What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-13 compared with 2023-08-17 · 117 added, 131 removed, 388 unchanged (39% of the section changed)

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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;

• 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;

• the performance by our affiliates of their obligations under various agreements with the Company;

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

• developments affecting the regional sports network industry, including the effects of such developments on MSG Networks Inc.’s (“MSG Networks”) ability to generate revenue and perform its obligations under its local media rights agreements with us;

• any NBA, NHL or other work stoppage;

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• the level of our expenses, including our corporate expenses;

• business, reputational and litigation risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches of our information security;

• activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including The Garden where the home games of the New York Knickerbockers (the “Knicks”) and the New York Rangers (the “Rangers”) are played;

• operational, business, reputational, litigation and other risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches of our information security or if third party facilities, systems and/or software upon which we rely are interrupted or unavailable;

• activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including Madison Square Garden Arena (“The Garden”) where the home games of the New York Knickerbockers (the “Knicks”) and the New York Rangers (the “Rangers”) are played;

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

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

• our ability to successfully integrate acquisitions or new businesses into our operations;

• the operating and financial performance of our strategic acquisitions and investments, including those we may not control;

• our ability to successfully integrate acquisitions or new businesses into our operations and the operating and financial performance of strategic acquisitions and investments, including those we may not control;

• the impact of governmental regulations or laws, including changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions (including for The Garden) and the ability for us and Madison Square Garden Entertainment Corp.

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• 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 tax-free treatment of the Sphere Distribution (as defined below);

• 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.

Sphere Distribution

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

Sphere Distribution and MSGE Distribution

On April 17, 2020, 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.

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

Unless the context otherwise requires, all references to MSG Entertainment, Sphere Entertainment and MSG Networks (a wholly-owned subsidiary of Sphere Entertainment) 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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This section provides a discussion of our financial condition, as well as an analysis of our cash flows for the years ended June 30, 2024 and 2023 .

The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations and off balance sheet arrangements that existed at June 30, 2023.

The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations and off-balance sheet arrangements that existed as of June 30, 2024.

Seasonality of Our Business.

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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 and premium hospitality, 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, beverage 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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Suites and Clubs

We earn revenue through the sale of suite and premium club licenses at The Garden, which are generally sold by MSG Entertainment to corporate customers pursuant to multi-year licenses.

We earn revenue through the sale of suite and premium club licenses at The Garden, which are generally sold by MSG Entertainment to corporate customers via multi-year licenses.

Under standard licenses, the licensees pay an annual license fee, which varies depending on the location and type of the suite or club.

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Pursuant to the Arena License Agreements, the Knicks and the Rangers pay MSG Entertainment a commission equal to 30% of revenues from the sales of their merchandise at The Garden.

Amounts collected for ticket sales, suite licenses and clubs, sponsorships and venue signage in advance of an event are recorded as deferred revenue and are recognized as revenues when earned.

The most significant expenses are player and other team personnel salaries and charges for transactions relating to players for career-ending and season-ending injuries, trades, and waivers and contract termination costs of players and other team personnel, including team executives.

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.

Amounts collected for ticket sales, media rights, suite licenses and clubs, sponsorships and venue signage in advance the Company’s satisfaction of its contractual performance obligations are recorded as deferred revenue and are recognized as revenues when earned.

The most significant expenses are player and other team personnel salaries.

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, NBA luxury tax, when applicable, and charges for transactions relating to players for career-ending and season-ending injuries, trades, and waivers and contract termination costs of players and other team personnel, including coaches and team executives.

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”).

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Amounts in this paragraph are in thousands, except for luxury tax rates.

The luxury tax rates for teams with aggregate player salaries above such threshold start at $1.50 for each $1.00 of team salary above the threshold up to $5,000 and scale up to $3.25 for each $1.00 of team salary that is from $15,000 to $20,000 over the threshold, and an additional tax rate increment of $0.50 applies for each additional $5,000 (or part thereof) of team salary in excess of $20,000 over the threshold.

In addition, for teams that are taxpayers in at least three of four previous seasons, the above tax rates are increased by $1.00 for each increment.

