Madison Square Garden Sports (MSGS) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements detail the company's financial position, performance, and cash flows Consolidated Balance Sheets The balance sheets show increased total assets and liabilities, with an improvement in the company's negative equity position | Metric (in thousands) | March 31, 2024 | June 30, 2023 | Change ($) | | :-------------------- | :------------- | :------------ | :--------- | | Total Assets | $1,388,471 | $1,315,017 | $73,454 | | Total Liabilities | $1,682,426 | $1,652,251 | $30,175 | | Total Equity | $(293,955) | $(337,234) | $43,279 | Consolidated Statements of Operations Revenues increased for the three and nine-month periods, but higher expenses led to decreased operating and net income | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $429,954 | $382,744 | $47,210 | 12% | $799,898 | $760,527 | $39,371 | 5% | | Operating income | $79,742 | $81,751 | $(2,009) | (2)% | $93,735 | $97,371 | $(3,636) | (4)% | | Net income | $37,877 | $51,813 | $(13,936) | (27)% | $33,280 | $55,122 | $(21,842) | (40)% | | Basic EPS | $1.58 | $2.19 | $(0.61) | (28)% | $1.39 | $2.28 | $(0.89) | (39)% | | Diluted EPS | $1.57 | $2.18 | $(0.61) | (28)% | $1.38 | $2.27 | $(0.89) | (39)% | Consolidated Statements of Comprehensive Income Comprehensive income attributable to stockholders decreased for both reporting periods, reflecting the decline in net income | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Comprehensive income attributable to stockholders | $37,884 | $52,382 | $33,299 | $57,059 | Consolidated Statements of Cash Flows Operating activities shifted to a net cash outflow while financing activities shifted to a net inflow for the nine-month period | Metric (in thousands) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Net cash (used in) provided by operating activities | $(16,220) | $114,801 | $(131,021) | | Net cash used in investing activities | $(5,689) | $(10,366) | $4,677 | | Net cash provided by (used in) financing activities | $26,234 | $(129,618) | $155,852 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $4,325 | $(25,183) | $29,508 | Consolidated Statements of Equity Total equity improved due to net income and share-based compensation, partially offset by dividends and treasury stock activity | Metric (in thousands) | March 31, 2024 | June 30, 2023 | | :-------------------- | :------------- | :------------ | | Total Equity | $(293,955) | $(337,234) | - Share-based compensation expense was $7,350 thousand for the three months and $18,069 thousand for the nine months ended March 31, 2024[22][28] Notes to Consolidated Financial Statements Detailed disclosures explain the figures in the financial statements, covering key accounting policies and transactions - The accompanying unaudited consolidated interim financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation[39] - The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year[39] - MSG Sports earns a disproportionate share of its revenues in the second and third quarters of the Company's fiscal year, when the majority of the sports teams' games are played[39] Note 1. Description of Business and Basis of Presentation The company owns the New York Knicks and Rangers, operates as a single segment, and recently sold its interest in CLG - MSG Sports owns and operates the New York Knickerbockers (NBA) and New York Rangers (NHL), along with development league teams (Hartford Wolf Pack, Westchester Knicks)[33] - In April 2023, the Company sold its controlling interest in Counter Logic Gaming (CLG) to Hard Carry Gaming Inc (NRG) in exchange for a noncontrolling equity interest[33] - The Company operates and reports financial information in one segment, with the Executive Chairman acting as the Chief Operating Decision Maker[34] Note 2. Accounting Policies The company's principles of consolidation, use of management estimates, and new accounting standards are outlined - The consolidated financial statements include Madison Square Garden Sports Corp and its subsidiaries, with all significant intercompany transactions eliminated[42] - Management makes estimates and assumptions for various items, including valuation of accounts receivable, goodwill, intangible assets, and revenue recognition[43] - The company is evaluating the impact of recently issued ASUs on Leases (ASU 2023-01, effective FY2025), Segment Reporting (ASU 2023-07, effective FY2025), and Income Taxes (ASU 2023-09, effective FY2026)[45][46][47] Note 3. Revenue Recognition Revenues are disaggregated by type, with event-related and media rights being the largest categories | Revenue Type (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Event-related | $177,826 | $144,650 | $306,096 | $292,304 | | Media rights | $139,579 | $135,200 | $269,345 | $260,344 | | Sponsorship, signage & suite licenses | $101,402 | $90,340 | $176,032 | $176,175 | | League distributions & other | $11,147 | $12,554 | $48,425 | $31,704 | | Total Revenues | $429,954 | $382,744 | $799,898 | $760,527 | - Deferred revenue, including non-current portion, decreased from $169,717 thousand as of June 30, 2023, to $118,092 thousand as of March 31, 2024[54] - Estimated future revenue from remaining performance obligations (excluding short-term and variable consideration) is $301,621 thousand[55][56] Note 4. Computation of Earnings per Common Share This note reconciles the calculation of basic and diluted earnings per common share, which decreased in the current periods | Metric | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $1.58 | $2.19 | $1.39 | $2.28 | | Diluted EPS | $1.57 | $2.18 | $1.38 | $2.27 | | Basic Shares Outstanding | 24,028 | 23,971 | 24,005 | 24,133 | | Diluted Shares Outstanding | 24,100 | 24,062 | 24,076 | 24,225 | Note 5. Team Personnel Transactions The company recorded a net provision for team personnel transactions of $2,170 thousand for the current periods | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net provision (credit) for Team personnel transactions | $2,170 | $81 | $2,170 | $(219) | Note 6. Cash, Cash Equivalents and Restricted Cash The company's total cash, cash equivalents, and restricted cash balances increased during the nine-month period | Metric (in thousands) | March 31, 2024 | June 30, 2023 | March 31, 2023 | | :-------------------- | :------------- | :------------ | :------------- | | Cash and cash equivalents | $40,033 | $40,398 | $65,182 | | Restricted cash | $4,751 | $61 | $653 | | Total | $44,784 | $40,459 | $65,835 | Note 7. Leases Lease liabilities increased, with a weighted average remaining lease term of 30 years and a discount rate of 7.1% | Metric (in thousands) | March 31, 2024 | June 30, 2023 | | :-------------------- | :------------- | :------------ | | Right-of-use lease assets | $697,464 | $715,283 | | Total lease liabilities | $807,247 | $796,182 | - The weighted average remaining lease term for operating leases was 30.0 years as of March 31, 2024[71] - The weighted average discount rate was 7.1% as of March 31, 2024[71] Note 8. Goodwill and Intangible Assets Goodwill and identifiable indefinite-lived intangible assets remained unchanged, with no impairments identified in fiscal 2024 tests - The carrying amount of goodwill was $226,523 thousand as of March 31, 2024, and June 30, 2023[73] | Indefinite-Lived Intangible Assets (in thousands) | March 31, 2024 | | :------------------------------------------------ | :------------- | | Sports franchises | $102,564 | | Photographic related rights | $1,080 | | Total | $103,644 | - No impairments were identified for goodwill or identifiable indefinite-lived intangible assets during the annual impairment tests performed in the first quarter of fiscal year 2024[73] Note 9. Investments Total investments decreased, driven by unrealized losses on Xtract One common stock and warrants | Investment Type (in thousands) | March 31, 2024 | June 30, 2023 | | :----------------------------- | :------------- | :------------ | | Equity method investments | $13,222 | $11,948 | | Equity investments with readily determinable fair values | $34,880 | $36,814 | | Derivative instruments (warrants) | $7,273 | $13,098 | | Total Investments | $61,443 | $67,374 | - For the nine months ended March 31, 2024, the company recognized an unrealized loss of $(5,645) thousand on Xtract One common stock and an unrealized loss of $(5,825) thousand on warrants, compared to gains in the prior year[82][87] - The company's ownership in NRG was approximately 25% as of March 31, 2024, and June 30, 2023[77] Note 10. Fair Value Measurements Assets measured at fair value are detailed, with warrants (Level III) decreasing in value and debt (Level II) approximating carrying value | Asset Type (in thousands) | Fair Value Hierarchy | March 31, 2024 | June 30, 2023 | | :------------------------ | :------------------- | :------------- | :------------ | | Money market accounts | I | $27,149 | $17,330 | | Time deposit | I | $11,487 | $1,457 | | Equity investments | I | $34,880 | $36,814 | | Warrants | III | $7,273 | $13,098 | | Total | | $80,789 | $68,699 | - The fair value of the company's warrants in Xtract One, classified as Level III, decreased from $13,098 thousand to $7,273 thousand during the nine months ended March 31, 2024, resulting in an unrealized loss of $(5,825) thousand[85][87] - The company's debt (current and long-term) is classified within Level II