[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and accompanying notes for the period ended September 30, 2023 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The company's total liabilities exceeded total assets, resulting in negative total equity as of September 30, 2023 Key Balance Sheet Metrics | Metric | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :----------------------- | :-------------------------------- | :----------------------------- | | Total Assets | $1,366,085 | $1,315,017 | | Total Liabilities | $1,724,628 | $1,652,251 | | Total Equity | $(358,543) | $(337,234) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss for the quarter, although the operating loss narrowed significantly compared to the prior year Quarterly Operating Results | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenues | $43,046 | $24,089 | | Operating loss | $(14,824) | $(35,898) | | Net loss | $(18,821) | $(18,527) | | Net loss attributable to MSG Sports' stockholders | $(18,821) | $(17,820) | | Basic loss per common share | $(0.79) | $(0.73) | | Diluted loss per common share | $(0.79) | $(0.73) | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company's comprehensive loss remained relatively stable compared to the same period in the prior year Quarterly Comprehensive Loss | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net loss | $(18,821) | $(18,527) | | Other comprehensive income, net of income taxes | $6 | $3 | | Comprehensive loss | $(18,815) | $(18,524) | | Comprehensive loss attributable to MSG Sports' stockholders | $(18,815) | $(17,817) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash from financing activities offset cash used in operations, resulting in a net increase in cash for the quarter Quarterly Cash Flow Summary | Cash Flow Activity | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash (used in) operating activities | $(54,141) | $1,285 | | Net cash used in investing activities | $(1,729) | $(271) | | Net cash provided by (used in) financing activities | $67,830 | $(10,996) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $11,960 | $(9,982) | [Consolidated Statements of Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity decreased during the quarter, continuing the trend from the prior year Change in Total Equity (Q1 FY2024) | Metric | Balance as of June 30, 2023 (in thousands) | Balance as of September 30, 2023 (in thousands) | | :-------------------------------- | :----------------------------------------- | :---------------------------------------------- | | Total Equity | $(337,234) | $(358,543) | Change in Total Equity (Q1 FY2023) | Metric | Balance as of June 30, 2022 (in thousands) | Balance as of September 30, 2022 (in thousands) | | :-------------------------------- | :----------------------------------------- | :---------------------------------------------- | | Total Equity | $(145,377) | $(171,910) | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies and financial statement components [Note 1. Description of Business and Basis of Presentation](index=10&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) The company owns major sports franchises and operates as a single reporting segment - Madison Square Garden Sports Corp (MSG Sports) owns and operates the **New York Knicks (NBA)** and **New York Rangers (NHL)**, along with two development league teams[30](index=30&type=chunk) - MSG Sports operates and reports financial information in **one segment**, with the Executive Chairman serving as the Chief Operating Decision Maker (CODM)[31](index=31&type=chunk) [Note 2. Accounting Policies](index=11&type=section&id=Note%202.%20Accounting%20Policies) The company is currently assessing the impact of a new accounting standard for leases under common control arrangements - The Company is currently evaluating the impact of ASU No 2023-01, Leases (Topic 842): Common Control Arrangements, which is effective for the first quarter of fiscal year 2025[42](index=42&type=chunk) [Note 3. Revenue Recognition](index=12&type=section&id=Note%203.%20Revenue%20Recognition) League distributions drove a significant increase in total revenues for the quarter Revenue by Type | Revenue Type | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Event-related | $5,821 | $5,346 | | Media rights | $7,219 | $6,986 | | Sponsorship, signage and suite licenses | $5,314 | $4,814 | | League distributions and other | $24,692 | $6,943 | | Total revenues | $43,046 | $24,089 | Contract Balances | Contract Balance | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :------------------------------------ | :-------------------------------- | :----------------------------- | | Receivables from contracts with customers, net | $31,842 | $20,134 | | Contract assets, current | $13,777 | $19,465 | | Deferred revenue, including non-current portion | $302,045 | $169,717 | Estimated Future Revenue from Existing Contracts | Fiscal Year | Estimated Revenue (in thousands) | | :-------------------------- | :------------------------------- | | Fiscal Year 2024 (remainder) | $162,928 | | Fiscal Year 2025 | $115,935 | | Fiscal Year 2026 | $72,727 | | Fiscal Year 2027 | $39,055 | | Fiscal Year 2028 | $20,213 | | Thereafter | $18,047 | | Total | $428,905 | [Note 4. Computation of Earnings (Loss) per Common Share](index=14&type=section&id=Note%204.%20Computation%20of%20Earnings%20(Loss)%20per%20Common%20Share) The company's basic and diluted loss per common share increased slightly compared to the prior-year period Loss Per Common Share | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | | Basic loss per common share | $(0.79) | $(0.73) | | Diluted loss per common share | $(0.79) | $(0.73) | [Note 5. Team Personnel Transactions](index=15&type=section&id=Note%205.%20Team%20Personnel%20Transactions) No team personnel transactions occurred during the quarter, unlike the prior-year period - There were **no Team personnel transactions** for the three months ended September 30, 2023, compared to a net credit of $329 thousand for the same period in 2022[57](index=57&type=chunk) [Note 6. Cash, Cash Equivalents and Restricted Cash](index=15&type=section&id=Note%206.%20Cash%2C%20Cash%20Equivalents%20and%20Restricted%20Cash) The company's total cash, cash equivalents, and restricted cash increased during the first fiscal quarter Cash Position | Metric | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :------------------------------------------------- | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | $51,208 | $40,398 | | Restricted cash | $1,211 | $61 | | Cash, cash equivalents and restricted cash (statements of cash flows) | $52,419 | $40,459 | [Note 7. Leases](index=15&type=section&id=Note%207.%20Leases) The company holds significant long-term operating lease assets and liabilities with a weighted average term of over 30 years Lease Balances | Lease Metric | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :-------------------------------- | :-------------------------------- | :----------------------------- | | Right-of-use lease assets | $713,350 | $715,283 | | Operating lease liabilities, current | $50,530 | $49,745 | | Operating lease liabilities, noncurrent | $734,277 | $746,437 | | Total lease liabilities | $784,807 | $796,182 | Lease Costs | Lease Cost Type | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating lease cost (Direct operating expenses) | $1,311 | $1,403 | | Operating lease cost (Selling, general and administrative expenses) | $2,230 | $613 | | Short-term lease cost (Direct operating expenses) | $0 | $45 | | Total lease cost | $3,631 | $2,061 | - The weighted average remaining lease term for operating leases as of September 30, 2023, was **30.3 years**, with a weighted average discount rate of **7.1%**[66](index=66&type=chunk) [Note 8. Goodwill and Intangible Assets](index=17&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets) Annual impairment testing confirmed no impairment of goodwill or indefinite-lived intangible assets - The Company performed its annual impairment test for goodwill and identifiable indefinite-lived intangible assets in the first quarter of fiscal year 2024 and **identified no impairments**[69](index=69&type=chunk) - There was **no amortization expense** for intangible assets for the three months ended September 30, 2023, due to the disposal of CLG in April 2023, compared to $108 thousand in the prior year period[70](index=70&type=chunk) Goodwill and Intangible Asset Balances | Asset Type | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :-------------------------- | :-------------------------------- | :----------------------------- | | Goodwill | $226,523 | $226,523 | | Sports franchises | $102,564 | $102,564 | | Photographic related rights | $1,080 | $1,080 | | Total indefinite-lived intangible assets | $103,644 | $103,644 | [Note 9. Investments](index=17&type=section&id=Note%209.%20Investments) The company's investment portfolio includes various equity securities and derivative instruments, with notable unrealized losses on certain holdings Investment Portfolio Summary | Investment Type | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :------------------------------------------------- | :-------------------------------- | :----------------------------- | | Equity method investments: NRG | $11,533 | $11,948 | | Equity investments with readily determinable fair values: Xtract One common stock | $15,855 | $22,408 | | Other equity investments with readily determinable fair values | $15,783 | $14,406 | | Equity investments without readily determinable fair values | $6,852 | $5,514 | | Derivative instruments: Xtract One warrants | $7,680 | $13,098 | | Total investments | $57,703 | $67,374 | - The Company recognized a net share of losses of **$415 thousand** from its equity method investment in NRG during the three months ended September 30, 2023, and holds approximately **25% ownership**[73](index=73&type=chunk) Unrealized Losses on Equity Investments | Unrealized Losses on Equity Investments | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Unrealized loss - Xtract One common stock | $(6,553) | $0 | | Unrealized loss - other equity investments | $(130) | $(103) | [Note 10. Fair Value Measurements](index=18&type=section&id=Note%2010.%20Fair%20Value%20Measurements) The company's assets measured at fair value consist primarily of liquid investments and derivative warrants Assets Measured at Fair Value | Asset Type | Fair Value Hierarchy | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | | :-------------------------- | :------------------- | :-------------------------------- | :----------------------------- | | Money market accounts | I | $25,489 | $17,330 | | Time deposit | I | $23,144 | $1,457 | | Equity investments | I | $31,638 | $36,814 | | Warrants | III | $7,680 | $13,098 | | Total assets measured at fair value | | $87,951 | $68,699 | - The Company's Level III assets consist of Xtract One warrants, valued using the Black-Scholes option pricing model; unrealized losses on these warrants for the quarter were **$5,418 thousand**[80](index=80&type=chunk) [Note 11. Commitments and Contingencies](index=19&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) Commitments primarily relate to sports personnel employment agreements, while ongoing litigation is not expected to have a material impact - The Company's commitments primarily include obligations under employment agreements with professional sports teams' personnel and future lease payments[81](index=81&type=chunk) - Management does not believe that the resolution of various lawsuits in which the Company is a defendant will have a **material adverse effect** on the Company[83](index=83&type=chunk) [Note 12. Debt](index=20&type=section&id=Note%2012.%20Debt) The company utilizes revolving credit facilities for its Knicks and Rangers teams and was in compliance with all debt covenants - The Knicks Revolving Credit Facility has a maximum capacity of **$275,000 thousand**, with an outstanding balance of **$275,000 thousand** as of September 30, 2023, at an interest rate of **6.67%**[86](index=86&type=chunk)[87](index=87&type=chunk) - The Rangers Revolving Credit Facility has a maximum capacity of **$250,000 thousand**, with an outstanding balance of **$95,000 thousand** as of September 30, 2023, at an interest rate of **7.17%**[95](index=95&type=chunk)[96](index=96&type=chunk) - The Rangers NHL Advance Agreement has an outstanding balance of **$30,000 thousand** as of September 30, 2023, bearing interest at **3.00%** per annum[101](index=101&type=chunk)[104](index=104&type=chunk) - Both Knicks LLC and Rangers LLC were in compliance with their respective debt service ratio covenants of at least **1.5:1.0** as of September 30, 2023[91](index=91&type=chunk)[100](index=100&type=chunk) [Note 13. Benefit Plans](index=22&type=section&id=Note%2013.%20Benefit%20Plans) The company incurred costs related to its pension, 401(k), and deferred compensation plans for employees and executives Benefit Plan Costs | Benefit Plan Cost | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net periodic benefit cost (Pension Plans) | $77 | $64 | | Expense (401(k) Plan and Excess Savings Plan) | $1,294 | $1,065 | - The Company recorded offsetting compensation cost credits and losses of **$104 thousand** related to the Executive Deferred Compensation Plan for the quarter[113](index=113&type=chunk) [Note 14. Share-based Compensation](index=23&type=section&id=Note%2014.