What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-04 compared with 2024-11-01 · 111 added, 68 removed, 157 unchanged (53% of the section changed)

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

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

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

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

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

• 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;

• a pandemic or public health emergency and our ability to effectively manage the impacts, including labor market disruptions;

• any NBA, NHL or other work stoppage;

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• 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;

• activities or other developments, such as the domestic terrorism recently experienced in New Orleans, 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 pandemic or public health emergency and our ability to effectively manage the impacts, including labor market disruptions;

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

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• 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.

• the impact of governmental regulations or laws, including potential legislation related to ticketing, 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.

(“MSG Entertainment”) to maintain necessary permits or licenses;

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Results of Operations.

This section provides an analysis of our unaudited results of operations for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, 2024 compared to the three and six months ended December 31, 2023.

Liquidity and Capital Resources.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, and (iii) certain contractual obligations.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, and (iii) certain contractual obligations.

Seasonality of Our Business.

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Results of Operations

Comparison of the three months ended September 30, 2024 versus the three months ended September 30, 2023

Comparison of the three and six months ended December 31, 2024 versus the three and six months ended December 31, 2023

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

Three Months Ended

September 30, Change

Three Months Ended Six Months Ended

December 31, Change December 31, Change

2024 2023 $ % 2024 2023 $ %

Revenues $ 357,759 $ 326,898 $ 30,861 9 % $ 411,066 $ 369,944 $ 41,122 11 %

Direct operating expenses 8,211 3,520 4,691 NM

Direct operating expenses 275,753 232,225 43,528 19 % 283,964 235,745 48,219 20 %

Selling, general and administrative expenses 67,900 65,066 2,834 4 % 120,487 118,622 1,865 2 %

Depreciation and amortization 782 794 (12) 2 %

Operating loss (8,273) (14,824) 6,551 44 %

Depreciation and amortization 791 790 1 NM 1,573 1,584 (11) (1) %

Operating income 13,315 28,817 (15,502) (54) % 5,042 13,993 (8,951) (64) %

Other income (expense):

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Interest expense (5,587) (7,419) 1,832 25 % (11,642) (14,348) 2,706 19 %

Miscellaneous expense, net (1,126) (12,665) 11,539 91 %

Loss before income taxes (14,590) (33,965) 19,375 57 %

Income tax benefit 7,048 15,144 (8,096) (53) %

Net loss $ (7,542) $ (18,821) $ 11,279 60 %

Miscellaneous (expense) income, net (6,609) 2,991 (9,600) NM (7,735) (9,674) 1,939 20 %

Income (loss) before income taxes 1,809 25,008 (23,199) (93) % (12,781) (8,957) (3,824) (43) %

Income tax (expense) benefit (698) (10,784) 10,086 94 % 6,350 4,360 1,990 46 %

Net income (loss) $ 1,111 $ 14,224 $ (13,113) (92) % $ (6,431) $ (4,597) $ (1,834) (40) %

______________

NM - Percentage is not meaningful

Revenues increased $10,261, or 24%, to $53,307 for the three months ended September 30, 2024 as compared to the prior year period.

The net increase was attributable to the following:

Revenues increased $30,861, or 9%, to $357,759 for the three months ended December 31, 2024 as compared to the prior year period.

Revenues increased $41,122, or 11%, to $411,066 for the six months ended December 31, 2024 as compared to the prior year period.

The net increases were attributable to the following:

Months Months

Increase in pre/regular season ticket-related revenues $ 14,339 $ 14,766

Increase in suite revenues 7,016 7,268

Increase in sponsorship and signage revenues 3,082 2,704

Increase in revenues from league distributions 2,649 12,376

Other net increases 534

The increase in revenues from league distributions for the three months ended September 30, 2024 was primarily due to an increase in certain league distributions unrelated to national media rights fees.

Increase in pre/regular season food, beverage and merchandise sales 2,107 2,438

Increase in revenues from local media rights fees 1,666 1,800

Other net increases (decreases) 2 (230)

$ 30,861 $ 41,122

The increases in pre/regular season ticket-related revenues for the three and six months ended December 31, 2024 were primarily due to the Knicks and the Rangers playing a combined 3 additional home games at The Garden during the current year periods as compared to the prior year periods and higher average per-game revenue.