of the fair value hierarchy, with its fair value approximating its carrying amount due to variable interest rates[87] Note 11. Commitments and Contingencies Commitments primarily involve employment agreements, and management does not expect lawsuits to have a material adverse effect - The company's commitments consist primarily of obligations under employment agreements with its professional sports teams' personnel[88] - No material changes in contractual obligations, including off-balance sheet commitments, have occurred since the end of fiscal year 2023, other than activities in the ordinary course of business[88] - 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[91] Note 12. Debt The company's debt facilities include outstanding balances on the Knicks and Rangers revolving credit facilities and an NHL advance - The Knicks Revolving Credit Facility had an outstanding balance of $275,000 thousand as of March 31, 2024, with an interest rate of 6.68%[95] - The Rangers Revolving Credit Facility had an outstanding balance of $55,000 thousand as of March 31, 2024, with an interest rate of 7.18%[104] - The Rangers NHL Advance Agreement had an outstanding balance of $30,000 thousand as of March 31, 2024, with an interest rate of 3.00%[112] - Both Knicks LLC and Rangers LLC were in compliance with their respective debt service ratio covenants (at least 1.5:1.0) as of March 31, 2024[99][108] Note 13. Benefit Plans The company sponsors frozen defined benefit pension plans and various defined contribution and deferred compensation plans | Benefit Plan Expense (in thousands) | 3 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2024 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Net periodic benefit cost (Pension Plans) | $78 | $232 | | 401(k) Plan and Excess Savings Plan expense | $1,261 | $3,869 | | Deferred Compensation Plan compensation expense | $821 | $1,556 | - All benefits in the Pension Plans are frozen, and no new participants can join[114] - Gains related to the remeasurement of assets under the Executive Deferred Compensation Plan fully offset the compensation expense recognized for the liability remeasurement[121] Note 14. Share-based Compensation Share-based compensation expense for the nine-month period was $18,069 thousand, with details on unvested RSUs and stock options | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | | Share-based compensation expense | $7,350 | $18,069 | - As of March 31, 2024, there were 127 nonperformance-based and 145 performance-based unvested RSUs[125] - As of March 31, 2024, 94 stock options were outstanding and exercisable, with a weighted-average exercise price of $138.78 per share[128] Note 15. Stock Repurchase Program The company has $184,639 thousand remaining under its stock repurchase program, with no shares repurchased in the quarter - The company's board of directors authorized the repurchase of up to $525,000 thousand of Class A Common Stock[130] - As of March 31, 2024, $184,639 thousand of availability remained under the stock repurchase authorization[133] - No share repurchases were made under the program during the three months ended March 31, 2024[133] Note 16. Related Party Transactions The company engages in significant transactions with entities controlled by the Dolan Family Group, including MSG and Sphere Entertainment - The Dolan Family Group collectively beneficially owns 100% of the Company's outstanding Class B Common Stock and approximately 70.9% of the aggregate voting power[134] - Key agreements with MSG Entertainment include Arena License Agreements, Sponsorship sales and service representation agreements, and a Services Agreement[135][136] - Key agreements with Sphere Entertainment (MSG Networks) include media rights agreements for Knicks and Rangers games[137] | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $86,944 | $84,024 | $173,419 | $167,148 | | Operating expenses | $70,590 | $62,466 | $136,668 | $140,811 | Note 17. Income Taxes The effective tax rate was 47% for both the three and nine-month periods, with a recent NYC audit resulting in no material changes | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax expense | $34,018 | $42,962 | $29,658 | $47,024 | | Effective tax rate | 47% | 45% | 47% | 46% | - The estimated annual effective tax rate exceeds the statutory federal tax rate of 21% primarily due to state taxes, nondeductible officers' compensation, and players' disability insurance premiums expense[141] - A New York City audit for fiscal years ended June 30, 2016, and 2017 was finalized in January 2024 with no material changes[143] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides its perspective on financial condition and results, covering