The NBA CBA generally provides for a luxury tax that is applicable to all teams with aggregate player salaries exceeding a threshold that is set prior to each season based upon projected league-wide revenues (as defined under the NBA CBA), with the amount of luxury tax owed determined based on that season’s luxury tax bracket and tax rates.

The luxury tax bracket for the 2023-24 season was $5,000 and the luxury tax bracket for subsequent seasons will increase annually at the same rate as the NBA salary cap.

Through the 2024-25 season, luxury tax rates for teams with aggregate player salaries above such threshold start at $1.50 for each $1.00 of team salary exceeding the threshold by 0% - 100% of the luxury tax bracket and scale up to $3.25 for each $1.00 of team salary exceeding the threshold by 300% - 400% of the luxury tax bracket.

An additional tax rate increment of $0.50 applies for each additional 100% of the luxury tax bracket of each $1.00 of team salary exceeding the threshold by greater than 400% of the luxury tax bracket.

In addition, through the 2024-25 season, for teams that are taxpayers in at least three of four previous seasons, the above tax rates are increased by $1.00 for each increment.

Beginning with the 2025-26 season, luxury tax rates for teams with aggregate player salaries above such threshold start at $1.00 for each $1.00 of team salary exceeding the threshold by 0% - 100% of the luxury tax bracket and scale up to $4.75 for each $1.00 of team salary exceeding the threshold by 300% - 400% of the luxury tax bracket.

In addition, beginning with the 2025-26 season, for teams that are taxpayers in at least three of the four previous seasons, the above tax rates are increased by $2.00 for each increment.

Fifty percent of the aggregate luxury tax payments is a funding source for the revenue sharing plan (described below) and the remaining 50% of such payments is distributed in equal shares to non-taxpaying teams.

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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.

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.

If, for a particular season, compensation reductions in excess of 10% are needed, the excess will be divided by three and recouped via reductions to players’ compensation over the same season, and the subsequent two seasons.

The reduction of players’ salary for any one season is capped at 20% and carried over to the subsequent season as additional compensation reductions.

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.

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

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

If, for a particular season, compensation reductions in excess of 10% were needed, the excess would be divided by three and recouped via reductions to players’ compensation over the same season, and the subsequent two seasons.

The reduction of players’ salary for any one season was capped at 20% and carried over to the subsequent season as additional compensation reductions.

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

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

Effective July 1, 2023, a “Ten-and-Roll” escrow system was put in place.

Under the Ten-and-Roll system, throughout each season, NBA teams withhold 10% of each player’s salary.

If, for a particular season, compensation reductions in excess of 10% are needed, the excess will be recouped via certain reductions to player benefit contributions and if necessary, reductions to players’ compensation over subsequent seasons, with the reduction of players’ salary capped at 10%.

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.

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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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.

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

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

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The NHL CBA also provides for a revenue sharing plan.

The plan generally requires the distribution of a pool of funds approximating 6.055% of league-wide revenues to certain qualifying lower-revenue teams and is funded as follows:

The plan generally requires the distribution of a pool of funds not more than 6.055% of league-wide revenues to certain qualifying lower-revenue teams and is funded as follows:

(a) 50% from contributions by the top ten revenue earning teams (based on preseason and regular season revenues, net of arena costs) in accordance with a formula;

(b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for each home playoff game (although this provision was waived for the 2020-21 season);

(b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for each home playoff game;

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

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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.

Other expenses primarily include Selling, general and administrative (“SG&A”) expenses that consist of (i) administrative costs, including compensation, costs under the Company’s services agreement with MSG Entertainment, operating lease costs and professional fees, (ii) fees related to the Company’s sponsorship sales and service representation agreements, and (iii) sales and marketing costs.

Factors Affecting Operating Results

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These transactions can result in significant charges as the Company recognizes the estimated ultimate costs of these events in the period in which they occur, although amounts due to these individuals are generally paid over their remaining contract terms .

For example, the expense for these items was $4,412, and $737 for fiscal years 2023 and 2022, respectively .

For example, the expense for these transactions was $781, and $4,412 for fiscal years 2024 and 2023, respectively .