The Knicks played 17 games at The Garden during the three and six months ended December 31, 2024 as compared to 15 games during the prior year periods.

The Rangers played 18 games at The Garden during the three months ended December 31, 2024 and 20 games at The Garden during the six months ended December 31, 2024 as compared to 17 and 19 games, respectively, during the prior year periods.

The increases in suite revenues for the three and six months ended December 31, 2024 were primarily due to the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods and higher net sales of suite products.

The increases in sponsorship and signage revenues for the three and six months ended December 31, 2024 were primarily due the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods and higher net sales of existing sponsorship and signage inventory.

The increase in revenues from league distributions for the three months ended December 31, 2024 was primarily due to increased national media rights fees in the current year period.

The increase in revenues from league distributions for the six months ended December 31, 2024 was primarily due to an increase in certain league distributions unrelated to national media rights fees and increased national media rights fees in the current year period.

The increases in pre/regular season food, beverage, and merchandise sales for the three and six months ended December 31, 2024 were primarily due to higher average per-game revenue and the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods, partially offset by lower online sales of merchandise.

The increases in revenues from local media rights fees for the three and six months ended December 31, 2024 were 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 fiscal year as compared to the prior fiscal year.

Direct operating expenses

Direct operating expenses increased $4,691 to $8,211 for the three months ended September 30, 2024 as compared to the prior year period.

The net increase was attributable to the following:

Direct operating expenses increased $43,528, or 19%, to $275,753 for the three months ended December 31, 2024 as compared to the prior year period.

Direct operating expenses increased $48,219, or 20%, to $283,964 for the six months ended December 31, 2024 as compared to the prior year period.

The net increases were attributable to the following:

Months Months

Increase in team personnel compensation $ 15,248 $ 15,247

Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax 14,873 18,999

Increase in net provisions for certain team personnel transactions 7,586 8,419

Other net decreases (268)

The increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three months ended September 30, 2024 was due to the net impact of adjustments to prior seasons’ revenue sharing expense (net of escrow).

Net provisions for certain team personnel transactions for the three months ended September 30, 2024 reflect provisions recorded for waiver/contract terminations of $833.

Increase in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden 2,418 2,418

Increase in other team operating expenses 2,299 1,882

Increase in pre/regular season expense associated with merchandise sales 1,104 1,254

$ 43,528 $ 48,219

The increases in team personnel compensation for the three and six months ended December 31, 2024 were primarily due to changes in the Knicks roster.

Three Months Ended Six Months Ended

December 31, December 31,

2024 2023 Increase 2024 2023 Increase

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ 38,457 $ 23,584 $ 14,873 $ 41,417 $ 22,418 $ 18,999

The increases in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three and six months ended December 31, 2024 were primarily due to higher estimated NBA luxury tax expense, partially offset by lower provisions for league revenue sharing expense (net of escrow and excluding playoffs).

The increases in estimated NBA luxury tax expense were the result of the expectation that the Knicks will be a significant luxury tax payer for the 2024-25 season based on their roster as of December 31, 2024, whereas the Knicks were not a luxury tax payer for the 2023-24 season.

The Knicks received an equal share of the portion of luxury tax receipts that were distributed to non-paying teams for the 2023-24 season.

The actual net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the 2024-25 seasons may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.

Net provisions for certain team personnel transactions for the three and six months ended December 31, 2024 reflect provisions recorded for player trades of $7,586.

In addition, for the six months ended December 31, 2024, net provisions for certain team personnel transactions reflect provisions for waiver/contract terminations of $833.

The increases in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden for the three and six months ended December 31, 2024 were a result of the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods.

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

The increases in other team operating expenses for the three and six months ended December 31, 2024 were primarily due to the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods and higher average per-game expenses.

The increases in pre/regular season expense associated with merchandise sales for the three and six months ended December 31, 2024 were primarily related to higher merchandise sales as a result of higher average per-game revenue and the Knicks and the Rangers playing additional home games at The Garden during the current year periods as compared to the prior year periods, partially offset by lower online sales of merchandise.

Direct operating expenses for fiscal year 2025 are expected to reflect higher team personnel compensation and corresponding NBA luxury tax due to the Knicks 2024-25 season roster.