%20Share-based%20Compensation) Share-based compensation expense decreased significantly from the prior year, with new RSU grants awarded during the quarter Share-based Compensation Expense | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Share-based compensation expense | $4,149 | $7,220 | RSU Activity | RSU Activity (in thousands) | Nonperformance Based Vesting RSUs | Performance Based Vesting RSUs | Weighted-Average Fair Value Per Share at Date of Grant | | :-------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------------------------------- | | Unvested award balance, June 30, 2023 | 124 | 160 | $167.08 | | Granted | 48 | 48 | $178.45 | | Vested | (42) | (52) | $161.41 | | Forfeited / Cancelled | (1) | (1) | $163.39 | | Unvested award balance, September 30, 2023 | 129 | 155 | $172.76 | - The fair value of RSUs that vested during the quarter was **$16,637 thousand**, with **$6,637 thousand** retained by the Company for tax withholding[117](index=117&type=chunk) [Note 15. Stock Repurchase Program](index=24&type=section&id=Note%2015.%20Stock%20Repurchase%20Program) The company did not repurchase any shares during the quarter, leaving significant capacity under its current authorization - As of September 30, 2023, the Company had **$184,639 thousand remaining** under its $525,000 thousand Class A Common Stock repurchase authorization, with no repurchases made during the quarter[121](index=121&type=chunk)[122](index=122&type=chunk) [Note 16. Related Party Transactions](index=24&type=section&id=Note%2016.%20Related%20Party%20Transactions) The company engages in numerous transactions with entities controlled by the Dolan Family, who hold majority voting power - The Dolan Family Group beneficially owns **100% of the Company's Class B Common Stock** and approximately 3.3% of Class A Common Stock, representing about **71.0% of aggregate voting power**[123](index=123&type=chunk) - Key related party agreements include Arena License Agreements, Sponsorship sales and service representation agreements, a Services Agreement with MSG Entertainment, and Media rights agreements with MSG Networks[124](index=124&type=chunk)[128](index=128&type=chunk) Summary of Related Party Transactions | Related Party Transaction | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenues | $8,817 | $8,174 | | Expense pursuant to the Services Agreement | $9,887 | $9,513 | | Rent expense (Sublease agreement) | $750 | $698 | | Costs (Sponsorship sales and service) | $2,601 | $2,933 | | Operating lease expense (Arena License) | $1,311 | $1,311 | [Note 17. Income Taxes](index=26&type=section&id=Note%2017.%20Income%20Taxes) The company's effective tax rate was significantly higher than the federal statutory rate due to various state and non-deductible items Income Tax Summary | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Income tax benefit | $15,144 | $20,493 | | Effective tax rate | 45% | 53% | - The effective tax rate exceeds the statutory federal tax rate of 21% primarily due to state taxes and nondeductible expenses for officers' compensation and players' disability insurance[131](index=131&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and operational results for the quarter, highlighting key changes and business factors [Introduction](index=28&type=section&id=Introduction) The company's financial information is operated and reported as a single business segment - The Company operates and reports financial information in **one segment**[141](index=141&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Quarterly revenues increased significantly, driven by league distributions, which led to a substantially lower operating loss Comparison of Operations | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Revenues | $43,046 | $24,089 | $18,957 | 79% | | Direct operating expenses | $3,520 | $3,681 | $(161) | (4)% | | Selling, general and administrative expenses | $53,556 | $55,281 | $(1,725) | (3)% | | Depreciation and amortization | $794 | $1,025 | $(231) | (23)% | | Operating loss | $(14,824) | $(35,898) | $21,074 | 59% | | Interest expense, net | $(6,476) | $(2,956) | $(3,520) | NM | | Miscellaneous expense, net | $(12,665) | $(166) | $(12,499) | NM | | Loss before income taxes | $(33,965) | $(39,020) | $5,055 | 13% | | Income tax benefit | $15,144 | $20,493 | $(5,349) | (26)% | | Net loss | $(18,821) | $(18,527) | $(294) | (2)% | | Net loss attributable to MSG Sports' stockholders | $(18,821) | $(17,820) | $(1,001) | (6)% | - Revenues increased by **$18,957 thousand (79%)** primarily due to a **$16,991 thousand** increase in league distributions[147](index=147&type=chunk) - Direct operating expenses decreased by **$161 thousand (4%)**, mainly due to lower team personnel compensation following the sale of CLG[148](index=148&type=chunk)[149](index=149&type=chunk) - Selling, general and administrative expenses decreased by **$1,725 thousand (3%)**, driven by lower employee compensation and related benefits[151](index=151&type=chunk) - Operating loss decreased by **$21,074 thousand (59%)** to $14,824 thousand, primarily due to higher revenues and lower SG&A expenses[153](index=153&type=chunk) - Net interest expense increased by **$3,520 thousand** due to higher average interest rates and increased average borrowings[154](index=154&type=chunk) - Miscellaneous expense, net, increased by **$12,499 thousand**, primarily due to unrealized losses on investments in Xtract One common stock and warrants[155](index=155&type=chunk) Reconciliation of Operating Loss to Adjusted Operating Loss | Adjusted Operating Loss Reconciliation | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Operating loss | $(14,824) | $(35,898) | $21,074 | 59% | | Depreciation and amortization | $794 | $1,025 | | | | Share-based compensation | $4,149 | $7,220 | | | | Remeasurement of deferred compensation plan liabilities | $(104) | $(103) | | | | Adjusted operating loss | $(9,985) | $(27,756) | $17,771 | 64% | - Adjusted operating loss decreased by **$17,771 thousand (64%)** to $9,985 thousand, primarily due to higher revenues[164](index=164&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through cash reserves and available credit, while managing significant deferred revenue obligations - As of September 30, 2023, the Company had **$51,208 thousand in cash** and **$155,000 thousand of available borrowing capacity**[168](index=168&type=chunk)[170](index=170&type=chunk) - Deferred revenue obligations were **$270,876 thousand**, primarily from tickets, suites, and local media rights[168](index=168&type=chunk) - Net cash used in operating activities was **$54,141 thousand**, a significant shift from net cash provided in the prior year, primarily due to changes in working capital[173](index=173&type=chunk)[174](index=174&type=chunk) - Net cash provided by financing activities was **$67,830 thousand**, primarily due to additional borrowings of **$75,000 thousand**[173](index=173&type=chunk)[177](index=177&type=chunk) [Seasonality of Our Business](index=33&type=section&id=Seasonality%20of%20Our%20Business) The company's revenue generation is concentrated in the second and third fiscal quarters, aligned with sports seasons - The Company's revenues are disproportionately earned in the **second and third quarters** of its fiscal year, coinciding with the majority of its NBA and NHL sports teams' games[178](index=178&type=chunk) [Critical Accounting Policies](index=33&type=section&id=Critical%20Accounting%20Policies) Annual impairment tests for goodwill and indefinite-lived intangible assets found no impairment - The Company performed its annual impairment tests for goodwill and identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2024 and concluded there was **no impairment**[180](index=180&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk) Indefinite-Lived Intangible Assets | Indefinite-Lived Intangible Assets | September 30, 2023 (in thousands) | | :--------------------------------- | :-------------------------------- | | Sports franchises | $102,564 | | Photographic related rights | $1,080 | | Total | $103,644 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to interest rate fluctuations on its floating-rate debt - The Company has potential interest rate risk exposure from **$370 million** in outstanding floating-rate borrowings; a hypothetical **100 basis point increase** in interest rates would increase annual interest expense by approximately **$3.7 million**[187](index=187&type=chunk)[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal financial reporting controls were effective as of the quarter's end - As of September 30, 2023, the Company's Executive Chairman and Chief Financial Officer concluded that **disclosure controls and procedures were effective**[190](index=190&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during the quarter ended September 30, 2023[191](index=191&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing lawsuits are not expected to have a material adverse effect on the company's financial condition - Management does not believe that the resolution of various lawsuits in which the Company is a defendant will have a **material adverse effect** on the Company[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) No shares were repurchased during the quarter, with approximately $185 million remaining under the buyback program - As of September 30, 2023, the Company had approximately **$185 million remaining** under its $525 million Class A Common Stock share repurchase program, with no repurchases made during the quarter[195](index=195&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the certifications and financial data exhibits filed with the quarterly report - Exhibits include certifications by the Executive Chairman and Chief Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline Extensible Business Reporting Language (iXBRL) formatted financial statements[197](index=197&type=chunk) [SIGNATURE](index=38&type=section&id=SIGNATURE) This section contains the official signature confirming the filing of the report - The report was duly signed on November 2, 2023, by Victoria M Mink, Executive Vice President, Chief Financial Officer and Treasurer of Madison Square Garden Sports Corp[199](index=199&type=chunk)[200](index=200&type=chunk)

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Madison Square Garden Sports Corp. (MSG Sports) owns and operates professional sports franchises, the New York Knicks (NBA) and New York Rangers (NHL), leveraging strong brands and market position for growth - MSG Sports owns and operates the New York Knicks (NBA) and New York Rangers (NHL), along with development league teams (Hartford Wolf Pack, Westchester Knicks) and a performance center[16](index=16&type=chunk) - In April 2023, the Company sold its controlling interest in Counter Logic Gaming (CLG), an esports organization, for a noncontrolling equity interest in the combined NRG/CLG company[16](index=16&type=chunk)[162](index=162&type=chunk) - Key strengths include iconic sports franchises, a strong presence in the New York market, deep fan connections, multi-year sponsorship and suite agreements with MSG Entertainment, and long-term local media rights with MSG Networks[18](index=18&type=chunk) - The company's strategy focuses on developing championship-caliber teams, employing a direct ticketing policy, maximizing exclusive live sports content through media rights, utilizing unique assets for sponsorship and suite sales, and investing in the fan experience[19](index=19&type=chunk)[20](index=20&type=chunk) - The Knicks and Rangers have 20-year local media rights agreements with MSG Networks (expiring 2035) and receive pro-rata shares from NBA and NHL national media rights (NBA agreements expire after 2024-25, NHL after 2027-28)[19](index=19&type=chunk) - The company operates under 35-year Arena License Agreements with MSG Entertainment for the Knicks and Rangers to play home games at Madison Square Garden, sharing revenues from suites, clubs, sponsorship, signage, food, beverage, and merchandise[18](index=18&type=chunk)[26](index=26&type=chunk) - The company is subject to various regulations, including ticket sales, consumer protection, building codes, zoning, data privacy laws (CCPA, CPRA), and league rules (NBA, NHL) which can impact operations[36](index=36&type=chunk)[37](index=37&type=chunk) - MSG Sports faces intense competition from numerous other professional sports teams and entertainment options in the New York metropolitan area, competing on team quality, success, entertainment environment, and ticket pricing[38](index=38&type=chunk)[39](index=39&type=chunk) - The company emphasizes diversity and inclusion through talent actions, building an inclusive workplace, and expanding to diverse stakeholders, including increasing ERG involvement by **80.1% in fiscal year 2023**[42](index=42&type=chunk)[45](index=45&type=chunk) - As of June 30, 2023, MSG Sports had **558 full-time and 404 part-time employees**, with approximately **11.3% represented by unions** (primarily players)[47](index=47&type=chunk)[50](index=50&type=chunk) [Overview](index=3&type=section&id=Overview) This section provides a general introduction to the company's business and operations [Our Strengths](index=3&type=section&id=Our%20Strengths) The company's strengths include iconic franchises, market presence, fan connections, and strategic agreements [Our Strategy](index=4&type=section&id=Our%20Strategy) The company's strategy focuses on team development, direct ticketing, media rights, sponsorship, and fan experience investment [Our Business](index=5&type=section&id=Our%20Business) This section details the company's core business operations, including sports franchises and arena agreements [Our Sports Franchises](index=5&type=section&id=Our%20Sports%20Franchises) The company's core business revolves around its professional NBA and NHL sports franchises [Arena License Agreements](index=5&type=section&id=Arena%20License%20Agreements) The company operates under long-term agreements for its teams to play home games at Madison Square Garden [Our Professional Sports Teams Performance Center](index=5&type=section&id=Our%20Professional%20Sports%20Teams%20Performance%20Center) This section describes the company's dedicated training and performance facility for its professional sports teams [The Role of the Leagues in Our Operations](index=5&type=section&id=The%20Role%20of%20the%20Leagues%20in%20Our%20Operations) The NBA and NHL leagues significantly influence the company's operations, rules, and financial performance [Media Rights](index=6&type=section&id=Media%20Rights) The company generates substantial revenue from local and national media rights agreements for its sports content [Our Community](index=6&type=section&id=Our%20Community) This section outlines the company's engagement and initiatives within its community [Garden of Dreams Foundation](index=6&type=section&id=Garden%20of%20Dreams%20Foundation) The company supports the Garden of Dreams Foundation, a non-profit organization dedicated to helping children [Supplier Diversity](index=6&type=section&id=Supplier%20Diversity) The company is committed to promoting diversity within its supplier network [Regulation](index=7&type=section&id=Regulation) The company is subject to various regulations, including ticket sales, consumer protection, and league rules [Competition](index=7&type=section&id=Competition) The company faces intense competition from other sports and entertainment options in its market [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) This section details the company's approach to managing its workforce, including diversity and talent initiatives [Diversity and Inclusion ("D&I")](index=8&type=section&id=Diversity%20and%20Inclusion%20%28%22D%26I%22%29) The company prioritizes diversity and inclusion through talent actions and an inclusive workplace [Talent](index=9&type=section&id=Talent) This section describes the company's focus on attracting, developing, and retaining talent [Financial Information about Geographic Areas](index=10&type=section&id=Financial%20Information%20about%20Geographic%20Areas) The company's financial information is primarily concentrated within a single geographic area [Available Information](index=10&type=section&id=Available%20Information) This section provides details on where the company's public filings and information can be accessed [Item 1A. Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) MSG Sports faces significant risks from competition, team performance, economic conditions, and corporate governance - The business faces intense competition from other live sporting events, media, and leisure activities in the New York City metropolitan area, impacting attendance, viewership, and advertising[58](index=58&type=chunk)[59](index=59&type=chunk) - Financial results are substantially dependent on the continued popularity and competitive success of the Knicks and Rangers, which drives ticket sales, premium seating, sponsorships, and merchandise revenue[62](index=62&type=chunk) - Basketball and hockey decisions, particularly player selection and salaries, can significantly impact business and results, with player compensation generally increasing and potential luxury tax obligations for the NBA[63](index=63&type=chunk)[64](index=64&type=chunk) - Actions by the NBA and NHL, including rules, regulations, media rights agreements, and potential expansion, can materially affect MSG Sports' business and financial performance[65](index=65&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - Player injuries or illnesses can hinder team success and result in significant financial commitments due to guaranteed contracts, even with insurance policies[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The COVID-19 pandemic materially impacted operations and results, and future pandemics or public health emergencies could lead to renewed restrictions, reduced attendance, and declines in discretionary spending[72](index=72&type=chunk)[74](index=74&type=chunk) - Economic downturns, recessions, financial instability, or inflation can adversely impact consumer and corporate spending on games, suites, food, beverages, merchandise, advertising, and sponsorships[75](index=75&type=chunk)[76](index=76&type=chunk) - Subsidiaries have substantial indebtedness (**$235 million for Knicks, $60 million for Rangers** as of June 30, 2023, plus a **$30 million NHL advance**), with covenants that could be implicated by revenue shortfalls[77](index=77&type=chunk)[79](index=79&type=chunk) - The company does not own Madison Square Garden and relies on Arena License Agreements with MSG Entertainment; failure to renew or MSG Entertainment's non-compliance could negatively impact the business[81](index=81&type=chunk)[84](index=84&type=chunk) - A potential change or withdrawal of a New York City real estate tax exemption for The Garden (**$42.4 million in fiscal year 2023**) could materially negatively affect the business, as teams are responsible for **100% of such taxes**[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) - The Dolan Family Group controls approximately **71.0% of the total voting power**, enabling them to prevent or cause a change in control and influence corporate actions, potentially leading to conflicts of interest with other Dolan-controlled entities[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[132](index=132&type=chunk) - The company is subject to continually evolving cybersecurity risks, including data breaches, which could result in loss of confidential information, business disruption, reputational damage, legal exposure, and financial losses[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Sports Business Risks](index=11&type=section&id=Sports%20Business%20Risks) Risks include intense competition, team performance dependence, player decisions, and league actions [Economic and Business Relationship Risks](index=15&type=section&id=Economic%20and%20Business%20Relationship%20Risks) Economic downturns, substantial indebtedness, and reliance on affiliated entities pose financial risks [Operational Risks](index=18&type=section&id=Operational%20Risks) Operational challenges include cybersecurity threats, system unavailability, and potential litigation [Corporate Governance Risks](index=21&type=section&id=Corporate%20Governance%20Risks) Corporate governance risks stem from controlling ownership and potential conflicts of interest [Item 1B. Unresolved Staff Comments](index=24&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - No unresolved staff comments[135](index=135&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) MSG Sports licenses Madison Square Garden and owns a training center, while subleasing office space - MSG Sports licenses Madison Square Garden (capacity **~19,800 for Knicks, ~18,000 for Rangers**) from MSG Entertainment via Arena License Agreements[136](index=136&type=chunk) - The company owns the **114,000 sq ft Madison Square Garden Training Center** in Greenburgh, NY[136](index=136&type=chunk) - MSG Sports subleases approximately **47,000 sq ft of office space** at Two Pennsylvania Plaza, New York City, from MSG Entertainment[137](index=137&type=chunk) - The lease for the CLG Performance Center in Los Angeles, CA (**8,000 sq ft**) ended in April 2023[136](index=136&type=chunk) [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) MSG Sports is a defendant in various lawsuits, but management expects no material adverse financial effect - The Company is a defendant in various lawsuits[138](index=138&type=chunk) - Management does not believe the resolution of these lawsuits will have a material adverse effect on the Company[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Madison Square Garden Sports Corp - Not applicable[139](index=139&type=chunk) PART II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) MSG Sports' Class A Common Stock is listed on the NYSE, and the company executed a special dividend and share repurchase program - Class A Common Stock is listed on the NYSE under the symbol 'MSGS'[142](index=142&type=chunk) - As of June 30, 2023, there were **569 holders of record for Class A Common Stock** and **16 for Class B Common Stock** (which has no public trading market)[144](index=144&type=chunk) - A special cash dividend of **$7.00 per share** was declared on October 6, 2022, and paid on October 31, 2022[145](index=145&type=chunk) - The company completed a **$75 million accelerated share repurchase (ASR) program**, repurchasing **456,458 shares of Class A Common Stock** at an average price of **$164.31 per share**[235](index=235&type=chunk)[560](index=560&type=chunk) - As of June 30, 2023, approximately **$185 million remained** under the **$525 million Class A Common Stock share repurchase program**[146](index=146&type=chunk)[562](index=562&type=chunk) Stock Performance Comparison (June 30, 2018 - June 30, 2023) | | 6/30/18 | 6/30/19 | 6/30/20 | 6/30/21 | 6/30/22 | 6/30/23 | |:---|:---|:---|:---|:---|:---|:---|\ | Madison Square Garden Company Sports Corp. | $100.00 | $90.25 | $66.41 | $78.02 | $68.27 | $89.00 | | Russell 3000 Index | 100.00 | 108.98 | 116.10 | 167.37 | 114.17 | 171.49 | | Bloomberg Americas Entertainment Index | 100.00 | 110.35 | 89.68 | 206.40 | 109.09 | 129.16 | [Performance Graph](index=25&type=section&id=Performance%20Graph) This section illustrates the company's stock performance compared to relevant indices over time [Issuer Purchases of Equity Securities](index=26&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Details on the company's share repurchase programs and activities are provided here [Securities Authorized for Issuance Under Equity Compensation Plans](index=26&type=section&id=Securities%20Authorized%20for%20Issuance%20Under%20Equity%20Compensation%20Plans) This section outlines the securities available for issuance under the company's equity compensation plans [Item 6. (Reserved)](index=26&type=section&id=Item%206.%20%28Reserved%29) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MSG Sports' FY23 revenues increased by 8% to $887.4 million, driven by ticket and sponsorship sales, while operating income slightly decreased to $85.2 million due to higher expenses - The Company's business operates in one segment, focusing on its sports teams, the Knicks and Rangers, and related assets[155](index=155&type=chunk)[162](index=162&type=chunk) - Primary revenue sources include ticket sales, suite rental fees, league distributions from national/international media contracts, venue signage and sponsorships, food and beverage sales, and merchandising[163](index=163&type=chunk) - Long-term performance is tied to the success and popularity of sports teams, with revenues typically concentrated in the second and third fiscal quarters due to NBA and NHL playing seasons[163](index=163&type=chunk)[422](index=422&type=chunk) - Significant expenses include player and team personnel salaries, costs for injuries/trades/terminations, travel, player insurance, league operating assessments, and NBA/NHL revenue sharing and luxury tax[176](index=176&type=chunk) - The NBA and NHL CBAs impose salary floors and caps, and revenue sharing/escrow systems, which impact player compensation and team finances. The Knicks received approximately **$15.1 million in luxury tax proceeds in FY23**[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Revenues increased by **$66.1 million (8%) in FY23**, driven by higher pre/regular season ticket-related revenues (**$33.3 million**), suite revenues (**$15.2 million**), sponsorship and signage revenues (**$9.5 million**), and local media rights fees (**$9.3 million**)[200](index=200&type=chunk)[201](index=201&type=chunk) - Direct operating expenses increased by **$48.2 million (10%) in FY23**, primarily due to higher team personnel compensation (**$56.0 million**) and other team operating expenses (**$8.3 million**), partially offset by a decrease in league revenue sharing expense (**$21.3 million**)[205](index=205&type=chunk)[206](index=206&type=chunk)[209](index=209&type=chunk) - Selling, general and administrative expenses increased by **$20.2 million (9%) in FY23**, mainly due to higher employee compensation (**$10.2 