performance, liquidity, and critical accounting policies - This MD&A contains forward-looking statements that are not guarantees of future performance and involve risks and uncertainties[146] - The Company operates and reports financial information in one segment[151] - Management evaluates performance based on operating income (loss) excluding certain items, referred to as adjusted operating income (loss), a non-GAAP measure[183] Introduction This section outlines the purpose of the MD&A, emphasizing its supplemental nature and the inclusion of forward-looking statements - The MD&A should be read in conjunction with the Company's unaudited financial statements and accompanying notes, as well as the Annual Report on Form 10-K for fiscal year ended June 30, 2023[150] - The Company operates and reports financial information in one segment[151] Results of Operations Revenues increased, but higher operating expenses and unfavorable miscellaneous income changes led to decreased operating and net income | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $429,954 | $382,744 | $47,210 | 12% | $799,898 | $760,527 | $39,371 | 5% | | Operating income | $79,742 | $81,751 | $(2,009) | (2)% | $93,735 | $97,371 | $(3,636) | (4)% | | Net income | $37,877 | $51,813 | $(13,936) | (27)% | $33,280 | $55,122 | $(21,842) | (40)% | Comparison of the three and nine months ended March 31, 2024 versus the three and nine months ended March 31, 2023 This analysis details the changes in revenues and expenses, explaining the drivers behind the company's financial performance Revenues Revenue growth was driven by higher ticket, suite, and food/beverage sales, primarily due to more Knicks home games | Revenue Driver (in thousands) | 3 Months Change | 9 Months Change | | :---------------------------- | :-------------- | :-------------- | | Pre/regular season ticket-related revenues | $29,874 | $11,166 | | Suite revenues | $10,932 | $5,253 | | Pre/regular season food, beverage, and merchandise sales | $4,274 | $3,998 | | Local media rights fees | $1,348 | $3,532 | | League distributions | $625 | $19,268 | | Sponsorship and signage revenues | $130 | $(5,397) | - The Knicks played 26 home games during the three months ended March 31, 2024, compared to 21 in the prior year, contributing to increased ticket and suite revenues[157][159] - For the nine months, fewer home games for the Knicks (41 vs 42) and Rangers (38 vs 41) partially offset revenue growth[158] Direct operating expenses Expenses increased due to higher team personnel compensation, league revenue sharing, and other team operating costs | Expense Driver (in thousands) | 3 Months Change | 9 Months Change | | :---------------------------- | :-------------- | :-------------- | | Team personnel compensation | $11,752 | $22,616 | | Net provisions for league revenue sharing & NBA luxury tax | $8,383 | $12,016 | | Other team operating expenses | $5,106 | $3,388 | | Operating lease costs (Garden home games) | $4,408 | $(2,847) | | Merchandise sales expense | $2,237 | $2,775 | | Team personnel transactions | $2,089 | $2,389 | - The Knicks were not a luxury tax payer for the 2022-23 season and are not expected to be for the 2023-24 season[167] - Increases in team personnel compensation were primarily due to roster changes for the Knicks and Rangers, partially offset by the absence of CLG-related expenses[164] Selling, general and administrative expenses SG&A expenses rose due to higher employee compensation, including executive transition costs, and increased operating lease costs - For the three months ended March 31, 2024, expenses increased by $15,296 thousand (25%) to $76,398 thousand, mainly due to $12,187 thousand in higher employee compensation and related benefits, including executive management transition costs[173] - For the nine months ended March 31, 2024, expenses increased by $3,001 thousand (2%) to $195,020 thousand, primarily due to $5,121 thousand in higher operating lease costs and $1,417 thousand in employee compensation[174] Depreciation and amortization Depreciation and amortization expenses decreased for both the three and nine-month periods compared to the prior year | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Depreciation and amortization | $788 | $840 | $(52) | (6)% | $2,372 | $2,703 | $(331) | (12)% | Operating income Operating income decreased due to higher operating and SG&A expenses, which outpaced the increase in revenues | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Operating income | $79,742 | $81,751 | $(2,009) | (2)% | $93,735 | $97,371 | $(3,636) | (4)% | Interest expense, net Net interest expense increased due to higher average interest rates and increased borrowings under