Madison Square Garden Sports (MSGS) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements detail the company's financial performance and position for the periods ended March 31, 2022 Consolidated Balance Sheets 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 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] Consolidated Statements of Comprehensive Income (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 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] - 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] Consolidated Statements of Equity 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] - Tax withholding associated with shares issued for equity-based compensation resulted in a decrease of $18,306 thousand in additional paid-in capital[28] Notes to Consolidated Financial Statements 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 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] - The company operates and reports financial information in one segment, with its Executive Chairman serving as the Chief Operating Decision Maker[33] - COVID-19 materially impacted operations and operating results in fiscal years 2020, 2021, and 2022, leading to reduced revenues and attendance restrictions[39][40][42][48] - As of March 7, 2022, New York City lifted all COVID-19 vaccination requirements for guests at indoor entertainment venues, allowing full capacity[47] Note 2. Accounting Policies 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] - Management makes estimates and assumptions for various financial statement items, including valuation of accounts receivable, goodwill, intangible assets, and revenue recognition[52] - 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] Note 3. Revenue Recognition 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] Note 4. Computation of Earnings (Loss) per Common Share 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 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] Note 6. Cash, Cash Equivalents and Restricted Cash 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] Note 7. Leases 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] - 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][87] Note 8. Goodwill and Intangible Assets 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] - Indefinite-lived intangible assets totaled $112,144 thousand, primarily consisting of sports franchises, with no impairment identified in the annual test[88] 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] Note 9. Fair Value Measurements 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] Note 10. Commitments and Contingencies 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] - 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] Note 11. Debt 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][100][104] - 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][110][114] - 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][116] - 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] Note 12. Benefit Plans 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 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] - The fair value of Restricted Stock Units (RSUs) that vested during the nine months ended March 31, 2022, was $40,490 thousand[127] - 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] Note 14. Stock Repurchase Program 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] - As of March 31, 2022, $259,639 thousand of availability remained under the stock repurchase authorization[133] - No share repurchase activities occurred during the nine months ended March 31, 2022, or 2021[133] Note 15. Related Party Transactions 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] - Key related party agreements include Arena License Agreements, Media Rights Agreements, Sponsorship Sales and Service Representation Agreements, and a Transition Services Agreement (TSA)[136] 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 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial condition and operating results, highlighting recovery from COVID-19 impacts and discussing liquidity 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] - Following the MSGE Distribution on April 17, 2020, the company operates and reports financial information in one segment[159] - COVID-19 disruptions have materially impacted the company's operations and operating results during fiscal years 2020, 2021, and temporarily in 2022[160] Factors Affecting Results of Operations 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][162][163][164] - These disruptions materially impacted revenues from ticket sales, suite licenses, sponsorships, local media rights, and food/beverage sales[165] - Cost-reduction measures, including workforce reductions and limits on discretionary spending, were implemented[167] - As of March and April 2022, New York City and State lifted all COVID-19 vaccination and capacity requirements for indoor entertainment venues[168] - Future business remains sensitive to COVID-19 concerns, new variants, and discretionary consumer spending[170] Results of Operations The company experienced substantial financial recovery with significant revenue growth and a return to operating profitability 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][178][179][180] Direct operating expenses 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][189][190] - 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] Selling, general and administrative expenses 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] Depreciation and amortization 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) 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] Interest expense, net 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] Income taxes 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] Adjusted operating income (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] - Adjusted operating income is a non-GAAP measure that excludes deferred rent expense, depreciation, amortization, and share-based compensation expense[199][200] Liquidity and Capital Resources 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][209] - The company has $240,000 thousand of additional available borrowing capacity under existing credit facilities[209] - Deferred revenue obligations were approximately $79,753 thousand as of March 31, 2022[207] - On April 27, 2022, the company made an additional principal repayment of $15,000 thousand under the 2021 Rangers Revolving Credit Facility[209] - Management believes the company has sufficient liquidity to fund operations and satisfy obligations for the foreseeable future[209] Seasonality of Our Business 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] - COVID-19 disruptions in the 2019-20 seasons caused certain revenues to be recognized in Q1 FY2021[216] Recently Issued Accounting Pronouncements and Critical Accounting Policies 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][221] - 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] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - A hypothetical 100 basis point increase in floating interest rates would increase annual interest expense by approximately $2.9 million[227] - 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] Item 4. Controls and Procedures 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] - There were no material changes in the company's internal control over financial reporting during the quarter ended March 31, 2022[229] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - Management does not believe that the resolution of these lawsuits will have a material adverse effect on the company[232] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - As of March 31, 2022, approximately $260 million remained available under the share repurchase authorization[233] - No share repurchase activity occurred during the three months ended March 31, 2022[233] Item 6. Exhibits 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]