MSG Knickerbockers Corp.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 06:36

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of MSG Knickerbockers Corp. (formerly Madison Square Garden Sports Corp.) and its direct and indirect subsidiaries (collectively, "we," "us," "our," "MSG Knicks," or the "Company"), including the impact of the spin-off of the Company's New York Rangers ("Rangers") business (the "Rangers Distribution") through the distribution of all of the common stock of MSG Rangers Corp. (formerly MSGS Spinco, Inc. and referred to herein as "MSG Rangers"). See Note 1 to the consolidated financial statements included in "Part I - Item 1. Financial Statements" of this Quarterly Report on Form 10-Q for further discussion of the Rangers Distribution. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "potential," "continue," "intends," "plans," and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
•the level of our revenues, which depends in part on the popularity and competitiveness of the New York Knickerbockers (the "Knicks") and their ability to reach and advance in the National Basketball Association ("NBA") playoffs;
•costs associated with player injuries, waivers or contract terminations of players, coaches and other team personnel;
•changes in professional sports teams' compensation, including the impact of signing free agents and executing trades, subject to league salary floors and caps and the impact of luxury tax;
•general economic conditions, especially in the New York City metropolitan area, including any economic downturn, recession, financial instability, impacts from government shutdowns or inflation;
•the demand for sponsorship arrangements and for advertising;
•competition, for example, from other teams and other sports and entertainment options;
•changes in laws, NBA rules, regulations, guidelines, bulletins, directives, policies and agreements, including the NBA's collective bargaining agreement with their players' association, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;
•developments affecting the regional sports network industry, including the effects of such developments on MSG Networks Inc.'s ("MSG Networks") solvency and its ability to perform its obligations under its local telecast rights agreement with us;
•a default by our subsidiary under its credit facility;
•any NBA or other work stoppage;
•any economic, political or other actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;
•geopolitical risks, including the risks of foreign wars and conflicts, including the conflict with Iran and related unrest in the Middle East, on international, domestic and local economies;
•the performance by our affiliates of their obligations under various agreements with the Company;
•seasonal fluctuations and other variation in our operating results and cash flow from period to period;
•the level of our expenses, including our corporate expenses;
•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 and the operating and financial performance of strategic acquisitions and investments, including those we may not control;
•a pandemic or another public health emergency and our ability to effectively manage the impacts, including labor market disruptions;
•actual or threatened 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 Knicks are played;
•the impact of governmental regulations or laws, changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions (including for The Garden) or tax deductions and the ability for us and Madison Square Garden Entertainment Corp. ("MSG Entertainment") to maintain necessary permits or licenses;
•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;
•the impact of any government plans to redesign New York City's Pennsylvania Station;
•changes in international trade policies and practices, including tariffs, and the economic impacts, volatility and uncertainty resulting therefrom;
•business, economic, reputational and other risks associated with, and the outcome of, litigation and other proceedings;
•financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;
•certain restrictions on transfer and ownership of our common stock related to our ownership of professional sports franchises in the NBA;
•the tax-free treatment of the Rangers Distribution;
•our ability to achieve the intended benefits of the Rangers Distribution;
•the performance by the Company and MSG Rangers of their obligations under transition services and other agreements entered into in connection with the Rangers Distribution; and
•the factors described under "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 (our "2026 Form 10-K").
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
Spin-off Transaction
On October 26, 2026 (the "Distribution Date") the Company distributed 100% of the outstanding common stock of MSG Rangers Corp. to its stockholders in the Rangers Distribution. MSG Rangers owns the New York Rangers business previously owned and operated by the Company. In the Distribution, stockholders of the Company received (a) one share of MSG Rangers' Class A common stock, par value $0.01 per share, for every two shares of the Company's Class A common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on October 20, 2026 (the "Record Date"), and (b) one share of MSG Rangers' Class B common stock, par value $0.01 per share, for every two shares of the Company's Class B common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on the Record Date.