million**), increased sales and marketing costs (**$5.2 million**), and professional fees (**$2.1 million**)[212](index=212&type=chunk) - Operating income decreased by **$0.9 million (1%) in FY23 to $85.2 million**, primarily due to higher expenses offsetting revenue growth[214](index=214&type=chunk) - Net interest expense increased by **$9.1 million (79%) in FY23 to $20.5 million**, mainly due to higher average interest rates on revolving credit facilities[215](index=215&type=chunk) - Miscellaneous income (expense), net, improved by **$26.0 million in FY23**, primarily due to unrealized gains on investments in Xtract One common stock and warrants[216](index=216&type=chunk) - Adjusted operating income increased slightly by **$0.1 million in FY23 to $115.0 million**, reflecting higher revenues offset by increased operating and administrative expenses[226](index=226&type=chunk) - As of June 30, 2023, the company had **$40.4 million in cash and cash equivalents** and **$230 million in available borrowing capacity** under existing credit facilities[230](index=230&type=chunk)[232](index=232&type=chunk) - Net cash provided by operating activities decreased by **$25.6 million in FY23**, primarily due to lower net income adjusted for non-cash items, partially offset by changes in working capital[238](index=238&type=chunk) - Net cash used in investing activities increased by **$14.8 million in FY23**, mainly due to higher purchases of investments and cash balances disposed of with the CLG sale[239](index=239&type=chunk) - Net cash used in financing activities increased by **$29.1 million in FY23**, primarily due to the special dividend payment and accelerated share repurchase, partially offset by additional net borrowings[240](index=240&type=chunk) Consolidated Statements of Operations (in thousands) | | Years Ended June 30, | |:---|:---|:---|\ | | 2023 | 2022 | | Revenues | $887,447 | $821,354 | | Direct operating expenses | 548,811 | 500,564 | | Selling, general and administrative expenses | 249,885 | 229,668 | | Depreciation and amortization | 3,577 | 5,042 | | Operating income | 85,174 | 86,080 | | Interest expense, net | (20,492) | (11,422) | | Miscellaneous income (expense), net | 25,239 | (726) | | Income before income taxes | 89,921 | 73,932 | | Income tax expense | (44,293) | (25,052) | | Net income | 45,628 | 48,880 | | Net income attributable to Madison Square Garden Sports Corp.'s stockholders | $47,793 | $51,131 | Cash Flow Activities (in thousands) | | Years Ended June 30, | |:---|:---|:---|\ | | 2023 | 2022 | | Net cash provided by operating activities | $152,473 | $178,056 | | Net cash used in investing activities | (17,759) | (2,932) | | Net cash used in financing activities | (185,273) | (156,142) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(50,559) | $18,982 | Contractual Obligations and Off-Balance Sheet Arrangements (in thousands) | | Payments Due by Period | |:---|:---|:---|:---|:---|:---|\ | | Total | Year 1 | Years 2-3 | Years 4-5 | More Than 5 Years | | Off balance sheet arrangements | $671,385 | $200,561 | $341,220 | $97,690 | $31,914 | | Contractual obligations reflected on the balance sheet: | | | | | | | Short-term debt | 30,000 | 30,000 | — | — | — | | Leases | 2,306,023 | 51,577 | 103,836 | 108,435 | 2,042,175 | | Long-term debt | 295,000 | — | — | 295,000 | — | | Contractual obligations | 126,341 | 104,683 | 9,135 | 4,984 | 7,539 | | Total | $3,428,749 | $386,821 | $454,191 | $506,109 | $2,081,628 | [Introduction](index=28&type=section&id=Introduction) This section provides an overview of the Management's Discussion and Analysis of Financial Condition and Results of Operations [Business Overview](index=29&type=section&id=Business%20Overview) This section details the company's revenue sources, expenses, and operational structure [Revenue Sources](index=29&type=section&id=Revenue%20Sources) The company generates revenue from various streams, including ticket sales, media rights, and sponsorships [Ticket Sales and Facility and Ticketing Fees](index=29&type=section&id=Ticket%20Sales%20and%20Facility%20and%20Ticketing%20Fees) Revenue from ticket sales and associated facility and ticketing fees are a primary income source [Media Rights](index=29&type=section&id=Media%20Rights) The company earns significant revenue from local and national media rights for its sports content [Suites and Clubs](index=30&type=section&id=Suites%20and%20Clubs) Revenue is generated from the rental and sales of premium suites and club access at Madison Square Garden [Sponsorships and Signage](index=30&type=section&id=Sponsorships%20and%20Signage) The company derives revenue from corporate sponsorships and advertising signage within its venues [Food, Beverage and Merchandise Sales](index=30&type=section&id=Food%2C%20Beverage%20and%20Merchandise%20Sales) Sales of food, beverages, and merchandise contribute to the company's overall revenue [Other](index=30&type=section&id=Other) This category includes miscellaneous revenue streams not covered by the primary categories [Expenses](index=30&type=section&id=Expenses) This section outlines the various operating and administrative expenses incurred by the company [Factors Affecting Operating Results](index=32&type=section&id=Factors%20Affecting%20Operating%20Results) Key factors influencing the company's operating results include general economic conditions and the impact of COVID-19 [General](index=32&type=section&id=General) This subsection discusses general factors that can influence the company's financial performance [Impact of COVID-19 on Our Business](index=33&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) The COVID-19 pandemic has had a significant impact on the company's business operations and financial results [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the reported periods [Comparison of the Year Ended June 30, 2023 versus the Year Ended June 30, 2022](index=34&type=section&id=Comparison%20of%20the%20Year%20Ended%20June%2030%2C%202023%20versus%20the%20Year%20Ended%20June%2030%2C%202022) This subsection compares the company's financial results between fiscal years 2023 and 2022 [Revenues](index=34&type=section&id=Revenues) This section analyzes the various revenue streams and their changes during the reporting period [Direct operating expenses](index=35&type=section&id=Direct%20operating%20expenses) This section details the direct costs associated with the company's operations [Selling, general and administrative expenses](index=36&type=section&id=Selling%2C%20general%20and%20administrative%20expenses) This section covers the selling, general, and administrative costs incurred by the company [Depreciation and amortization](index=36&type=section&id=Depreciation%20and%20amortization) This section discusses the depreciation and amortization expenses for the reporting period [Operating income](index=36&type=section&id=Operating%20income) This section analyzes the company's operating income and its contributing factors [Interest expense, net](index=36&type=section&id=Interest%20expense%2C%20net) This section details the net interest expenses incurred by the company [Miscellaneous income (expense), net](index=37&type=section&id=Miscellaneous%20income%20%28expense%29%2C%20net) This section covers other non-operating income and expenses [Income taxes](index=37&type=section&id=Income%20taxes) This section discusses the company's income tax expense for the reporting period [Adjusted operating income](index=37&type=section&id=Adjusted%20operating%20income) This section analyzes the company's adjusted operating income, a non-GAAP financial measure [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations and fund operations [Overview](index=39&type=section&id=Overview) This subsection provides a general overview of the company's liquidity and capital resources [Financing Agreements and Stock Repurchases](index=39&type=section&id=Financing%20Agreements%20and%20Stock%20Repurchases) This section details the company's financing arrangements and stock repurchase activities [Special Dividend and Accelerated Share Repurchase](index=39&type=section&id=Special%20Dividend%20and%20Accelerated%20Share%20Repurchase) This section discusses the company's special dividend payment and accelerated share repurchase program [Cash Flow Discussion](index=40&type=section&id=Cash%20Flow%20Discussion) This section analyzes the company's cash flows from operating, investing, and financing activities [Contractual Obligations and Of Balance Sheet Arrangements](index=41&type=section&id=Contractual%20Obligations%20and%20Of%20Balance%20Sheet%20Arrangements) This section outlines the company's contractual obligations and off-balance sheet arrangements [Seasonality of Our Business](index=41&type=section&id=Seasonality%20of%20Our%20Business) The company's business experiences seasonality, with revenues concentrated in specific fiscal quarters [Recently Issued Accounting Pronouncements and Critical Accounting Policies](index=41&type=section&id=Recently%20Issued%20Accounting%20Pronouncements%20and%20Critical%20Accounting%20Policies) This section discusses recent accounting pronouncements and the company's critical accounting policies [Recently Issued Accounting Pronouncements](index=41&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This subsection details new accounting standards and their potential impact on the company [Critical Accounting Policies](index=42&type=section&id=Critical%20Accounting%20Policies) This subsection describes the accounting policies that require significant judgment and estimation [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) MSG Sports is exposed to interest rate risk from floating-rate borrowings, potentially mitigated by swaps - The Company has interest rate risk exposure from floating-rate borrowings under its credit facilities[270](index=270&type=chunk) - As of June 30, 2023, total outstanding borrowings were **$295 million**[271](index=271&type=chunk) - A hypothetical **100 basis point increase** in floating interest rates would increase annual interest expense by approximately **$3.0 million**[271](index=271&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the audited consolidated financial statements and supplementary data, starting on page F-1 - The financial statements and supplementary data are incorporated by reference and begin on page F-1[273](index=273&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[274](index=274&type=chunk) [Item 9A. Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2023 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[275](index=275&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 30, 2023, based on the COSO framework[278](index=278&type=chunk) - Deloitte & Touche LLP audited and expressed an unqualified opinion on the effectiveness of internal control over financial reporting[279](index=279&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2023[280](index=280&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management assessed the effectiveness of disclosure controls and procedures as of June 30, 2023 [Management's Report on Internal Control over Financial Reporting](index=46&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management's report on the effectiveness of internal control over financial reporting is presented here [Changes in Internal Control over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in internal control over financial reporting [Item 9B. Other Information](index=46&type=section&id=Item%209B.%20Other%20Information) This item reports no other information - No other information to report[281](index=281&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=46&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Madison Square Garden Sports Corp - Not applicable[282](index=282&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=47&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance will be incorporated from the 2023 proxy statement - Information on directors, executive officers, and corporate governance will be incorporated by reference from the 2023 proxy statement[284](index=284&type=chunk) [Item 11. Executive Compensation](index=47&type=section&id=Item%2011.