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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 three months ended September 30, 2024 decreased $969, or 2%, to $52,587 as compared to the prior year period driven by (i) lower sales and marketing costs of $744, (ii) lower employee compensation and related benefits of $617, and (iii) lower other general and administrative expenses, partially offset by higher professional fees of $1,181.

Depreciation and amortization

Depreciation and amortization for the three months ended September 30, 2024 decreased $12, or 2%, to $782 as compared to the prior year period.

Operating loss

Operating loss for the three months ended September 30, 2024 decreased $6,551, or 44%, to $8,273 as compared to the prior year period primaril y due to higher revenues and, to a lesser extent, lower selling, general and administrative expenses, partially offset by higher direct operating expenses.

Selling, general and administrative expenses for the three months ended December 31, 2024 increased $2,834, or 4%, to $67,900 as compared to the prior year period driven by higher operating lease costs of $3,613 and higher professional fees of $2,713, partially offset by lower employee compensation and related benefits of $2,648 and lower other general and administrative expenses.

Selling, general and administrative expenses for the six months ended December 31, 2024 increased $1,865, or 2%, to $120,487 as compared to the prior year period driven by higher professional fees of $3,901 and higher operating lease costs of $3,764, partially offset by (i) lower employee compensation and related benefits of $3,278, (ii) lower sales and marketing costs of $1,406, and (iii) lower other general and administrative expenses.

Operating income

Operating income for the three months ended December 31, 2024 decreased $15,502, or 54%, to $13,315 as compared to the prior year period primarily due to higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses, partially offset by higher revenues.

Operating income for the six months ended December 31, 2024 decreased $8,951, or 64%, to $5,042 as compared to the prior year period primarily due to higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses, partially offset by higher revenues.

Interest income

Interest income for the three months ended September 30, 2024 increased $411, or 91%, to $864 as compared to the prior year period primarily due to higher average cash balances in the current year period.

Interest income for the three months ended December 31, 2024 increased $71, or 11%, to $690 as compared to the prior year period primarily due to higher average cash balances in the current year period, partially offset by lower average interest rates.

Interest income for the six months ended December 31, 2024 increased $482, or 45%, to $1,554 as compared to the prior year period primarily due to higher average cash balances in the current year period.

Interest expense

Interest expense for the three months ended September 30, 2024 decreased $874, or 13%, to $6,055 as compared to the prior year period primarily due to lower average borrowings under the Rangers Revolving Credit Facility in the current year period, partially offset by higher average borrowings under the Knicks Revolving Credit Facility in the current year period.

Miscellaneous expense, net

Miscellaneous expense, net for the three months ended September 30, 2024 decreased $11,539, or 91%, to $1,126 as compared to the prior year period primarily due to lower unrealized losses in the current year period related to the Company’s investments in Xtract One common stock and warrants.

Interest expense for the three months ended December 31, 2024 decreased $1,832, or 25%, to $5,587 as compared to the prior year period primarily due to lower average borrowings under the Rangers Revolving Credit Facility in the current year period and lower average interest rates under the Knicks Revolving Credit Facility in the current year period.

Interest expense for the six months ended December 31, 2024 decreased $2,706, or 19%, to $11,642 as compared to the prior year period primarily due to lower average borrowings under the Rangers Revolving Credit Facility in the current year period and lower average interest rates under the Knicks Revolving Credit Facility in the current year period, partially offset by higher average borrowings under the Knicks Revolving Credit Facility in the current year period.

Miscellaneous (expense) income, net

Miscellaneous (expense) income, net for the three months ended December 31, 2024 reflected net expense of $6,609 and Miscellaneous (expense) income, net for the three months ended December 31, 2023 reflected net income of $2,991.

The decrease in Miscellaneous (expense) income, net as compared to the prior year period was primarily due to the recognition of unrealized losses in the current year period as compared to unrealized gains in the prior year period related to the Company’s investments in Xtract One common stock and warrants.

Miscellaneous (expense) income, net for the six months ended December 31, 2024 reflected net expense of $7,735 and Miscellaneous (expense) income, net for the six months ended December 31, 2023 reflected net expense of $9,674.

The decrease in Miscellaneous (expense) income, net as compared to the prior year period was primarily due to lower unrealized losses in the current year period related to the Company’s investments in Xtract One common stock and warrants.

See Note 17 to the consolidated financial statements included in “Part I — Item 1.