The accompanying unaudited consolidated interim financial statements include the financial results of the Company's Rangers business in continuing operations for all periods presented. Beginning with the Company's Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2026, the historical financial results of the Rangers business through the Distribution Date will be presented as discontinued operations under U.S. generally accepted accounting principles ("GAAP") for all periods presented.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the unaudited consolidated financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q, as well as our 2026 Form 10-K, to help provide an understanding of our financial condition, changes in financial condition and results of operations.
The Company operates and reports financial information in one segment.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our unaudited results of operations for the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
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, 2026 compared to the three months ended September 30, 2025, and (iii) certain contractual obligations.
Seasonality of Our Business. This section discusses the seasonal performance of the Company.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates. This section discusses accounting pronouncements that have been adopted by the Company, if any, as well as the results of the Company's annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2027. This section should be read together with our critical accounting policies, which are discussed in our 2026 Form 10-K under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Recently Issued Accounting Pronouncements and Critical Accounting Policies - Critical Accounting Estimates" and in the notes to the consolidated financial statements of the Company included therein.
Business Overview
The Company owns and operates one of the most storied franchises in all of sports, the Knicks of the NBA and, prior to the Rangers Distribution, owned and operated the Rangers of the National Hockey League ("NHL"). Both the Knicks and the Rangers play their home games at The Garden. The Company also includes the Westchester Knicks of the NBA G League and, prior to the Rangers Distribution, the Hartford Wolf Pack of the American Hockey League. Our professional sports franchises are collectively referred to herein as "our sports teams" or the "teams." Prior to the Rangers Distribution, the Company also operated a professional sports team performance center - the Madison Square Garden Training Center in Greenburgh, NY.
Factors Affecting Operating Results
General
Our operating results are largely dependent on the continued popularity and/or on-court competitiveness of the Knicks and, prior to the Rangers Distribution, the on-ice competitiveness of the Rangers, which have a direct effect on ticket sales for the teams' home games and are each team's largest single source of revenue. In addition, the popularity of our sports teams can generate fan enthusiasm, resulting in sustained premium seating, suite, sponsorship, food and beverage and merchandise sales. Furthermore, success in the regular season may qualify our sports teams for participation in post-season playoffs, which provides us with a significant source of additional revenue, operating income and adjusted operating income. As with other sports teams, the competitive positions of our sports teams depend primarily on our ability to develop, obtain and retain talented players, for which we compete with other professional sports teams. A significant factor in our ability to attract and retain talented players is player compensation. The Company's operating results reflect the impact of high costs for player salaries (including NBA luxury tax, if any) and salaries of non-player team personnel. In addition, we have incurred significant charges for costs associated with transactions relating to players on our sports teams for season-ending and career-ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives. Waiver and termination costs reflect our efforts to improve the competitiveness of our sports teams. 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. We expect to continue to pursue opportunities to improve the overall quality of our sports teams and our efforts may result in continued significant expenses and charges. Such expenses and charges may result in future operating losses although it is not possible to predict their timing or amount. In addition, our performance has been, and may in the future be, impacted by work stoppages. See "Part I - Item 1A. Risk Factors - Economic and Business Relationship Risks -Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations." in our 2026 Form 10-K.
In addition to our future performance being dependent upon the continued popularity and/or on-court or on-ice competitiveness of the Knicks, it is also dependent on general economic conditions, in particular those in the New York City metropolitan area, and the effect of these conditions on our customers. An economic downturn could adversely affect our business and results of operations as it may lead to lower demand for suite licenses and tickets to Knicks' games, which would also negatively affect merchandise and concession sales, as well as decrease levels of sponsorship and venue signage revenues.
Results of Operations
Comparison of the three months ended September 30, 2026 versus the three months ended September 30, 2025
The table below sets forth, for the periods presented, certain historical financial information.
