entertainment entered into a new lease for principal executive offices at Two Pennsylvania Plaza in New York, which was assigned to MSG Entertainment in connection with the MSGE Distribution (the “New MSGE Lease Agreement”).

In accordance with the terms of the Sublease Agreement and the New MSGE Lease Agreement, the lease term of the Sublease Agreement was extended until October 31, 2024.

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In addition, in connection with the New MSGE Lease Agreement, the Company has entered into a commitment whereby if the New MSGE Lease Agreement were terminated under certain circumstances, the Company would be required to enter into a new lease for executive offices in Two Pennsylvania Plaza directly with the landlord, with a consistent lease term through January 31, 2046.

As the Company has not yet entered into a new sublease for or taken possession of the new executive office space at Two

Pennsylvania Plaza, no additional right-of-use assets or operating lease liabilities have been recorded as of June 30, 2022 related to the commitments discussed above.

As the Company has not yet entered into a new sublease for or taken possession of the new executive office space at Two Pennsylvania Plaza, no additional right-of-use assets or operating lease liabilities have been recorded as of June 30, 2023 related to the commitments discussed above.

In addition, we are party to long term leases with MSG Entertainment that end June 30, 2055 that allow the Knicks and the Rangers to play their home games at The Garden.

The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term.

Effective July 1, 2021, the Company began paying license fees to MSG Entertainment under the Arena License Agreements in their full contractual amounts.

The Knicks and the Rangers are entitled to use The Garden on home game days, which are usually nonconsecutive, for a pre-defined period of time from before and after the game.

At the time of the Sphere Distribution, The Garden was not available for use due to the government-mandated suspension of events in response to COVID-19, and was only available at reduced capacity beginning in December 2020 through May 2021.

a result, the Company was not required to pay license fees under the Arena License Agreements until games resumed at The Garden, and the Company paid substantially reduced fees while attendance was limited.

Effective July 1, 2021, the Company began paying license fees under the Arena License Agreements in their full contractual amounts.

The Knicks and the Rangers are entitled to use The Garden on home game days, which are usually nonconsecutive, for a pre-defined period of time before and after the game.

In evaluating the Company’s lease cost, the Company considered the timing of payments throughout the lease terms and the nonconsecutive periods of use, provided for within each license.

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As such, the Company concluded that the related straight-line operating lease costs should be recorded by each team equally over each team’s individual event days.

As part of Arena License Agreements, we recognized license fees which are characterized as operating lease liabilities and a right of use assets.

As part of Arena License Agreements, we recognized license fees which are characterized as operating lease liabilities and ROU assets.

We measured the lease liabilities at the present value of the future lease payments as of April 17, 2020 and remeasured the lease liabilities during the period that The Garden was not available for use as discussed above.

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Absent a lease modification we will continue to utilize the April 17, 2020 incremental borrowing rate.

In June 2023, the Company entered into a lease agreement for an aircraft with a term through December 30, 2031.

The lease ROU asset and liability were recorded in the Company’s accompanying consolidated balance sheet as of June 30, 2023 based on the present value of minimum lease fixed payments over the lease term utilizing the Company’s incremental borrowing rate as of the lease commencement date.

Estimation of the incremental borrowing rate requires judgment by management and reflects an assessment of credit standing to derive an implied secured credit rating and corresponding yield curve.

Changes in management’s estimates of discount rate assumptions could result in a significant overstatement or understatement of right of use assets or lease liabilities, resulting in an adverse impact to MSG Sports’ financial position.

Changes in management’s estimates of discount rate assumptions could result in a significant overstatement or understatement of ROU assets or lease liabilities, resulting in an adverse impact to MSG Sports’ financial position.

See Note 7 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our leases.

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-K

Item 7. Management’s Discussion and Analysis