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

Adjusted operating loss

Adjusted operating income

The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) 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.

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

The Company uses revenues and adjusted operating

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

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.

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

The following are the reconciliations of operating loss to adjusted operating loss for the three months ended September 30, 2024 and 2023:

Three Months Ended

September 30, Change

The following are the reconciliations of operating income to adjusted operating income for the three and six months ended December 31, 2024 and 2023:

Three Months Ended Six Months Ended

December 31, Change December 31, Change

2024 2023 $ % 2024 2023 $ %

Operating loss $ (8,273) $ (14,824) $ 6,551 44 %

Operating income $ 13,315 $ 28,817 $ (15,502) (54) % $ 5,042 $ 13,993 $ (8,951) (64) %

Depreciation and amortization 791 790 1,573 1,584

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Remeasurement of deferred compensation plan liabilities 142 839 1,107 735

Adjusted operating loss (a)

Adjusted operating income (a)

$ 20,239 $ 37,016 $ (16,777) (45) % $ 17,981 $ 27,031 $ (9,050) (33) %

_________________

(a) Adjusted operating loss includes operating lease costs which is comprised of a contractual cash component plus or minus a non-cash component for each period presented.

(a) Adjusted operating income includes operating lease costs which is comprised of a contractual cash component plus or minus a non-cash component for each period presented.

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.

Adjusted operating loss includes operating lease costs of (i) $854 and $829 of expense paid in cash for the three months ended September 30, 2024 and 2023, respectively, and (ii) a non-cash expense of $457 and $482, for the three months ended September 30, 2024 and 2023, respectively.

For the three months ended September 30, 2024, adjusted operating loss decreased $7,727, or 77%, to $2,258 as compared to the prior year period.

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

Adjusted operating income (loss) for fiscal year 2025 is expected to reflect higher team personnel compensation and corresponding NBA luxury tax due to Knicks 2024-25 season roster.

Adjusted operating income includes operating lease costs of (i) $17,447 and $18,301 of expense paid in cash for the three and six months ended December 31, 2024, respectively, and $15,409 and $16,238 of expense paid in cash for the three and six months ended December 31, 2023, respectively, and (ii) a non-cash expense of $9,334 and $9,791 for the three and six months ended December 31, 2024, respectively, and $8,953 and $9,435 for the three and six months ended December 31, 2023, respectively.

For the three months ended December 31, 2024, adjusted operating income decreased $16,777, or 45%, to $20,239 as compared to the prior year period.

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

For the six months ended December 31, 2024, adjusted operating income decreased $9,050, or 33%, to $17,981 as compared to the prior year period.

Adjusted operating income for fiscal year 2025 is expected to reflect higher team personnel compensation and corresponding NBA luxury tax due to Knicks 2024-25 season roster.

Liquidity and Capital Resources

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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, dividends, if declared, and investments.

As of September 30, 2024, we had $52,252 in C ash and cash equivale nts.

In addition, as of September 30, 2024, the Company’s deferred revenue obligations were $272,957, net of billed, but not yet collected deferred revenue.

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

As of December 31, 2024, we had $107,823 in C ash and cash equivale nts.

In addition, as of December 31, 2024, the Company’s deferred revenue obligations were $222,146, net of billed, but not yet collected deferred revenue.

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

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

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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 $52,252 in Cash and cash equivalents as of September 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.

We believe we have sufficient liquidity, including approximately $107,823 in Cash and cash equivalents as of December 31, 2024, along with $250,000 of additional available borrowing capacity under existing credit facilities (as of December 31, 2024), to fund our operations and satisfy any obligations for the foreseeable future.

If MSG Networks were to experience a bankruptcy or insolvency event (as set forth in each of the credit facilities), we would be prevented, absent a cure or waiver, from making borrowings under our revolving credit facilities.

The Rangers Credit Agreement also includes an event of default that is implicated by a bankruptcy or insolvency event with respect to a material media rights counterparty, including MSG Networks.

There were no borrowings under the Rangers Revolving Credit Facility as of September 30, 2024.

The Rangers Credit Agreement also includes an event of default upon a bankruptcy or insolvency event with respect to a material media rights counterparty, including MSG Networks.

There were no borrowings outstanding under the Rangers Revolving Credit Facility as of December 31, 2024.