Three Months Ended September 30, Change
2026 2025 $ %
Revenues $ 45,489 $ 39,454 $ 6,035 15 %
Direct operating expenses 8,824 8,279 545 7 %
Selling, general and administrative expenses 60,762 57,789 2,973 5 %
Depreciation and amortization 781 811 (30) (4) %
Restructuring charges 579 - 579 NM
Operating loss (25,457) (27,425) 1,968 7 %
Other income (expense):
Interest income 473 578 (105) (18) %
Interest expense (4,699) (5,591) 892 (16) %
Miscellaneous (expense) income, net (3,663) 15,085 (18,748) NM
Loss before income taxes (33,346) (17,353) (15,993) (92) %
Income tax benefit 2,209 8,555 (6,346) (74) %
Net loss $ (31,137) $ (8,798) $ (22,339) NM
______________
NM - Percentage is not meaningful.
Revenues
Revenues increased $6,035, or 15%, to $45,489 for the three months ended September 30, 2026 as compared to the prior year period.
The net increase was attributable to the following:
Increase in revenues from league distributions $ 3,129
Increase in pre/regular season food, beverage and merchandise sales 2,643
Other net increases 263
$ 6,035
The increase in revenues from league distributions for the three months ended September 30, 2026 was primarily due to an increase in certain league distributions unrelated to national media rights fees.
The increase in pre/regular season food, beverage and merchandise sales for the three months ended September 30, 2026 was primarily due to higher Knicks merchandise revenues driven by ongoing demand from the team winning the 2026 NBA Championship.
Direct operating expenses
Direct operating expenses increased $545, or 7%, to $8,824 for the three months ended September 30, 2026 as compared to the prior year period.
The net increase was attributable to the following:
Increase in pre/regular season expense associated with merchandise sales $ 1,556
Increase in team personnel compensation 1,259
Increase in net provisions for certain team personnel transactions 682
Increase in other team operating expenses 32
Decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax (2,984)
$ 545
The increase in pre/regular season expense associated with merchandise sales for the three months ended September 30, 2026 was primarily due to higher Knicks merchandise revenues driven by the team winning the 2026 NBA Championship.
The increase in team personnel compensation for the three months ended September 30, 2026 was primarily due to the timing of the start of the 2026-27 NHL regular season as compared to the 2025-26 NHL regular season.
Net provisions for certain team personnel transactions were as follows:
Three Months Ended
September 30,
2026 2025 Increase
(Decrease)
Player trades $ 3,275 $ - $ 3,275
Waivers/contract terminations (211) 2,382 (2,593)
Net provisions for certain team personnel transactions $ 3,064 $ 2,382 $ 682
The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three months ended September 30, 2026 was primarily due to the impact of adjustments to prior seasons' revenue sharing expense (net of escrow) in the current year period.
Selling, general and administrative expenses
Selling, general and administrative expenses primarily consist of (i) administrative costs, including compensation, costs under the Services Agreement with MSG Entertainment (the "Services Agreement"), professional fees, and operating lease costs, (ii) fees related to the 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 three months ended September 30, 2026 increased $2,973, or 5%, to $60,762 as compared to the prior year period primarily driven by expenses related to the Rangers Distribution of $3,554 in the current year period and higher other general and administrative expenses, partially offset by lower employee compensation and related benefits of $1,235.
Restructuring charges
Restructuring charges for the three months ended September 30, 2026 were $579 due to termination benefits provided to certain employees during the current year period. There were no restructuring charges for the three months ended September 30, 2025.
Operating loss
Operating loss for the three months ended September 30, 2026 decreased $1,968, or 7%, to $25,457 as compared to the prior year period primarily due to higher revenues, partially offset by higher selling, general and administrative expenses.
Interest income
Interest income for the three months ended September 30, 2026 decreased $105, or 18%, to $473 as compared to the prior year period.
Interest expense
Interest expense for the three months ended September 30, 2026 decreased $892, or 16%, to $4,699 as compared to the prior year period.
Miscellaneous (expense) income, net
Miscellaneous (expense) income, net for the three months ended September 30, 2026 reflected net expense of $3,663 and miscellaneous (expense) income, net for the three months ended September 30, 2025 reflected net income of $15,085. The decrease in miscellaneous (expense) income, net relates to changes in fair value in the Company's investments.
Income taxes
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.