the Knicks credit facility | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Interest expense, net | $(6,444) | $(6,300) | $(144) | (2)% | $(19,720) | $(14,768) | $(4,952) | (34)% | Miscellaneous (expense) income, net The shift from net income to net expense was driven by unrealized losses on Xtract One investments, compared to gains previously | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Miscellaneous (expense) income, net | $(1,403) | $19,324 | $(20,727) | $(11,077) | $19,543 | $(30,620) | - The decrease was primarily due to unrealized losses on investments in Xtract One common stock and warrants in the current year, compared to unrecognized gains in the prior year[180] Income taxes Income tax expense was recorded for both periods, reflecting an effective tax rate of 47% | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax expense | $(34,018) | $(42,962) | $(29,658) | $(47,024) | | Effective tax rate | 47% | 45% | 47% | 46% | Adjusted operating income Adjusted operating income, a non-GAAP measure, increased for the three-month period but decreased for the nine-month period | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | Change ($) | Change (%) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Adjusted operating income | $88,701 | $86,179 | $2,522 | 3% | $115,732 | $122,847 | $(7,115) | (6)% | - The definition of adjusted operating income was amended in the fourth quarter of fiscal year 2023 to include the non-cash portion of operating lease costs related to Arena License Agreements[182][188] - Adjusted operating income is considered an appropriate measure for evaluating operating performance and is used by management as a key indicator[186] Liquidity and Capital Resources Liquidity is supported by cash, operating cash flow, and credit facilities, which management believes is sufficient for the future - Primary sources of liquidity are cash and cash equivalents, cash flow from operations, and available borrowing capacity under credit facilities[191] - As of March 31, 2024, the company had $40,033 thousand in Cash and cash equivalents and $195,000 thousand of additional available borrowing capacity[193][195] - Management believes the company has sufficient liquidity to fund operations and satisfy obligations for the foreseeable future[195] Overview The company's liquidity position includes cash balances, deferred revenue, and available borrowing capacity - Cash and cash equivalents totaled $40,033 thousand as of March 31, 2024[193] - Deferred revenue obligations were $88,452 thousand (net of billed, but not yet collected) as of March 31, 2024[193] - The company has $195,000 thousand of additional available borrowing capacity under existing credit facilities[195] Financing Agreements and Stock Repurchases Readers are directed to specific notes for details on debt obligations, financing agreements, and stock repurchase activities - Refer to Note 12 for discussions of the Company's debt obligations and various financing agreements[196] - Refer to Note 15 for discussions of the Company's stock repurchases[196] Contractual Obligations No material changes in contractual obligations have occurred since fiscal year-end 2023, other than in the ordinary course of business - The Company did not have any material changes in its contractual obligations since the end of fiscal year 2023 other than activities in the ordinary course of business[197] Cash Flow Discussion Cash flow activities for the nine-month period show significant shifts in operating and financing cash flows | Cash Flow Activity (in thousands) | 9 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash (used in) provided by operating activities | $(16,220) | $114,801 | | Net cash used in investing activities | $(5,689) | $(10,366) | | Net cash provided by (used in) financing activities | $26,234 | $(129,618) | Operating Activities Operating cash flow shifted from a net inflow to an outflow, driven by lower net income and adverse working capital changes - Net cash used in operating activities for the nine months ended March 31, 2024, was $16,220 thousand, compared to net cash provided of $114,801 thousand in the prior period[199] - The shift was primarily driven by a decrease in deferred revenue ($52,369 thousand), a lower decrease in accrued and other liabilities ($37,191 thousand), and a higher increase in prepaid expenses and other assets ($14,114 thousand)[199] Investing Activities Net cash used in investing activities decreased, primarily due to lower purchases of investments in the current period - Net cash used in investing activities decreased by $4,677 thousand to $5,689 thousand for the nine months ended March 31, 2024[201] - This decrease was primarily due