%20Executive%20Compensation) Details on executive compensation will be incorporated by reference from the 2023 proxy statement - Information on executive compensation will be incorporated by reference from the 2023 proxy statement[285](index=285&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=47&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters will be incorporated from the 2023 proxy statement - Information on security ownership and related stockholder matters will be incorporated by reference from the 2023 proxy statement[286](index=286&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=47&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence will be incorporated from the 2023 proxy statement - Information on certain relationships, related transactions, and director independence will be incorporated by reference from the 2023 proxy statement[287](index=287&type=chunk) [Item 14. Principal Accountant Fees and Services](index=47&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services will be incorporated from the 2023 proxy statement - Information on principal accountant fees and services will be incorporated by reference from the 2023 proxy statement[288](index=288&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, supplementary schedules, and a comprehensive list of exhibits filed as part of the 10-K report - The report includes financial statements, Schedule II – Valuation and Qualifying Accounts, and a list of exhibits[291](index=291&type=chunk) - Exhibits include distribution agreements, certificates of incorporation, by-laws, transfer consent agreements with NBA/NHL, registration rights agreements, employment agreements, credit agreements, and various certifications[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) [Financial Statements and Schedules](index=48&type=section&id=Financial%20Statements%20and%20Schedules) This subsection lists the financial statements and supplementary schedules included in the report [Exhibits](index=48&type=section&id=Exhibits) This subsection provides a comprehensive list of all exhibits filed with the report [Item 16. Form 10-K Summary](index=51&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to provide summary information for this Form 10-K - The Company has elected not to provide summary information for this Form 10-K[295](index=295&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-36900 MADISON SQUARE GARDEN SPORTS CORP. (Exact name of registrant as specified in its ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements detail the company's consolidated financial position, operations, and cash flows, highlighting increased liabilities, a wider equity deficit, and improved net income for the period [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets remained stable, while total liabilities significantly increased due to higher long-term debt, widening the total equity deficit Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Dec 31, 2022 (Unaudited) | June 30, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,300,867** | **$1,301,966** | | Cash and cash equivalents | $43,912 | $91,018 | | **Total Liabilities** | **$1,687,279** | **$1,447,343** | | Debt (Current) | $30,000 | $30,000 | | Long-term debt | $405,000 | $220,000 | | **Total Equity** | **$(386,412)** | **$(145,377)** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Revenues and net income increased for both the three and six months ended December 31, 2022, indicating improved operational performance Statement of Operations Summary (in thousands) | Period | Revenues | Operating Income | Net Income (Loss) | | :--- | :--- | :--- | :--- | | **Three Months Ended Dec 31, 2022** | **$353,694** | **$51,518** | **$21,836** | | Three Months Ended Dec 31, 2021 | $289,581 | $35,919 | $15,198 | | **Six Months Ended Dec 31, 2022** | **$377,783** | **$15,620** | **$3,309** | | Six Months Ended Dec 31, 2021 | $308,375 | $981 | $(1,687) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, while financing activities saw significant outflows for dividends and share repurchases, partially funded by increased borrowings Cash Flow Summary for Six Months Ended Dec 31 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $31,577 | $24,030 | | Net cash used in investing activities | $(1,314) | $(627) | | Net cash used in financing activities | $(76,123) | $(39,879) | | **Net decrease in cash** | **$(45,860)** | **$(16,476)** | - Major financing activities in the six months ended Dec 31, 2022 included a **$170.7 million dividend payment**, a **$75.0 million accelerated share repurchase**, and **$185.0 million in net borrowings** ($215M proceeds - $30M repayment)[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail business operations, revenue disaggregation, significant debt obligations, related-party transactions, and the accelerated share repurchase program - The company operates as a **single segment**, owning and operating sports teams including the **New York Knicks** and **New York Rangers**, with **seasonal revenue** disproportionately earned in the second and third fiscal quarters[33](index=33&type=chunk)[36](index=36&type=chunk) Disaggregation of Revenue for Six Months Ended Dec 31 (in thousands) | Revenue Source | 2022 | 2021 | | :--- | :--- | :--- | | Event-related | $147,654 | $112,944 | | Media rights | $125,144 | $118,894 | | Sponsorship, signage and suite licenses | $85,835 | $61,704 | | League distributions and other | $19,150 | $14,833 | | **Total revenues** | **$377,783** | **$308,375** | - As of December 31, 2022, the company had **$260 million outstanding** under the **2021 Knicks Revolving Credit Facility** and **$145 million outstanding** under the **2021 Rangers Revolving Credit Facility**[84](index=84&type=chunk)[95](index=95&type=chunk) - The Dolan Family Group beneficially owns **100% of Class B Common Stock** and approximately **3.2% of Class A Common Stock**, representing approximately **71.0% of the aggregate voting power**[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth drivers, increased operating expenses, improved adjusted operating income, liquidity impacts from dividends and share repurchases, and the absence of impairments [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Revenues increased by **22%** driven by ticket, suite, and sponsorship income, while operating expenses rose, resulting in a **43%** increase in operating income Key Financial Metrics Comparison (Three Months Ended Dec 31, in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $353,694 | $289,581 | $64,113 | 22% | | Direct operating expenses | $225,702 | $192,847 | $32,855 | 17% | | SG&A expenses | $75,636 | $59,600 | $16,036 | 27% | | Operating income | $51,518 | $35,919 | $15,599 | 43% | - The increase in revenues was primarily driven by **higher ticket-related revenues**, **suite license fees**, and **sponsorship**, largely due to the Rangers playing **six more regular season home games** in the current period compared to the prior year[148](index=148&type=chunk)[149](index=149&type=chunk) - The rise in direct operating expenses was mainly due to **increased team personnel compensation** related to **roster changes** for the Knicks and Rangers[153](index=153&type=chunk) Reconciliation of Operating Income to Adjusted Operating Income (in thousands) | | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Operating income | $51,518 | $35,919 | | Deferred rent | $12,202 | $11,179 | | Depreciation and amortization | $838 | $1,215 | | Share-based compensation | $11,619 | $7,354 | | Remeasurement of deferred compensation plan liabilities | $449 | — | | **Adjusted operating income** | **$76,626** | **$55,667** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position, significant cash uses for dividends and share repurchases, and funding through increased borrowings are detailed - The company's Board of Directors declared a **special dividend of $7.00 per share**, resulting in payments of **$170.7 million** during the period[175](index=175&type=chunk) - A **$75 million accelerated share repurchase (ASR) program** was authorized and initiated in October 2022[176](index=176&type=chunk) - To fund the special dividend and ASR, the company borrowed an additional **$55 million under the Knicks facility** and **$160 million under the Rangers facility** in October 2022[178](index=178&type=chunk) - As of December 31, 2022, the company had approximately **$44 million in cash and cash equivalents** and **$120 million of additional available borrowing capacity**[171](index=171&type=chunk)[173](index=173&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) Annual impairment tests for goodwill and indefinite-lived intangible assets were conducted qualitatively, concluding no impairments were identified - The **annual impairment test for goodwill** was conducted as of August 31, using a **qualitative assessment**, and **no impairment** was found[187](index=187&type=chunk)[188](index=188&type=chunk) - The **annual impairment test for identifiable indefinite-lived intangible assets** (primarily sports franchises) was also conducted as of August 31, using a **qualitative assessment**, and **no impairments** were identified[189](index=189&type=chunk)[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from its variable-rate debt, where a 100 basis point increase would raise annual interest expense by **$4.1 million** - The company has potential **interest rate risk exposure** from its **$405 million in outstanding borrowings** under credit facilities, which bear interest at **floating rates** based on SOFR or other benchmarks[193](index=193&type=chunk)[194](index=194&type=chunk) - A hypothetical **100 basis point increase** in interest rates would increase the company's **annual interest expense by approximately $4.1 million**[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of December 31, 2022, the company's **disclosure controls and procedures were effective**[195](index=195&type=chunk) - **No material changes** to the company's **internal control over financial reporting** occurred during the quarter ended December 31, 2022[196](index=196&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits, but management anticipates no material adverse effect from their resolution - The company is involved in **various lawsuits**, but management does not expect the outcomes to have a **material adverse effect**[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company completed a **$75 million** accelerated share repurchase program, with **$185 million** remaining available under its existing authorization - On October 28, 2022, the company entered into a **$75 million Accelerated Share Repurchase (ASR) agreement** with JP Morgan[200](index=200&type=chunk) - The **ASR concluded** on January 31, 2023, with a final **average purchase price of $164.31 per share**[200](index=200&type=chunk)[203](index=203&type=chunk) - As of December 31, 2022, approximately **$185 million remained available** for future repurchases under the existing authorization[201](index=201&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and iXBRL financial statements - Filed exhibits include **Sarbanes-Oxley Act certifications** (Sections 302 and 906) and **iXBRL data files** for the financial statements[205](index=205&type=chunk)

Financial Data and Key Metrics Changes - Total revenues for the fiscal second quarter were $353.7 million, an increase of 22% year-over-year from $289.6 million [15][59] - Adjusted operating income increased 38% to $76.6 million compared to the prior year period [21][59] - Event-related revenue rose 30% year-over-year to $142.3 million, driven by ticket sales and increased per game revenue [15][21] Business Line Data and Key Metrics Changes - Ticketing revenue saw substantial year-over-year growth, with average tickets sold per game exceeding pre-pandemic levels [7][15] - Suites and sponsorship revenues increased 38% to $81 million, attributed to a higher number of games and increased per game revenue [16][21] - Merchandise sales benefited from new product offerings and partnerships with fashion brands, contributing to overall revenue growth [8][15] Market Data and Key Metrics Changes - The Knicks were valued at an estimated $6.6 billion, an 8% increase year-over-year, while the Rangers were valued at $2.2 billion, a 10% increase [67] - Local and national media rights fees increased due to contractual escalators, contributing to overall revenue growth [12][70] Company Strategy and Development Direction - The company aims to continue executing growth opportunities through new ticketing products, enhanced fan relationships, and global brand strengthening [60][61] - There is a focus on expanding commercial opportunities globally, particularly with the NBA's international sponsorship initiatives [11][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's resilience despite broader economic concerns, noting strong demand across all sectors [32][35] - The company remains optimistic about future revenue growth, particularly with potential playoff revenues and upcoming media rights renewals [30][40] Other Important Information - The company returned approximately $250 million to shareholders through a special cash dividend and share repurchase program [17][68] - The balance sheet showed a cash balance of approximately $44 million, with total debt outstanding at $435 million [18][72] Q&A Session Questions and Answers Question: How is the company addressing potential risks in distribution due to changes in the RSN space? - Management highlighted strong partnerships with MSG Networks and the introduction of direct-to-consumer offerings to enhance distribution [26][78] Question: What is the outlook for corporate demand given the current economic environment? - Management reported robust demand for sponsorships and suite licenses, indicating no signs of softening in corporate spending [34][35] Question: How will the upcoming NBA National TV rights renewal impact financials? - Management expects a positive financial impact from the renewal, with all teams sharing equally in the increase from national media fees [40][41]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-36900 MADISON SQUARE GARDEN SPORTS CORP. (Exact name of registrant as specified in ...