Changes in tax laws and regulations have limited and in the future could further limit the availability of tax benefits or deductions that the Company expects to claim or otherwise increase the taxes imposed on the Company's operations. For example, Section 162(m) of the U.S. Internal Revenue Code generally limits a publicly held corporation's deduction for compensation paid to each "covered employee" to $1 million per year. Effective for our tax year beginning July 1, 2027, Section 162(m) expands the definition of "covered employee" to include the five highest compensated employees for the taxable year other than our principal executive officer, principal financial officer, and three highest compensated executive officers. This expanded provision will apply to players on our sports teams and would cause a significant amount of compensation expense to be nondeductible in fiscal year 2028 and beyond. See "Item 1A. Risk Factors-Operational Risks-We Are Subject to Governmental Regulation, Including Tax Laws and Regulations, Which Can Change, and Any Failure to Comply With These Regulations May Have a Material Negative Effect on Our Business and Results of Operations" in our 2026 Form 10-K.
Adjusted operating income (loss)
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).
The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company's performance. 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. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
The following is a reconciliation of operating loss to adjusted operating loss for the three months ended September 30, 2026 and 2025:
Three Months Ended September 30, Change
2026 2025 $ %
Operating loss $ (25,457) $ (27,425) $ 1,968 7 %
Depreciation and amortization 781 811
Share-based compensation 3,953 4,844
Restructuring charges 579 -
Remeasurement of deferred compensation plan liabilities 140 963
Adjusted operating loss $ (20,004) $ (20,807) $ 803 4 %
For the three months ended September 30, 2026, adjusted operating loss decreased $803, or 4%, to $20,004 as compared to the prior year period. The decrease in adjusted operating loss was primarily due to higher revenues, partially offset by higher selling, general and administrative expenses.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash and cash equivalents, cash flow from operations and available borrowing capacity under our credit facility. See Note 13 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 2025 Knicks Credit Agreement.
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. In addition, in connection with the Rangers Distribution, the Company contributed $19,095 of cash to MSG Rangers.
As of September 30, 2026, we had $40,046 in Cash and cash equivalents. In addition, as of September 30, 2026, the Company's deferred revenue obligations were $292,428, net of billed, but not yet collected deferred revenue. This balance is primarily comprised of obligations in connection with tickets and suites. The outstanding balance under the Knicks Revolving Credit Facility was $282,000 as of September 30, 2026.
We regularly monitor and assess our ability to meet our net funding and investing requirements. The decisions of the Company as to the use of its available liquidity will be based upon the ongoing review of the funding needs of the business, management's view of a favorable allocation of cash resources, and the timing of cash flow generation. To the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and 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 $40,046 in Cash and cash equivalents as of September 30, 2026, along with $113,000 of additional available borrowing capacity under the 2025 Knicks Credit Agreement (as of the date of filing), to fund our operations and satisfy any obligations for the foreseeable future.
On October 22, 2026, the Company borrowed an additional $30,000 under the Knicks Revolving Credit Facility. In addition, in connection with the Rangers Distribution, in October 2026, the Company incurred additional one-time costs of approximately $20,000 for employee awards and financial advisory fees.
In addition, prior to the Rangers Distribution, amounts that we collected for tickets, suites and sponsorship sales in advance were recorded as deferred revenue and were recognized as revenues when earned for both accounting and tax purposes. In connection with the Rangers Distribution, the tax recognition by the Company for certain of these deferred revenues will be accelerated to the Distribution Date, rather than recognized over the course of one year. The Company will not be reimbursed by MSG Rangers for such taxes associated with collection of Rangers deferred revenue.
Financing Agreements and Stock Repurchases
See Note 13 and Note 15 to the consolidated financial statements included in "Part I - Item 1. Financial Statements" of this Quarterly Report on Form 10-Q for discussions of the Company's debt obligations and various financing agreements, and the Company's stock repurchases, respectively.