These expenses add to the volatility of our operating results .

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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 or another pandemic or public health emergency could result in reduced attendance at Knicks and Rangers games.

Impact of COVID-19 on Our Business

During fiscal years 2020 and 2021, COVID-19 disruptions materially impacted the Company’s revenues and the Company recognized materially less revenues, or in some cases, no revenues, across a number of areas.

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.

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.”

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

Results of Operations

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Interest expense, net (24,802) (20,492) (4,310) 21 %

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

Miscellaneous (expense) income, net (15,568) 25,239 (40,807) NM

Income before income taxes 105,668 89,921 15,747 18 %

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Revenues for the year ended June 30, 2024 increased $139,702, or 16%, to $1,027,149 as compared to the prior year.

The net increase is attributable to the following:

The net increase was attributable to the following:

Increase in playoff related revenues $ 71,848

Increase in pre/regular season ticket-related revenues 25,549

Increase in revenues from league distributions 22,423

Increase in suite revenues 11,187

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 5,289

Decrease in playoff related revenues (8,625)

Decrease in revenues from league distributions (211)

Increase in revenues from local media rights fees 2,985

Decrease in sponsorship and signage revenues (1,855)

Other net increases 2,276

The increase in playoff related revenues was primarily due to the Rangers and the Knicks playing additional home playoff games at The Garden in the current year as compared to the prior year and higher average per-game revenue.

The Rangers played eight home playoff games in the current year as the team advanced to the Eastern Conference Finals, as compared to three home playoff games in the prior year.

The Knicks played seven home playoff games at The Garden in the current year as compared to five home playoff games in the prior 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.

The increase in revenues from league distributions was primarily due to an increase in certain league distributions unrelated to national media rights fees, including a non-recurring territorial fee from the NHL of approximately $7 million dollars, and increased national media rights fees in the current year, partially offset by the absence of league distributions related to CLG in the current year and lower other league distributions in the current year.

The increase in suite revenues was primarily due to higher net sales of suite products, including revenue related to new premium hospitality offerings which were made available at the start of the 2023-24 seasons.

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

The increase in revenues from local media rights fees was primarily due to contractual rate increases, partially offset by a reduction in rights fees due to a decrease in the number of games exclusively available to MSG Networks during the current year as compared to the prior year.

The decrease in sponsorship and signage revenues was primarily due to the absence of sponsorship and signage revenues related to CLG 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 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;

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

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

• the cost of merchandise sales.

Direct operating expenses for the year ended June 30, 2024 increased $67,703, or 12%, to $616,514 as compared to the prior year.

The net increase is attributable to the following:

The net increase was attributable to the following:

Increase in playoff related expenses $ 27,844

Increase in team personnel compensation 22,925

Increase in other team operating expenses 9,295

Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax 7,831

Increase in pre/regular season expense associated with merchandise sales 3,439

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 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:

Years Ended June 30, Increase (Decrease)

Waivers/contract terminations $ 3,269 $ 731 $ 2,538

Player trades 1,143 (1,066) 2,209

Season-ending player injuries — 2,662 (2,662)

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

Decrease in net provisions for certain team personnel transactions (3,631)

The increase in playoff related expenses was primarily due to the Rangers and the Knicks playing additional home playoff games at The Garden in the current year as compared to the prior year and, to a lesser extent, higher average per-game expenses.

The increase in team personnel compensation was primarily due to the impact of roster changes for the Knicks and the Rangers, partially offset by the absence of expenses related to CLG in the current year.

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

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

Years Ended June 30, Increase

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

$ 44,334 $ 36,503 $ 7,831

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 increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax was primarily due to higher provisions for league revenue sharing expense (net of escrow and excluding playoffs) of $4,045 and lower recoveries of NBA luxury tax in the current year.

The Knicks were not a luxury tax payer for the 2022-23 or 2023-24 seasons and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams.

Based on the current roster the Knicks would be a luxury tax payer for the 2024-25 season, however the final determination will be based upon the Knicks roster at the end of the 2024-25 regular season.