Madison Square Garden Sports Corp. (NYSE:MSGS) Q4 2022 Earnings Conference Call August 18, 2022 10:00 AM ET Company Participants Ari Danes - Investor Relations Andy Lustgarten - President & Chief Executive Officer Victoria Mink - Executive Vice President, Chief Financial Officer & Treasurer Conference Call Participants Brandon Ross - LightShed Partners Ben Swinburne - Morgan Stanley David Karnovsky - JPMorgan Devin Brisco - Wolfe Research Farshid Javar - Jefferies Operator Good morning. Thank you for standi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) For the fiscal year ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ Commission File Number: 1-36900 MADISON SQUARE GARDEN SPORTS CORP. (Exact name of registrant as specified in its charter) Delaware 47-3373056 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Ide ...

Financial Data and Key Metrics Changes - For the fiscal third quarter, the company reported revenues of $338 million and adjusted operating income of $81.5 million, reflecting strong consumer and corporate demand [8][34] - Total revenues increased significantly from $183 million in the prior year period, primarily due to the absence of capacity restrictions and a return to normal operations [34][36] - Adjusted operating income rose by $51.4 million compared to the prior year, driven by increased revenues despite higher operating expenses [36][38] Business Line Data and Key Metrics Changes - Ticket, suite, and sponsorship revenues are now above pre-pandemic levels on a per game basis, indicating a strong recovery in these areas [36][34] - Food and beverage (F&B) and merchandise per caps saw double-digit percentage increases compared to pre-pandemic levels, driven by improved guest spending and innovative product offerings [17][19] - Suite revenue per game has also surpassed pre-COVID levels, with strong demand for corporate hospitality continuing to grow [20][21] Market Data and Key Metrics Changes - The company noted a significant improvement in fan attendance and engagement, with ticket holder attendance returning to pre-Omicron levels by March [14][15] - The average combined season renewal rate for tickets is above 85%, indicating strong demand for the upcoming season [15] - The introduction of new marketing partnerships, particularly in mobile sports gaming, has positioned the company to capitalize on emerging revenue streams [23][24] Company Strategy and Development Direction - The company is focused on leveraging its iconic franchises to drive sustained growth and long-term shareholder value, with a strong emphasis on fan engagement and innovative marketing strategies [30][19] - There is a strategic push towards expanding into new sponsorship categories, including blockchain and international markets, to enhance revenue opportunities [25][68] - The company anticipates significant benefits from upcoming media rights deals and playoff runs, which are expected to generate incremental value [29][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to navigate challenges posed by the pandemic, highlighting a strong operational momentum [10][30] - The outlook for ticket revenue growth is positive, supported by new ticket inventory and increased prices for season tickets [16][16] - Management remains cautious about the unpredictable environment but is optimistic about the trajectory of the business and the potential for sustained growth [52][92] Other Important Information - The company has a total debt of $315 million and a liquidity position of $289.2 million, reflecting ongoing efforts to manage debt levels prudently [39][40] - The company has been actively paying down debt, with a total of $60 million repaid since the start of the third quarter, demonstrating confidence in future cash flow [40][56] Q&A Session Summary Question: Drivers of higher per caps for food and merchandise - Management indicated that the increase in per caps is driven by a combination of pricing strategies, new merchandise offerings, and improved service efficiency [45][47] Question: Update on capital allocation and debt paydown - Management reiterated a focus on debt paydown while maintaining financial flexibility, with ongoing evaluations of capital allocation options [50][56] Question: Potential sponsorship opportunities and jersey patches - Management highlighted the significant upside potential for jersey patch renewals and the importance of strategic partnerships in maximizing revenue [58][60] Question: Impact of playoffs on revenue - Playoff games are expected to provide a substantial boost to revenues, with each home playoff game generating approximately $1.5 million in adjusted operating income [78][79] Question: Corporate demand for next year - Management expressed optimism regarding corporate suite sales and sponsorship demand, indicating strong interest from partners [86][89]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements detail the company's financial performance and position for the periods ended March 31, 2022 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show an increase in total assets and liabilities, with an improvement in the company's negative total equity position Total Assets | Metric | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,363,773 | $1,309,939 | | Current Assets | $264,069 | $185,246 | | Cash and cash equivalents | $49,176 | $64,902 | | Accounts receivable, net | $92,694 | $74,197 | | Net related party receivables | $51,391 | $6,420 | | Right-of-use lease assets | $689,580 | $703,521 | | Deferred income tax assets, net | $0 | $15,943 | Total Liabilities and Equity | Metric | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Liabilities | $1,541,639 | $1,511,805 | | Total Current Liabilities | $454,487 | $368,278 | | Long-term debt | $285,000 | $355,000 | | Operating lease liabilities, noncurrent | $703,718 | $691,152 | | Deferred tax liabilities, net | $15,030 | $0 | | Total Equity | $(177,866) | $(201,866) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported significant improvements in revenue and net income, driven by the recovery from COVID-19 impacts Financial Performance (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $337,774 | $183,010 | +$154,764 | +84.6% | | Direct operating expenses | $206,273 | $126,510 | +$79,763 | +63.0% | | Selling, general and administrative expenses | $68,902 | $46,803 | +$22,099 | +47.2% | | Operating income (loss) | $61,393 | $8,124 | +$53,269 | +655.7% | | Net income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $24,503 | $5,468 | +$19,035 | +348.1% | | Basic earnings (loss) per common share | $1.01 | $0.23 | +$0.78 | +339.1% | Financial Performance (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $646,149 | $268,819 | +$377,330 | +140.3% | | Direct operating expenses | $407,698 | $182,957 | +$224,741 | +122.8% | | Selling, general and administrative expenses | $172,230 | $138,708 | +$33,522 | +24.2% | | Operating income (loss) | $62,374 | $(57,686) | +$120,060 | NM | | Net income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $23,943 | $(63,574) | +$87,517 | NM | | Basic earnings (loss) per common share | $0.99 | $(2.64) | +$3.63 | NM | - Revenues from related parties were **$75,851 thousand** and **$153,229 thousand** for the three and nine months ended March 31, 2022, respectively[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported comprehensive income, a significant improvement from the prior year's comprehensive loss, driven by higher net income Comprehensive Income (Loss) (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $23,919 | $5,095 | | Other comprehensive income, net of income taxes | $23 | $57 | | Comprehensive income (loss) | $23,942 | $5,152 | | Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $24,526 | $5,525 | Comprehensive Income (Loss) (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $22,232 | $(65,053) | | Other comprehensive income, net of income taxes | $67 | $77 | | Comprehensive income (loss) | $22,299 | $(64,976) | | Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $24,010 | $(63,497) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company generated significant net cash from operating activities, a reversal from the prior year, while financing activities used cash Cash Flow Activities (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $64,233 | $(54,367) | | Net cash used in investing activities | $(1,136) | $(437) | | Net cash (used in) provided by financing activities | $(84,978) | $42,155 | | Net decrease in cash, cash equivalents and restricted cash | $(21,881) | $(12,649) | | Cash, cash equivalents and restricted cash at end of period | $50,155 | $78,024 | - Operating activities improved due to **increased net income** and non-cash adjustments, partially offset by changes in working capital[213](index=213&type=chunk) - Financing activities shifted from cash provided to cash used, primarily due to **$70,000 thousand in principal repayments** on the Rangers revolving credit facility and no new borrowings in 2022[215](index=215&type=chunk) [Consolidated Statements of Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity improved significantly due to net income and share-based compensation, despite tax withholding adjustments Total Equity (Nine Months Ended March 31, 2022) | Metric | June 30, 2021 (in thousands) | March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Equity | $(201,866) | $(177,866) | | Net income (loss) | $(78,898) (Accumulated Deficit) | $(62,887) (Accumulated Deficit) | | Share-based compensation | $23,102 (Additional Paid-In Capital) | $12,862 (Additional Paid-In Capital) | - Share-based compensation expense for the nine months ended March 31, 2022, was **$19,178 thousand**[28](index=28&type=chunk) - Tax withholding associated with shares issued for equity-based compensation resulted in a decrease of **$18,306 thousand** in additional paid-in capital[28](index=28&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on business operations, accounting policies, and transactions, offering context to the financial statements [Note 1. Description of Business and Basis of Presentation](index=12&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) The company owns professional sports teams and operates as a single segment, with operations materially impacted by COVID-19 - The company's core business involves owning and operating the **New York Knicks (NBA)** and **New York Rangers (NHL)**, two development league teams, and esports franchises[33](index=33&type=chunk) - The company operates and reports financial information in **one segment**, with its Executive Chairman serving as the Chief Operating Decision Maker[33](index=33&type=chunk) - **COVID-19 materially impacted operations** and operating results in fiscal years 2020, 2021, and 2022, leading to reduced revenues and attendance restrictions[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk)[48](index=48&type=chunk) - As of March 7, 2022, New York City **lifted all COVID-19 vaccination requirements** for guests at indoor entertainment venues, allowing full capacity[47](index=47&type=chunk) [Note 2. Accounting Policies](index=14&type=section&id=Note%202.%20Accounting%20Policies) The financial statements are prepared in accordance with GAAP, include subsidiaries, and rely on management estimates - The consolidated financial statements include Madison Square Garden Sports Corp and its subsidiaries, with all significant intercompany transactions and balances eliminated[51](index=51&type=chunk) - Management makes estimates and assumptions for various financial statement items, including valuation of accounts receivable, goodwill, intangible assets, and revenue recognition[52](index=52&type=chunk) - The company adopted ASU No 2019-12, Income Taxes (Topic 740), at the beginning of fiscal year 2022, which did not have a material impact on its consolidated financial statements[54](index=54&type=chunk) [Note 3. Revenue Recognition](index=15&type=section&id=Note%203.