On January 3, 2025, the Company made a principal repayment of $6,000 under the Rangers NHL Advance Agreement and on January 23, 2025, the Company made a principal repayment of $8,000 under the Knicks Revolving Credit Facility.

Financing Agreements and Stock Repurchases

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Cash Flow Discussion

The following table summarizes the Company’s cash flow activities for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

The following table summarizes the Company’s cash flow activities for the six months ended December 31, 2024 and 2023:

Six Months Ended December 31,

Net loss $ (6,431) $ (4,597)

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

11,035 18,325

Changes in working capital assets and liabilities 31,017 (33,985)

Net cash used in operating activities (26,158) (54,141)

Net cash provided by (used in) operating activities 35,621 (20,257)

Net cash used in investing activities (2,302) (5,238)

Net cash (used in) provided by financing activities (12,373) 26,268

Net (decrease) increase in cash, cash equivalents and restricted cash $ (36,823) $ 11,960

Net increase in cash, cash equivalents and restricted cash $ 20,946 $ 773

Operating Activities

Net cash used in operating activities for the three months ended September 30, 2024 decreased by $27,983 to $26,158 as compared to the prior year period.

The decrease was primarily due to changes in working capital assets and liabilities and the decrease in net loss adjusted for non-cash items.

The changes in working capital assets and liabilities were primarily driven by (i) a higher increase in deferred revenue of $25,806 primarily due to higher collections of ticket, suites, and sponsorship sales in advance of recognition, (ii) a lower decrease in accrued and other liabilities of $10,914 primarily due to lower payments related to employee compensation in the current year period, and (iii) a lower decrease in net related party receivables of $8,552 primarily due to primarily due to the

timing of collections related to the Company’s arena license agreements.

These changes were partially offset by (i) an increase in accounts receivable, net of $16,851 primarily due to higher receivables related to league distributions in the current year period and (ii) a higher increase in prepaid expenses and other assets of $5,034 primarily due to higher prepayments related to team personnel compensation in the current year period.

Net cash provided by (used in) operating activities for the six months ended December 31, 2024 improved by $55,878 to $35,621 as compared to the prior year period.

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

The changes in working capital assets and liabilities were primarily driven by (i) a higher increase in deferred revenue of $29,563 primarily due to higher collections of ticket, sponsorship,

and suite sales in advance of recognition, (ii) a lower decrease in accrued and other liabilities of $26,020 primarily due to increased accruals for NBA luxury tax in the current year period and lower payments related to employee compensation in the current year period, (iii) a decrease in net related party receivables of $13,626 primarily due to primarily due to the timing of collections related to the Company’s arena license agreements and sponsorship sales and service representation agreements, and (iv) a lower increase in prepaid expenses and other assets of $6,213 primarily due to lower contract assets, current in the current year period and higher collections of other receivables in the current year period.

These changes were partially offset by a higher increase in accounts receivable, net of $13,085 primarily due to higher receivables related to league distributions in the current year period.

Investing Activities

Net cash used in investing activities for the three months ended September 30, 2024 decreased by $566 to $1,163 as compared to the prior year period primarily due to lower purchases of investments in the current year period.

Net cash used in investing activities for the six months ended December 31, 2024 decreased by $2,936 to $2,302 as compared to the prior year period primarily due to lower purchases of investments in the current year period.

Financing Activities

Net cash used in financing activities for the three months ended September 30, 2024 was $9,502 as compared to net cash provided by financing activities for the three months ended September 30, 2023 of $67,830.

This was primarily due to additional borrowings under the Company’s credit facilities in the prior year period.

Net cash used in financing activities for the six months ended December 31, 2024 was $12,373 as compared to net cash provided by financing activities for the six months ended December 31, 2023 of $26,268.

This was primarily due to additional borrowings under the Company’s credit facilities in the prior year period partially offset by higher principal repayments in the prior year period.

Seasonality of Our Business

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There have been no material changes to the Company’s critical accounting policies from those set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

The carrying amount of goodwill as of September 30, 2024 was $226,523.

The carrying amount of goodwill as of December 31, 2024 was $226,523.

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

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

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of September 30, 2024:

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of December 31, 2024:

Sports franchises $ 102,564

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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-Q

Item 2. Management’s Discussion and Analysis