The actual amounts for the 2023-24 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 pre/regular season expense associated with merchandise sales was primarily related to higher merchandise sales as a result of higher average per-game revenue and higher online sales of merchandise.

Net provisions for certain team personnel transactions were as follows:

Years Ended June 30, Increase (Decrease)

Season-ending player injuries $ 2,613 $ — $ 2,613

Player trades (1,500) 1,143 (2,643)

Waivers/contract terminations (332) 3,269 (3,601)

Net provisions for certain team personnel transactions $ 781 $ 4,412 $ (3,631)

Selling, general and administrative expenses

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 primarily consist of (i) administrative costs, including compensation, costs under the Company’s services agreement with MSG Entertainment, operating lease costs and professional fees, (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.

Selling, general and administrative expenses for the year ended June 30, 2024 increased $11,548, or 5%, to $261,433 as compared to the prior year primarily due to higher (i) operating lease costs of $7,435, (ii) employee compensation and related benefits of $4,086, including the net impact of executive management transition costs, and (iii) playoff related expenses of $2,829, partially offset by lower other general and administrative expenses.

Depreciation and amortization

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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.

For the year ended June 30, 2024, operating income increased $60,864, or 71%, to $146,038 as compared to the prior year.

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

Interest expense, net

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.

Interest expense, net increased $4,310, or 21%, to $24,802 as compared to the prior year.

The increase was primarily due to increased interest expense caused by higher average interest rates in the current year and higher average borrowings under the Knicks Revolving Credit Facility in the current year.

The increase was partially offset by lower average borrowings under the Rangers Revolving Credit Facility in the current year and, to a lesser extent, higher interest income primarily due to increased interest rates in the current year.

Miscellaneous (expense) income, net

Miscellaneous (expense) income, net decreased $40,807 to a net expense of $15,568 as compared to the prior year primarily due to the recognition of unrealized losses in the current year related to the Company’s investments in Xtract One common stock and warrants, as compared to unrecognized gains in the prior year related to the Company’s investments in Xtract One common stock and warrants, and, to a lesser extent, losses, including other than temporary impairments, associated with the company’s equity method investments in the current year.

Income tax expense for the year ended June 30, 2024 of $46,897 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 $18,348 and nondeductible officers’ compensation of $5,899.

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.

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.

During the fourth quarter of fiscal year 2023, the Company amended the definition of adjusted operating income (loss) 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 the calculation of adjusted operating income (loss) 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 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).

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 (expense) income, 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 provided by (used in) 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 from 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.

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Adjusted operating income (a)

$ 115,045 $ 114,906 $ 139 NM

$ 172,242 $ 115,045 $ 57,197 50 %

(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.

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(a) During the fourth quarter of fiscal year 2023, the Company 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.

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Adjusted operating income includes operating lease costs of (i) $42,769 and $41,524 of expense paid in cash for the years ended June 30, 2024 and 2023, respectively, and (ii) a non-cash expense of $24,850 and $26,096, for the years ended June 30, 2024 and 2023, 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.

For the year ended June 30, 2024, adjusted operating income increased $57,197, or 50%, to $172,242 as compared to the prior year.

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

Liquidity and Capital Resources

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

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 (each as defined therein).

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.

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 Knicks Credit Agreement, Rangers Credit Agreement, and Rangers NHL Advance Agreement.

As of June 30, 2024, we had $89,136 in Cash and cash equivalents.

In addition, as of June 30, 2024, the Company’s deferred revenue obligations were $118,018, 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.

This balance is primarily comprised of obligations in connection with tickets and suites.

In addition, the Company’s deferred revenue obligations included $11,033 from the NBA which the league provided to each team.

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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.

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 approximately $89,136 in Cash and cash equivalents as of June 30, 2024, along with $250,000 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.

If MSG Networks were to experience a bankruptcy event, we would be prevented, absent a cure or waiver, from borrowing additional amounts under our revolving credit facilities.

See “Item 1A.

Risk Factors — Economic and Business Relationship Risks — Certain of Our Subsidiaries Have Incurred Substantial Indebtedness, and the Occurrence of an Event of Default Under Our Subsidiaries’ Credit Facilities or Our Inability to Repay Such Indebtedness When Due Could Substantially Impair the Assets of Those Subsidiaries and Have a Negative Effect on Our Business.”