to lower purchases of investments in the current year period[201] Financing Activities Financing activities shifted from a net cash outflow to an inflow, mainly due to the absence of prior-period dividends and share repurchases - Net cash provided by financing activities for the nine months ended March 31, 2024, was $26,234 thousand, compared to net cash used of $129,618 thousand in the prior period[202] - This shift was primarily due to the impact of dividends paid and the accelerated share repurchase in the prior year period, and lower principal repayments under credit facilities[202] Seasonality of Our Business The company's revenues are seasonal, with a disproportionate share earned in the second and third fiscal quarters - The Company earns a disproportionate share of its revenues in the second and third quarters of its fiscal year[203] - This seasonality is due to the majority of the sports teams' games being played during these quarters[203] Critical Accounting Policies No material changes to critical accounting policies were reported, and annual impairment tests identified no impairments - 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 for the fiscal year ended June 30, 2023[205] Recently Issued Accounting Pronouncements This section refers to Note 2 for a discussion of recently issued accounting pronouncements not yet adopted - Refer to Note 2 to the consolidated financial statements for discussion of recently issued accounting pronouncements[204] Goodwill The annual qualitative impairment test for goodwill was performed in the first quarter, and no impairment was identified - The carrying amount of goodwill as of March 31, 2024, was $226,523 thousand[206] - The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2024, using a qualitative assessment[207] - No impairment of goodwill was identified[207] Identifiable Indefinite-Lived Intangible Assets The company's identifiable indefinite-lived intangible assets totaled $103,644 thousand, with no impairments identified | Indefinite-Lived Intangible Assets (in thousands) | March 31, 2024 | | :------------------------------------------------ | :------------- | | Sports franchises | $102,564 | | Photographic related rights | $1,080 | | Total | $103,644 | - The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2024, using a qualitative assessment[209] - No impairments were identified for identifiable indefinite-lived intangible assets[209] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from its credit facilities, with a quantifiable impact from rate changes - The company has potential interest rate risk exposure related to outstanding borrowings incurred under its credit facilities[211] - Borrowings under credit facilities incur interest at a floating rate based upon SOFR, US Federal Funds Rate, or US Prime Rate, plus a fixed spread[213] - A hypothetical 100 basis point increase in floating interest rates would increase annual interest expense by approximately $3.3 million, based on $330 million outstanding as of March 31, 2024[213] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Company's disclosure controls and procedures were effective as of March 31, 2024[214] - There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[215] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is a defendant in various lawsuits but does not expect their resolution to have a material adverse effect - The Company is a defendant in various lawsuits[218] - Management does not believe that resolution of these lawsuits will have a material adverse effect on the Company[218] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Approximately $185 million remains under the share repurchase program, with no repurchases made during the quarter - As of March 31, 2024, the Company had approximately $185 million remaining under its $525 million Class A Common Stock share repurchase program[219] - No share repurchases were made under the program during the three months ended March 31, 2024[219] - Stock repurchases, if any, are expected to be funded through a combination of cash on hand, cash generated by operations, and available borrowing capacity under existing credit facilities[219] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and iXBRL financial statements - Exhibit 31.1 and 31.2 are Certifications by the Executive Chairman and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002[221] - Exhibit 32.1 and 32.2 are Certifications by the Executive Chairman and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002[221] - Exhibit 101 includes the consolidated financial statements and Notes to Consolidated Financial Statements formatted in Inline Extensible Business Reporting Language (iXBRL)[221]