Contractual Obligations
The Company did not have any material changes in its contractual obligations since the end of fiscal year 2026 other than activities in the ordinary course of business, except for the related party agreements entered into in connection with the Rangers Distribution as further described in Note 16 to the consolidated financial statements included in "Part I - Item 1. Financial Statements" of this Quarterly Report on Form 10-Q.
Cash Flow Discussion
The following table summarizes the Company's cash flow activities for the three months ended September 30, 2026 and 2025:
Three Months Ended September 30,
2026 2025
Net loss $ (31,137) $ (8,798)
Adjustments to reconcile net loss to net cash used in operating activities: 7,509 (16,681)
Changes in working capital assets and liabilities (122,640) (59,475)
Net cash used in operating activities (146,268) (84,954)
Net cash used in investing activities (1,231) (1,848)
Net cash provided by (used in) financing activities 23,034 (9,110)
Net decrease in cash, cash equivalents and restricted cash $ (124,465) $ (95,912)
Operating Activities
Net cash used in operating activities for the three months ended September 30, 2026 increased by $61,314 to $146,268. The increase was primarily due to changes in working capital assets and liabilities, partially offset by the change in net loss adjusted for non-cash items. The changes in working capital assets and liabilities were primarily driven by (i) a higher decrease in accrued and other liabilities of $89,002, primarily due to higher payments related to employee compensation and league revenue sharing in the current year period, (ii) a higher decrease in accounts payable of $8,292, primarily related to the timing of payment of playoff related expenses, and (iii) a higher increase in net related party receivables of $6,128, primarily related to the timing of receipts under the Arena License Agreements and Sponsorship Sales & Service Agreements. These changes were partially offset by a higher increase in deferred revenue of $34,590, primarily due to higher collections of ticket sales in advance of recognition in the current year period and a lower increase in accounts receivable, net of $8,449, primarily due to the collections of certain league receivables in the current year period.
Investing Activities
Net cash used in investing activities for the three months ended September 30, 2026 decreased by $617 to $1,231 as compared to the prior year period primarily due to lower purchases of investments in the current year period, partially offset by higher capital expenditures in the current year period.
Financing Activities
Net cash provided by financing activities for the three months ended September 30, 2026 increased by $32,144 to $23,034 as compared to the prior year period primarily due to additional borrowings under the Company's credit facilities in the current year period. The increase was partially offset by higher taxes paid in lieu of shares issued for equity-based compensation in the current year period.
Seasonality of Our Business
The Company's dependence on revenues from the Knicks, and prior to the Rangers Distribution, the Rangers, generally means that it earns a disproportionate share of its revenues in the second and third quarters of the Company's fiscal year, which is when the majority of the teams' games are played.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in "Part I - Item 1. Financial Statements" of this Quarterly Report on Form 10-Q for discussion of recently issued accounting pronouncements.
Critical Accounting Estimates
The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2027. There have been no material changes to the Company's critical accounting policies from those set forth in our 2026 Form 10-K.
Goodwill
The carrying amount of goodwill as of September 30, 2026 was $226,523. Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is the same as or one level below the operating segment level. The Company has one operating and reportable segment, and one reporting unit for goodwill impairment testing purposes.
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative 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. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. 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 2027 impairment test. These assessments considered factors such as:
•macroeconomic conditions;
•industry and market considerations;
•market capitalization;
•cost factors;
•overall financial performance of the reporting unit;
•other relevant company-specific factors such as changes in management, strategy or customers; and
•relevant reporting unit specific events such as changes in the carrying amount of net assets.
The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2027, and there was no impairment of goodwill. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st 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 consolidated balance sheet as of September 30, 2026:
Sports franchises $ 102,564
Photographic related rights 1,080
$ 103,644
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that
more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform a qualitative assessment of impairment for the indefinite-lived intangible assets. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset. Examples of such events and circumstances include:
•cost factors;
•financial performance;
•legal, regulatory, contractual, business or other factors;
•other relevant company-specific factors such as changes in management, strategy or customers;
•industry and market considerations; and
•macroeconomic conditions.
The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2027, and there were no impairments identified. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the indefinite-lived intangible assets was less than their carrying amount.
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