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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Net cash used in financing activities (28,785) (185,273)

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

Net increase (decrease) in cash, cash equivalents and restricted cash $ 54,448 $ (50,559)

Operating Activities

Net cash provided by operating activities for the year ended June 30, 2024 decreased by $60,342 to $92,131 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.

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

The changes in working capital assets and liabilities were primarily driven by (i) a decrease in accrued and other liabilities of $69,417 primarily due to higher payments related to employee compensation and league revenue sharing in the current year, (ii) an increase in net related party receivables of $27,820 primarily due to the timing of collections related to the Company’s arena license agreements and sponsorship sales and service representation agreements, and (iii) a decrease in deferred revenue of $27,482 primarily due to the timing of collections related to pre/regular season ticket sales.

These changes were partially offset by (i) a an increase in net related party payables of $14,975 primarily due to the timing of payments related to the Services Agreement and other agreements with MSG Entertainment, (ii) a decrease in prepaid expenses and other assets of $10,147 primarily related to decreased contract assets due to the timing of collections related to the Company’s

arena license agreements, and (iii) a lower increase in investments of $7,892 primarily related to the Company’s Executive Deferred Compensation Plan.

Investing Activities

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.

Net cash used in investing activities for the year ended June 30, 2024 decreased by $8,861 to $8,898 as compared to the prior year primarily due to lower purchases of investments in the current year and, to a lesser extent, the impact of cash balances disposed of as part of the sale of CLG in the prior year.

Financing Activities

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.

Net cash used in financing activities for the year ended June 30, 2024 decreased by $156,488 to $28,785 as compared to the prior year primarily due to the impact of dividends paid and the accelerated share repurchase in the prior year, lower principal repayments under the Knicks Revolving Credit Facility and the Rangers Revolving Credit Facility in the current year and, to a lesser extent, lower taxes paid in lieu of shares issued for equity-based compensation in the current year.

These impacts were partially offset by additional borrowings under the Company’s credit facilities in the prior year.

Contractual Obligations and Off-Balance Sheet Arrangements

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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, 2024.

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

(d) Consists of amounts drawn under the Knicks 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.

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These estimates are subjective in nature and involve significant uncertainties and judgments and therefore cannot be determined with precision.

Changes in assumptions could significantly affect the estimates.

assumptions could significantly affect the estimates.

If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived and/or indefinite-lived assets.

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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.

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.

If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative assessment is performed 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.

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.

If the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of that goodwill, an impairment loss was recognized in an amount equal to that excess.

The implied fair value of goodwill was determined in the same manner as the amount of goodwill that would be recognized in a business combination.

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

The Company elected to perform the qualitative assessment of impairment for the Company’s reporting unit for the fiscal year 2024 impairment test.

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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, the lease of the CLG Performance Center until April 2023, and an aircraft lease entered into in June 2023.

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, an aircraft lease, and the lease of the CLG Performance Center until April 2023.

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’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.

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.

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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.

The Company has accounted for this extension as a lease remeasurement and remeasured the right-of-use asset and operating lease liability utilizing the Company’s incremental borrowing rate as of the date of remeasurement.

The Company has accounted for this extension as a lease remeasurement and remeasured the ROU asset and operating lease liability utilizing the Company’s incremental borrowing rate as of the date of remeasurement.

In accordance with the terms of the Sublease Agreement, the Company has committed to enter into a new sublease agreement with MSG Entertainment for a lease term equivalent to the New MSGE Lease Agreement term, which ends January 31, 2046.

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, 2023 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 ROU assets or operating lease liabilities have been recorded as of June 30, 2024 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.

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 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 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.

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.

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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.

We measured the lease liabilities at the present value of the future lease payments as of April 17, 2020 and remeasured the operating lease liabilities and ROU assets as a result of government-mandated suspension of events and government-mandated assembly restrictions in response to COVID-19.

We use our incremental borrowing rates based on the remaining lease term to determine the present value of future lease payments.

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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.

The lease ROU asset and operating lease 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.

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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