%20Revenue%20Recognition) Revenue from contracts with customers increased significantly due to the lifting of COVID-19 restrictions on events Revenue Disaggregation (Three Months Ended March 31) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Event-related | $119,728 | $4,552 | +$115,176 | +2530.1% | | Media rights | $124,803 | $139,963 | -$15,160 | -10.8% | | Sponsorship, signage and suite licenses | $76,715 | $25,391 | +$51,324 | +202.1% | | League distributions and other | $16,528 | $13,104 | +$3,424 | +26.1% | | **Total revenues** | **$337,774** | **$183,010** | **+$154,764** | **+84.6%** | Revenue Disaggregation (Nine Months Ended March 31) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Event-related | $232,672 | $4,552 | +$228,120 | +5011.4% | | Media rights | $243,697 | $212,458 | +$31,239 | +14.7% | | Sponsorship, signage and suite licenses | $138,419 | $32,336 | +$106,083 | +328.0% | | League distributions and other | $31,361 | $19,473 | +$11,838 | +60.8% | | **Total revenues** | **$646,149** | **$268,819** | **+$377,330** | **+140.3%** | Contract Balances | Metric | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Receivables from contracts with customers, net | $66,547 | $30,834 | | Contract assets, current | $42,779 | $9,604 | | Deferred revenue, including non-current portion | $133,233 | $162,628 | - Estimated future revenue from unsatisfied performance obligations as of March 31, 2022, totals **$377,795 thousand**[66](index=66&type=chunk) [Note 4. Computation of Earnings (Loss) per Common Share](index=17&type=section&id=Note%204.%20Computation%20of%20Earnings%20(Loss)%20per%20Common%20Share) Basic and diluted EPS increased significantly, reflecting improved profitability with relatively stable weighted-average shares outstanding EPS (Three Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Basic earnings (loss) per common share | $1.01 | $0.23 | | Diluted earnings (loss) per common share | $1.00 | $0.22 | | Weighted-average shares for basic EPS | 24,275 | 24,156 | | Weighted-average shares for diluted EPS | 24,394 | 24,344 | EPS (Nine Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Basic earnings (loss) per common share | $0.99 | $(2.64) | | Diluted earnings (loss) per common share | $0.98 | $(2.64) | | Weighted-average shares for basic EPS | 24,235 | 24,120 | | Weighted-average shares for diluted EPS | 24,377 | 24,120 | [Note 5. Team Personnel Transactions](index=17&type=section&id=Note%205.%20Team%20Personnel%20Transactions) Net provisions for team personnel transactions decreased significantly, indicating fewer waiver and contract termination costs Net Provisions for Team Personnel Transactions | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $304 | $3,305 | | Nine months ended March 31 | $729 | $17,003 | - The 2022 figures are net of an insurance recovery of **$656 thousand**[69](index=69&type=chunk) [Note 6. Cash, Cash Equivalents and Restricted Cash](index=18&type=section&id=Note%206.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Total cash, cash equivalents, and restricted cash decreased from the prior fiscal year-end due to a decline in cash balances Cash, Cash Equivalents and Restricted Cash | Metric | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $49,176 | $64,902 | | Restricted cash | $979 | $7,134 | | **Total cash, cash equivalents and restricted cash** | **$50,155** | **$72,036** | - Restricted cash as of March 31, 2022, primarily included cash deposited in an escrow account[73](index=73&type=chunk) [Note 7. Leases](index=18&type=section&id=Note%207.%20Leases) Lease obligations, primarily for The Garden, increased, with operating lease costs rising substantially due to the end of COVID-19 payment reductions ROU Assets and Lease Liabilities | Metric | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Right-of-use lease assets | $689,580 | $703,521 | | Operating lease liabilities, current | $43,412 | $41,951 | | Operating lease liabilities, noncurrent | $703,718 | $691,152 | | **Total lease liabilities** | **$747,130** | **$733,103** | Operating Lease Costs (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Direct operating expenses | $29,737 | $20,454 | +$9,283 | +45.4% | | Selling, general and administrative expenses | $613 | $611 | +$2 | +0.3% | | Short-term lease cost | $42 | $35 | +$7 | +20.0% | | **Total lease cost** | **$30,392** | **$21,100** | **+$9,292** | **+44.0%** | Operating Lease Costs (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Direct operating expenses | $59,004 | $22,852 | +$36,152 | +158.2% | | Selling, general and administrative expenses | $1,837 | $1,833 | +$4 | +0.2% | | Short-term lease cost | $119 | $86 | +$33 | +38.4% | | **Total lease cost** | **$60,960** | **$24,771** | **+$36,189** | **+146.1%** | - Cash paid for amounts included in the measurement of lease liabilities for the nine months ended March 31, 2022, was **$32,580 thousand**[83](index=83&type=chunk) - Maturities of operating lease liabilities as of March 31, 2022, total **$2,305,252 thousand** in future lease payments, with a weighted average remaining lease term of **32.9 years**[84](index=84&type=chunk)[87](index=87&type=chunk) [Note 8. Goodwill and Intangible Assets](index=20&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets) Goodwill and indefinite-lived intangible assets remained stable with no impairments identified, while amortizable intangible assets decreased - The carrying amount of goodwill was **$226,955 thousand** as of March 31, 2022, and June 30, 2021, with no impairment identified in the annual test[88](index=88&type=chunk) - Indefinite-lived intangible assets totaled **$112,144 thousand**, primarily consisting of sports franchises, with no impairment identified in the annual test[88](index=88&type=chunk) Amortizable Intangible Assets (Net) | Asset Type | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Trade names | $153 | $498 | | Non-compete agreements | $160 | $520 | | Other intangibles | $587 | $677 | | **Total Net** | **$900** | **$1,695** | - Amortization expense for intangible assets was **$265 thousand** for the three months and **$795 thousand** for the nine months ended March 31, 2022[89](index=89&type=chunk) [Note 9. Fair Value Measurements](index=21&type=section&id=Note%209.%20Fair%20Value%20Measurements) Assets measured at fair value increased, driven by time deposits, while debt instruments are valued at fair value approximating carrying value Assets Measured at Fair Value (March 31, 2022) | Asset | Fair Value (in thousands) | | :--- | :--- | | Money market account | $14,003 | | Time deposits | $34,017 | | **Total** | **$48,020** | Assets Measured at Fair Value (June 30, 2021) | Asset | Fair Value (in thousands) | | :--- | :--- | | Money market account | $33,820 | | Time deposits | $5,000 | | **Total** | **$38,820** | - The fair value of the company's debt approximates its carrying amount due to variable interest rates[93](index=93&type=chunk) [Note 10. Commitments and Contingencies](index=21&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) Commitments primarily involve employment agreements and lease payments, with no material changes since fiscal year 2021 - The company's commitments primarily consist of obligations under employment agreements with professional sports teams' personnel and future lease payments[94](index=94&type=chunk) - The company is a defendant in various lawsuits, but management does not believe that their resolution will have a **material adverse effect** on the company[95](index=95&type=chunk) [Note 11. Debt](index=21&type=section&id=Note%2011.%20Debt) The company refinanced its Knicks and Rangers credit facilities, increasing total capacity and making significant principal repayments - The 2021 Knicks Revolving Credit Facility provides up to **$275,000 thousand**, matures in December 2026, and had an outstanding balance of **$220,000 thousand** as of March 31, 2022[99](index=99&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - The 2021 Rangers Revolving Credit Facility provides up to **$250,000 thousand**, and the company made **$70,000 thousand in principal repayments**, leaving an outstanding balance of **$65,000 thousand**[109](index=109&type=chunk)[110](index=110&type=chunk)[114](index=114&type=chunk) - The 2021 Rangers NHL Advance Agreement provided a **$30,000 thousand** advance from the NHL, with the full balance outstanding as of March 31, 2022[115](index=115&type=chunk)[116](index=116&type=chunk) - The company incurred **$2,836 thousand** in deferred financing costs during the nine months ended March 31, 2022, related to the new credit facilities[118](index=118&type=chunk) [Note 12. Benefit Plans](index=24&type=section&id=Note%2012.%20Benefit%20Plans) The company maintains defined benefit and defined contribution plans, with expenses for the latter increasing significantly Net Periodic Benefit Cost (MSGS Pension Plans) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $64 | $46 | | Nine months ended March 31 | $192 | $186 | Defined Contribution Plan Expenses (Savings Plans) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $1,238 | $426 | | Nine months ended March 31 | $3,076 | $1,530 | [Note 13. Share-based Compensation](index=25&type=section&id=Note%2013.%20Share-based%20Compensation) Share-based compensation expense trends were mixed, with a decrease over nine months due to a prior-year one-time expense recognition Share-based Compensation Expense | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $6,973 | $3,867 | | Nine months ended March 31 | $19,178 | $26,193 | - The decrease in share-based compensation expense for the nine months was partly due to the recognition of approximately **$7,400 thousand** in previously unrecognized expense in the prior year[126](index=126&type=chunk) - The fair value of Restricted Stock Units (RSUs) that vested during the nine months ended March 31, 2022, was **$40,490 thousand**[127](index=127&type=chunk) - As of March 31, 2022, **94 thousand time-vesting stock options** were outstanding and exercisable, with an aggregate intrinsic value of **$3,151 thousand**[131](index=131&type=chunk) [Note 14. Stock Repurchase Program](index=26&type=section&id=Note%2014.%20Stock%20Repurchase%20Program) The company has a $525,000 thousand stock repurchase program with remaining availability, but no shares were repurchased - The company's board of directors authorized a **$525,000 thousand** Class A Common Stock repurchase program on September 11, 2015[132](index=132&type=chunk) - As of March 31, 2022, **$259,639 thousand** of availability remained under the stock repurchase authorization[133](index=133&type=chunk) - **No share repurchase activities** occurred during the nine months ended March 31, 2022, or 2021[133](index=133&type=chunk) [Note 15. Related Party Transactions](index=26&type=section&id=Note%2015.%20Related%20Party%20Transactions) The company has extensive related party transactions with entities controlled by the Dolan family, with revenues and expenses increasing - The Dolan Family Group, controlling stockholders of MSG Sports, also controls MSG Entertainment and AMC Networks Inc, leading to extensive related party transactions[135](index=135&type=chunk) - Key related party agreements include Arena License Agreements, Media Rights Agreements, Sponsorship Sales and Service Representation Agreements, and a Transition Services Agreement (TSA)[136](index=136&type=chunk) Related Party Revenues and Operating Expenses (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Revenues from related parties | $153,229 | $103,752 | +$49,477 | +47.7% | | Corporate general and administrative expenses, net | $31,579 | $29,162 | +$2,417 | +8.3% | | Costs associated with Sponsorship sales | $16,857 | $10,184 | +$6,673 | +65.5% | | Costs associated with Arena License Agreements | $83,212 | $27,697 | +$55,515 | +200.4% | [Note 16. Income Taxes](index=28&type=section&id=Note%2016.%20Income%20Taxes) Income tax expense resulted in effective tax rates exceeding the statutory federal rate due to state taxes and nondeductible expenses Income Tax Expense (Three Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Income tax expense | $34,993 | $53 | | Effective tax rate | 59% | N/A | Income Tax Expense (Nine Months Ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Income tax expense | $30,939 | $(275) (benefit) | | Effective tax rate | 58% | N/A | - The estimated annual effective tax rate exceeds the statutory federal tax rate of 21% primarily due to **state taxes** and **nondeductible expenses**[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and operating results, highlighting recovery from COVID-19 impacts and discussing liquidity [Introduction](index=31&type=section&id=Introduction) This MD&A supplements the financial statements, providing insights into the company's single operating segment and the impact of COVID-19 - The MD&A serves as a supplement to the unaudited financial statements, offering an understanding of the company's financial condition, changes, and results of operations[157](index=157&type=chunk) - Following the MSGE Distribution on April 17, 2020, the company operates and reports financial information in **one segment**[159](index=159&type=chunk) - **COVID-19 disruptions** have materially impacted the company's operations and operating results during fiscal years 2020, 2021, and temporarily in 2022[160](index=160&type=chunk) [Factors Affecting Results of Operations](index=31&type=section&id=Factors%20Affecting%20Results%20of%20Operations) COVID-19 significantly impacted operations through season suspensions and attendance restrictions, though these have since been lifted - COVID-19 led to the suspension of NBA and NHL seasons, shortened schedules, and initial fan prohibitions or limited capacity at The Garden[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - These disruptions materially impacted revenues from ticket sales, suite licenses, sponsorships, local media rights, and food/beverage sales[165](index=165&type=chunk) - **Cost-reduction measures**, including workforce reductions and limits on discretionary spending, were implemented[167](index=167&type=chunk) - As of March and April 2022, New York City and State **lifted all COVID-19 vaccination and capacity requirements** for indoor entertainment venues[168](index=168&type=chunk) - Future business remains sensitive to COVID-19 concerns, new variants, and discretionary consumer spending[170](index=170&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) The company experienced substantial financial recovery with significant revenue growth and a return to operating profitability [Revenues](index=33&type=section&id=Revenues) Revenues surged due to the lifting of COVID-19 restrictions, driving significant increases in event-related income Total Revenue Growth | Period | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $337,774 | $183,010 | +$154,764 | +85% | | Nine months ended March 31 | $646,149 | $268,819 | +$377,330 | +140% | Key Revenue Drivers (Nine Months Ended March 31) | Revenue Source | Increase (in thousands) | | :--- | :--- | | Pre/regular season ticket-related revenues | +$210,264 | | Suite license fee revenues | +$73,167 | | Sponsorship and signage revenues | +$32,916 | | Pre/regular season food, beverage and merchandise sales | +$18,527 | | Local media rights fees | +$39,597 | | Revenues from league distributions | +$551 | - The increases in revenues were primarily a result of the **elimination of government-mandated assembly restrictions** at The Garden[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Direct operating expenses](index=34&type=section&id=Direct%20operating%20expenses) Direct operating expenses increased significantly due to higher league-related costs and other expenses from the return to full operations Total Direct Operating Expenses Growth | Period | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $206,273 | $126,510 | +$79,763 | +63% | | Nine months ended March 31 | $407,698 | $182,957 | +$224,741 | +123% | Key Expense Drivers (Nine Months Ended March 31) | Expense Source | Increase (in thousands) | | :--- | :--- | | Net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax | +$70,211 | | Other team operating expenses | +$46,874 | | Operating lease costs associated with The Garden | +$35,854 | | Pre/regular season food, beverage and merchandise sales expense | +$8,276 | | Team personnel compensation | +$78,210 | | Net provisions for certain team personnel transactions | -$14,684 | - The increases were largely due to the **elimination of government-mandated assembly restrictions** at The Garden and the delayed start of the 2020-21 seasons[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Net provisions for league revenue sharing expense and NBA luxury tax increased by **$70,211 thousand** for the nine months ended March 31, 2022[185](index=185&type=chunk) [Selling, general and administrative expenses](index=36&type=section&id=Selling,%20general%20and%20administrative%20expenses) SG&A expenses increased, driven by higher employee compensation, marketing costs, and sponsorship sales commissions Total SG&A Expenses Growth | Period | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $68,902 | $46,803 | +$22,099 | +47% | | Nine months ended March 31 | $172,230 | $138,708 | +$33,522 | +24% | - The increases were primarily due to higher employee compensation, marketing costs, commissions related to sponsorship sales, and costs related to the TSA with MSG Entertainment[194](index=194&type=chunk) [Depreciation and amortization](index=36&type=section&id=Depreciation%20and%20amortization) Depreciation and amortization expenses decreased compared to the prior year periods Depreciation and Amortization | Period | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $1,206 | $1,573 | -$367 | -23% | | Nine months ended March 31 | $3,847 | $4,840 | -$993 | -21% | [Operating income (loss)](index=36&type=section&id=Operating%20income%20(loss)) Operating income improved significantly, turning from a loss to a profit due to increased revenues offsetting higher expenses Operating Income (Loss) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $61,393 | $8,124 | | Nine months ended March 31 | $62,374 | $(57,686) | - The improvements to operating income were primarily due to **increases in revenues**, partially offset by higher direct operating and SG&A expenses[196](index=196&type=chunk) [Interest expense, net](index=36&type=section&id=Interest%20expense,%20net) Net interest expense decreased for the quarter but increased for the nine-month period due to various financing activities Net Interest Expense | Period | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $(2,418) | $(2,930) | +$512 | +17% | | Nine months ended March 31 | $(9,013) | $(7,406) | -$1,607 | -22% | - The increase in net interest expense for the nine months was driven by commitment fees, interest on the NHL advance, and accelerated financing costs[197](index=197&type=chunk) [Income taxes](index=36&type=section&id=Income%20taxes) The company recorded income tax expense for the three and nine-month periods, as detailed in Note 16 Income Tax Expense (Three Months Ended March 31) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Income tax expense | $34,993 | $53 | Income Tax Expense (Nine Months Ended March 31) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Income tax expense | $30,939 | $(275) (benefit) | - For a detailed discussion of the company's income taxes, refer to **Note 16** to the consolidated financial statements[198](index=198&type=chunk) [Adjusted operating income (loss)](index=36&type=section&id=Adjusted%20operating%20income%20(loss)) Adjusted operating income, a non-GAAP measure, improved significantly, reflecting the overall business recovery Adjusted Operating Income (Loss) | Period | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Three months ended March 31 | $81,454 | $30,042 | | Nine months ended March 31 | $108,989 | $(6,729) | - The improvements were primarily due to **increases in revenues**, partially offset by higher direct operating and SG&A expenses[203](index=203&type=chunk) - Adjusted operating income is a non-GAAP measure that excludes deferred rent expense, depreciation, amortization, and share-based compensation expense[199](index=199&type=chunk)[200](index=200&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash and available borrowing capacity to fund operations for the foreseeable future - As of March 31, 2022, the company had approximately **$49,200 thousand** in cash and cash equivalents[207](index=207&type=chunk)[209](index=209&type=chunk) - The company has **$240,000 thousand** of additional available borrowing capacity under existing credit facilities[209](index=209&type=chunk) - Deferred revenue obligations were approximately **$79,753 thousand** as of March 31, 2022[207](index=207&type=chunk) - On April 27, 2022, the company made an additional principal repayment of **$15,000 thousand** under the 2021 Rangers Revolving Credit Facility[209](index=209&type=chunk) - Management believes the company has **sufficient liquidity** to fund operations and satisfy obligations for the foreseeable future[209](index=209&type=chunk) [Seasonality of Our Business](index=39&type=section&id=Seasonality%20of%20Our%20Business) The company's revenues are typically concentrated in the second and third fiscal quarters due to the NBA and NHL seasons - The company generally earns a disproportionate share of its revenues in the **second and third quarters** of its fiscal year[216](index=216&type=chunk) - COVID-19 disruptions in the 2019-20 seasons caused certain revenues to be recognized in **Q1 FY2021**[216](index=216&type=chunk) [Recently Issued Accounting Pronouncements and Critical Accounting Policies](index=39&type=section&id=Recently%20Issued%20Accounting%20Pronouncements%20and%20Critical%20Accounting%20Policies) Annual impairment testing for goodwill and intangible assets identified no impairments, and there were no material changes to critical accounting policies - The company performed its annual impairment test of goodwill during the first quarter of fiscal year 2022, and **no impairment was identified**[219](index=219&type=chunk)[221](index=221&type=chunk) - The annual impairment test of identifiable indefinite-lived intangible assets was performed during the first quarter of fiscal year 2022, and **no impairments were identified**[223](index=223&type=chunk) - There have been **no material changes** to the company's critical accounting policies from those set forth in its Annual Report on Form 10-K[218](index=218&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure from its floating-rate credit facilities - The company has potential **interest rate risk exposure** related to outstanding borrowings incurred under its credit facilities, which bear interest at a floating rate[226](index=226&type=chunk) - A hypothetical **100 basis point increase** in floating interest rates would increase annual interest expense by approximately **$2.9 million**[227](index=227&type=chunk) - The broad effects of COVID-19, including its negative impact on the global economy and financial markets, are also noted as a market risk[225](index=225&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The company's disclosure controls and procedures were evaluated and concluded to be **effective** as of March 31, 2022[228](index=228&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the quarter ended March 31, 2022[229](index=229&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits, but management believes their resolution will not have a material adverse effect - The company is a defendant in various lawsuits[232](index=232&type=chunk) - Management does not believe that the resolution of these lawsuits will have a **material adverse effect** on the company[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a $525 million share repurchase program with remaining availability, but no activity occurred during the quarter - The company has a **$525 million** Class A Common Stock share repurchase program authorized by its board of directors on September 11, 2015[233](index=233&type=chunk) - As of March 31, 2022, approximately **$260 million** remained available under the share repurchase authorization[233](index=233&type=chunk) - **No share repurchase activity** occurred during the three months ended March 31, 2022[233](index=233&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements, certifications, and iXBRL financial statements - Exhibits include an Employment Agreement, Certifications by the CEO and CFO, and financial statements formatted in Inline Extensible Business Reporting Language (iXBRL)[235](index=235&type=chunk)